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152 Cards in this Set
- Front
- Back
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CONTRACTS
Governing law |
The Uniform Commercial Code governs transactions dealing in goods, which are all things moveable and tangible at time of identification to the contract. The common law governs all other contracts.
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CONTRACT
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A valid contract requires mutual assent (offer and acceptance), consideration and no defenses to formation.
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MUTUAL ASSENT
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The process in which parties enter into a contract and agree to the same terms of the transaction. This takes the form of offer and acceptance.
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MUTUAL ASSENT UCC
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The UCC is more liberal than the common law in determining mutual assent. The UCC provides that
1. a sale of goods may be in any manner to show agreement, including conduct that recognizes a contract 2. moment of making the contract need not be shown and 3. if one or more terms are left open, there is a contract, if the parties intended a contract, and there is some reasonable basis for giving a remedy |
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OFFER
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An offer is a manifestation of present contractural intent that is definite and certain in its terms so as to create a power of acceptance in an ascertainable offeree.
1. Intent to contract -- objective test 2. content -- certain and definite as to parties, price, subject matter, time, place and quantity (cannot be implied) 3. communicated to the offeree -- objective test |
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MERCHANTS
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A person who deals in goods of the kind or who holds himself out as having knowledge or skill peculiar to the practices or goods involved in the transaction
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TEST FOR MUTUAL ASSENT
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Would a reasonable person, after reviewing the facts, conclude that the parties manifested present contractual intent so as to bind themselves in a contract?
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ACCEPTANCE
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The unequivocal assent to the terms of the offer and is properly communicated to the offeror. The offeror may dictate the means and effective times for communication between the parties.
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REJECTION
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Rejection is the refusal of the offer and is communicated to the offeror. Rejection is good upon receipt.
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MAILBOX RULE
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If the offeror does not specify, acceptance is good when dispatched by “authorized means.” If acceptance is dispatch, and then rejection is dispatched, there is a contract unless the rejection arrives first and the offeror relies on the rejection. If rejection is dispatched and then acceptance is dispatched, the first to be received by offeror controls. The Mailbox Rule is suspended because of the prior rejection.
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MAILBOX RULE AUTHORIZED MEANS
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Authorized means is the same means by which the offer was made or faster means.
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MAILBOX RULE UNAUTHORIZED MEANS
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If the acceptance is sent by unauthorized means, it is not good until received by the offeror. Recipt means actual recipt by the offeror or to a place where the offeror would ordinarily receive communications or the proper agent or employer of the offeror.
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KNOWLEDGE OF OFFER
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The offeree must know of the offer and intend to accept the offer. There is neither mutual assent nor consideration if either is lacking.
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NOTICE OF ACCEPTANCE (bilateral offer)
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In a bilateral offer, the return promise is the notice of acceptance. The offeree may also commence performance in a bilateral offer and this is an acceptance if the offeror knows of the performance and does not object to the performance.
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NOTICE OF ACCEPTANCE acceptance (unilateral offer)
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Acceptance is the requested return performance unless notice was required or the performance is in such a place or time that the offeror would not know performance had begun.
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REVOCATION
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Revocation is the withdrawal of the offer by the offeror that is communicated to the offerree. The communication may be by any reliable sources (indirect revocation). The common law rule is that an offer may be revoked at any time, even if the offeror said he would not revoke it.
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LAPSE OF AN OFFER
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The offer will terminate upon the date or days state in the offer. Unless stated otherwise, the time runs from the date the offer was made, not the date it was received. If no time stated, it lapses in a reasonable time, based on price volatily and other factors.
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COUNTEROFFER
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The offeree terminates the offer by making a “new” offer.
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OFFER
Death or incapacity of the offeror or offeree |
If negotiations were pending, the death or incapacity (usually mental) of either party will terminate the offer. If the contract was formed, it is enforceable through the estate of the deceased.
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OFFER
Supervening illegality |
If, after the commencement of the negotiations, a law is passed that make the transaction illegal, the offer terminates.
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OFFER
Destruction of the subject matter |
If before acceptance, the subject matter is destroyed, the offer terminates.
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UNILATERAL OFFER
Revocation |
Courts differ on how a unilateral offer can be revoked. The There The majority view is an option contract is created when performance begins. The California view is that the offer becomes bilateral upon commencement of performance.
