Contracts Outline for the California Bar Exam


  1. APPLICABLE LAW: CL v. U.C.C.

    1. UCC governs sale of goods.

      1. Goods = movable objects.

      2. UCC has special rules if both parties are merchants.

        1. Merchants = those who regularly deal in the particular goods.

    2. Common law – any K’s not governed by UCC are governed by CL (i.e. service K, real estate K)

    3. Mixed Goods/Services Test: Which is the more important part of deal?

      1. Exception: Separate Payments.

  1. FORMATION – Is there a valid K?

    1. OfferManifestation of present intent to contract demonstrated by a promise, undertaking, or commitment

      1. Definite/Certain Terms = material terms cannot be vague or ambiguous (i.e. cannot use “fair, reasonable, appropriate”);

        1. UCC quantity is an essential term (requirements/output K’s satisfy quantity requirement)

          1. Price not req’d – UCC only requires: the parties intend an offer and a quantity term

        2. CL

          1. Real estate – requires identification of land and price terms

          2. Employment/Service Kduration must be specified

      2. Communicated to an Identified Offeree or Class of Offerees

        1. Invitations for Offers = Advertisement, price quotation

    2. Termination of Offer.

      1. Lapse of time – offer may terminate by offeree’s failure to accept w/in time specified by offeror w/in reasonable period if no deadline specified.

      2. Revocation by Offeror unambiguous words or conduct demonstrating unwillingness or inability to K that have been received by Offeree

        1. Revocation Effective = when received by Offeree

      3. Irrevocable offers

        1. OptionK (promise to keep offer open; supported by consideration)

          1. General Contractor/Sub-Contractor Rule: Whenever a General relies on a Sub’s bid in their (General’s) bid an option K is formed b/w the Gen and Sub in which the Gen may or may not choose to accept if Gen accepts and Sub’s costs exceeds their bid they owe the Gen the diff

          2. Note – survives even if the offeror dies

        2. Merchant’s “Firm Offer” under UCCwritten offer signed by merchant promising to hold open an offer is irrevocable w/o consideration for the stated time period or reasonable time if no period stated period cannot exceed 3 months.

          1. Rejection/counteroffers do not terminate offer during option period unless Offeror detrimentally relies on it

        3. (Offeree’s) Detrimental RelianceOfferee detrimentally relied; and Offeror could reasonable have expected reliance.

        4. Start of Performance of Unilateral K

      4. Rejection by Offereewords or conduct showing rejection, received by the Offeror

        1. Can be express rejection or counteroffer.

        2. Effective when Received.

        3. Rejection of Optiondoes NOT terminate offer – offeree free to accept w/in option period unless detrimental reliance by Offeror.

        4. Distinguish: Counteroffer/Conditional Acceptance v. Mere Inquiry

          1. Counter/Conditional = firm stmt to O’or;

          2. Mere Inquiry = question about offer to O’or

      5. Death or Insanity of either party b/4 acceptance (except options)

      6. Destruction of K’s subject matter

      7. Supervening Illegality (no formation if illegal b4 K)

    3. Acceptance

      1. Additional Terms

        1. CLMirror Image Rule – acceptance must mirror the offer, otherwise it’s a counter offer

        2. UCCany acceptance/written confirmation showing intention to K is effective. Status of parties is important when terms in acceptance differ from or are in addition to offered terms.

          1. Nonmerchant – terms of offer governs. New/diff terms = mere proposals.

          2. Both Merchants (Battle of the Forms) – add’l terms become part of K unless:

            1. They materially alter og K (i.e. subst. change to economic risk/benefit or change in remedy);

            2. Offer limits acceptance to Offer’sterms;

            3. Offeror objects w/in reasonable time;

      2. Only Offeree may accept (EXCEPT: options K can be assigned for consideration)

      3. Mode of Acceptance– manner authorized by offer or any reasonable commercially reasonable manner

      4. Methods of Acceptance

        1. Completion of Performance – only method for unilateral K. (improper performance = both acceptance + breach)

        2. Start of Performance = acceptance for bilateral K

        3. Promise to Perform

        4. Via Mail – Mailbox Rule.

          1. Effective when sent (moment of dispatch)

            1. Exceptions:

              1. Offer expressly limits acceptance methods

              2. Option K (acceptance effective upon receipt)

              3. If REJ then ACC: first to arrive controls

              4. If ACC then REJ, Acc is effective when sent (MR applies) UNLESS REJ arrives first and Offeror detrimentally relies

        5. UCC Acceptance Via Shipment – Offer to buy goods from current shipment construed as inviting acceptance either by: (i) a promise to ship OR (ii) prompt shipment of conforming or nonconforming goods

          1. Shipment of Nonconforming goods = acceptance + breach UNLESS Accommodation Exception: nonconforming goods; AND an explanation).

