Contracts

Applicable Law

All contracts are governed by the common law of contracts, except for the sale of goods, which is governed by the UCC. Goods are items identified and movable at the time of contract.

Merchants are persons or entities who regularly deal in the particular good.

Formation, Valid K

A valid contract requires: offer, acceptance, and consideration

An offer is a (1) promise to enter into contract (2) with essential and definite terms (3) communicated to the offeree

An acceptance requires a (1) manifestation of assent to the terms of the offer (2) communicated to the offeror. Acceptance may be made in any reasonable manner, except where limited by the offeror.

Consideration requires a bargained for exchange, usually a detriment to the offeree or benefit to the offeror.

Revocation of Offer/Irrevocable Offers

An offer may be revoked anytime before acceptance, so long as the offeree receives reliable information that would indicate to a reasonable person the offer is terminated

Offers that are irrevocable include: (1) a merchant's firm offer, (2) an options contract, (3) if the offeree detrimentally relied, or (4) part performance has occurred

Termination of Offer, Lapse of Time

An offer must be accepted within a reasonable time starting from when the offer is received or would have been received by the offeree, otherwise offeree allows offer to terminate

Termination of Offer, Rejection by Offeree + Counteroffer

An offer is terminated by an offeree's (1) nonconforming acceptance or (2) counteroffer

Acceptance must mirror the terms of the offer.

A counteroffer is a rejection of the offeror's offer and a new offer by the offeree.

Acceptance, Mailbox Rule

Acceptance is effective when mailed, except under an option contract, acceptance is effective when received.

Acceptance, Differing Terms - CL

Acceptance must mirror the terms of the offer. An acceptance with differing terms operates as a rejection and counteroffer

Acceptance, Differing/Conflicting Terms - UCC 2-207

An acceptance under the UCC that varies in terms is still a valid acceptance.

Where one party is not a merchant, additional/differing terms are only proposals and not part of the contract unless assented to.

Agreements between merchants, conflicting terms are "knocked out" and replaced by UCC gap fillers. This also applies where there is no acceptance, but the parties perform anyways

Acceptance, Additional Terms - UCC 2-207

Between merchants, additional terms will become part of the contract unless: (1) the offer expressly limits acceptance, (2) they materially alter the offer or (3) objection to the additional term is given within a reasonable time

Consideration, NONE, 3 types IGP

Illusory promises occur when only one party is bound to perform, leaving performance to the discretion of the other party

Gratuitous promise is a promise to make a gift without any consideration in return

Past consideration, a promise in exchange for something already given or performed is not consideration, with the exception of a new promise to pay a barred or discharged debt.

Consideration, Alternatives, 3 types PQI

Promissory estoppel requires: (1) promisor should reasonably expect to induce substantial action or forbearance and (2) such action or forbearance is in fact induced

Quasi-K occurs where P has conferred a benefit upon D where no enforceable K results, P may be entitled to recover the value of the benefit conferred

Implied Best Efforts: Where a party is to be the exclusive distributor, courts will imply a promise to use best efforts to sell the product. Implied promise is valid consideration

Defenses to Formation, Incapacity

Incapacity includes infancy or mental incompetence at the time of the contract

Defenses to Formation, Misrepresentation

Misrepresentations require: (1) false statements (2) made intentionally, negligently, or innocently (3) with the intent to induce a party to rely on the statement and (4) the party actually relies upon the statement to their detriment

Defenses to Formation, Fraudulent Nondisclosure

Fraudulent nondisclosure requires: (1) a nondisclosure of material facts (2) while under a duty to disclose and (3) the complaining party reasonably relied upon the nondisclosure

Defenses to Formation, Fraud in the Inducement

Fraud in the inducement requires: (1) a material misstatement of fact (2) that was false and (3) made with the knowledge or reckless ignorance of the falsity and (4) the complaining party relied upon the statement to their detriment

Defenses to Formation, Duress

Duress requires: (1) an intent to inflict harm, (2) or wrongful threat, where (3) the complaining party had no reasonable choice but to succumb to the threat

Defenses to Formation, Undue Influence

requires: (1) an unfair persuasion (2) against a vulnerable party

Defenses to Formation, Unconscionability

Unconscionability requires that a contract be (1) so unfair and one-sided that they (2) shock the conscience of the court and are deemed unenforceable.

