1
Q
Offer - terms required
A
- Real estate: land and price
- Goods: quantity OR output/requirements K
- Services: nature of work
2
Q
Offer - terms required - how offer can fail
A
- Missing price in real estate contract
- Material terms that are vague or ambiguous (appropriate, fair, reasonable)
3
Q
Offer - means of termination
A
- Lapse of time (stated or reasonable)
- Death of a party prior to acceptance, unless irrevocable
- Revocation through unambiguous words or conduct of offeror, when offeree receives/becomes aware
- Rejection through words or conduct of the offeree
4
Q
Offer - irrevocable offers
A
- Options supported by consideration; not revocable for time stated
- Merchants’ firm offer (signed writing); not revocable for time stated or reasonable time, up to three months
- Detrimental reliance if actual and foreseeable; not revocable for reasonable time
- Start of performance pursuant to unilateral K offer makes offer irrevocable for reasonable time to complete performance
- Distinguish mere preparations to perform
5
Q
Offer - means of rejection
A
- Counteroffer
- Conditional acceptance
- Additional terms for common law K, but not for UCC K (battle of forms)
6
Q
Offer - acceptance - who can accept
A
- Person who knows about the offer at the time she accepts
- Person to whom it was made.
Offers can not be assigned; options can be assigned unless the option otherwise provides.
7
Q
Offers - acceptance - mailbox rules
A
- All communications other than acceptance are effective only when received
- Acceptance is generally effective when mailed (i.e., the “mailbox rule”)
- If a rejection is mailed before an acceptance is mailed, then neither is effective until received
- If an acceptance is mailed and then a rejection, the acceptance is effective unless rejection received first and offeror detrimentally relies
- Cannot use the mailbox rule to meet an option deadline
8
Q
Offers - acceptance - by shipping nonconforming goods
A
- General rule: acceptance and breach
- Accommodation (i.e., explanation) exception: counteroffer and no breach
Note: if seller accepts and then ships nonconforming goods as “accommodation,” still breach
9
Q
Offers - acceptance - by starting performance
A
General rule: start of performance is acceptance.
- Exception: Start of performance is not acceptance of unilateral contract offers; completion of performance required
10
Q
Consideration - past consideration
A
General rule: not consideration
- Exception: expressly requested by promisor and expectation of payment by promisee AND (modernly) act in response to emergency; subsequent promise to pay enforceable
- Exception: new promise or part performance of existing obligation
11
Q
Consideration - preexisting duty
A
Under common law, generally not consideration; Art 2 needs no new consideration if modification of K is in good faith
Exceptions to common law rule:
- addition to or change in performance (e.g., early payment of debt)
- unforeseen difficulty so severe as to excuse performance
- honest dispute as to duty (e.g., whether debt owed)
- ratification of voidable obligation (e.g., K w/ minor)
- third-party promise to pay
12
Q
Consideration - consideration substitutes - promissory estoppel (detrimental reliance)
A
- Promise
- Reliance that is reasonable, detrimental, and foreseeable
- Enforcement necessary to avoid injustice.
13
Q
Defenses - overview
A
Simian dump Statute of Frauds Incapacity Misrepresentation Illegality Ambiguity Non-Disclosure Duress Unconscionability Mistake Public policy
14
Q
Defenses - incapacity
A
- Lack of capacity:
1. Infants: those under 18
2. Mental incompetents: those who lack ability to understand agreement, or
3. Intoxicated persons: if other party has reason to know - Consequences of incapacity:
1. Right to disaffirm by person without capacity
2. Implied affirmation by retaining benefits after gaining capacity
3. Quasi-contract liability for necessaries
15
Q
Defenses - statute of frauds
A
MY LEGS!