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OFFER
Option contracts |
Option contracts are “paid for offers” to enter into a secondary agreement and are not revocable. Once an option offer is accepted, there is a contract. Some courts require an actual exchange of consideration; others say a recitation of fair consideration is sufficient.
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FIRM OFFER
UCC Merchants |
An offer, in a signed writing by a merchant, dealing in goods, is not revocable if assurances are given that the offer will be left open. The time limit is the stated time but no longer than three months. If the assurance comes from the offeree, it must be signed by the offeror.
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NON-CONFORMING GOODS
UCC |
Shipment of goods not responsive to the offer (non-conforming goods) though obviously equivocal, is not a rejection and does not terminate the offer. It ats as an acceptance by the offeree, unless it is shipped as an accommodation. If so, the goods act as a counteroffer and may be accepted or rejected. Acceptance is effective upon shipment (performance) or a promise to ship. If the buyer accepts nonconforming goods, the buyer may recover the difference between the value the goods would have had if they had been what he wanted and their actual value.
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DIFFERENT AND ADDITIONAL TERMS
Non-merchants |
In goods, additional or different terms in the acceptance or confirmation, although equivocal, is not a rejection and does not terminate the offer, as it would at common law. If the parties are not merchants, the additional or different terms are mere proposals and do not become part of the contract unless accepted by the offeree.
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CONDITIONAL ACCEPTANCE OF ADDITIONAL TERSM
For non-merchants and merchants alike |
If acceptance is made conditional on agreeing to the additional or different terms, then there is a counteroffer that may be accepted or rejected by the offeror. If not accepted, they do not become part of the contract.
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DIFFERENT OR ADDITIONAL TERMS
Merchants |
The additional or different terms become part of the offer unless
1. the offer precludes any additional terms 2. the additional terms would materially alter the contract or 3. the additional or different terms were objected to, or are objected to, within a reasonable time |
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MISTAKEN IN FORMATION
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Mistake is a sate of mind not in accord with the facts.
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MUTUAL MISTAKE
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Both the offeror and offeree are mistaken. There is no contract because there is no mutual assent,. Both parties are not agreeing to the same terms.
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UNILATERAL MISTAKE
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No contract if the party asserting the contract knew or should have known about the mistake as there is no mutual assent. If the non-mistaken party did not know nor should have known of the mistake, there is a contract on the terms understood by the non-mistaken party.
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UNILATERAL MISTAKE (California view)
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Relifef will be granted for a unilateral mistake against the non-mistaken party if 1) the mistaken party was not neglectful of a legal duty 2) the non-mistaken party can be restored to the status quo 3) there is prompt notice of the mistake to the non-mistaken party 4) there is restoration of anything of value to the non-mistaken party and 5) enforcement of the mistaken agreement would be unconscionable
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CONSIDERATION
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Consideration is a legal detriment incurred by the promisee as a result of a bargained-f0r exchange between the promisor and promissee. Detriment is doing that which one is not already obligated to do or foregoing that which one is legally entitled to do.
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BENEFIT
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Receiving that which one is not otherwise entitled to receive
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GIFT PROMISE
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There is no consideration for a gift promise as there is no expectation by the promisor that the promise will give anything in exchange.
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ADEQUACY OF CONSIDERATION
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Generally the law is not concerned with an unequal exchange unless it so lopsided as to raise gift intent instead of contractual intent.
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PRE-EXISTING DUTY RULE
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There is no consideration if one, for an additional exchange in the same transaction, is only doing that which one is already obligated to do. There is no detriment.
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PRE-EXISTING DUTY RULE
Exceptions |
The resolution of a “disputed claim” may provide consideration. The payment of part of a debt to discharge the full debt has no consideration (Foakes v. Beer) because one is already obligated to pay the debt. But if a change in the terms is made, there may be consideration.
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PAST CONSIDERATION
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There is no consideration for an event that has already occurred because there can’t be a bargained-for exchange.
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MORAL CONSIDERATION
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An agreement to compensate for a previous ‘moral obligation’ lack consideration as the even its in the past and was performed without the expectation of compensation.