Defenses to Formation, Mistake

There are two types of mistake, unilateral and mutual.

Unilateral mistake requires (1) a mistake as to a material fact by one party and (2) the non-mistaken party knows or should know of the mistake.

Mutual mistake requires that both parties be mistaken as to a material fact. The mistake must be as to the nature of the subject matter of the contract.

Statute of Frauds (Defense to Form/Enforce)

SOF requires that certain agreements be in writing to be enforceable, including: MY LGS

(1) marriage contracts

(2) contracts that cannot be performed in 1 year,

(3) land sale contracts

(4) guaranty contracts

(5) sales of good for $500 or more

Land sale contracts do not need a writing if part-performance by (1) improvements, (2) payment, or (3) possession

Guaranty contracts are a promise to guarantee the debt of another person. A writing is not required if the guarantor's main purpose is for his own economic advantage

Sales of goods for $500 or more do not require a writing if: (1) contract for specially manufactured goods, (2) partial performance, or (3) there is a merchant's confirmation not objected to within 10 days.

Statute of Frauds, Satisfactory Writing

A satisfactory writing under the SOF requires: (1) one or more writings that (2) reflect material terms and (3) be signed by the party to be charged.

If there are multiple writings, the writings must: (1) be attached onto one another, (2) signed writing refers to the unsigned writings, or (3) both signed and unsigned writings clearly refer to the same subject matter.

Parol Evidence Rule

Where parties have put in writing the final and complete expression of their agreement, evidence of prior or contemporaneous oral or written negotiations are inadmissible to vary the terms of the writing

Integration:

Complete - A writing is completely integrated if the parties intended it to be their final expression of agreement. Extrinsic evidence may only be used to explain, not to contradict or supplement the writing.

Partial - A writing is partially integrated if it is a final, but not complete expression of agreement. Extrinsic evidence may only be used to supplement the writing if there is evidence of imperfection or the parties dispute the validity of the writing

Parol Evidence Rule, Exceptions

PER does not apply to: (1) subsequent agreements, (2) collateral agreements, (3) conditions precedent, (4) show formation defects

Conditions precedent must occur before a party's contractual obligations or rights become effective.

Formation defects include: mistake, misrepresentation, fraudulent nondisclosure, and fraud in the inducement

Ambiguous terms must be ambiguous on their face. They may be explained through course of performance, course of dealing, and trade usage

*If UCC, UCC default rules: implied warranties + obligation of good faith and fair dealing

Modifications to Contract

At common law, modifications require additional consideration. Under the UCC, only good faith is needed to modify.

Past consideration is not consideration. A preexisting duty cannot be used as consideration for another promise, except where the: (1) duty was not already owed to the promisee, (2) parties agree to a different performance, or (3) promise of increased compensation is given in exchange for performance substantially more burdensome than reasonably anticipated at formation

A UCC modification must be in writing for the sale of goods $500 or more

Conditions

Conditions are events, other than the passage of time, that modify a duty to perform.

There are 3 types of conditions: (1) express, (2) implied and (3) constructive

Express conditions are expressed in the contract

Implied conditions are inferred from the parties' conduct.

Constructive conditions are those read into the contract by the court including conditions precedent to either effectiveness or performance.

Failure of a condition constitutes an excuse from performance, avoiding breach

Breach by Anticipatory Repudiation

Anticipatory repudiation is an unequivocal statement to not perform before the due date of performance. The other party is entitled to treat the anticipatory repudiation as a breach, wait to or sue immediately, discharge the contract, or urge the breaching party to perform.

Repudiating party may retract unless other party already (1) acted in reliance under repudiation, (2) accepts repudiation, or (3) brings suit.

Demand for Assurances

If there are reasonable grounds for insecurity with respect to the other party's performance, a party may demand assurances: (1) in writing with (2) a reasonable time within which to give adequate assurances is limited to 30 days.