- Marriage (provide a dowry or child support)
- Cannot be performed w/in 1yr (not: life; task)
- Interest in Land (except lease of 1yr or less)
- Executor (promise to pay w/ own funds)
- Sale of goods over $500
- Surety (promise to pay if another does not; exception if “main purpose” benefits guarantor)
16
Q
Defenses - statute of frauds - satisfying
A
- Performance
- Writing
- Judicial admission
- Estoppel
17
Q
Defenses - statute of frauds - satisfying - performance
A
- Real estate: 2 of 3 - pay, improve, possess
- Services: full performance
- Goods:
1. Ordinary goods - extent of performance; delivered but no payment, paid but no delivery
2. Special goods - seller makes “substantial beginning”
18
Q
Defenses - statute of frauds - satisfying - writing
A
- Common law: all material terms, signed by party to be bound
- Art 2: writing that there is K w/ quantity; merchant’s confirmatory memo (recipient has reason to know of contents; doesn’t object w/in 10 days)
19
Q
Defenses - illegality
A
- Subject matter is illegal: not enforceable.
2. Subject matter is legal: enforceable if P did not have reason to know of D’s illegal purpose.
20
Q
Defenses - ambiguity
A
No contract if:
- parties use a material term that is open to at least two reasonable interpretations
- each party attaches different meaning
- neither party knows or has reason to know term open to at least two reasonable interpretations
If 1 party knows of ambiguity and other does not, term enforced as understood by unknowing party
21
Q
Defenses - duress; unconscionability; public policy
A
- Duress: econ/physical. Need [i] improper threat (usu. to breach); [ii] vulnerable party (usu. no reasonable alternative)
- Unconscionability: unfair surprise (procedural) OR oppressive terms (substantive); tested by court as of time agreement was made
- Public policy: exculpation from intentional or reckless conduct; covenant not to compete w/o r’ble need or r’ble time and place limits
22
Q
Defenses - misrepresentation; non-disclosure
A
- Misrepresentation: [i] statement of “fact” before K; [ii] by party or agent; [iii] that is false; and [iv] induces K. No wrongdoing req if material.
- Non-disclosure: generally must be wrongdoing unless fiduciary relationship
23
Q
Defenses - mistake
A
- Mutual: relief if basic assumption, material, party seeking avoidance did not assume risk
- Unilateral: no relief unless palpable
24
Q
Terms - parol evidence rule - when applicable
A
- Final written contract
2. Earlier written/oral statement OR simultaneous oral statement of one or both parties
25
Terms - parol evidence rule - prohibitions and exceptions
- Not allowed: looking at PE to:
1. Change/contradict terms in written deal
2. Add consistent terms to written deal, unless [i] partial integration or [ii] terms would ordinarily be in separate agreement.
- Exceptions: looking at PE OK to determine:
1. If mistake in integration (i.e. clerical error)
2. If defenses apply (misrep., fraud, duress, etc.)
3. If condition precedent applies
4. Meaning of term (resolve ambiguity)
26
Terms - interpretation based on conduct
1. Course of performance: same people, same K
2. Course of dealing: same people, different but similar K
3. Custom and usage: different but similar people, different but similar K
27
Terms - battle of forms
Applies only to Art 2 Ks
1. Both parties are merchants
2. Additional term not "material" [fact question]
3. Additional term not objected to by original offeror
28
Terms - gap fillers
Applies only to Art 2 Ks
1. Price: reasonable at time of delivery
2. Place: seller's business; if none, home
3. Time for shipping/delivery: reasonable
4. Time for payment: when buyer receives goods
29
Terms - delivery obligations for seller w/ common-carrier delivery
1. Shipment K: seller's obligation complete when goods get to carrier; r'ble delivery arrangements made, buyer notified
2. Destination K: goods arrive at destination.
3. Determining type of K: usually shipment; determine with "FOB" term
- FOB seller/goods city: shipment K
- FOB anywhere else: destination K
30
Terms - risk of loss
1. Agreement: agreement of the parties controls.
2. Breach: breaching party liable for any uninsured loss even if breach unrelated
3. Common carrier delivery: risk shifts from seller to buyer when seller completes delivery obligation
4. Fall-back: risk of loss --
- Shifts from a merchant-seller to the buyer on buyer's "receipt" of goods
- Shifts from nonmerchant seller when he "tenders" goods
31
Terms - warranties
1. Express: facts, promise, sample/model.
2. Implied warranty of merchantability: IF seller is a merchant who deals in goods of that kind, THEN warranty that goods are fit for ordinary purposes.
