Contracts terms

BUT unilateral mistake CAN allow rescission in limited situations.

The mistaken party may avoid the contract if:

1. The mistake is about a basic assumption

2. The mistake has a major/material effect

3. The mistaken party did not bear the risk

4. AND either:

   • enforcement would be extremely unfair (unconscionable),

   • the other party knew of the mistake,

   • or the other party caused the mistake

A party bears the risk of mistake of fact when

(1) the parties agreed in the contract to allocate the risk to that party,

(2) a court allocates the risk to that party because the risk is reasonable under the circumstances, or

(3) the party was consciously ignorant of the relevant facts. (not an objectively reasonable standard)

What kinds of mistakes are generally NOT considered “basic assumptions” for mistake doctrine? :

Mistakes about value, market conditions, or price fluctuations, because contracts are meant to account for uncertainty and volatility in those things.

A mistake must :

relate to a basic assumption on which the contract was made.

four circumstances that must be considered in determining whether a breach of contract is material:

(1) the loss of benefit to the nonbreaching party;

(2) the adequacy of compensation for the nonbreaching party’s loss;

(3) the likelihood of a cure by the breaching party; and

(4) the extent of forfeiture by the breaching party if the breaching party is denied the bargained-for compensation or benefit

A party to a contract may suspend her own performance and demand adequate assurance if

there are reasonable grounds to believe that the other party may be unable to perform.

If the other party does not provide adequate assurance within a reasonable time, then

the suspending party may treat the prospective inability to perform as an anticipatory repudiation and sue for a remedy.

What are the two ways anticipatory repudiation can occur? :

(1) A party clearly indicates through words or actions that they will not perform, or

(2) reasonable grounds exist to believe the party cannot perform, allowing the other party to demand adequate assurances.

In determining whether a breach of contract is material, courts consider

(1) the loss of benefit to the nonbreaching party,

(2) the adequacy of compensation for the nonbreaching party’s loss,

(3) the likelihood of a cure by the breaching party, and

(4) the extent of forfeiture by the breaching party if the breaching party is denied the bargained-for compensation or benefit.

Any anticipatory repudiation that has not become final may

be retracted, and the injured party may no longer sue before a breach occurs

An anticipatory repudiation may take the form of

(1) a statement that clearly indicates an intent to breach or

(2) a voluntary, affirmative act that renders (or apparently renders) a party unable to perform.

UCC

SALE OF MOVABLE TANGIBLE GOODS

the doctrines of impossibility and impracticability are generally used by the ,

seller

frustration of purpose is generally used by the

buyer

When does frustration of purpose apply? :

A party may avoid performance when the party’s main purpose for entering the contract, which the other party knew about, is substantially frustrated by changed circumstances that make the other party’s performance virtually worthless.

A party may avoid performance when ;

it becomes impossible or impracticable to perform due to changed circumstances

impossibility results from three types of events

(1) the death or incapacity of a particular person who is necessary for the performance;

(2) destruction of the subject matter, when a specific thing that is necessary for the performance has failed to come into existence, has been destroyed, or has significantly deteriorated such that performance is impossible; and

(3) performance is prevented by law.

while impracticability is

established where the party’s performance would be subjectively impracticable, through extreme and unreasonable difficulty, expense, injury, or loss.

A performance has become impossible if it .

objectively cannot be performed by anyone, not just the specific party to the contract

UCC § 2-608(1) A buyer may revoke acceptance of a unit or delivery that is substantially impaired by its nonconformity, within a reasonable time of discovering the nonconformity and before any substantial change in the condition of the goods not caused by their nonconformity, where

(1) the buyer reasonably assumed that the nonconformity would be cured, but it was not; (2) the buyer could not have been expected to discover the nonconformity before acceptance, due to the difficulty of discovering such nonconformity; or (3) the buyer accepted the goods based on the seller’s assurances of conformity, but later discovered that the goods in fact were nonconforming.

the seller may still cure the nonconformity where the seller promptly notifies the buyer of the intention to cure and either:

(1) cures the nonconformity by the date of performance; or

(2) cures the nonconformity within a reasonable time of being notified of it

UCC § 2-606(1) provides that a buyer may accept delivery of goods by

indicating acceptance to the seller, failing to make an effective rejection, or acting inconsistently with the seller’s ownership of the goods.

