Contracts Attack Sheet for the California Bar Exam

  1. What is the APPLICABLE LAW?

The UCC governs the sale of goods, with applicable rules also applying to merchants.

The Common Law are majority rules governing contracts other than the sale of goods.

Mixed contracts are determined by the more important part of the deal, except divided contracts in which both UCC and common law rules may apply.

Types of Ks: Unilateral K: offer expressly required perf as method for acceptance. Divisible Ks: perf divided into 2+ parts under K; number of parts due from ea party is the same; and perf btwn parties is equivalent. Option K: agmt to leave open in exchange for consideration. Ads: gen preliminary proposal unless words are to identifiable person, e.g. first come first serve.

  1. Contract FORMATION problems

Offer requires 1) a manifestation of a present intent to contract demonstrated by promise, undertaking or commitment, 2) definite and certain terms, and 3) communicated to an identified offeree.

Content: Sales – price & description. UCC – quantity. Req’t K – terms of exclusivity. Real estate – ID of land and price. Employment – duration.

Termination. Revocation: unambiguous stmt by offeror to offeree or unambiguous conduct indicating unwillingness to K that offeree is aware of. No rev for option K, firm offer (UCC – offer can’t be revoked for up to 3 months if offer to buy or sell goods, signed written promise to keep open and party is merchant), detrimental reliance (reasonably foreseeable detrimental reliance) or start of performance. Rejection: counteroffers kill; add’l terms under CL mirror image rule; lapse of time, e.g. > 1 month; conditional acceptance kill.

Acceptance is a manifestation of assent to the terms of an offer in the manner prescribed or authorized by the offer. Full performance; Start performance; Offeree promise to perform; Mailbox rule (acceptance effective when mailed, all else when received); Seller of goods sends wrong goods, unless with explanation (then it’s a counteroffer)

Add’l terms: CL mirror image rule; UCC – one party merchant  add’l term is proposal subject to sep rejection; both parties merchant  add’l term is part of K unless materially alters, offeror objects w/in reas time, or offer limits acceptance to the terms.

Consideration requires a bargained-for exchange of legal detriment between the parties. Past consideration is no consideration, except expressly requested performance/ forbearance and expectation of payment. New consideration req’d for pre-existing K or statutory duty: except in CL, unforeseen difficulty, third party promise or promise to pay debt barred by SoL.

Substitutes: written promise when prior obligation had applic legal defense; promissory estoppel

Defenses. Incapacity: under 18 has a rt to disaffirm K unless minor retains benefit after gaining capacity. Illegality – subject matter illegal  K is void; subject matter is legal, purpose is illegal  enforceable only by person who didn’t know of illegal purpose. Public policy. Misrepresentation/Nondisclosure – innocent party may rescind if induced to enter K by fraudulent misrep or non-fraudulent material misrep . Duress – improper threat and no reasonable alternative. Unconscionability – unfair surprise and oppressive terms at time of K. Ambiguity/ Misunderstanding –ea party uses a material term open to two reas interpretations; ea party attaches dif meaning to term; neither party knows or has reason to know the term is subject to two imterps causing ambiguity. Mistake – no K if mutual mistake on basic assumption of fact that materially effects agreed exchange and not a risk that either party bears. Unilateral mistake not voidable unless other party knew or should have known. SoF

SoF: applies to Marriage, Year, Land, Executory guarantee, Goods > $500, Suretyships (My Legs). Satisfy by perf, writing, or judicial admission. In real estate, part perf req’s two of payment, possession, or improvements. Writing req’s: Non-UCC: parties, subj matter, terms & conditions, consideration, sig. UCC: quantity terms and sig, unless confirmatory memo of oral K and no obj w/in 10 days.

TERMS (disagreements): PER: integration issues. Merger clause is highly persuasive but not determinative. No PE to reform or contradict written terms, unless there’s a mistake in integration. PE ok to argue defense to enforcement, explain ambiguous terms, to provide add’l terms if only partial integration, or add’l terms would ordinarily be in sep agmt. Conduct: course of perf (same ppl, same K), course of dealing (same ppl, sim K) custom and usage (dif ppl, sim K). UCC Default: delivery obligation – either Shipment Ks or Destination Ks; risk of loss – determined by agmt, breach (even slight), delivery by common carrier (shipment K  risk of loss to buyer when seller delivers to carrier; destination K  risk of loss to buyer when seller delivers to buyer), if none, merchant seller  risk of loss to buyer on receipt of goods; if non-merchant  risk of loss to buyer upon tender. If risk of loss on buyer  buyer pays full K price; on seller  possible liability on seller for non-perf); implied warranty of merchantability if dealing in goods of that kind and fitness for a particular purpose if seller has reason to know of purpose and reliance. .

All Ks have implied warranty of good faith and fair dealing.

