Contracts

Question 1

Applicable law

Answer 1

1. Article 2 of UCC
   - goods (movable)
   - merchant: deals in goods of the kind
2. Common law: not goods
3. Predominance test: both goods and services, look to predominant purpose of K as a whole

Question 2

Contract formation

Answer 2

1. Offer
   - expression of intent to enter into a contract
   - define terms (QTIPS: quantity, time, id parties, price, subject matter)
   - communicated to offeree
2. Irrevocable offers
   - UCC firm offers
   - - merchants
   - - signed writing
   - - 3-month max (if not supported by consideration)
   - option contract: consideration given
   - detrimental reliance
   - once performance (not preparation) starts for a unilateral K, or bilateral K indifferent as to the manner of acceptance
3. Acceptance: manifestation of asset to terms of offer
   - within reasonable time
   - only in response
   - C/L mirror image rule
   - UCC: shipment of nonconforming goods both acceptance and breach, unless:
   - - accommodation: seller gives notice of nonconforming shipment (buyer may accept/reject all)
4. Termination of power to accept
   - rejection
   - counteroffer (also a new offer)
   - revocation
   - lapse in time
   - death or incapacity of either party
   - destruction of subject matter
5. Mailbox rule
   - only to acceptance
   - exceptions:
   - - offer says otherwise
   - - option K: upon receipt
   - - both acceptance & rejection
   - – rejection 1st: whichever received 1st
   - – acceptance 1st: acceptance unless rejection received 1st and detrimental reliance
6. Battle of the forms (UCC)
   - added terms:
   - - 1 not a merchant: then proposal only
   - - both merchants: then add terms, unless:
   - – offer limited to its terms expressly
   - – material alteration
   - – objection within reasonable time
   - conflicting terms:
   - - knock-out rule
   - - UCC gap fillers
7. Consideration - bargained for exchange of legal value
   - illusory promise
   - requirements contracts: seller is exclusive source and promises to sell required amount to buyer
   - output contracts: buyer agrees to buy all of seller’s output
   - promissory estoppel
   - - promisor should reas expect to induce action or forbearance; and
   - - such action or forbearance is in fact induced.

Question 3

Defenses to formation

Answer 3

SUD FILM

1. SOF (MY LEGS)
   - marriage
   - year
   - land
   - executor
   - goods $500 or more (except SWAP: specially manufactured goods, written confirmation by merchs, admission in court, performance)
   - surety (debt of another), except “main purpose”
2. SOF writing requirement
   - essential terms
   - signed by party charged
   - exception: merchant’s confirming memo:
   - - 2 merchants
   - - 1 receives confirmation
   - - both are bound
   - - unless objection within 10 days
   - exception: promissory estoppel
   - exception: judicial admission
   - exception: performance
   - - land: full or part if unequivocally indicate K
   - - services: full performance only
   - - goods: specialty manufactured, goods paid or accepted
3. Unconscionability
4. Duress
5. Fraud/misrepresentation
   - fraud in the inducement: innocent party justifiably relied on misrepresentation
   - nonfraudulent misrep: K voidable if material + justifiable reliance
6. Illegality
7. Lack of capacity (except for necessities): infants, crazy, intoxicated, duress/undue influence
8. Mutual mistake
   - basic assumption
   - material effect
   - party voiding K did not assume the risk

Question 4

Contract terms

Answer 4

1. Parol evidence rule
   - partial integration
   - - PE not to contradict
   - - PE ok to supplement
   - total integration
   - - PE not to contradict
   - - PE not to supplement
2. PER exceptions:
   - subsequent communications (i.e. reformation, modification)
   - K formation defect evidence
   - collateral agreements
   - conditions precedent to K effectiveness
   - interpret ambiguous terms
   - - course of performance
   - - course of dealings
   - - usage of trade
3. Contract modification
   - C/L: mutual assent + consideration, unless unanticipated circumstances and fair + equitable
   - UCC: mutual assent + good faith (no consideration required)
   - 3P beneficiary
   - - intended (can sue)
   - - incidental (can’t sue)

Question 5

Breach of contract

Answer 5

1. Material v. minor
   - amount of benefit received
   - adequacy of compensation
   - extent of part performance
   - hardship to breaching party
   - negligent/willful behavior
   - likelihood breaching party will perform remainder of K
2. UCC: Perfect tender rule
   - reject the whole
   - accept the whole
   - accept a commercial unit
   - except: does not apply to installment Ks (must be substantial impairment of installment/K)
   - except: accommodation is a counteroffer (not a breach)
3. Seller’s right to cure (UCC)
   - notice + timely new tender
   - further time to cure if seller reasonably believed goods would be accepted
4. Divisible contract
   - agreed equivalents
   - operates as separate Ks
5. Anticipatory repudiation
   - unequivocal expression
   - won’t perform
   - before performance due
   - non-repudiating party can:
   - - sue immediately
   - - suspend performance
   - - urge performance
   - right to demand adequate assurances
   - - reasonable grounds for insecurity
   - - in writing
   - - ok to suspend performance pending assurances
6. Warranties
   - express
   - implied warranty of merchantability:
   - - merchant seller
   - - goods fit for the ordinary purpose for which such goods are used.
   - fitness for a particular purpose:
   - - any seller;
   - - has reason to know the particular use + buyer is relying; and
   - - buyer in fact relies.
   - implied warranty of title: any seller
   - implied warranty against infringement: merchant seller
   - implied good faith + fair dealings
7. Accord
   - agree to substitute performance
   - doesn’t discharge original K
8. Satisfaction
   - performance of the accord
   - discharges both Ks

