Review Common law majority Rule UCC Article 1 & 2 (transaction in goods)- usually same as majority common law except in a few areas Significant minority rules- will be on test and are there to fool you. DO NOT CHOOSE! 34 Contracts MCQ * 60% Offer and Acceptance (6-8 Qs), Conditions (6-8Qs) and Remedies- UCC and Common law (6-8 Qs) * 40% – 1-2Qs on the following areas * Consideration * 3rd party beneficiaries * Assignments and delegations * Statute of Frauds * Parol Evidence Rule * Discharge of Duties- Impossibility, frustration * ? f contract Qs will deal with UCC (sales and transactions of goods) Understand terminology Offeree, offeror, promisee, promissor, assignor, assignee , etc. Types of Contracts * Express: formed by statements of the parties- say or write promises that form contract * Implied: * Implied in fact (implied): Requires conduct of one or both of the parties to form contract. Contractor goes to wrong house and redoes driveway. Owner watches. Contractor submits bill to owner and owner states they did not ask for it to be done. But because of conduct (owner not stopping) contract was formed. Ex: Woman brings older daughter to dance, teacher and mom allow younger daughter to dance with them every day—implied in fact contract mother liable to pay for younger daughter) * Implied in law: really not a contract at all, but when one person confers a benefit on another, in order to avoid unjust enrichment to the person who received the benefit the law may imply the right to recover a reasonable value of that benefit in Quasi-contract. (ex: Dr who treats injured victim along road. Victim recovers and nothing was ever said about paying the dr.
Bec the victim was enriched by Dr’s actions the law may imply a contract so the Dr can recover) * Bilateral: formed by promises only. One party promises one party to perform an obligation the other party promises to perform and obligation. (formed when all parties promises are fully executory) * Unilateral: contract formed with promise on one side and a fully completed performance on the other. (Ex: I will pay you $1000 if you paint my house, the only way you can accept is by completly painting my house) * Four rules to differentiate between * If an offer requests a promise (bilateral) If the offer is indifferent about whether a promise or performance is requested (Bilateral –majority rule) * If the offer is a public offer (always unilateral) * If the offer solicits performance alone (unilateral) – “I’ll pay $1000 to paint my house and the only way to accept is to paint my house” “Detective told he would be paid $500 a day for each day he investigated fires for the city” * Entire Contract: requires substantial performance of all obligations to avoid breach. Most states treat construction contracts as entire * Divisible Contract: contract broken into separate, individual contracts.
Each divisible contract will require an equivalent payment on the other side. * Ex:“I will pay you $52000 for one year of work as a secretary” Majority rule. Employment are divisible- get $1000 a month. Separate components of consideration. * Ex. Painter gets contract to paint 10 houses for $1000 each. When painter paints one house he gets $1000 Mutual Assent- offer and acceptance * Offer. (majority rule) offers are comprised of 4 elements. * Commitment: judged objectively- would a reasonable person hearing the words spoken under the circumstances believe that the speaker intends to enter into a contractual relationship. Course of dealing could change the reasonableness of the commitment to not an offer * Industry custom (letters of intent of merger) * Jest, banter, anger usually not commitment * Advertising- (majority rule). Invitations to deal. Ads are not offers * Only time considered an offer- when it lists all the critical terms of the offer AND identifies the offeree (first person who enters our door today they will get diamond for $2) * Auction: I will sell you this furniture and will take your bid. The bidder makes the offer.
True even without reserve. * Communicated: offer must actually be communicated to offeree, actual knowledge * Until offer is communicated and offeree knows about offer they cannot accept no matter what they say * Crossing offers: send letter offering selling item, other person sends a letter the same day offering to buy. NO CONTRACT WAS FORMED bec it was not communicated * Unilateral offer- Post “I will give anyone who finds my watch $500”- must know about the offer BEFORE completing performance (majority rule). * To an identified offeree. Offer is always personal to the offeree * Public offers- no identified offeree at time of the offer- whoever with knowledge of the offer performs the requested act becomes the identified offeree * Majority rule: look to the objective intention of the offeror to determine how many identified oferees * Containing definite terms * Traditional and minority rules- Must contain ALL material terms for an offer to stand (don’t choose) * Majority Rule: the offer must state the subject matter with certainty * Subject matter: Real estate- always the description of land and price * Goods- quantity * Employment- term of employment measured by time or by task * Even though offer was defective and the employee starts working still impose that the employee would be a contracted employee at will If the offer tries to state any other material term it must do so with definiteness or the offer fails Good offer: “I will sell you 10 horses” Not valid: “ I will sell you 10 horses for some price” Termination of Offer 1. Language of the offer that it will lapse: a.