Party may suspend performance until assurances are received. Failure to provide assurances within a reasonable time renders the contract as repudiated

Breach

A breach occurs when a promisor has a duty and fails to perform it. A minor breach is one where the obligee receives the substantial benefit of the bargain despite the defective performance, and obligee may recover damages attributable to the minor breach. A material breach is one where the obligee does not receive the substantial benefit of the bargain, and has the rights to all remedies

Implied Covenant of Good Faith and Fair Dealing

Implied covenant of good faith and fair dealing exists in every contract and requires that both parties do nothing to prevent performance by the other

UCC Perfect Tender

Perfect tender requires all goods and tender conform to the terms of the contract.

If the good or tender fails in any way, buyer may: (1) accept all the goods, (2) reject all the goods, or (3) accept some and reject the rest of the goods. Rejection must be made within a reasonable time after tender and requires that buyer seasonably notify the seller. Buyer must also allow seller opportunity to cure after seller's seasonable notice.

Excuses to Performance, Impossibility

An objective impossibility arising after the contract had been entered into excuses the parties from performance

Excuses to Performance, Impracticability

Impracticability occurs when (1) obligee encounters an extreme and unreasonable difficulty or expense and (2) the difficulty was not anticipated

Excuses to Performance, Frustration of Purpose

Frustration of purpose occurs when (1) a supervening act (2) unforeseen at the time of contract (3) frustrates or destroys the purpose of the contract and (4) both parties realized the purpose when making the contract

Excuses to Performance, Accord and Satisfaction

An accord and satisfaction requires a new agreement that obligee accept some other different performance by obligor in satisfaction of the original duty and contract.

Accords must be supported by consideration, such as partial payment of the original agreed-upon price and forbearance to sue.

Excuses to Performance, Mistake

There are two types of mistake, unilateral and mutual.

Unilateral mistake requires (1) a mistake as to a material fact by one party and (2) the non-mistaken party knows or should know of the mistake.

Mutual mistake requires that both parties be mistaken as to a material fact. The mistake must be as to the nature of the subject matter of the contract.

Excuses to Performance, Novation

All parties expressly agree to release and substitute a party. There is no writing required

Excuses to Performance, Waiver

A condition of a contract may be waived by words or conduct indicating that the party will not insist on the condition being met. Generally, a one-time waiver does not waive the condition on future occurrences, but a series of waivers may result in a permanent waiver of the condition.

Third Party Beneficiaries, Third party

A third party beneficiary may be either intended or incidental to an agreement.

Intended beneficiaries are those (1) expressly identified in the contract, (2) who performance is made to directly, (3) who have rights under the contract, or 4) whose relationship with the promisee suggests an intent to benefit

Third Party Beneficiaries, Creditor or Donee

Creditor donee: If the promisee's intent was to discharge an obligation to the third party, then the third party beneficiary is a creditor beneficiary. A creditor beneficiary can always sue the promisee on the underlying obligation that the promisor's performance was supposed to discharge.

Donee Rule: If the promisee's intent was to bestow a gift on the third party, then the third party beneficiary is a donee beneficiary. If the promisor fails to perform, a donee third-party beneficiary cannot sue the promisee unless the third-party beneficiary detrimentally relied on the promise

Third Party Beneficiaries, Enforcement/Vesting

Intended beneficiaries can enforce the contract if their rights are vested. Rights vest when the beneficiary (1) manifests assent as requested by the parties, (2) brings suit to enforce the contract, or (3) materially changes their position in justifiable reliance on the contract.

Assignment of Rights

All contractual rights may be assigned, except those that would substantially change an obligor's duty

Assignment of Rights, Writings

An assignment does not require a writing, except for: (1) wage assignments, (2) interests in land, (3) choses in action more than $5000, and (4) security interests.

Assignment of Rights, Revocability

An assignment is revocable, except when: (1) it is given for consideration, (2) the obligor has already performed, (3) it is an assignment of a chose in action in writing, (4) on delivery of a tangible claim, (5) estoppel

Assignment of Rights, Liabilities

- An obligor can assert any defenses against the assignee it had against the assignor, except personal defenses that arose after the obligor had notice of the assignment

- Assignee may sue obligor (under assignor's rights) and assignor (by implied warranty that assignor do nothing to impair value of assignment; assignor had actual right to assign)

Delegation

Delegation requires a transfer of duties. All duties may be delegated, except: (1) duties involving personal judgment and skill, (2) where there is a special trust in delegator, (3) delegation would create a change in the obligee's expectancy or (4) there is a contractual restriction

Delegation, Liabilities

- Delegator may still be sued by obligee absent novation releasing delegator

- Delegatees who receive consideration from delegator may be sued by delegator or obligee

Remedies, Legal = Money Damages

Expectation damages are benefit of the bargain damages. The usual measure is the difference between the contract price and market price.