(UCC) perfect-tender rule,

a buyer of goods may reject a delivery that fails to conform to the contract in any way, no matter how trivial or immaterial. A buyer may reject the entire delivery, accept entire, or accept some and reject the rest.

Revocation is available only if the value of the goods is substantially impaired by their nonconformity and one of the following three circumstances exists:

1) the buyer reasonably assumed the seller would cure the nonconformity but the seller did not do so,

(2) the buyer discovered the nonconformity after acceptance due to the difficulty of detection, or

(3) the buyer discovered the nonconformity after acceptance due to the seller’s assurances.

A buyer must accept a nonconforming installment and They can cancel an installment contract U.C.C. § 2-612.

if the seller gives adequate assurance that the problem will be cured.

if a nonconforming delivery substantially impairs the value of the entire contract.

Assignment

assigns Rights

Delegation

delegates Duties

Novation

completely replaces the party

any rights under a contract may be assigned to a third party, unless

assignment would materially change the other party’s duty or burden, or would materially impair or devalue the return performance to the other party

any duties under an existing contract may be delegated to a third party, unless

the other party has a substantial interest in the original party’s performance. Typically, this rule means that the delegator’s personal performance involves a personal element, or an exercise of personal skill or discretion.

Only a intended third party beneficiary can sue who is is an the person

the contract satisfies a monetary debt to the third party, or when circumstances indicate that one of the parties intended to give a benefit to the third party.

When can a change in law support impossibility? :

Only when the law comes into existence after the contract was formed.

perfect tender rule paplies to before the

acceptance

expectation damages not available for

loss that the party in breach did not have reason to foresee as a probable result of the breach when the contract was made.

A liquidated damages clause will be enforced if

the amount is reasonable in light of the anticipated or actual loss caused by the breach

when a breach of contract does not cause any loss, or when the loss is not provable, the court will award a small sum as

nominal damages.

Reliance damages serve as an alternative to expectation damages and are typically awarded when

njured party relied on the contract but cannot prove any lost profits.To calculate the amount of damages, considers the loss incurred in reliance on the contract, including expenditures made while performing or preparing for the contract.

There are two types of restitution that may be awarded as a remedy:

(1) restitution damages, in the form of a sum of money, and (2) specific restitution, which allows a party to recover a specific thing, rather than an amount of money.

specific performance only for

non breaching party

A party may not receive restitution when she has rendered

full performance and the breaching party’s only remaining performance is payment of money

contracts for personal services are not subject to

specific performance

A court will only order specific performance where

(1) damages are inadequate to make the injured party whole,

(2) the terms of the contract are definite, and

(3) the order will not be disproportionately burdensome for the court to enforce.

Several factors are considered to determine whether damages are adequate as a remedy:

(1) the difficulty of proving damages with reasonable certainty,

(2) the difficulty of using damages to procure a substitute for the breaching party’s performance, and

(3) the likelihood of collecting damages.

Real property is always considered unique, such that

damages are inadequate to compensate a nonbreaching buyer for the seller’s breach of a land sale contract.

courts will not order specific performance or injunctions to compel performance of

personal service contracts

What are the elements of unilateral mistake? :

(1) The mistake concerns a basic assumption of the contract, (2) the mistake has a material effect on the exchange, (3) the mistaken party does not bear the risk of the mistake, and (4) enforcement would be unconscionable, the other party knew of the mistake, or the other party caused the mistake.

for consideration the promised or provided performance may consist of (1) an affirmative act;

(2) a forbearance to do something a party has a legal right to do; or (3) the creation, modification, or termination of a legal relationship.

Nonoccurrence of a condition may be excused

if the condition is not a material part of the agreement and occurrence is impracticable.

A contract can be modified without additional consideration if:

(1) unforeseen circumstances not anticipated ; or

(2) the parties’ duties are altered sufficiently

A promissory-estoppel claim has three elements:

(1) the promisor made a promise that reasonably expected would induce action or forbearance,

(2) the promisee actually and justifiably relied on the promise, and (3) enforcement of the promise is necessary to avoid injustice

A contract is procedurally unconscionable if it

results from unequal bargaining power between the parties.