Offer can say how long the offer will remain open b. If offer does not say how long open, it will be open for a reasonable time c. Mailbox Rule: Where the offer gets communicated by mail i. Measure the date from when the offer was delivered to offeree. If it is not offered normally you measure from the date that it should have been delivered. 2. Acts of the parties( Revocation/rejection): d. Revocation- offeror: the offeror through language or conduct withdraws the offer ii. Express: before acceptance you tell the person you revoke your offer. . A revocation made to an identified oferee is effective when the oferee is in receipt of it (do not have to read it, just has to have it in their possession-at their house even if they aren’t home, someone in their control has it (butler) ) 2. Public offer- must occur in the same way that the offer was made or through a comparable medium. iii. Impliedly –By Conduct: If the offeror does an act that prevents the performance of the contract that will be a revocation when the oferee learns about it from a reliable source e.
Rejection- Oferee- Rejection is effective when offeror or his agent receives it. Once rejected it can’t be revised iv. Expressly: 3. No thank you 4. Counteroffer- rejection and counteroffer happens when original offeror receives v. Impliedly: 5. By doing nothing—let the contract lapse 6. 3. Supervening Events f. Death or incapacity of either the offeree or offeror g. Supervening illegality- I promise to sell you firearms before you accept the state passes a law that firearms cannot be sold privately- contract cannot be formed bec it would illegal h.
Death/destruction of the subject matter Four Offers that do not terminate in the above ways 1. Option contract- where the offeree has paid the offeror consideration to keep the offer open up for a period of time 2. Merchant firm offer (UCC)- a merchant (someone in business) puts offer in writing and the offer says it will remain open. That offer remains open for the time stated or if no time is stated for a reasonable time, but never longer than 3 months without consideration. 3.
Equitable Options: where the offoree detrimentally, reasonably and foreseeably relies on the offer. Offer does not terminate normal ways- It will remain open for a reasonable time (Promissory estoppel) usually under contracting contract in sub contract situations 4. Offers to make unilateral contracts- promise is made expecting a full performance is completed a. I offer to pay you $1000 to paint my house and the only way to accept is to fully complete my house. Cannot revoke if person started painting. i. Can be revoked until the offeree begins to perform.
Once offeree commences performance that offer cannot be terminated for a reasonable time ii. Preparation to perform is not enough- If you go out and buy stuff and hire, but not have come to my house and began it can be revoked. May be able to get damages from detrimental reliance to get a refund for purchases. Acceptance- depends on what kind of offer it was * Bilateral- offer that asks for a promise in return * Express: requires 3 elements * Commitment- same as offer * must be a mirror image of offer * Communicated the right way- The way the offer says how to communicate * Silent to how to communicate- may accept the same way offer came or another reasonable method (as speedy or speedier than the offer and as legally dependable) * Oral acceptance is not legally dependable if offer was written * May be effective upon dispatch (when sent)- Mailbox rule- Contract is formed when acceptance is dispatched (put out of your hands) * Doesn’t always apply to mail- all effective bilateral acceptance * Doesn’t always apply- 4 MAJOR EXCEPTIONS When the offer says “acceptance must be received to be effective” * Option contracts- acceptance must be received within the option period * Offer is made, the first thing offeree accepts then changes his mind, then sends rejection * impliedly * Unilateral * UCC- by any medium reasonable under the circumstances (Promise, Performance, Conduct, Language, Anything that looks like the party wants to enter a contract) * Acceptance or Counteroffer? UCC limits counteroffer to * Where the words of acceptance are expressly conditioned on a new or different term * EX: I offer to sell my car for 10- you respond “I’ll buy car only if you promise to deliver on Saturday- counteroffer * New or different terms- “I will buy it for 10, please deliver on Saturday” * Not a counteroffer.
When new or different term added that is not conditioned it is an acceptance * Find the language where the parties have agreed and that will be the contract * For the new or different term you have to distinguish whether there is a contract where a non-merchant part or between two merchants * Non-merchant party: the new or different term is always a proposal to an addition to the contract * Two merchant parties: the new or different term automatically becomes part of the contract unless: * The offer was expressly limited to only its terms “I will accept no other terms” * Where the offeror expressly rejects the new term * Materially alters the obligations under the contract * Performance.
By conforming to offer and performing * Non-conforming goods. The shipment of non-conforming goods is an act of acceptance and breaches it immediately * Exception: where the seller ships non-conforming goods merely as an accommodation to buyer (not an acceptance, but a counteroffer) Consideration Consideration Contract must have consideration to be enforceable Each promise in the contract must have good consideration Three tests: 1. Bargained for exchange- the promise must be made to induce a current exchange of performance from the other party a. Will not occur when: i. Promise to make a gift (promise to give you my tv) ii.