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ILLUSORY PROMISES
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If the terms of an agreement allow “escape” by one party from the obligation, there is no consideration. But if the promise depends upon an event outside of the party’s control, it may not be illusory
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NOMINAL OR SHAM CONSIDERATION
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If the exchange is a mere recital of consideration, without any real detriment or bargained-for element, there is no consideration.
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RESOLUTION OF A DISPUTED CLAIM
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There is no consideration for a patently invalid claim. But there is consideration for an invalid claim if the holder of the claim has a good faith belief in its validity and there is some factual basis for this belief.
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RECISSION
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If a contract is yet to be performed, or partly performed, there is consideration for the recission of the contract. The rationale is theat each party is giving up their right to enforce the contract. Both parties must want the recission. If the contract is fully performed on one side, there is no consideration as nop detriment is incurred.
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REQUIREMENTS AND OUTPUT CONTRACTS
UCC |
A requirements contract is when one party agrees to buy all it needs of a particular item from one supplier. An output contract is when one party agrees to sell all of its production to one source. Under common law, there was no consideration. Modernly, there is consideration for requirements and output contracts as well as “exclusive dealings” if 1) the parties don’t demand a performance dispoportionate to the estimated amount or the “normal” amount 2) the agreements are exercised in good faith, which includes going out of business if done in good faith.
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CONSIDERATION
Promissory estoppel |
At common law, a gratuitous promise (no contract intended), which the promisor should realize will induce reliance by the promisee or a third person, will be enforced if necessary to avoid injustice if there is reasonable reliance. The remedy is usually limited to the reliance.
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CONSIDERATION
Obligations barred by bankruptcy or statute of limitations |
In most states, my statutes, a new promise to pay a time-barred obligation or a new promise to pay a bankrupt debt is valid without consideration. Most states require a writing and enforcement is limited to the terms og the new promise. Under common law, there would be no consideration.
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QUASI-CONTRACT
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If a party has exchanged something of value during the bargaining process but formation fails due to a lack of mutal assent or consideration, the “out of pocket” party may seek restitution in quasi contract to avoid unjust enrichment. If the exchange were for services, the restitution is “quantum meruit” to avoid unjust enrichment.
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STATUTE OF FRAUDS
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Contracts that must be in wrriting and signed by the party to be charged:
1. a promise in consideration of marriage 2. real property 3. surety contracts to guarantee the debt of another unless the “main purpose” doctrine applies 4. bilateral contracts that can’t be performed within one year of the making 5. contracts for the sale of goods of $500 or more. |
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STATUTE OF FRAUDS (California)
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California has additional statutes for 6) agreements which can’t be performed within the life of the promisor 7) real property agents authority 8) non-consumer loans of more than $100,000 and 9) authority of agents dealing in subjects within the Statute of Frauds (equal dignities rule)
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SOF: Real property
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A writing is required for any interested in real property greater than a one-year lease.
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SOF: Surety contracts
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If a promisor, who has no obligation to the creditor, promises to pay the creditor if the debtor or obligor fails to pay or perform, the agreement is within the Statute of Frauds and must be in writing. If the promise is made to the debtor and not the creditor, or if the primary purpose of the promisor is to secure some benefit for himself (the main purpose doctrine), it falls outside the Statute of Frauds.
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SOF: One year
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A contract that can be performed within one year (even if not very likely or fulfilled by someone’s death) is not within the Statute.
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SOF: Marriage
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Does not apply to promises to marry but to promises in consideration of marriage such as prenuptial and marital settlement agreements.
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SOF: Sale of goods of $500
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Must be in writing but a missing material term is not fatal, but enforcement is limited to the quantity sates.
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SOF: Custom goods
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No writing is required for specially manufactured goods nor for goods received and accepted or accepted and paid for.
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DEFENSE TO FORMATION
Lack of legal capacity |
Infants’ contracts are voidable. Infants can affirm or disaffirm their contracts at anytime during the infant’s minority or a reasonable time after reaching majority Infants are liable in quasi-contract for necessities.
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DEFENSE TO FORMATION
Duress |
Duress is wrongful coercion. If one party wrongfully places the other contracting party in a position of potential financial loss and then extracts a promise for an additional exchange, the contract is avoidable if the promise would have been given by reasonable person to avoid the loss. The promise lacks mutual assent.
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DURESS
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Duress is also present if there is a threat of violence, or an abuse of a legal right for an improper purpose, or a threat to breach the contract without a good faith belief to breach.