Question 6

Defenses to enforcement

Answer 6

1. Formation defenses (other flashcard)
   - no mutual assent
   - lack of consideration
   - no writing and writing was required SOF (MY LEGS)
   - misrepresentation/fraud/duress
   - unconscionability
   - lack of capacity
   - illegality of contract
   - condition precedent not met
2. Impossibility/Impracticality
   - supervening, unforeseeable event
   - makes performance impossible/impractical (extremely and unreasonably difficult)
   - neither party assumed risk
3. Frustration of purpose
   - supervening, unforeseeable event
   - destroys party’s purpose for entering K
   - both parties know the purpose
   - frustration is total

Question 7

Remedies

Answer 7

1. Damages limitations
   - foreseeability
   - duty to mitigate
   - certainty
   - Goods:
   - - buyer: (K - market) or (cover - K) + consequential + incidental - $ saved b/c breach
   - - seller: (K - market), (K - resale), or lost profit (if seller has unlimited supply) + incidental - $ saved b/c breach
2. Expectation damages
   - as if K performed (benefit of the bargain)
3. Consequential damages
   - direct foreseeable consequences
   - could not be reasonably avoided
   - unique to plaintiff (i.e. lost profits)
4. Incidental damages: expenses related to sale of GOODS (inspection, storage, shipping)
5. Reliance damages
   - as if K was never made
   - if expectation damages too speculative
   - put P in the position would have been had the K never been formed
6. Liquidated damages
   - difficult to calculate
   - reasonable approximation of damages
   - only measure used if ok
7. Nominal damages: breach w/o actual loss
8. No punitive damages in K
9. Restitution (quasi-K, quantum meruit)
   - nonbreaching party must not have fully performed
   - value of benefit conferred to D or loss suffered by P
   - unfair to allow D to keep
   - when there is no K:
   - - P conferred a benefit;
   - - reasonable expectation of being compensated;
   - - D knew/should have known P’s expectation; and
   - - D unjustly enriched
10. Replevin (person prop or inability to cover)
11. Ejectment (real prop)
12. Reformation (rewrite K)
    - mistake
    - misrepresentation
13. Rescission (undo K)
    - mutual mistake
    - unilateral mistake if other party knew
    - unilateral mistake w/ extreme hardship outweighs other party’s expectations under K
    - misrepresentation of fact or law
    - other grounds: duress, undue influence, illegality, etc
14. Specific performance
    - K is valid
    - K conditions satisfied
    - inadequate legal remedy (never services)
    - - damages too speculative
    - - insolvent D
    - - multiplicity of suits
    - - property is unique
    - mutuality of performance
    - feasibility of enforcement
    - no defenses
    - - laches: delay prejudiced defendant
    - - unclean hands: P is also wrongful
    - - other K defenses

Question 8

Third party rights and duties

Answer 8

1. Only intended (not incidental) 3P beneficiaries have K rights:
   - specifically identified in K; and
   - receives performance directly from promisor; or
   - has relationship with the promisee to establish intent.
2. Only vested 3P beneficiaries can enforce K:
   - manifests assent to K
   - brings suit to enforce
   - material changes position in justified reliance
3. Assignment (transfer rights)
   - no consideration required
   - gratuitous assignment ok
   - assignee stands in shoes
   - can’t if material change
4. Assignment irrevokable if:
   - for value:
   - - for consideration; or
   - - for security/payment of preexisting debt
   - gratuitous:
   - - token chose (stock) delivered;
   - - assignment of simple chose (K right) put in writing;
   - - obligor already performed
   - - assignee detrimentally relied on assignment
5. Delegation
   - delegator remains liable
   - not allowed for:
   - - personal judgment and skill
   - - would change obligee’s expectancy
   - - special trust
   - - contractual restriction
6. Novation
   - obligee accepts new performance
   - terminates delegator liability

Question 9

Contract performance

Answer 9

1. Conditions: promise modifiers
   - precedent/subsequent
   - express: strict compliance
   - constructive: substantial compliance
2. Excuse of conditions (SWAN DIPE)
   - substantial performance of constructive condition
   - waiver
   - anticipatory repudiation (unequivocal)
   - noncooperation
   - divisibility of K (i.e. CL price per unit)
   - impossibility/impracticability/frustration: basic assumption, neither party assumed risk
   - - impossibility: can’t perform by anyone
   - - impracticability: extreme and unreas difficulty + nonoccurance basic assumption
   - - frustration:
   - – supervening act
   - – parties did not reasonably foresee
   - – purpose of K destroyed
   - – both parties knew purpose during K formation
   - prospective inability or unwillingness to perform (raise doubts)
   - estoppel

• actual breach

3. Discharge of performance 
IM FOR SANTI
- impossibility/impracticability
- modification of K
- frustration
- operation of law
- substitute K
- accord and satisfaction
- novation
- time (lapse)
- illegality

• performance/tender
• condition subsequent
• rescission
• cancellation
• release
• statute of limitations