Promise based on moral obligations (moral consideration-no such thing- make a promise because they feel like they ought to) iii. Promise based on past acts/events- made to compensate for past events (for the fine work that you did last year, I’ll pay you $5000) 1. Majority rule exceptions: a. Written revival of prior date barred by the statute of limitations or bankruptcy- most states will allow to be enforceable (I owed you $10000 10 years ago- I wrote you letter saying “I’ll pay you the $10000 I owed you 10 years ago by the end of the year. i. Only enforceable for the time and amount written ii. If the writing is in excess of the debt it is only enforceable for the original debt b.
Most states will say that if the promise that is being made now would have been enforceable at the time it was requested and the promisee performed it with an expectation to be paid and then the promisor later promises to pay it is enforceable 2. Legal detriment- the promise must offer detriment from the promisor b. The promisor must be promise to do something that he would not otherwise be legally obligated to do c. Forbearance- Promising not to do something that the promisor has a legal and reasonable good faith to do d. There is a significant minority rule- if the promisor is not giving up legal detriment it will still be good consideration if the promisee receives a benefit (I promise you $1000 to do a lecture that you are already legally obligated to do) Don’t pick this answer e.
Doesn’t matter how much consideration is- adequacy is not relevant on the exam f. Things that will fail iv. Preexisting legal duty 2. Exceptions c. Unforeseen circumstance iii. Whenever a promise has been made and there are unforeseen difficulties (circumstances) so severe that the promise can be rescinded then a new promise to do the same act with additional consideration are enforceable d. A good faith dispute of contract price or obligations iv. A new promise to resolve dispute is enforceable v. Ex: sending a check saying “Full payment of services” when lesser and the person accepted check by endorsement and deposit. v.
Preexisting contract duty 3. Doctrine of Mutuality- each promise must be binding and enforceable g. “I will sell you my house if I feel like it”- illusory (not enforceable) h. When a promisor reserves an unrestricted discretion on whether to perform i. Contracts that look illusory: vi. A promise without a definite undertaking- “I will be your agent” without duties listed. MAJORITY rule- enforceable vii. Promises involving satisfaction conditions 3. “you don’t have to pay me if you’re not satisfied”- MAJORITY RULE- if not satisfied in good faith j. UCC that looks illusory viii. Output/requirement contracts 4.
Output-deliver all we can manufacture and you will buy all we manufacture- UCC says output contract that there is an obligation to produce that you previously manufactured or a similar company makes (reasonable Quantity required) 5. Requirement- I’ll buy all the pencils I need for my job next year from you Substitute for Consideration Only use a substitute when the real consideration is not present- make contracts enforceable 1. 2 Non-code substitutes a. Promissory Estoppel: Whenever a promise detrimentally, reasonably and foreseeably relies upon a promise the contract becomes enforceable i. b. Contracts under seal do not require consideration (don’t need to know- Minority-don’t pick this answer) 2. 2 UCC c.
Merchant firm offer: when a merchant puts an offer in writing and says it will keep it open, it will be irrevocable for a reasonable amount of time- no consideration needed to to keep open. d. Modifications to contract- no extra consideration not needed as long as it is made in good faith Defenses to formation 1. Doctrine Mistake/ambiguity (defect in bargain) a. Three independent defenses i. Mutual mistake-makes contract voidable by either party (whenever both parties make a false common assumption about a material fact in the contract) 1. Sherwood v. walker ii. Unilateral mistake- one party is mistaken, other has no idea- Enforceable contract unless the other part knew or should have known the mistake. iii.
Ambiguous contract term- term in the contract can mean more than one thing- there is no contract unless both parties intend the same meaning to the ambiguous term or unless one party knows there is an ambiguity and the other does not in this case contract would be enforced to the way the non-knowing party thinks 2. Ship Peerless case- two ships called peerless 2. Lack of Capacity (defect in party)- b. Infants- under age 18- the contract is voidable by infant even if they misrepresent their age and the other person reasonably believes they are over 18 c. Mentally incapable- iv. Adjudicated incompetent- void v. Not adjudicated incompetent, but have mental infirmities (retarded, intoxicated)- voidable if they can prove that the other person knew or should have known that they were lacking in mental capacity d.
If after they have gained capacity and they continue to take benefit of the contract they will have affirmed the contract and are fully liable. e. Not a defense to contract for necessaries (food, clothing, education.. ) 3. Transaction and how it was negotiated f. Fraud/misrepresentation. vi. Fraud in the execution (in factum)- void 3. Where person is induced to sign a contract that they do not know it’s a contract vii. Fraud in the inducement – voidable by the defrauded party 4. Deceive in the matter in the contract- ex: show a picture of a beautiful place and ask if you want to buy. You agree, you later learn that the location is not what you had been shown g. Illegality. viii. Subject matter illegal. Void 5. Contract to murder, to smuggle pot ix.