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DEFENSE TO FORMATION
Mistake |
Many jurisdictions allow avoidance of a contract for a unilateral mistake even if the other party is not chargeable with knowledge of the mistake. The requisites are 1) prompt notification of the mistake 2) the mistake is “innocent,” such a clerical error 3) there is no hardship on the other party 4) and it would be unconscionable to enforce the mistaken contract.
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DEFENSE TO FORMATION
Illegality |
If the exchange in the contract, or the purpose of the contract, is illegal the contract is void or voidable, depending upon the seriousness of the transgressions and the relative culpabilities of the parties.
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ILLEGALITY – IN PARI DELICTO
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If both parties are in pari delicto, (each equally culpable), the law will not intercede to aid either party. The contract is void and the parties will be left in their respective positions even if it results in a windfall to one of the parties (such as a contract to bribe someone where the would-be bribe payer pockets the money). A minority of jurisdictions allows recovery if there is repentance before the illegal performance and the transgression is not malum in se.
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ILLEGALITY – NOT MALUM IN SE
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If the illegality is not malum in se, but in violation of a regulatory or revenue statute (malum prohibitum), quasi-contractual recovery may be allowed if the parties are not in pari delicto.
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BLUE PENCIL RULE
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Divisibility of a contract may be available if only part of the contract is illegal and the illegal part is not against good morals. The court may strike the illegal part if the rest of the contract can be enforced.If the statute provides for the protection of a designated group, such as minimum wage earners, the general rule is that the protect class can’t be in pari delicto in an agreement to circumvent the protection, as that would defeat the purpose of the statute.
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DEFENSE TO FORMATION
Undue influence |
The defense is unacceptable persuasion. The defense may be available in the exploitation of a relationship of trust, such as fiduciary relationship, or taking advantage of aperson when the actor is in a position of dominance over a vulnerable person.
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DEFENSE TO FORMATION
Misrepresentation |
Misrepresentation is an assertion, by word or conduct, not in accord with the facts. It can be through
1. actual fraud 2. concealment 3. non-disclosure and 4. negligent misrepresentation |
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INTENTIONAL MISREPRESENTATION (ACTUAL FRAUD)
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Actual fraud has five elements: 1) a false representation of a material fact (not an opinion, unless by an expert) 2) the false representation is done with knowledge of its falsity or a reckless disregard of the truth 3) the false representation is made to induce reliance 4) the person to whom the representation was made justifiably relied on it and 5) the reliance results in damages
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CONCEALMENT
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Same elements as fraud except the falsity is hidden
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NON-DISCLOSURE
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The failure to inform when there is an affirmative duty to disclose a material fact
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NEGLIGENT MISREPRESENATION
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Same elements as actual fraud except that the representation is made without sufficient information to warrant a representation A “boiler plate” recitation that there are “no other representations,” etc. does not bar an assertion of misrepresentation.
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FRAUD IN THE FACTUM
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The procurement of a signature on a document that is materially different from the representation. It renders the agreement void if a reasonable person would have unknowingly signed the document.
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DEFENSE TO FORMATION
Unconscionability |
Unconscionability is the absence of meaningful choice on the part of one party, together with contract terms that are unreasonably favorable to the other party. The usual test for unconscionabilty requires both a procedural unfairness, such as unequal bargaining power, and substantive unfairness, such as oppressive terms.
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DEFENSE TO FORMATION
Unconscionability UCC |
In goods transactions, unconscionability is defined as so one-sided, in view of commercial standards at the time of formation, so to unconscionable.” The UCC view is measured by the market norms for the particular goods and is more liberal than the common law. The offending portion of the agreement may be stricken if the rest can be enforced.
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PERFECT TENDER RULE – UCC
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Under the UCC, the seller must tender goods conforming in every respect to the contract. If there is no “perfect tender,” there is a breach and the buyer may:
1. reject the whole 2. accept the whole 3. accept any commercial unit or units and reject the rest. The rejection of goods must be in a reasonable time and the buyer may “cure” the imperfect tender by giving notice of intention to cure and curing before the time for the performance is due. |
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INSTALLMENT CONTRACTS –UCC
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If the contract calls for several deliveries, the contract is usually divisible and perfect tender rule does not apply. Substantial performance may be available and the buyer has the right to reject an entire installment of goods if defective or the entire contract if one delivery is an indicator that all the goods would be defective.
