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132 Cards in this Set
- Front
- Back
Contract Def.
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Legally Enforceable agreement
i) Express: Based on words (written or spoken) ii) Implied: Requires conduct |
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Quasi-Contract: Equitable remedy (3 rqmts)
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i)Plainitff conferred benefit
ii) Plainitff reasonably expected to be paid iii) Def. unjustly enriched if Plain. not paid |
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Bilateral K
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When acceptance of a K is open to both methods (express and implied)
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Unilateral K
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Offer EXPRESSLY requires performance as only method of acceptance
Includes prizes, awards, contests |
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Common Law is Applicable if:
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K deals with real estate or service
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Art 1 and 2 UCC is applicable
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K is for Sale of goods
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Mixed Contracts: UCC or common law?
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Most Importantr Test: If sale of goods is most important part of K, UCC applies
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EXCEPTION to Mixed Contract
'Most Important Test' |
Divisible Payment Exception:
-Use when payment is divided by goods vs. services -Apply UCC to goods, common law to rest |
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Offers: General rule
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Manifestation/intent to K
by words or conduct Objective test: would rp in oferee's position believe his assent created a K? |
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Offers and Material Terms: Common Law
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Offer need not contain all material terms
Real Estate Exception: Must include PRICE & DESCRIPTION |
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Offers: Material Terms, UCC
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K need not include price;
"offer is an offer if parties so intend" |
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Offers: Vague or Ambiguous Material Terms
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Offers with vague material terms invalid under UCC AND common law
(ex."a fair price") |
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Offers: Requirement/Output Contracts
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Quantity retermined by seller's outpurs or buyer's requirements generally valid
Exception: Limitations or increases must be reasonably proportionate |
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Non-Offers
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Price quotes are generally not offers (unless in response to specific inquiry)
Ads are not offers unless: (1)Reward (2)Specific quantity and specific person who can accept |
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Termination of Offers:
General |
Offer dies,can't be accepted if terminated.
5 ways to kill offer: 1. Time Lapse 2. Offeror's Words or Conduct 3. Irrevocable Offers(4 type) 4. Rejection of Offer(5 ways) 5. Death |
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Termination of Offers:
Time Lapse |
i) Time stated expires
ii)Reasonable time lapses Hint: 30 days+ probably a lapse. Watch for dates! |
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Termination of Offers:
Offeror's Words or Conduct |
i) DIRECT STATEMENT to offeree not willing/able to K
ii)CONDUCT that Offeree is AWARE OF that indicates offeror not willing/able to K Whether words or conduct, revocation of offer nmot effective until offeree RECEIVES IT. IF OFFER IS ACCEPTED, CANNOT BE REVOKED |
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Termination of Offers:
4 Types of Irrevocable Offers |
i)Options K's
ii) UCC 'Firm Offer' iii)Detrimental Reliance iv) Start of Preformance |
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Irrevocable Offers:
Option K's |
i)Promise to keep offer open made by Offeror
ii)Offeree give consideration |
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Irrevocable Offers::
UCC "Firm Offer" Rule |
i)K covered under UCC
ii)SIGNED WRITTEN PROMISE TO KEEP OFFER OPEN iii)Offeror is MERCHANT iv)Offer can be open for UP TO 3 MONTHS |
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Termination of Offers:
Time Lapse |
i) Time stated expires
ii)Reasonable time lapses Hint: 30 days+ probably a lapse. Watch for dates! |
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Termination of Offers:
Offeror's Words or Conduct |
i) DIRECT STATEMENT to offeree not willing/able to K
ii)CONDUCT that Offeree is AWARE OF that indicates offeror not willing/able to K Whether words or conduct, revocation of offer nmot effective until offeree RECEIVES IT. IF OFFER IS ACCEPTED, CANNOT BE REVOKED |
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Termination of Offers:
4 Types of Irrevocable Offers |
i)Options K's
ii) UCC 'Firm Offer' iii)Detrimental Reliance iv) Start of Preformance |
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Irrevocable Offers::
Option K's |
i)Promise to keep offer open made by Offeror
ii)Offeree give consideration |
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Irrevocable Offers:
UCC "Firm Offer" Rule |