  1. PERFORMANCE problems

Breach of contract occurs any time a party refuses to perform under the terms of the agreement. Such breaches are categorized as either material or minor, with material breaches excusing the other party from performance.

Sale of goods: Perfect tender: if sale of goods, S’s perf must be perfect or B can reject. Rejection of goods: retain and sue for damages or reject all of a commercial unit and sue for damages. Cure: S has second chance at perfect tender if: S had reasonable ground to believe delivery OK OR time to perform hadn’t expired. Installment Ks: B can reject installment only if there’s a substantial impairment that can’t be cured. Acceptance of goods: if accepting goods, B can’t later reject. Payment doesn’t equal acceptance w/o opp to inspect. Implied acceptance if B keeps for reasonable amt of time. Revocation: if B hasn’t accepted goods, B may cancel K by revoking acceptance if: nonconformity substantially impairs value of goods, excusable ignorance of grounds for revocation or reasonable reliance on S’s assurance, and revocation w/in reasonable time after discovering nonconformity.

Common law: substantial performance

  1. What are the REMEDIES?

Non-monetary (in rem): Specific performance: typically limited to real estate, sale of unique goods, but never for services. Req – valid K, conditions satisfied, inadequacy of legal remedies, mutuality, feasibility of enforcement. Rescission: cancels K. Req – grounds for rescission, e.g. mutual mistake or unilateral mistake if non-mistaken party would suffer undue hardship or knew of mistake. No negligence. Reformation: changes written agmt to conform to parties’ original understanding. Req – valid K, grounds for reformation. No negligence, SoF, PER. Reclamation: rt of unpaid seller to get goods back. Only if Buyer was insolvent at time of receipt and Seller makes demand for return w/in 10 days of buyer’s receipt or reasonable time if buyer gives express representation; and buyer has goods at time of demand. Rights of good faith purchaser in entrustment: owner entrusts good to person who sells that kind of good and person wrongfully sells to third party. GFP cuts off rt of original owner.

Monetary Damages: Expectation interest: put P as if K wasn’t breached. Reliance interest: puts P in same dollar position as if K wasn’t breached. Restitution interest: prevent D’s unjust enrichment.

Damages for sale of goods: S breaches/B keeps – difference btwn value of goods delivered and fair market value had they been perfect. S breaches/S keeps – difference btwn K price and either market price or cost of replacement. B breach/B keeps – S recovers K price. B breaches/S keeps – Dif btwn market and K price.

Additions Damages: Incidental: cost for finding replacement. Foreseeable consequential damages: damages from P’s special circumstances, only if D had reason to know of special circumstances.

Limitations: Avoidable damages: P must mitigate. Certainty: loss must be proved w/ reasonable certainty

Liquidated damages: K fixes amount of damages . Valid if: damages dif to ascertain &reasonable forecast.

Has there been an EXCUSE for non-performance? Improper perf by other guy – material breach. Non-occurrence of condition – mutually agreed promise requiring strict compliance. Anticipatory Repudiation – Effect  excuse relying party from perf and immediately sue for damages (not avail if relying party fully performed); suspend perf and wait for perf date to sue; treat repudiation as offer to rescind and treat K as discharged. Retraction ok if other hasn’t materially changed position. Insecurity – if reasonable grounds, relying party can demand adequate assurance and may suspend perf.

Later K: Rescission: only if perf not completed. Accord and satisfaction: mutual agmt of existing obligation to accept dif perf or by acceptance of check marked “pay in full.” Modification: mutual agmt to accept dif agmt to satisfy existing K. Novation: mutual agmt to substitute existing party w/ another, excusing perf of substituted party.

Later unforeseen event: Impossibility: can’t be done. Impracticability: can’t be done w/o extreme and unreasonable difficulty or expense. Frustration of purpose: unforeseeable supervening event destroys purpose of K. Damage. Destruction. Death. Subsequent law or regulation

  1. THIRD PARTY RIGHTS and obligations

Third party beneficiaries: Incidental TPB don’t have K rts, only intended TPB’s do. No cancellation or modification after TPB’s rts have vested by either relying, assenting or suing for enforcement.

Assignment of rights: one party transfers rts under K to assignee. If K prohibits assignment, assignor is liable for breach but assignee who doesn’t know of prohibition can enforce. If K invalidates, all assignments are void. Gratuitous assign: can be revoked; last gratuitous assign wins. Assign for consideration: no recovery from obligor. Assignor implies warranty that rt exists, rt is not subject to any defenses, assignor won’t do anything to impair value of assignment. First assign for consid wins.

Delegation: allowed unless K prohibits delegation, K calls for v. special skills, or K has v. special reputation. If 3rd party doesn’t perform, delegating party always remains liable. Delegatee liable only if she receives consid from delegating party, in which delegatee is liable to delegating party and obligee

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