Purpose illegal. Voidable by the innocent party 6. Rent a car, they find out that you are using it as a get away car- they can avoid the contract to rent h. Duress. x. Personal- someone is forcing you into a contract through intimidation/threat- voidable to the person subject to duress xi. Economic/business compulsion- person taking advantage or your personal/business situation- no a defense unless you can prove that the person taking advantage of you caused the problem. 7. Ex. AC guy broke the ac without you knowing and he goes to you and says he wants $1000 to take a look at it. i. Unconscionably- at the time of contracting xii.
Procedural unconscionability- bargaining process is unfair 8. xiii. Substantive- terms of the contract are substantively unfair to one of the parties at the time of contracting 9. Remedy term- if anything goes wrong we aren’t liable 10. Business term- pay $5000 for a $500 fix xiv. Hint: Tested at time of contracting- Contracted 25 years ago for a condo saying they could pay it in 25 years- seller tries to say 25 years later that the price is not fair—not unconscionable bec it has to be fair at the time the contract was made xv. Decided by judge xvi. Allows court to do whatever is necessary to make the contract fair, void the entire contract, change terms, etc. 4.
Statute of frauds (heavily tested)- adopted by legislature for valuable contracts that need protection- for certain defined contracts we are going to allow them to be enforced only if there is tangible evidence that the contract was really made. j. Tangible evidence xvii. Writing- must identify parties, state subject matter, state consideration to be given, and signed by party to be charged (can only enforce the contract against the party that signed) xviii. Performance- part or full performance of obligation under the contract makes the contract enforceable to the extent of the performance. xix. Promissory Estoppel- detrimentally reasonably and foreseeably relied on the contract k. Type of contracts xx. Marriage- marriage is the reason for the contract 11. “I want you to have the mercedes when we marry” 12. I want you to have the ranch if we divorce” 13. Promises made by parents of spouses- Parents say “If you kids get married we’ll by you a property by the lack” xxi. For contracts that cannot be completely performed within 1 year from formation 14. Measure year from date of formation- if the end of that year the contract is not capable of being completely performed 15. If there is any possibility that the contract can be performed within a year the statute of frauds does not apply. “I’ll pay you $10000 if you take care of me for life” – he could have died the next day so it could have been perfumed within a year 16.
Contract that can be terminated within the year without complete performance (3 year contract, either party can terminate with 60 day notice)- NO just because you can end the contract without breach within the first year doesn’t mean you have completely performed- covered by staute of frauds xxii. Land (real estate)-sale, mortgage, easement, option, lease for one year of more 17. Part performance requires possession of the property, plus either a payment or improvement upon it 18. Agency equal dignity rule- if a person has an agent who is going to enter into a real estate contract, agents authority to enter must be in writing xxiii. Executor of a will to pay a debt of the estate with his own money 19. xxiv. Sale of Goods of $500 or more (UCC) 20. Three additional tangible evidence a.
If the goods are specially manufactured goods- if they start to manufacture it satisfies the statute of frauds b. Merchants confirming memorandum- merchant A orally order goods from merchant B, Merchant B sends written confirmation, IF A does not object after receipt within 10 days it is evidence of a contract c. An admission in a judicial context- even if not in writing and not performed. If you can get someone to admit in a judicial context that a contract exists, then it can be enforced. xxv. Surety contract- answer debt for another 21. Must be a collateral promise d. Ex: Uncle goes to farm dealer saying “my nephew is a really good farmer, but needs equipment.
When my nephew comes in let him pick any tractor and ill pay for it” – this is a direct promise If nephew says “I need a tractor, but I don’t have the money, I need to pay for it in credit. Tractor dealer says we don’t know you—if your uncle comes in and guarantees the debt we might be able to sell you the contract- uncle comes in and says “If my nephew doesn’t pay it, I will” – COLLATERAL PROMISE 22. Promise has to be not for the benefit of the promisor e. If uncle does it to just help his nephew it is not a benefit f. If uncle says “I will guarantee it provided I can use it 10 days of the year” Terms of Contract Parol Evidence Rule- substantive contract law that tells you which portion if any of the negotiations leading up to the contract actually credit rights under the contract. If the parties have a final written agreement no prior oral or written negotiations nor contemporaneous oral negotiations may be introduced into evidence to vary or contradict the writing. Four issues 1. how do you know if you have a final written agreement? a. Look to see if it says you have one- MERGER CLAUSE/INTEGRATION CLAUSE (final agreement) b. If the agreement is clearly incomplete- all parol evidence would be admissible c. If the writing has all components of an agreement- deemed to be final and parol evidence applies d. Would reasonable people, similarly situated have expected their prior negotiations to survive the writing and still be enforceable- if court finds this then the parol evidence will not be applied 2. Can you use parol evidence to undermine the entire contract? e.