i)K covered under UCC
ii)SIGNED WRITTEN PROMISE TO KEEP OFFER OPEN iii)Offeror is MERCHANT iv)Offer can be open for UP TO 3 MONTHS |
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Irrevocable Offers:
Detrimental Reliance |
(a)Offeree detrimentally relied on the offer
(b)Reliance was reasonably foreseeable Usually applies with general contractors and subcontractors (General uses sub’s bid to make General’s bid) |
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Irrevocable Offers:
Start of Performance |
(a)Unilateral contract
(b)Requires performance as acceptance (c)Offer irrevocable for a reasonable time to complete performance (d)Must be more than mere preparation (if preparation, use detrimental reliance argument) |
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Rejection of Offer: 5 ways
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1. Counter-offer
2. Conditional Acceptance 3. Additional Terms: Common Law (Mirror-Image Rule) 4. Additional Terms: UCC (Eliminates Mirror Image Rule 5. DEATH |
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Rejection of Offer:
Counteroffer |
Terminates offer and becomes new offer. Offeree cannot accept original offer once counteroffer made
Valid counter-offer: Look for no '?' in MBE hypo vs. *Bargaining* does not terminate original offer (look for a '?' in MBE hypo) |
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Rejection of Offer:
Conditional Acceptance |
Words of condition (if, provided, so long as, on condition that)
"Acceptance is expressly conditioned on these terms” |
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Rejection of Offer:
Additional Terms at Common Law (Mirror Image Rule) |
(a) Acceptance must be the mirror image of the offer
(b) Acceptance that adds new terms is a counter offer |
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Rejection of Offer:
Additional Terms in UCC |
UCC Eliminates Mirror Image Rule
(a)Issue Spotting (i)Offer to buy or sell goods (ii)Response adds additional terms (b)Is there a contract? (i)Response to offers that add terms are acceptances (seasonable expression of acceptance) (ii)“Acceptance is expressly conditioned on these terms” is not a contract (c)Is the term a part of the contract? (i)If parties are merchants yes unless (1) materially changes the offer or (2) offeror objects to the change (ii)If one or both are not merchants, additional term is a proposal and must be separately accepted or rejected |
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Rejection of Offer: Death
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Death of a party before acceptance terminates offer
Exception (a) Option contract (b) Part performance of offer to enter into unilateral contract |
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Acceptance: Who Can Accept
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i) Who Can Accept?
(1) Acceptance only by person who knows about the offer and is the person to whom it was made (2) Only way they can test is if there’s a reward |
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Acceptance:3 Posssibilities
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1. Offeree performs
2. Offeree begins to perform 3. Offeree promises to perform |
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Acceptance: Offeree Performs
(Notice Issue) |
(1) Acceptance depends on whether notice is required to accept
(2)Notice required if offeree has reason to believe that offeror will not learn of acceptance (look for offeror and offeree in different locations) (3)Notice not required if offer dispenses with notice requirement |
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Acceptance: Offeree Begins to Perform
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(1)Acceptance for bilateral contracts
(a)Where offer is open to method of acceptance E.g., O offers P to paint home for $1000; offer silent as to acceptance. P starts painting. P has accepted (2)Not acceptance for unilateral (a) Offer states that acceptance only by performance (b) Completion of performance is required (c) E.g., O offers P to paint home for $1000; offer says performance required for acceptance. P starts painting. P has not accepted |
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Acceptance: Offeree Promises to Perform
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(1) Most offers can be accepted by a promise to perform
(2) If offer states performance required, promise to perform is not enough for acceptance |
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Mailbox Rule
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Offeror and Offeree are at different locations and there are conflicting communications
(1)Offer invites acceptance by mail (i.e., offer was mailed, says so, or silent as to acceptance) (2)Acceptance effective when mailed (3)NOTE: Revocation of offer only effective when received by offeree (4)For multiple communications, rule is whichever gets there first controls |
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Seller Sends Wrong Goods under UCC
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Gen'l rule: If seller sends wrong goods, it acts as seller’s acceptance& a breach
(2)Accommodation Exception: Acts as a counter offer and no breach if (a) Seller sent goods as an accommodation and (b)Explains why he sent the wrong goods |
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Def: Consideration
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Bargained-for legal detriment
(a)“Bargained-for” means asked for by the promisor in exchange for promisor’s promise (b)“Legal detriment” means any detriment |
