BarBri Contracts Lecture - Review: Contracts Short Outline Checklist

Contracts Pneumonic

Armadillos From Texas Play Rap Eating Tacos

A - Applicable Law

F- Formation

T- Terms

P - Performance

R - Remedies

E - Excuse

T - Third Party Rights and Obligations

Applicable Law - First think what law applies to my fact pattern?

1. Common law

2. If sale of goods, look for some special Article 2 rule.

Formation - Show Agreement is Formed - #1 Offer

1. Actual intent largely irrelevant.

a. reasonable person standard (objective)

2. Missing terms [other than price in sale of land] ok.

a. Okay for UCC Art. 2, not for common law

3. Watch for "appropriate," "fair," or "reasonable," which are disqualifying vague terms.

a. these words not an offer.

4. Watch for "all," "exclusively," "only," or "solely," which manifest commitment and give rise to requirements contract or output contract.

a. even though no specific quantity, this is valid offer

Formation - Show Agreement is Formed - #2 Termination of Offer

1. Revocation of offers and where is So a Vergara

a. need offer awareness of revocation)

2. *"Firm offer" rule—writing signed by merchant expressly promising to keep offer open (bar exam certainty).

3. Counteroffers kills offers.

4. Watch for acceptance followed by "if," "provided," "so long as," or "on condition that," which means rejection.

a. conditional acceptance

5. Mirror image requirement for common law but not for sale of goods.

a. absolutely and unequivocally

6. In sale of goods, distinguish additional term, which means contract generally, from conditional acceptance, which means no express contract.

a. express conditional acceptance is Article 2 still not acceptance.

Formation - Show Agreement is Formed - #3 Acceptance

1. Offer can control method and time of acceptance but on bar exam rarely does.

2. Bilateral world so most offers can be accepted by promise or the implied promise resulting from start of performance.

3. Start of performance pursuant to offer to enter into unilateral contract makes offer irrevocable, but is not acceptance.

a. irrevocable v. acceptance questions.

4 Acceptance (and only acceptance) effective when sent.

a. mailbox rule

Formation - Show Agreement is Formed - #4 Lack of Consideration as Reason Not to Enforce Agreement

1. Promise breaker must have asked for something in return for her promise (bargained for).

2. Promise can be consideration.

3. Peppercorn can be consideration.

a. do not inquire into adequacy

4. Stuff done before promise (past consideration) is not consideration.

5. Doing only what you are already obligated to do (pre-existing duty) is not consideration.

6. No consideration required to modify Article 2 contract.

a. all that is required is good faith

7. No new consideration in settlement of due and undisputed debt.

a. do not let debtor out

8. Foreseeable, detrimental reliance (promissory estoppel) is substitute for consideration.

Formation - Show Agreement is Formed - #5 Statute of Frauds as a Reason Not to Enforce Agreement

1. "Promise to answer for the debts of another" so limited (guarantee only/main purpose exception) that is generally wrong answer.

a. little 3

2. Watch for John Tesh and performance more than a year away.

a. just because concert is 3 hours long, does not matter.

3. "Task" never a Statute of Frauds problem.

4. Not one year real estate lease.

a. no SOF requirement

5. Full performance (BUT NOT PART PERFORMANCE) of service contracts.

6. Sale of goods whether dispute as to goods delivered.

a. undelivered goods have SOF defense)

7. Real estate part performance by 2 of 3.

8. If a writing, look for contents and who signed:

a. Who and what and defendant signed if common law

b. How (quantity) many and defendant signed if Article 2 unless "answer the damned letter" rule

i. merchane confirmatory memo.

Formation - Show Agreement is Formed - #6 Misrepresentation as a Reason Not to Enforce Agreement

Even if honest and innocent, so long as material and relied on.

Formation - Show Agreement is Formed - #7 Mistake of Fact, Ambiguity, Duress, Unconscionability

Reasons why agreement will not be enforced.

Terms - What are the terms of the Contract? #1 Pre-contract Words of Parties and Parol Evidence Rule -

1. Vocabulary

a. Integration - final written agreement

b. Parol evidence - can be oral or wirrtne

c. Merger clause

*2. Admissibility and purpose of proffer:

a. Admissible to explain ambiguity

b. Admissible to establish defense

c. Admissible to establish mistake in integration (clerical error)

d. Admissible to add term, unless complete integration (generally cannot bring in parol evidence to add terms)

e. Inadmissible to contradict or otherwise change (where parol evidence not allowed)

Terms - What are the terms of the Contract? #2 Conduct

1. 1st—course of performance: same people, same contract.

2. 2d—course of dealing: same people, earlier contract.

3. 3d—custom and usage: other people, similar contracts

Terms - What are the terms of the Contract? #3 UCC

1. Delivery obligations of seller if shipment contract:

a. Get goods to common carrier.

b. Make delivery arrangements.

c. Notify buyer.

2. Risk of loss if common carrier turns on whether shipment contract.

3. Risk of loss if not common carrier turns on if seller is merchant:

a. Receipt rule for merchant sellers.

b. Tender rule for others.

4. Disputes over quality of delivered goods: (warranties)

a. Fit for ordinary purpose if seller regularly sells. (implied warranty of merchantability)

b. Fit for buyer's special purpose if seller knows.