You can always use parol evidence to establish defenses of duress, fraud, mistake, ambiguity, and defect in formation 3. Can you explain an ambiguity with parol evidence? f. Parol evidence will not be available to vary or contradict the writing, but it can be used to explain it. i. If contract says “fruit” and you thought oranges I thought bananas- parol evidence can be used to explain what “fruit” was to be ii. Words to disguise what it really is intentionall- parol evidence can be used 4. What about negotiations after the written agreement? g. Could be a modification h. Subsequent negotiations can always be used- not covered by parol evidence rule IMPLIED TERMS Both Majority and UCC Obligation of good faith and fair dealing UCC warranties implied * Express warranties- (can’t disclaim express warranties that are made) * Description of the goods (warranty of what it is) * Affirmation of fact about the goods (This car has only been driven 10000 miles) * Promise about the goods ( we will repair/replace any defective parts in the first 6 months of your ownership) * Exhibition of a sample/model of what the goods would be like (this is the color that your car will be) * Implied warranties * Implied warranty of Title- applies to ever sale of good * Seller warrants that the seller owns and has the right to transfer If true owner takes from buyer, the buyer can sue the seller for breach of implied warranty of title * Language or circumstances can disclaim (buying something from a trench coat) * Implied warranty of Merchantability * Occurs when you have a seller that deals in goods of the kind * If retail store sells deliver truck (not in the business) * If an automobile dealer sells truck it is in the business and implied warranty of merchantability applies * Warranty- Goods can be used for their purpose and are safe to use for their ordinary purpose * Disclaimed if * “There is no warranty of implied merchantability” is written conspicuously – LARGE, BOLD, Noticeably * “As is” or “with all faults” Implied warranty of Fitness for particular purpose * Whenever the seller knows that the buyer is relying on the seller’s skill and judgment to select suitable goods for a particular purpose * Got to pharmacist for plaque removal, pharmacist recommends a product- creates an implied warranty of fitness for a particular purpose * Can be disclaimed by any language that indicates it is not being made * “there is no warranty of fitness for particular purpose” * “there are no warranties beyond those express warranties in the contract” Under UCC- implied terms of quality of goods Third Party Beneficiaries Original contract party introducing a stranger to the contract who has rights under the contract Recognizing the non-party * third party beneficiary – If you see a non party present at the moment of formation mentioned in the promises in the contract (if one of the promises between A and B refers to C) * Assignment or delegation- contract must already be formed then one of the parties will introduce a stranger Threshold- non party gets rights from the contracting party Non-party always stands in the shoes of the contracting party from whom bestowed the rights to them. Non-parties rights vest (solidify)- once they vest the non-party is now in a direct contract with the other contracting party from whom obligations or rights are flowing Third Party Beneficiaries- Present non-party at the formation of the contract- contains one promise that runs to the benefit of a third party * Deal with each promise at a time- separate them out and identify the promisor, promissee, and beneficiary * Two definitional rules to apply 1. Intended- (gets rights under contract) a. is the beneficiary identified in the promise b.
Performance runs directly to the beneficiary c. There is a relationship between the promisee and the beneficiary that supports an intention to benefit 2. Incidental- d. (ex: my promise to you to plant your mother’s garden, the nursery that you get your plants from would be an incidental beneficiaries) If intended then you have to decide Donee beneficiary or creditor * Donee beneficiary- gets performance as a gift * Creditor beneficiary- underlying obligation already owed from the promisee to beneficiary that the promise is seeking to satisfy from this performance Vesting- beneficiary’s rights will vest when the beneficiary learns about the promise and affirmatively assents to it. calls you and thanks you, cancels other plans, sends a note) * Once you find that the beneficiary’s rights have vested there are three substantive rules * Beneficiary can enforce the promise the way it exists at the moment of vesting- nothing before * Creditor beneficiary can sue either the promisor on the 3rd party promise or the promisee on the underlying obligation (can only get one satisfaction) * The promisee can also sue the promisor for performance (ex: when I don’t pay your loan to your bank, you can sue me as well as your bank)- Even though not entitled to the benefit of the promise you can still sue to enforce the 3rd party promise Assignments and Delegations After contract is formed a third party is introduced and assign rights or delegate Transfer entire agreement” to 3rd party- when they don’t tell you if they are assigning or delegation the transfer of entire agreement BOTH an assignment and delegation Most of the time you can transfer assignments and delegations, UNLESS: 1. Contract Prohibition- the contract may prohibit it a. If contract says you cannot delegate duties, you may not delegate b. If a contract says you cannot assign rights- under majority rule a contract prohibition against assignment of rights takes away the privilege of assignment but it does not take away the power to assign i. If they assign with clause in place, they will breach that clause and be liable for damages; however ii. Assignment will be valid c. UCC- the clause that prohibits the assignment is unenforceable iii. Assignment valid and no breach 2. Legal prohibition- law that prohibits d.