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4 Forms of Consideration
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(a) Performance
(b) Forbearance (c) Promise to Perform (d) Promise to Forbear |
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Illusory Promise
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Almost always a wrong answer
Promise in which the promisor has not committed herself in any manner, i.e., no new detriment (3) E.g., A agrees to sell car to B unless A changes his mind. That’s illusory. If the facts said “. . . unless A notifies B otherwise” would not be illusory |
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Past Consideration
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(1) General Rule
(a) Past consideration cannot be consideration, (can’t bargain for something that already happened: ex. A saved B’s life. C, B’s dad, promises to pay A $5000. Later, C changes his mind. Promise is not legally enforceable (2)Very Limited Exception (a) Promisor expressly requests something and (b) Promisor knows that promisee expects payment (c) E.g., C asks A to save B’s life. After A saves B’s life, C promises to pay A $5000. Later, C changes his mind. Promise is legally enforceable |
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Common Law: Preexisting Contractual or Statutory Duties
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Common Law General Rule
(a)Doing what you were already required to do is not consideration for a promise to do it (2)Exceptions to Common Law General Rule (a)Addition to or Change in Performance Exception (b)Unforeseen Difficulty so Severe Excuses Performance Ex: DJ's equipment gets rained on, doesn't work Third Party Promise to Pay for Preexisting Obligations or Duties are Enforceable |
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UCC Rule: Preexisting Contractual or Statutory Duties
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GOOD FAITH TEST for changes in existing sale of goods contract
E.g., A agrees to sell toys to B for $1000. Before delivery, A says he can’t do it for less than $1500 because of a shortage. B agrees to pay the $500. B’s promise is enforceable. |
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Promise to Forgive Balance of Debt
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(1)If debt is due and undisputed, part payment is not consideration for forgiving the debt
(2)If debt is not due, early payment is a new detriment |
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Written Promise to Pay Debt Barred by Technical Defense (Statute of Limitations): Consideration Substitute
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(1)Written Promise to satisfy obligation that is unenforceable because SOL has run, IS ENFORCEABLE WITHOUT CONISDERATION
(2) Elements (a)Existing debt (b)Can’t enforce it because of statute of limitations (c)In writing (d)Promise is to pay a new amount to satisfy the debt (usually less than the original debt) |
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Promissory Estoppel: Consideration Substitute
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(1)Use only if no other possible consideration
(2)Don’t choose this if it’s in the (A) slot (3) Elements (a) Promise (b) Reliance is reasonable, detrimental, and foreseeable (c) Enforcement necessary to avoid injustice (4) Distinguish Consideration (a) Parties ask each other to do something = consideration (b) Acts of reliance = promissory estoppel |
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Lack of Capacity:
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(1) Infants
(2) Mentally incompetent (3) Intoxicated unless other person knows ii) Consequences (1) Party without capacity can avoid or disaffirm the contract (2) Party without capacity affirms by retaining benefit after gaining capacity iii) Liability for Necessaries (1) Food, clothing, medical care, shelter (2) Liability based on quasi-contract law |
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Statute of Fraud: What K's are covered?
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1)Promise in Consideration of Marriage
2)Promises by Exec/Admin Pay Decedant's Debts Personally 3. Service K's Incapable of Being Performed w/in 1 year or Less 4. Transfers of Real Estate Interest (w/exception of leases of 1 year or less) 5) Sale of Goods for $500 or more. |
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Statute of Fraud: Promise in Consideration of Marriage
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(a) Not promise to marry
(b) E.g., H claims that W agreed to get rid of property before marriage. SOF applies |
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Statute of Frauds: Promises by Exec/Admin Pay
Decedant's Debts Personally |
Promise to pay obligation of decedent from personal funds
E.g., Funeral home says that Executor agreed to pay funeral home out of pocket. SOF applies |
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Statute of Frauds: Service K's Incapable of Being Performed w/in 1 year or Less
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(a) Specific Time Period (i.e., “3 years” = statute applies
(b) Specific Time of Performance (i.e., contract date is Jan. 1 1999; perform by Feb. 2000 = statute applies) (c) Tasks Excluded (i.e., nothing said about time): Focus on what might have happened with unlimited resources (d) Contracts “For Life” Excluded |
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Statute of Frauds: Transfers of Real Estate Interest
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Exception of leases of 1 year or less.