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REVOCATION OF ACCEPTANCE -- UCC
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After receipt of goods, the buyer may revoke his acceptance of goods within a reasonable time, if the non-conformity of the goods substantially impairs the value of the goods, and the goods were accepted on the assumption the seller would cure the non-conformity or if the acceptance was caused by the difficulty of discovering the non-conformity.
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RISK OF LOSS -- UCC
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If the contract specifies the risk of loss, that controls. Absent an agreement and absent a breach, the risk of loss passes to the buyer when the goods are delivered to the carrier if the seller is not required to deliver to a particular place. If the seller is to deliver to a place, the risk passes to the buyer at that particular place.
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RIGHT TO INSPECT
UCC |
The buyer has right to inspect the goods at a reasonable time and place. If the buyer rejects the goods or evokes acceptance, the buyer must hold and protect the goods for a reasonable time for the seller to remove them.
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OBLIGATION TO PRESERVE GOODS
UCC |
The buyer must obey any reasonable request from the seller and even to dispose of the goods in the buyer’s control if the goods are perishable or would speedily decline in value and the seller has no business or agent in that market site or if the buyer is a merchant in those kind of goods.
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CONDITIONS
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A condition is a fact, other than the lapse of time, the happening or non-happening of which creates or extinguishes a duty on the part of the promisor.
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CONDITION
Express |
Express conditions are explicitly stated in the contract and must be completely satisfied.
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CONDITION
Implied-in-fact |
Implied-in-fact conditions are those that are inferrable form the contract or as matters of good faith and cooperation. The test is whether a reasonable person would believe that the parties contracted with the understanding that those facts existed?
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CONDITIONS
Implied-in-law |
Implied-in-law conditions are imposed by law to provide a logical sequence of performance when the parties fail to specify
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CONDITION
Precedent |
A condition precedent is one that must occur before there is a duty to execute the promise.
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CONDITION
Concurrent |
Each performance is dependent upon the other and neither party has a duty to perform until the other party tenders performance.
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CONDITION
Subsequent |
If a condition subsequent occurs, a present duty ceases.
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FAILURE OF CONDITION
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If an express condition fails to occur, there is no duty to perform.
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CONDITION SATISFIED OR EXCUSED
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If the express condition is satisfied or excused, the condition no longer protects the promise and the promise must be performed or discharged.
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NINE WAYS TO EXCUSE A CONDITION
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They are:
1. material breach 2. waiver 3. election 4. estoppel 5. prevention 6. avoidance of forfeiture 7. impossibility 8. divisibility and 9. substantial performance |
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BREACH
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If the promise is no longer protected by a condition, the promise is now a duty and must be performed unless the it is otherwise discharged. If the duty is not discharged, there is breach.
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MATERIAL BREACH
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If a party is in material breach, any conditions that were protecting the party are excused and the promise is now an absolute duty.
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MINOR BREACH
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The same factors for material breach are analyzed, but a different conclusion is reached, and the effect is to give an immediate remedy for the part of the contract not performed and a temporary suspension of the counter-performance but the balance of the contract must be performed.
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DISCHARGE OF DUTIES
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Promises that are no longer protected by conditions are duties that must be discharged. The effect of discharge of a promise is to avoid what otherwise would be a breach of promise.
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DEFENSE TO BREACH
Impossibility |
A duty can be discharged if
1. the performance became objectively impossible 2. and the risk of the event that occurred was not allocated to either party when the contract was formed If the impossibility is only temporary, duty to perform is suspended. Usual grounds for impossibility are destruction of the subject matter, death or incapacity of a party or supervening illegality. |
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DEFENSE TO BREACH
Impracticability |
The duty may be discharged if
1. an unforseen event 2. the risk of which was not assumed by either party 3. has increased cost of performance far beyond what either party could have foreseen. Examples: war, embargo, corp failure |
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DEFENSE TO BREACH
Frustration of purpose |
If the promised exchange is still possible, but the purpose of the contract is destroyed or nearly destroyed, a discharge may be allowed. The elements are
1. an unforeseen intervening event 2. the risk was not allocated to a party and 3. the event has the result of destroying the purpose of the contract. |
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RECISSION
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If a contract is executory on both sides, the parties may mutually agree to eliminate the obligation. The consideration is each party giving up (forbearing) their respective contract rights due from the other party.