Consequential damages require: (1) causation (2) foreseeability (3) certainty (4) unavoidability . The nonbreaching party has a duty to mitigate damages.

Reliance damages apply when compensatory damages are difficult to calculate. Reliance damages include any expenditures made in reliance of a contract.

Remedies, Restitution RE (Legal)

Damages to prevent unjust enrichment retained by D

Replevin is required where: (1) plaintiff have a legal right to possess the property (2) the property is a specifically identifiable personal property, not real estate (3) defendant must be wrongfully withholding the property

Ejectment is required where: (1) plaintiff holds legal title to the property and (2) the defendant is in possession of the property without legal right or permission.

Remedies, Restitution CE (Equitable)

Constructive trust: Courts may establish a constructive trust upon a showing of: (1) specific identifiable property or an interest in property subject to the claim (2) plaintiff has a legitimate claim to that property and (3) defendant must have wrongfully acquired or be wrongfully detaining the property from the plaintiff

Equitable lien: Courts may establish an equitable lien upon a showing of the following: (1) a debt owed by one party to another that (2) is related to specific identifiable property (3) with the intent the property serve as security for the debt and (3) allowing the party to retain the benefit without compensating the other would be unjust

Tracing: Plaintiff may follow the property to whatever form it takes

Remedies, Equitable, PI/TRO

PI/TRO requires plaintiff show: (1) likelihood of success on the merits, (2) irreparable harm, (3) balancing of hardships in plaintiff's favor, and (4) feasibility of enforcement

TRO requires: All the elements of a preliminary injunction and *(5) the harm is imminent

Remedies, Equitable, Specific Performance

Specific performance requires: (1) a valid contract, (2) conditions precedent be met or excused, (3) inadequate legal remedy, (4) feasibility of enforcement, and (5) there be no defenses.

Remedies, Equitable, Rescission

Recission undoes a contract, requires that (1) grounds for rescission exist at the time of contract and (2) no defenses.

Grounds for rescission include: (1) mistake, (2) misrepresentation, (3) fraudulent nondisclosure, and (4) fraud in the inducement

Remedies, Equitable, Reformation

Reformation requires the court modify a writing to conform it to the parties' original understanding, requires: (1) a valid contract (2) grounds for reformation and (3) no defenses

Grounds for reformation include: (1) mistake, (2) misrepresentation, (3) fraudulent nondisclosure, (4) fraud in the inducement and (5) scrivener's error - minor mistake made by the person writing or copying a document, like a typo or misspelling

Defenses to Equitable Remedies, ULU

Unclean hands requires: (1) The plaintiff's conduct was not in good faith or was otherwise inequitable and (2) the conduct relates to the subject matter of the plaintiff's claims.

Laches requires: (1) an undue delay by plaintiff in bringing the claim, (2) causing prejudice to the defendant, (3) negatively impacting the defendant's ability to defend themselves or their position.

Undue hardship

UCC Buyer's Remedies

- COVER: difference between the contract price and either the market price or the cost of replacement (cover), measured at the time buyer learns of the breach

- Breach a Warranty: If the buyer accepts goods which breach a warranty, the damages are the difference between the value as delivered and the value had they been according to the contract, plus incidental and consequential damages

REPLEVIN: if (1) buyer has paid for some or all of the goods; (2) seller refuses to deliver; AND EITHER (3) seller becomes insolvent within 10 days of receiving buyer's first payment; OR (4) the goods were purchased for personal, family, or household purposes.

UCC Seller's Remedies

- Seller Damages: difference between K price and resale price or fair market value if not resold

- Lost volume sellers assumed to have as many items as he can sell, damages would be the profit on the lost sale and any incidental damages