Make sure it is a TRANSFER of real estate, not just construction |
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Statute of Frauds:Guarantees (Answering for Debts of Others)
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a) “I will pay you” does not come within the statute of frauds
(b) “I will pay you if A doesn’t” comes within the statute of frauds (c) Usually a wrong answer on the MBE (d) Exception: Main purpose for the promise is to benefit the guarantor |
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Statute of Frauds: Satisfying the SOF Overview
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Performance
or Writing |
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Statute of Frauds: Satisfaction Through Performance: Service K's
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(i) Full performance satisfies the statute of frauds
(ii) Part Performance does not satisfy statute |
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Statute of Frauds: Satisfaction Through Performance: UCC K's
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i) Ordinary Goods
1.Delivered Goods: part performance satisfies the state 2.Undelivered goods: part performance does not satisfy (ii)Specially Manufactured Goods 1. Custom made goods and 2. Substantial beginning |
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Statute of Frauds: Satisfaction Through Performance: Real Estate Transfer
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(i) Full cash payment does not satisfy the statute of frauds
(ii) Part performance and two of the following satisfies: 1. Payment 2. Possession 3. Improvements |
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Writings that Satisfy the statute of frauds
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(a)Common Law
(i) All material terms: who and what? (ii) Signed by the party to be charged (b) UCC (i) Quantity: How many? (ii) Signed by the party to be charged (iii) Exception to Signature Requirement 1. Merchants and 2. Party claiming no contract receives a writing with the quantity term 3. Fails to respond within 10 days |
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Authorization to Enter into Contract for Someone Else: Equal Dignity Doctrine
(SOF side issue) |
Must be signed and in writing if the original contract must have been also, like due to SOF rqmt.
E.g., A sends B to sign a one year lease agreement for A. No written authorization requirement. If the lease agreement was for 2 years, need written authorization. |
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Contract Modification:
When is Written Modification Required (SOF side issue) |
(i)Look at the deal with the modification as a whole
(ii) If deal with the change is within statute, then modification must be in writing (iii) E.g., A leases building to B for one year. A claims that they later agreed to a three year lease. Modification must be in writing (time for contract more than a year now) (iv) E.g., A sells 600 toys to B for $600. B claims that they modified the price to $100. Modification need not be in writing because no longer $500 or more. |
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Modification Clause in Contracts
(SOF side issue) |
(i) Common Law
1. Disregard the writing 2. Ignore the modification clause (ii) UCC Rule: Modification clause is effective unless waived 3. Apply the Written Modification Rule |
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Illegality
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i)Illegal Subject Matter: agreement is void
ii)Legal subject matter but illegal purpose: agreement is enforceable by the person who did not know of the illegal purpose |
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Misrepresentation
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i) False Assertion of fact or b Concealment of facts
ii) Effect (1) Fraudulent or material misrepresentation of terms is voidable (2) Misrepresentation of nature of contract is void |
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Duress
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Improper threat to breach unless new deal made and
Other party has no reasonable alternative source of supply |
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Unconscionability
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i) Unfair surprise and oppressive terms
ii) At the time agreement made iii) Determined by the court |
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Ambiguity
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i) Material term open to at least two reasonable interpretations
ii) Each party attaches a different meaning to the term iii) Neither party knows or has reason to know that the term is open to two interpretations |
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Mutual Mistake of Fact
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(1)Both parties mistaken
-Mistaken as to what it is = no contract -Mistaken as to what it is worth = contract AND (2)Basic assumption of fact (3)Materially affects the agreed exchange |
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Unilateral Mistake of Fact
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General Rule: Party cannot avoid a contract for mistake made by only one party
Exceptions (a) Mistaken party can avoid contract for obvious mistakes known to the other party (b) Mistakes discovered before significant reliance by the other party |
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Vocabulary for Parol Evidence Rule: Integration, Partial, Complete, and Merger Clause
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i)Integration: final agreement
ii)Partial Integration: written and final, but incomplete iii)Complete Integration: written, final, and complete iv)Merger Clause: “This is the complete and final agreement of the parties” |