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CANCELLATION
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If the other party is in material breach, the non-breaching party may communicate his cancellation of the contract because of the breach. The effect is to discharge the canceling party’s duties but preserve any rights held by the non-breaching party for breach.
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ACCORD AND SATISFACTION
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An accord is an agreement between the parties in a bilateral contract, in which one of the parties promises to render a substitute performance and the other party agrees to accept the substitute performance, there is a discharge of the original promise. Upon the actual performance of the substitute performance, there is a discharge of the original promise – the satisfaction.
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SUBSTITUTED CONTRACT
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The discharge is the same as an Accord and Satisfaction except that the original performance is immediately discharged in exchange for the promise of substituted contract. The different performance becomes merged in the substituted contract and only the new agreement can be enforced.
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NOVATION
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A novation is an agreement in which a new obligor replaces one of the existing obligors in the contract. In the majority view, the substitution of the new party in place of an original party requires the assent of all parties -- the original parties and the new one.
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ACCOUNT STATED
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If a debtor and a creditor have a series of transactions with agreed periodic statements of the transaction, the debtor (obligor) must object within a reasonable time to any improper charges on the statements. Failure to object within the contract time or a reasonable time discharges objection to the improper charges.
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RELEASE
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A release is a delivered writing manifesting an intention to discharge another form a contractual obligation. It usually requires consideration but that may be changed by statute.
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ALTERATION
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If a party fraudulently alters a written contract, the other party is discharged from his promises.
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MODIFICATION
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A modification is a change made to an existing contract. Under the common law, it requires mutual assent and consideration. Under the UCC, consideration is not needed if the modification is
1. fair and equitable 2. prompted by unforeseen events and 3. justice requires the modification. |
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BREACH
Divisibility |
Even if there is a breach, the breaching contract can be compensated for the performed divisible part with an offset for the part not performed. This requires that the contract be
1. divisible into two or more parts 2. each party’s performance has a corresponding counter-performance and 3. performance of each part confers a measurable benefit to the party receiving performance. |
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SUBSTANTIAL PERFORMANCE
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The doctrine of substantial performance allows recovery even though there is not full performance. The factors to determine if there was substantial performance are the same ones that are used in considering whether a breach is material or minor. They are
1. how much of the benefit of the bargain did injured party receive 2. ability to compensate injured party 3. risk of forfeiture to breaching party 4. likelihood of cure by breaching party and 5. presence or lack of good faith and fair dealing |
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FORMS OF BREACH
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If a party avoids a contractural promise, it is a breach. Three forms are
1.repudiation 2. anticipatory repudiation and 3. prospective inability |
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BREACH
Repudiation |
Repudiation is the unequivocal renunciation of a present contractural obligation.
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BREACH
Anticipatory repudiation |
If the promise is not yet due, but the promisor has given a statement that the promisor will not perform when the promise is due, it is an anticipatory repudiation. The effect of an anticipatory repudiation is to allow a suspension of the counterperformance and an immediate cause of action even though the performance is not yet due.
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BREACH
Prospective inability (common law) |
If the promisor by conduct, such as going out of business, appears to a reasonable person so that the promisor will not be able to perform on the due date, the conduct is known as prospective inability or voluntary disablement. There is a split of authority on what the effect is. The majority view is that prospective inability is treated like voluntary repudiation, especially if the conduct is volitional. The minority view is to require the promisee to wait until the performance comes due before allowing a cause of action.
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REPUDIATION
Retraction of |
A party, by a communication, may retract his repudiation unless the other party has
1. sued for the breach 2. materially changed his position or 3. has indicated that he regards the repudiation as final. |
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DEMAND FOR ASSURANCES -- UCC
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If the conduct of one of the parties causes the other party to be insecure about receiving the performance, the insecure party may demand assurances and if the demand is justified under market norms, the insecure party may treat the failure to provide assurances as an anticipatory repudiation.
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THIRD-PARTY BENEFICIARY
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If a primary purpose of a contract is to benefit a third party, that party, although lacking in privity, may recover on the contract provide the third party’s rights have vested.