Prevents both assignments and delegations 3. Material change- whenever there has been a material change in the performance as a result of the transaction e. Personal service performance- treat it as a material change, unless they tell you it’s not iv. Assignment- (assign right to the paint job to neighbor- could be entirely different, size, condition) if they don’t tell you it’s the same as doing your house, then it can be assigned- if its not the same cannot assign v. Delegation- not allowed unless they say that the performance of the new person is of the same quality and reliable as you f. Requirement/ output contracts vi. annot be assigned (requirement) or delegated (output) vii. If the facts say there will not change the output or requirement it is allowed 4. Anytime that the performance is going to be rendered at a different time or place as a result of the transaction (assignment/delegation) g. Look for the answer that says “cannot be assigned/delegated because it materially changes the performance” Assignments of Rights Obligor- the person who owes the performance of the right being assigned Assignor –the person who originally was going to receive the right be assigned Assignee- person who will receive the performance of the right as a result of the assignment
Valid Assignment- You must have a description of the right being assigned and there must be words of present transfer- “I hereby assign to you, to you my friend, the right of the $10000 for the sale of my car” * Cannot say “I will transfer when you graduate” – future transfers are not valid assignments * With consideration for that assignment, there is a warranty by the assignor to the assignee- the right is assignable and enforceable * No limitations to assignment (have the ability to transfer and has not been transferred to anyone else * And enforceable * Assignee can sue the assignor if there is no valid assignment (no right or not enforceable) * If it was a gift, no recourse
Valid assignment gives the assignee the real owner of the right Assignor is still the apparent owner of the contract- can create problems * Assignor might continue to deal with the obligor * No notice- Until the obligor gets notice of the assignment any modification to the rights assigned are binding on the assignee * If assignment was gift, assignee has no recourse * If given with consideration- assignee can sue assignor for breach * Once obligor has notice of the assignment it cuts off the ability to change contract with assignor * Assignor might assign to other assignees * Multiple assignments of same right Any gratuitous assignments are automatically revoked by a subsequent assignment unless * A symbolic writing has been delivered- you have given one of the assignees a gift that represents the right assigned- suppose when you agree to buy the car you gave me a post dated check (represents payment of)- If I deliver that check to one of my gratuitous assignees gives them a right to compete * Promissory estoppel applies- detrimentally, reasonably, and foreseeably relied on the assignment, makes the assignment with consideration * If you still have multiple assignments, multiple unrevoked assignments * First in time is first in right * Exceptions * If a later assignee without knowledge of the others gets to the obligor first and gets one of the following (FOUR HORSEMEN OF ASSIGNMENTS) they win all others can sue assignor for breach of assignment * Paid * Judgment * Symbolic writing * Novation Delegations Transfer of Duty
Obligee- person who was originally entitled to the performance of the duty be delegated Delegator: person who was originally required to perform the duty Delegate: person who is now obligated to perform the duty as a result of the delegation 1. If it is a delegable duty, the oblige must accept performance of the delegate 2. The delegate’s performance must be performed by the delegator as surety a. If oblige doesn’t perform, delegator is still responsible 3. If the delegation is gratuitous the oblige cannot force the delegate to perform 4. If the delegation is for consideration, the obligee can force the delegate to perform (third party beneficiary) Conditions 1. Condition precedent- and event that must occur before a performance becomes due 2.
Condition concurrent- – an event that must occur at the moment the performance occurs 3. Condition subsequent- an event that must occur after the performance is due and if the event doesn’t occur the performance will be discharged. All Conditions must be satisfied or excused in order that the performance will remain or become mature and performable Express condition- one that is stated in the contract (“You will buy my house if you get financing”) 1. True condition- an event over which neither party has any control (“I will sell you my laptop if the dow stock reaches $200) 2. Condition and an implied covenant- an event over which one or both of the parties may have some control a.
Must use reasonable and good faith efforts to make the event occur (implied covenant)(“I will buy your house if I get financing”- must make a good faith effort to obtain financing) i. If you don’t use reasonable and good faith effort you’ll be in breach even though the condition wasn’t satisfied because you made an implied covenant that you’d use reasonable and good faith to obtain financing. Constructive (implied) Condition- an event that is actually the performance of the other party. Conditions implied by the performances themselves 1. if one party’s performance precedes the others, the first is a constructive condition to the 2nd. “I’ll sell you my watch on June 1st, pay me on June 15th” Duty to deliver is a constructive condition to your duty to pay 2.