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Triggering Facts for Parol Evidence Rule
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i)Written contract that court finds is the final agreement and
(1)Oral statement made at the time the contract was signed OR (2) Earlier oral or written statements by the parties to the contract |
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Parol Evidence Scenario: Changing the Written Deal
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(1) Partial or complete integration
(2) General Rule: can’t change the written deal based on earlier agreements that are inconsistent with the terms of the contract (3)Exception: clerical errors |
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Parol Evidence Scenario: Establishing a Defense to the Enforcement of the Written Deal
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(1) Partial or complete
(2) Earlier words of parties to determine defenses like misrepresentation, fraud, duress |
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Parol Evidence Scenario: Explanatory Terms
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(1) Despite the parol evidence rule,
(2) Parol can be considered to resolve ambiguities in the written contract |
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Parol Evidence Scenario:
Adding to the Written Deal |
(1) Partial Integration: agreements with consistent additional terms admissible
(2) Complete Integration: agreements with terms that would naturally and normally be in a separate agreement are admissible |
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K Terms: Conduct & Course of Performance
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In order of Importanc
i)Course of Performance: Same Parties, Same Contract ii)Course of Dealing: Same Parties, different but similar contract iii)Custom & Usage: different but similar people, different but similar contract |
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K Terms: UCC Gap Fillers:
Delivery Obligations |
(1) No agreement
(a) Place of delivery is sellers place (b) Exception: Both parties know that the goods are some place else (in which case, this place would be place of delivery) (2) Agreement about Place of Delivery by Common Carrier: Seller’s Obligation (a) Shipment Contracts (i) Seller gets the goods to the carrier (ii) Makes reasonable arrangements for delivery (iii) Notifies the buyer (b) Destination Contracts (i) Obligation is complete when goods arrive at the buyer’s location (c) Determining Shipment or Destination (i) FOB Seller’s Location = Shipment (ii) FOB Buyer’s Location = Destination |
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K Terms: UCC Gap Fillers:
Risk of Loss |
K formed; before buyer gets goods; goods damaged/ destroyed; B and S not to blame)
(1) Agreement Controls (if there is one; if not, go through 2-4 below) (2) Any Breach: Breaching party has the risk of loss (3) Delivery by Common Carrier other than Seller: ROL shifts once seller completes delivery obligations (see above) (4) No Agreement, No Breach, No Delivery by Common Carrier (a) Merchant Seller: risk of loss shifts to buyer when buyer receives the goods (b) Non-merchant Seller: When seller tenders the goods (makes them available |
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Express Warranties of Quality
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(a) Words of promise, description, or facts
(b) Puffing excluded (i.e., opinions) (c) Samples and Models are express warranties warranting that the goods will be like the sample or model (d) Correlates with parol evidence rule |
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Implied Merchantability
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(a) Any merchant that deals with goods of that kind
(b) Goods fit for ordinary purpose |
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Implied Fitness
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(a) Buyer has particular purpose
(b) Relies on seller to select suitable goods (c) Seller has reason to know of purpose and reliance (d) Warrants that goods will fit the particular purpose |
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Warranty Disclaimers
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(a) Eliminates IMPLIED Warranties
(b) As is or with all faults (for both implied warranties) or (c) CONSPICUOUS language of disclaimer mentioning merchantability (for merchantability) |
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Warranty Limitations
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(a) Can limit implied and express warranties
(b) Test is unconscionability at the time of the contract (c) Limitation is prima facie unconscionable if breach of warranty of consumer goods that results in personal injury |
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UCC K Performance: General Rule and Exception
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i)General Rule: Seller must make perfect tender
ii) Cure: Seller gets opportunity to cure if: (1) Time of performance has not yet expired (sends wrong goods before deadline) or (2) Time of performance has expired and seller has reasonable grounds for believing that the improper tender would be acceptable |
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UCC Performance:
Rejection of Goods |
(1) Rejection must occur before acceptance (otherwise, must revoke acceptance)
(2) General Rule: no perfect tender = ability to reject (3) Exception: Installment contracts— (a) Contract requires or authorizes (b) Delivery in separate lots (c) Separately accepted |
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UCC Performance: Acceptance