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CREDITOR BENEFICIARY
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If the benefit to the third party is intended to extinguish an obligation, the third-party beneficiary is a creditor beneficiary.
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DONEE BENEFICIARY
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If the benefit to the third party is intended to convey a gift, the third party is a donee beneficiary.
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VESTING
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Vesting is the right to asset an interest in the contract. At any time before vesting, the original parties have the right to rescind or modify the contract so as to cut out the third party.
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VESTING (COMMON LAW)
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Donee and creditor beneficiaries vest upon knowledge and assent (assent is presumed). giver. But promissory estoppel may apply
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VESTING (MODERN)
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The intended beneficiary vests when he has 1) changed position in justifiable reliance on the expectation of receiving the benefit 2) brings suit to enforce it or 3) manifested assent to it. RAS
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INTENDED BENEFICARY, COMMON LAW
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The common law distinguished between creditor and donee beneficiaries. A creditor beneficiary may enforce the obligation directly against the promisor. A done beneficiary may enforce against the promisor but no against the promisee because the promisee is merely a gift
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INTENDED BENEFICIARY (MODERN)
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A beneficiary of a promise is an intended beneficiary if recognition of a right to performance is appropriate to effectuate the wishes of the parties and either 1) the the performance of the promise will satisfy an obligation of the promisee to pay money to the beneficiary or 2) the
circumstances indicate that the promisee intends to give the beneficiary the benefit of the promised performance. |
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INCIDENTIAL BENEFICIARY
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An incidental beneficiary in a beneficiary who is a beneficiary by happenstance and is not an intended beneficiary. An incidental beneficiary has no rights to enforce the contract.
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RIGHTS OF THE BENEFICIARY
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The beneficiary’s rights against the promisor is not subject to the promisor’s claims or defenses against the promisee or to the promisee’s claims or defenses against the beneficiary. The beneficiary’s right against the promisor is subject to any claims or defenses arising from his own contract or agreement with the promisor.
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REMEDY
Specific Performance |
Specific performance is an equitable remedy required the party to carry out the duties under hte contract. The party requesting specific performance must show that he has
1. no adequate remedy at law (uniqueness) 2. a definite and certain contract 3. feasibility of enforcement (including no jurisdictional problems) 4. mutuality of remedy (common law) or that one party can guarantee performance or has performed (modernly) |
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CONTRACTS
Big picture for essays |
1. Is there a contract?
2. Do any defenses bar the contract? 3. Are there any conditions which must be be fulfilled before the duty to perform arises, and, if so, have the conditions been satisified or excused? 4. Has a duty to perform been discharged? 5. Has a duty to perform been breached? 6. Are thre any third-party beneficiary, assignment or delegation issues? 7. What is the remedy? |
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CONTRACT REMEDIES
Big picture for essays |
1. Damages -
2. Restitution 3. Quasi-contract 4. Recission 5. Reformation 6. Specific performance |
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CONTRACT REMEDY
Duty to mitigate |
A non-breaching party has a duty to mitigate, and the party's damages will be reduced by the amount that could have been avoided by mitigation.
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CONTRACT REMEDY
Expectation damages |
The general rule is that a non-breaching party is entitled to the benefit of his bargain. In most cases, the standard measure is expectation damages that would permit the plaintiff to buy a substitute.
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CONTRACT REMEDY
Reliance damages |
In cases in which the expectation damages are too speculative, the plaintiff may recover reliance damages, which are out-of-pocket costs.
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REMEDY
Consequential damages |
Consequential damages are awarded in addtion to the standard damages if
1. they were reasonably foreseeable and 2. in the contemplation of the parties 3. at the time of formation of the contract |
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CONTRACT REMEDY
Liquidated damages |
A liquidated damages provision will be valid if
1. the damages were difficult to ascertain at the time the contract was formed and 2. the amount agreed-upon was a reasonable forecase and not punitive |
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CONTRACT REMEDY
UCC buyer's breach |
If the buyer breaches, the seller may
1. withhold or satop delivery 2. reseell the goods and recover the difference or 3. recover ordinary contract damages for nonacceptance. If the buyer has already accepted the goods or the seller can't resell them, the seller may recover the contract price. |
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CONTRACT REMEDY
UCC seller's breach |
If the seller breaches, the buyer may
1. reject nonconforming goods 2. cancel 3. cover 4. recover goods identified to the contract 5. obtain specific performance (in some cases) 5. recover damages of rnondelivery |
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PAROL EVIDENCE RULE
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When the parties hve reduced their agreement to a final integration, parol evidence is not admissible to vary terms.