3. Implied warranty of fitness for a particular purpose: IF buyer has particular purpose, relies on seller to select suitable goods, seller has reason to know of purpose and reliance, THEN warranty that goods fit for particular purpose
32
Terms - warranties - limits
1. SOL: 4 yrs from tender of delivery
2. Buyer's inspection: no implied warranties as to obvious defects
3. Disclaimer: applies to implied warranties only; must be conspicuous or say "as is"; "w/ all faults"
4. Privity: lack of privity not defense
33
Performance - goods contract - obligations and remedies
1. Basic obligation: perfect tender
2. If less than perfect tender, buyer has right to keep and sue for damages or reject "all or any commercial unit" and sue for damages
- No right to reject in installment K unless "substantial impairment"
3. Sometimes seller has right to cure
- Time for performance not yet expired
- Seller had reasonable ground to believe would be acceptable, perhaps with a money allowance
34
Performance - goods contract - acceptance and consequences
Once accepted, can't reject
- Payment w/o opportunity to inspect not accept.
- If don't reject w/in r'ble time, it's acceptance
- Retention is acceptance
35
Performance - goods contract - acceptance - revocation
Can revoke acceptance if:
1. Nonconformity substantially impairs value
2. Excusable ignorance of grounds for revocation or reasonable reliance on seller's assurance of satisfaction
3. Revocation within a reasonable time after discovery of nonconformity
36
Remedies - reclamation from an insolvent buyer of goods
1. Buyer insolvent at time it received goods
2. Seller demands return of goods w/in 10 days of receipt (or w/in r'ble time if buyer made express representation of solvency before delivery)
3. Buyer still has goods at time of demand
37
Remedies - replevy from an insolvent seller of goods
Can replevy upon tendering full payment if:
1. Part payment by buyer
2. For identified goods
3. Seller becomes insolvent w/in 10 days of first payment
38
Excuse - other party's performance
1. Nonperformance
2. Anticipatory repudiation: unambiguous statement or conduct before performance due indicating that repudiating party will not perform
- Immediate claim for damages for breach, UNLESS non-repudiating party has completely performed; then must wait until performance due
- Can retract if no material change in position by other party; duty to perform reimposed but can be delayed until adequate assurance provided
3. If reasonable grounds for insecurity, can make written demand for adequate assurance and if commercially reasonable can stop performance until assurance received
39
Excuse - breach
1. Minor breach: if get substantial benefit of bargain, must perform but get damages
2. Material breach: if no substantial performance, no obligation to perform
3. Divisible contract exception
40
Excuse - condition
1. Strict compliance required for satisfaction of express condition
2. Benefited party can waive
3. Benefited party cannot hinder or interfere w/ other party's ability to satisfy
41
Excuse - rescission
- Parties may cancel by express agreement
- Ks must be executory on both sides: rescission itself is K & must be supported by consideration; here, giving up right to performance by other party
- Cannot rescind if 3PB rights have vested
42
Excuse - accord and satisfaction
- Accord: agreement in which party to exist K agrees to accept substitute performance
- Satisfaction: performance of accord
- Breach by debtor: creditor may sue on K or accord
- Breach by creditor (i.e., sues on original K): debtor may raise accord as equitable defense and ask suit to be dismiss OR wait for damages and then sue for breach of accord
43
Excuse - novation
Agreement between BOTH parties to an existing contract to the substitution of a new party, i.e., same performance, different party.