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(1) Express Acceptance (“I accept”)
(2) Payment General Rule: Payment without opportunity for inspection is not acceptance (3) Exception: buyer retains good without objection after a opportunity for inspection (multiple weeks) (4) Effect: Buyer cannot reject if he accepts |
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UCC Performance: Revocation of Acceptance
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(1)Nonconformity substantially impairs the value of the goods
(2) Excusable ignorance and (3) Revocation comes within a reasonable time after discovery of nonconformity |
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UCC Performance:Payment
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(1) Cash unless otherwise agreed
(2) Buyer can pay by check (3) Seller can reject the check but must give buyer reasonable time to get cash |
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Conditions of Performance:
Terminology |
(1) Condition: Mutually agreed upon promise modifier
(2) True Condition: event beyond the influence of either party that affects duty to perform (3) Covenant: E.g., “Seller covenants that it will sail the next day” (4) Condition with Express Covenant: “Seller covenants that it will sail the next day and Buyer promises to pay if seller sails the next day” (5) Condition with Implied Covenant: “This sale is conditioned on B’s obtaining an 8% mortgage” (B implies a covenant to get an 8% mortgage) |
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Conditions of Performance:
Standard for Satisfying Express Condition |
(1) General Rule: Strict compliance with the condition
(2) Exception: Condition based on approval by one of the contracting parties (a) Satisfied if reasonable person would approve (b) Exception: art or other matters that are inherently discretionary |
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Excusing Express Condition
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(1) Estoppel
(a) Identify the person who benefits from or is protected by condition (b) See if that person gave up the benefit or protection with a statement before the condition was to occur and requires a change of position (2) Waiver (a) Identify the person who benefits from or is protected by condition (b) See if that person gave up the benefit or protection with a statement after the condition was to occur and does not require a change of position |
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Constructive Condition
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(1) Identification
(a) Keyed to the order of performance (b) E.g., silent as to the time of payment: A goes to get a haircut. Completing the haircut is a constructive condition to payment. (2) Rule: Substantial performance satisfies the condition (compare express condition, where strict compliance is required) (3) Exception: Divisible Contract (a) Divides performance of each party into the same number of parts (b) Substantial performance applied to each divisible part of the contract |
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5 EXCUSES OF NONPERFORMANCE
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1. Excuse by Reason of Breach
2. Anticipatory Repudiation 3. Inability to Perform 4. Excuse by Later Contract 5. Excuse by Later Unforeseen Event |
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Excuse of Non-Performance: By Reason of Breach
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i) Sale of Goods: perfect tender rule
ii) Common Law: Material Breach (question of fact) |
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Excuse of Non-Performance: Anticipatory Repudiation
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(1) Unambiguous statement
(2) Repudiating party will not perform (3) Mad before time that performance due (4) Excuses non-repudiating party’s duty to perform and give immediate claim for damages unless non-repudiating party already performed (5) Can be retracted if timely. If timely, performance can be delayed until adequate assurance is provided |
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Excuse of Non-Performance: Inability to Perform
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(1) Agreement for services in exchange for something other than money
(2) Before performance, the thing is gone (3) Performance excused for party that was going to get the thing |
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Excuse by Later Contract:
Rescission (Cancellation) |
(1) Mutual rescission before performance ends excuses performance
(2) Mutual rescission after performance ends does not excuse performance |
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Excuse by Later Contract: Accord and Satisfaction (substituted performance)
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(1) Accord: agreement to an existing obligation to accept different performance to satisfy the existing obligation
(2) Satisfaction: performing the newly agreed performance to fulfill the obligation (3) Accord Alone: Suspends enforcement of the original obligation to provide time to perform the accord (4) No Satisfaction: Claimant can sue under the old obligation or the accord, BUT NOT BOTH |
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Excuse by Later Contract:
Modification(Substituted agreement) |
(1) Mutual agreement
(2) Accept a different agreement to satisfy an existing obligation |
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Excuse by Later Contract: Novation
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iv) Novation (substituted party)
(1) Mutual agreement (2) Substitute a new party (3) Performs the same performance (4) Excuses the party that was substituted |