(implied warrant of fitness for particular purpose)

c. Look for "as is" / "with all faults" to disclaim implied warranties.

d. Look for limitation of remedies of express warranties

Performance - #1 *Perfect Tender (Read Literally)

100% perfection, 99.99999% is not good enough.

Performance - #2 Rejection of Goods

Performance - #3 Rejection Limited by Sellers Option to Cure if:

1. early delivery

2. reasonable in light of past deals.

Performance - #4 Rejection Not Possible After Acceptance

1. Buyer's payment without opportunity to inspect not acceptance.

2. Buyer's keeping goods without objection is acceptance.

Performance - #5 Revocation of Acceptance

1. Substantial impairment (i.e., something really bad wrong).

a. ex: sleep bag

2. Not discoverable earlier.

Remedies - #1 Specific Performance (non monetary)

1. Only if money damages inadequate.

a. in real estate, monetary damages is inadequate

2. Generally wrong answer.

Remedies - #2 Reformation (non-monetary)

where the court reforms the contract

think about fraudulent misrepresentation or missing terms due to mistake

Remedies - #3 Reclamation (non-monetary)

1. Delivery of goods on credit to buyer insolvent at time of receipt

2. Timely (generally 10 days from buyer's receipt of goods).

Remedy - #4 Money Damages

1. Generally expectation damages—compensate by putting P in same position as if contract had been performed without breach.

#1 Determine dollar result of performance without breach. (value of perfect performance)

#2 Determine dollar result of performance with breach. (current position)

#3 Compare #1 and #2. (subtract & those are your expectation damages)

2. More than one question on consequential damages:

a. Look for special facts about buyer that caused it to sustain special loss.

a. Recoverable only if other party knew special facts at time of contract.

3. Also think about reliance (before made) and restitution damages as well (defendant unjust enrichment)

Excuse - #1 Other Party's Material Breach

If it is material it means is substantially burdens the benefit of the bargain.

Excuse - #2 Other Party's Anticipatory Repudiation

Unequivocal words or conduct.

Right to suspend own performance, right to immediate damage s

Excuse - #3 Nonoccurrence of Express Condition

1. Determining whether there is an express condition:

a. Modifies other contract duties, not create new duties.

b. If, only if, provided that, so long as, in the event that, unless, when, until, and on condition that. (what words to look for, for express condition words)

c. IF IN DOUBT, not a condition.

2. Strict compliance test for satisfying condition.

3. Excuse of condition: focus on word or conduct of person protected by condition:

a. Waiver.

b. Estoppel

Excuse - #4 Later Agreement

1. Rescission: make sure some performance is still remaining

2. Accord AND satisfaction:

a. If no satisfaction, liability under accord OR original deal. (need satisfaction to excuse)

b. Distinguish substituted agreement from accord and satisfaction.

3. Modification

4. Novation:

a. Mutually agreed upon replacement party that excuses.

i. both get together and both agree 3rd party to do other job.

b. Distinguish novation from delegation.

Excuse - #5 Later Occurrences that Affect the ABILITY to Perform or MUTUALLY UNDERSTOOD PURPOSE of Performance: Impossibility, Impracticability, and/or Frustration of Purpose

1. Death of party generally not an excuse.

a. unless she is a special party to the contract.

2. Later illegality of performance of purpose generally an excuse.

3. Destruction of subject matter of contract is two part reading comprehension test.

a. First, reading facts, what is the contract performance obligation?

b. Second, comprehending facts, how does later occurrence affect ability to perform?

4. Later performance becoming more expensive is no excuse.

Third Party Rights & Obligations - #1 Third-Party Beneficiary

1. Like life insurance: two people contracting with "intent" to benefit third party.

2. On bar, intended third-party beneficiary will be named in contract.

3. Promisor is contract party whose promise more directly benefis third party.

4. Third party can recover from promisor.

5. Alternatively, promisee can recover from promisor.

6. Third party cannot recover from promisee on the contract.

Third Party Rights & Obligations - #2 Assignment

1. Two people contracting and then, later, one of the two (the assignor) transfers to a third party (the assignee) his rights under the contract against the other party to that contract (the obligor).

2. No consideration required for assignments but assignments without consideration can be revoked and have no implied warranties.

a. gift assignments freely revoked

3. Assignment cannot "substantially change duties of obligor"

a. Not an issue in assignment of right to payment.

b. Issue in assignment of right to services.

4. Contract provisions usually treated as prohibition (read carefully), which means that assignee who did not know of contract prohibition still has rights of assignee.

5. Assignee can recover from obligor.

6. Obligor has same defenses against assignee as it would have against assignor.

7. Multiple assignments:

a. Last in time if not for consideration

b. Otherwise, first assignee for consideration

Third Party Rights & Obligations - #3 Delegation (3rd Party Problems

1. Two or more people contracting, and then later one of the two transfers duty to perform.

2. Need to be able to distinguish (1) a delegation and assignment from (2) a delegation for consideration.

3. Delegatee is legally obligated only if delegation and assignment or delegation for consideration.

a. if just give, then delegatee not liable.

4. Delegating party is always liable after delegation.