If one party’s performance takes longer than the other, the longer is a constructive condition to the shorter. (I’ll pay you $1000 to paint my house) constructive condition is the painting of the house, then the duty arises to pay 3. Performance at the same time- Both performances are constructively conditioned concurrently on each other (Giving keys at the same time money is tendered) When we determine what kind of condition we have- the condition must be excused or satisfied Excusing a condition: * Voluntary excuse * Waiver- where the condition has not occurred, but the party who is entitled to the condition says he will perform any way. Estoppel- before the event is supposed to occur, the party entitled to the condition says she’ll perform anyway. If the other changes position as a result of that statement, the condition is excused. * Excuse by breach * Prevention/failure to cooperate- failure to perform implied covenant excuses the condition * Anticipatory repudiation- if a party that is entitled to a condition repudiates the contract the condition is excused and they are entitled to immediate breach (present). Duty to perform unconditioned. Other person can suspend their performance. (excuses conditions, sue immediately for breach, suspends performance) * Repudiation can occur overtly * Repudiation by conduct- perspective inability to perform/voluntary disablement. ex: applies for loan to purchase home, before approved the person files bankruptcy) * Demand for adequate assurance- (UCC & Common law)- you don’t say you aren’t going to , but you give the other party signals that you probably aren’t * Make a written demand for adequate assurance (tell me you are going to perform) * Response in a reasonable time (not to exceed 30 days under UCC) * If the other party fails to give adequate assurance it becomes a repudiation, excuses all conditions, sue immediately for breach, and suspends other parties duty Satisfy conditions 1. Complete satisfaction- a. Express conditions- required for ALL express conditions b. Constructive- Under UCC- single delivery of goods (PERFECT TENDER) must be completely satisfied- ex. You order 500 chickens, if you get 499 this is a breach- buyer can reject for any non conformity- if the buyer accepts and doesn’t count them-once accepts they can only revoke acceptance for a substantial defects that were difficult to discover at the time the goods were accepted. i. Seller can cure- anytime up to the time of the agreed performance ii.
If the seller reasonably believed the goods would be acceptable to the buyer then they have a reasonable time to cure (after the agreed time) iii. 2. Substantial satisfaction c. Enough for all other constructive conditions- substantial completion is enough 3. Doctrine of divisibility d. If you have a contract in divisible parts, you can satisfy conditions divisibly – no need to substantial complete the entire contract Discharge of Duty 1. New Agreements (needs to satisfy all requirements of offer and acceptance in order to have any affect on discharge) a. Modification: where the parties change the duties under the original contract with a new agreement- discharges some or all of the duties under the original contract i. UCC 1.
Modification will be enforceable without consideration as long as it is made with good faith 2. If the contract as modified is covered by the statute of frauds then the modification must also be in writing to be enforceable b. Mutual recession: (cancellation/release): where both parties agree to eliminate duties under contract c. Accord and Satisfaction: when the parties are resolving a good faith dispute over their duties under the original contract. ii. Account stated- several disputes- ex: lawyer is working with a client on several cases, lawyer gives bill to client and the client says it is too high and offers him a lesser amount and lawyer agrees d.
Novation: when the parties substitute a new party and a new performance for the old party and an old performance-discharges the original duties for the new duties- all parties must agree 2. Legal theories e. Doctrine of impossibility: when there is an unforeseen event that has not been assumed by any party, it will be impossible if the contract is objectively impossible to perform as a result of the unforeseen event. No reasonable person could perform the contract as written because the event iii. Four times it can be raised 3. If the subject matter of the contract is destroyed 4. Supervening illegality- law is passed that says a contract cant be performed. 5.
Death or illness of a personal performer- doesn’t have to be a human being 6. Failure of a sole or agreed source of supply- ex: you ordered bread from france that had the only special oven capable of making this bread. A bomb destroys the oven- contract cannot be performed) iv. UCC (impossibility) Casualty to identified goods before risk of loss has passed 7. Goods must be identified a. Identified in the contract through description b. If it describes many goods of a particular, When the seller designates, marks or otherwise identifies the goods to the contract 8. Casuality to identified goods must come BEFORE risk of loss c.
Determine risk of loss i. Face to face transaction: 1. if the seller is a merchant risk of loss passes on physical delivery to the buyer 2. If non merchant, risk of loss passes on tender of delivery (seller has made goods available to buyer for a reasonable time and have given the buyer notice that they are available for delivery) ii. Carrier transaction- general rule seller has the obligation to get the goods to the carrier and make a reasonable contract for their transportation. All the seller has to do is get the goods to carrier. If destroyed in route from carrier to destination (buyers problem) 3.
FOB (place)- Price includes delivery of goods to whatever (place) 4. FAS (port of vessel) – free along side ship. The price of the goods includes deliver 5. CIF (place)- Cost Insurance and Freight are covered to (place) 6. C&F (place or port)- Cost and freight included iii. EXCEPTION: Destination Contract- FOB (place other than where the seller is)- means the seller has the obligation to get the goods to the named destination and there tender delivery (notify buyer that the goods have arrived and are ready for delivery for a reasonable time) After a reasonable time has passed it is buyers loss. 9.