In a binding, integrated agreement, the parol evidence rule will

exclude extrinsic evidence that is inconsistent with the agreement

What factors do courts consider in determining whether a breach is material? : (1) The loss of benefit to the nonbreaching party, (2) whether compensation can adequately remedy the loss, (3) the likelihood the breaching party will cure the breach, and (4) the extent of forfeiture to the breaching party if denied the contract benefit.

(1) The loss of benefit to the nonbreaching party,

(2) whether compensation can adequately remedy the loss,

(3) the likelihood the breaching party will cure the breach, and

(4) the extent of forfeiture to the breaching party if denied the contract benefit.

When interpreting a contract, courts will generally prefer

(1) to give lawful, reasonable, and effective meaning to all terms; (2) to give greater weight to specific terms than to general terms; (3) to give greater weight to negotiated or added terms than to standard terms; and (4) to interpret terms against the drafter when choosing among reasonable meanings.

For all three impossibility, frustration of purpose, impracticability, the nonoccurrence of the event must have been a

basic assumption of the contract, and the event must not be the party’s fault.

When are a mentally incapacitated person’s contractual obligations voidable? :

A mentally incapacitated person’s contractual obligations are voidable if, because of mental illness or defect, the person either (1) cannot reasonably understand the nature and consequences of the transaction, or (2) cannot act reasonably in the transaction and the other party knows or has reason to know of the condition.

in order for the parol-evidence rule to apply, the integrated agreement must be

binding. An integrated agreement does not supersede prior agreements if it is not binding

When does the parol evidence rule apply? :

only when the integrated agreement is binding and enforceable. If the written agreement is not binding, earlier agreements are not replaced or excluded.

UCC How can all implied warranties be disclaimed? :

All implied warranties may be excluded by conspicuous language such as “as is” or “with all faults,” or other language clearly calling the buyer’s attention to the exclusion of warranties, especially when the buyer examined or refused to examine the goods.

Firm offers are made by

merchants in a signed writing that explicitly assures the offeree that an offer will be kept open. cannot be left open for longer than three months.

For contracts for the sale of goods for $500 or more, there are three exceptions that allow a contract to be enforceable without a signed writing:

(1) the goods are specially manufactured goods;

(2) the non-injured party admits in court that the contract was made; or

(3) the contract is partly performed, in that payment already has been made and accepted, or the goods have already been received and accepted.

In restitution, the general measure of damages is the

value of the benefit conferred, not the loss to the party seeking restitution.

When is an obligor estopped from enforcing a condition? :

When the obligee reasonably and foreseeably relied on the obligor’s promise to perform despite the condition not occurring, and enforcing the condition would unjustly harm the obligee.

How can an obligor waive a condition? :

By expressly communicating intent to waive the condition or by accepting performance despite knowing the condition did not occur.

When is a waiver of a condition not binding? :

When the condition was a material part of the bargain or the obligor assumed the risk that the condition would not occur.

What happens when a waiver is not binding? :

The waiver is treated as a contract modification and may require new consideration or detrimental reliance to be enforceable.

Express warranties may be created by

statements made by the seller about the product, by a description of the product, or by a sample or floor model, which warrants that the goods will conform to the sample or model.

A firm offer requires:

• merchant

• sale of goods

• signed writing

• assurance the offer will be held open

n order for a condition’s nonoccurrence to be excused due to impracticability,

a condition must not be a material part of the agreement.

If the parties had different meanings for a term due to a misunderstanding, then the court will typically find

a lack of mutual assent and void the contract.

The Uniform Commercial Code (UCC) provides that a buyer may accept delivery of goods by

indicating acceptance to the seller, failing to make an effective rejection, or acting inconsistently with the seller’s ownership of the goods.

When is an assignment generally valid?

Contractual rights are generally assignable unless the assignment would materially change the other party’s duty or burden or materially impair the value of the return performance.

a non- occurence condition may be excused by

acceptance of performance in spite of the non-occurrence of the condition

What are the requirements for rescission based on unilateral mistake? :

(1) The mistake was major and affected the basic agreement,

(2) the mistaken party was not seriously careless,

(3) no third-party rights have arisen,

(4) the parties can be returned to their original positions, and

(5) the mistaken party did not cause the mistake.