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Excuse by Later Unforeseen Event
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(1) Event after contract formation but before complete performance
(2) Unforeseen (3) Makes performance impossible, commercially impracticable or frustrates the purpose of the performance (4) Unforeseen event never excuses buyer’s performance if the buyer has the risk of loss |
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Excuse by Death
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(i)Death of a party to contract after formation does not excuse performance unless decedent was a special person
(2) E.g., hired notably architect to design building and he dies. Performance excused. |
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Excuse by Subsequent law or regulation
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(1) Later law makes performance of contract illegal = excuse by impossibility
(2) Later law makes mutually understood purpose of contract illegal = excuse by frustration |
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Damages: Punitive and Liquidation
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i) NO PUNITIVE DAMAGES (always a wrong answer)
ii) Liquidated Damages (1) Amount of possible damages for later breach is difficult to determine (2) Provision is a reasonable forecast of possible damages (3) E.g., single sum liquidation provision is suspect |
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General Damages Approach
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(1) Who’s the P?
(2) What would P receive if contract was performed? (3)What did actually get? |
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Damages: General Rule
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(1) Expectation interests of the P
(2) Put the P in a position she would have been had the contract been performed |
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Incidental Damages
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(1) Costs incurred in dealing with the breach
E.g., costs of finding replacement |
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Foreseeable Consequential Damages are SPECIAL DAMAGES
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(1) Special damages where LOSS IS SPECIFIC to THIS PARTICULAR P
(2) Must be reasonably contemplated by both parties at the time of the contract |
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UCC: Damages
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i)Seller breach, buyer keeps goods:
Fair market value if perfect tender – fair market value as delivered ii) Seller breach, seller has the goods: Replacement price – contract price iii) Buyer breaches, buyer has the goods: Seller gets contract price iv) Buyer breaches, seller has the goods: Contract price – market price and PROVABLE lost profits (1) Lost Profits (a) Regular inventory (b) Breach followed by resale at the same price (c) Provable lost profit is recoverable |
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Equitable Remedy: Specific Performance
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(1) Always specific
performance for real estate (2) Specific performance for goods if (a) Unique goods (b) Antiques, art, custom-made goods (3)Contracts for Services (a)No specific performance (b)Injunction to stop party from competing: negative specific performance |
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Equitable Remedy:Reformation
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(Almost Always Wrong Answer)
(1) For mistake (clerical errors) or (2) Fraudulent misrepresentation |
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Equitable Remedy: Adequate Assurance of Future Performance
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(1) One party learns something after the contract
(2) Reasonable grounds for insecurity about the other party’s performance (3) Written demand for adequate assurance |
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Equitable Remedy: Reclamation
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(1) Right of unpaid seller to get goods back from buyer if
(a) Buyer is insolvent at the time he receives the goods (b) Seller demands return (i) Within 10 days of receipt or (ii) Reasonable time if buyer expressly said he was insolvent before delivery (c) Buyer still has the goods at the time of demand |
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Good Faith Purchasers
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(1) Owner leaves goods with seller who sells goods of that kind
(2) Seller wrongfully sells the goods to third party (3) Owner can’t sue good faith purchaser |
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Third Party Beneficiaries:
Terminology |
(1) Third party beneficiary contract:
two parties contracting with the intent of benefiting a third party (e.g., insurance policies) (2) Third party beneficiary: not a party to the contract BUT ABLE TO ENFORCE! (3) Promisor: person who makes the promise that benefits the third party (e.g., insurance company) (4) Promisee: person who obtains the promisee that benefits the third party (e.g., policy holder) (5) Intended beneficiary: named beneficiary with contract rights (6) Creditor beneficiary: Promisee owes the beneficiary money (7) Donor beneficiary: all others (this is usually the case) |
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Third Party Beneficiaries:
Cancellation or Modification |
(1) Can’t cancel or modify after beneficiary knows about the contract
(2) If the rights have vested, contract can’t be modified or cancelled without consent of beneficiary or the contract provides otherwise |
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Third Party Beneficiaries: Who Can Sue?