44
Excuse - destruction of subject matter
- Service K: depends if performance is impossible (K to repaint house; burns down) or just more difficult (K to build house; burns down); only impossible excused
- Goods K: do risk of loss - if risk on buyer, buyer pays; if on seller, buyer does not pay, gets damages if performance still possible (e.g., can procure substitute goods)
45
Excuse - death or physical incapacity
Does not make K obligations disappear
| - EXCEPTION: death of K party who is "special" person excuses performance
46
Excused - subsequent law or regulation
- If later law makes performance of K illegal, excuse by impossibility
- If later law makes mutually understood purpose of K illegal, excuse by frustration of purpose
47
Excuse - impossibility and impracticability
1. Impossibility: must be objectively impossible; K duties could not be performed by anyone
2. Impracticability: extreme and unreasonable difficulty/expense; nonoccurrence was a basic assumption of K parties
48
Excuse - frustration
1. Supervening act or event
2. Parties did not reasonably foresee
3. Purpose of K (almost) completely destroyed as a result
4. Both parties aware of purpose at time of K formation
49
Third-party beneficiary - types
- Intended vs. incidental: only intended have rights; look if - named in K; receives performance from promisor; has r'ship w/ promisee to indicate intent to benefit
- Creditor vs. donee: creditor if was a creditor of the promisee before K
50
Third-party beneficiary - vesting
1. 3PB manifests assents
2. 3PB materially changes positions in justifiable reliance ok K
3. 3PB brings suit to enforce K
51
Third-party beneficiary - who can sue?
1. 3PB can recover from promisor, subject to defenses promisor has against promisee
2. Promisee can recovery from promisor
3. Beneficiary cannot recover from promisee, unless creditor
--
Promisor: makes promise that benefits 3PB
Promisee: obtains promise that benefits 3PB
52
Assignment - definition
X and Y contract; Y assigns rights to X's performance to Z
- X: obligor
- Y: assignor
- Z: assignee
53
Assignment - restrictions - in contract
- Prohibition ("rights hereunder not assignable"): assignor is liable for breach, but assignee unaware of prohibition can still enforce assignment
- Invalidation ("all assignments of rights under this K void"): breach by assignor and no rights in assignee
54
Assignment - restrictions - if contract silent
Common law bars an assignment that substantially changes duties of obligor; typically, this is assignment of right to K performance other than right to payment
55
Assignment - how to effect
Assignor must manifest intent to immediately and completely transfer rights; writing usually not required
56
Assignment - revocability
1. Assignment for value not revocable
2. Gratuitous assignments revocable
- EXCEPTION: obligor has already performed; assignee can show detrimental reliance
57
Assignment - who can sue?
1. Assignee can recover from the obligor, subject to defenses obligor has against assignor
2. Assignor for consideration cannot recover from obligor, but can sue for breach of warranties:
- Right assigned actually exists
- Right assigned not subject to any then-existing defenses by obligor
- Assignor will do nothing after assignment to impair the value of assignment
58
Assignment - successive assignments
1. Gratuitous: last assignee generally wins
2. For value: first assignee wins
- EXCEPTIONS ("four horsemen" rule): subsequent assignee for value who does not know of earlier assignment prevails if first to obtain ONE of:
[i] payment; [ii] judgment; [iii] novation; [iv] indicia of ownership
59
Assignment - to whom is performance due?
- Payment by obligor to assignor is effective until obligor knows of assignment
- Modification agreements between obligor and assignor effective if obligor did not know of assignment
60
Delegation - definition
X and Y contract, with Y promising to perform for X; Y delegates duty to Z
- X: obligee
- Y: obligor/delegator
- Z: delegate
61
Delegation - restrictions
- Generally, contractual duties are delegable; limitations are very limited
- Delegations permitted unless: (1) contract prohibits delegations OR assignments or (2) "personal services contract" that calls for VERY SPECIAL skills.
62
Delegation - liability
1. Delegator always remains liable.
| 2. Delegate liable only if receives consideration from delegating party
63
Consideration - consideration substitutes
1. Payment to settle legal claim
2. Payment of debt barred by statute of limitations
3. Promissory estoppel (detrimental reliance)