Partial casualty- some of the goods have been destroyed, some are still available for delivery- the buyer gets to choose- d. Buyer can either terminate the contract, or e. Buyer can take the available goods with a price adjustment f. Doctrine of impracticability: an event that the parties assumed would not occur and when it does happen it will discharge or suspend the duties until event subsides v. Usually temporary- snow storm vi. When the problem is solved, duty is reinstated vii. If it is a permanent impracticability, duties will be permanently discharged g. Doctrine of frustration- event doesn’t effect subject matter or parties ability to perform, but destroys the purpose (reason) for the contact. viii.
Both parties have to know the reason of the contract at the time of contracting for frustration to discharge the duties 10. Ex: Person books a hotel to see coronation of king and both person and hotel know the reason for the hotel stay is for the coronation, king gets sick—the reason for the contract for the hotel stay is no longer and can be discharged without breach. h. Failure to satisfy or excuse a condition subsequent ix. Ex: Insurance policies- if anyone steals something from my car, the insurance policy will pay- when theft occurs, they will pay. This obligation does not have to happen if they don’t give notice within time period then the obligation to pay is discharged Perform a duty (see above notes) 1.
Complete performance a. Ex. Construction contract that is for building a home- if it’s express terms saying the exact measurements a building that is smaller IS NOT substantially performed it must be COMPLETE 2. substantial performance 3. doctrine of divisibility Contract Remedies Three legal remedies 1. Expectation Damages: a. Non code i. Put the non breaching party in as good as a situation as performance of the contract would have done ii. Consequential damages- damages that are reasonably foreseeable at time of contracting- add these to expectation damages (loss revenues, loss wages if not compensated by insurance) iii.
Incidental damages-cost of obtaining a substitute to perform (ads, lodging, long distance phone calls to get a replacement) iv. Mitigation (subtract)- non breaching party could have minimized damages if the acted swiftly and reasonably v. Calculating non code damages: Expectation damages + consequential damages + incidental damages – mitigation b. UCC vi. Seller’s expectation remedies 1. Commercially reasonable resale of goods- seller should try to sell the goods in whatever reasonable market, price, quantity a. Seller has to give buyer notice that there will be a resale unless i. Perishable goods ii. Speedily declines in value b. Seller gets the difference between the contract price and the resale price 2.
Elect to recover market price damages- seller can get the difference between the contract price less the market price at the time and place of tender 3. Lost volume sellers: infinite amount of goods to sell and an infinite amount of buyers. c. Sellers who cant get an reasonably recovery may elect to recover their profit that they lost vii. Buyer’s remedies for seller’s breach 4. Cover: going out into the market and buying a reasonable substitute for the goods ordered without unreasonable delay. Buyer gets difference between the cost of cover minus contract price 5. Market Price recovery: Buyer gets difference between market price when the buyer learned of the breach minus contract price 6.
Breach of warranty recover : Goods delivered in breach of warranty buyer can recover difference between value of the goods as warranted (as true) minus the price of the value of the goods delivered plus any personal injuries 2. Liquidated damages (agreed)- parties agree to them in contract and are enforced c. Liquidated damages clause Will be enforceable if: viii. The damages must have been difficult to ascertain at the time of formation ix. The amount of damages must be reasonable – if too high or too low it might be deemed void as a penalty 3. Quasi contract recovery- a remedy when a contract was never formed and a part is enriched (unilateral contract never accepted or never formed or avoided) d.
Measure the value of any benefit conferred (ex: I ask you to paint my house and in the middle of painting I tell you to stop, you can get the value of painting half the house) e. Reliance damages- If not benefit conferred, measure the cost incurred (ex: you go out and buy paint supplies hire people preparing to start painting and I revoke)- re Equitable Damages- when money damages are inadequate. Equitable defenses- when you wait too long to raise equitable damages (latches), cant be personally liable for the damages (unclean hands) 1. Recession- used when contract is void or voidable and party wants to terminate all responsibility under contract 2.
Restitution- contract has been avoided, but for one reason of another part of what was done to form it a benefit was conferred to a party (usually deposit money back) 3. Reformation- when the parties have written their contract incorrectly and they need a court to modify the agreement to state it correctly. 4. Doctrine of specific performance- orders the party to perform what they agreed to in the contract. Available if the subject matter of the contract is UNIQUE a. Real estate b. One of a kind goods (usually stated in fact pattern) c. Personal services- can never order a personal performer to perform BUT you can get an injunction against the performer that they cannot perform anywhere else at the same time of the agreed upon performance