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(1) Beneficiary can sue promisor
(2) Promisee can sue promisor (3) Donee beneficiary cannot sue promisee but creditor beneficiary can sue on the pre-existing debt |
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Third Party Beneficiaries:
Defenses to Lawsuit |
(1) If beneficiary sues promisor, promisor can assert defenses it has against promisee
(2) E.g., policy holder doesn’t pay; beneficiary sues insurance company; company can defend by saying promisee didn’t pay |
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Third Parties: Assignments
(define assignment, assignee/assignor, obligor) |
Assignment: transfer of rights under contract in two steps: (1) contract between only two parties; (2) one of the parties later transfers rights under that contract to a third party
(2) Assignor: transfers rights (3) Assignee: not a party but able to enforce (4) Obligor: the other party to the contract |
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Third Parties: Assignments:
Limitations by Contract |
(1) Prohibition: Clause takes away right to assign but not the power to assign. Assignee can still enforce if he did not know about the prohibition (“Rights hereunder are not assignable”)
(2) Invalidation: Clause makes any assignment void (“Assignments are void”) |
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Third Parties: Assignments:
Limitations under Common Law |
(1) Assignment invalid if it substantially changes the duties of the obligor
(2) Assignment of the right to payment is generally ok (3) Assignment of other performance rights generally not ok |
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Third Parties:Requirements to Assign
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(1) Language of present assignment
(2) 'I assign'is sufficient; “I promise to assign” or something similar is no good (3)NO CONSIDERATION is required |
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Third Parties:Rights of Assignee
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(1) Assignee can sue the obligor
(2) Obligor has the same defenses against the assignee as it would have against the assignor (3) Obligor can continue to pay assignor until obligor learns of the assignment |
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Third Parties:Multiple Assigments
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(1) Gratuitous Assignments: Last assignee wins
(2) Assignments for Consideration: First assignee for consideration wins (3) Warranty: Assignor makes warranty that the rights assigned are assignable and enforceable |
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Third Parties: Delegation of Duties Def.
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Def: Party to a contract transfers work under that contract to a third party
E.g., P contracts to paint O’s house for $1000. P and X agree that X will paint O’s house |
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Third Parties:
Assignment vs. Delegation |
(1) Assignment: Party gets rights to payment or performance
(2) Delegation: Party gets work to do (3) E.g., P contracts to paint O’s house for $1000. P and X agree that X will paint O’s house. X will get the $1000 from O. This is both an assignment and a delegation. |
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Third Parties: Delegable duties
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(1) General Rule: contractual duties are delegable
(2) Exception (a) Contract prohibits delegation (b) Contract prohibits assignments (c) Contract calls for very special skills (d) Contract calls for very special reputation |
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Third Parties:Consequences of Delegation
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(1) Delegating party always remains liable
(2) Delegatee liable only if she receives consideration from delegating party (3) Delegation and assignment combined can create a third party beneficiary relationship |
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Third Party Beneficiary Quick Rules/Analysis
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i) Did the Right Vests?
(1) Detrimental reliance (2) 3d party accepts in a manner expressly stated by the agreement (3) 3d party files lawsuit ii) Creditor or Donee Beneficiary? (1) Facts are silent, donee beneficiary (2) Donee beneficiary can only sue promisor; Creditor beneficiary can sue promisee iii) 3d party has no greater rights than the original parties |
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Assignment and Delegation Quick Rules/Analysis
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i)“Assign contract” = assignment and delegation;
2) “I assign” = assignment; read the facts for delegation 3. When rights are assigned, assignor cannot receive further benefits 4. When duties are delegated, delegating party is secondarily liable |