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PAROL EVIDENCE
Essay approach |
If parol evidence is being offered, consider:
1. was the writing final? 2. was it a complete integration? 3. Does an exception apply to allow use of the parol evidence? |
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PAROL EVIDENCE
Exceptions |
If the parol evidence contracts, varies or adds to the final and integrated writing, it is inadmissible unless it is offered to:
1. clarify ambiguous terms 2. show defenses to contract formation (i.e. fraud) 3. show existence of a conditoin precedent 4. show that it's not a final integration 5. show a consistent collateral subordinate contract that normally would not be included in an integrated writing |
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PAROL EVIDENCE
UCC |
Under the UCC, parol evidence can b e shown by parol evidence unless the contract has an iron-clad merger class or the court finds the contract was intended to be a final and exclusive agreement.
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CONDITION
Personal satisfaction |
If the contract involves personal taste, the standard is subjective and the work can be rejected on any basis as long as it is done in good faith.
In commercial contracts, an objective standard of reasonableness will be used. |
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BREACH
Prospective inability UCC |
Under the UCC, if a party has reasonable grounds for insecurity, the party may
1. demand adequate assurances 2. in writing 3. and suspend perofrmance until receiving them. The other party has a reasonable time, not more than 30 days to supply them. |
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BREACH
Waiver |
A waiver occurs when a party, having the benefit of an express or implied condition, voluntarily and knowingly relinquishes that right either by language or implicity by conduct.
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CONTRACT DAMAGES
Cover UCC |
If the buyer covers by buying substitute goods, the difference between what he pays for the goods and what he would have paid under the contract becomes the measure of damages, plus incidental and consequential damages.
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DAMAGES
Avoidance doctrine |
The plaintiff will not recover damages that were foreseeable and could have been avoided by the expenditure of reasonable effort.
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RISK OF LOSS
General rule |
The risk of loss is on the party most likely to have insured against it -- the party in actual or constructive possession of the goods.
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RISK OF LOSS
F.O.B. Seller's place of business |
If seller is a merchant, risk of loss passes when buyer receives the goods. Non-merchant, a reasonable time after seller has offered the goods to the buyer.
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RISK OF LOSS
F.O.B. Buyer's destination |
Risk of loss passes when seller makes a tender at the destination point.
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RISK OF LOSS
Shipment contract |
Risk passes when the seller gives the goods to a carrier and makes a proper contract for shipment.
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UCC GAP FILLERS
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1. No delivery time specified -- a reasonable time
2. No shipment specified -- a single shipment unless circumstances indicate otherwise 3. no delivery location -- seller's place of business, or where goods are known to be located |
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INSTALLMENT CONTRACTS
UCC |
1. Payment is due on each tender of a part of the goods if price can be apportioned, unless parties intend otherwise
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INSTALLMENT CONTRACT
UCC Breach |
Buyer may reject any installment only if
1. it substantially impairs the value of the installment and 2. cannot be cured When nonconformity is not substantial and can be cured, buyer's only remedy is to sue for damages. |
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EXCUSE OF CONDITION
Election |
If a buyer has a choice of alternative methods of performance and elects one, and the seller delivers that, the buyer can't change his mind and want the other
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EXCUSE OF CONDITION
Estoppel |
A party is estopped to insist upon satisfaction of a conditoin as a defense to performance if
1. his actions has created an impression that he will not insist on the condition and 2. the party reasonably relied on that to his detriment |
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MATERIAL BREACH
Factors to determine |
1. extent to which the party who received substantial performance will be deprived of full contract benefits -- “the benefit of the bargain”
2. extent that party can be compensated for the part of the bargain that he will not received 3.extent the party who has substantially performed will suffer a forfeiture 4. likelihood the party who has substantial performed will perform the remainder of the contract – likelihood of “cure” and 5. extent the behavior (including intentional refusal) of the party who has substantially performed comports with standards of good faith and fair dealing – willfulness |