            1. Applies only when shipment is used as form of acceptance (does not apply if S has already accepted offer by promising to ship)

            2. Explanation = Counteroffer (not a breach)

            3. ONLY Remedy = Reject in whole OR Accept in Whole

    4. ConsiderationBargained for exchange of legal detriment or benefit.

      1. Adequacy of Considerationlaw does not question

      2. Failure of Consideration.

        1. Gift

        2. Past (Moral) Consideration = invalid UNLESS requested and payment is expected

          1. Past Consideration Exception: Past act performed by Promisee at Future Promisor’s request, and Future Promisor anticipated making pymt for request

          2. Valid Obligation Barred by Technical Defense Exception: If once valid obligation is barred by a technical defense (i.e. SOL) obligation will be enforceable if new promise made in writing or partial performance

        3. Preexisting Duty (legal or contractual)

          1. CL – PD insufficient consideration (Lil Jon cannot demand $20k from O’or for perf after he K’ed to perf for $15K)

          2. PD Exceptions:

            1. additional or change in perf (Lil Jon changes concert playlist for more $); or

            2. 3p promise to pay for same perf (Lil Jon wants $5k more to perform and 3p promises to pay the $5k); or

            3. unforeseen difficulty excuses perf and new/additional consid induces perf

        4. Illusory Promises (no detriment at all)

          1. Illusory Promise = only 1 party bound to perform

      3. Partial Payment as consideration for Promise to Forgive Disputed or Not-Yet-Due Debt.

        1. Consideration Test: Debt must be disputed or not due for part payment to be consideration

      4. Consideration Substitutes.

        1. Promissory Estoppel/Detrimental Reliance:

          1. Promisor should reasonably expect her promise to induce action or forbearance (Detr. Rel)

          2. Of a definite and substantial character; and

          3. Such action/forbearance is in fact induced

        2. Modification to correct a clerical/typographical

          1. Such modification/reformation does not require consid.

        3. Modification under the UCCconsid not req’d to good faith written modification of a K

        4. Written Promises to satisfy legal obligation barred by Legal Defenseis enforceable w/o cosid if legal oblig not enforceable under law (i.e. barred by SOL), a new promise enforceable if in writing (new terms control).

        5. UCCwritten release for all/part of a claim for breach of sale of goods enforceable w/o consid

    5. Defenses(for K to be valid, there should be no defenses)

      1. Defenses to Formation

        1. Absence of Mutual Assent

          1. Mutual Mistake: Mistake by both parties = defense if:

            1. Mistake re a Basic Assumption on which K was made (mistake of SM not $)

            2. Mistake has Material Adverse Effect on agreed-upon exchange

            3. Adversely affected party did not assume risk of mistake

          2. Unilateral Mistakemistake by 1 party insufficient to make K voidable. UNLESS Non-mistaken party knew/should have known of mistake THEN K voidable by mistaken party

          3. Latent Ambiguity MistakesK contains ambiguous terms; and:

            1. Neither Party Aware – no K unless both intended same meaning; or

            2. Both Parties Aware – no K unless both intended same meaning; or

            3. One Party Awarebinding K based on what ignorant party reasonably believed to be meaning

          4. Misrepresentationinducement via: fraudulent misrep OR nonfraudulent material misrep AND justifiable reliance on misrep THEN K is voidable by innocent party

            1. Fraud in the Factum: K is void

              1. Party is tricked into assenting w/o understanding significance Buying cubic zirconium after being told it was diamond

        2. Absence of Consideration – no K exists

        3. Public policy defenses

          1. Illegal Subject Matter K is void.

            1. Exceptions:

              1. P is unaware of illegality while D knows

              2. One party not as culpable as the other

          2. Illegal PurposeK is voidable by: party who was unaware of purpose OR aware but did not facilitate the purpose and purpose doesn’t involve serious moral turpitude.

      2. Defenses Based on Lack of Capacity(D’s capacity)

        1. K is voidable

        2. Minors (under 18)

          1. Affirmanceupon reaching majority may affirm; OR, benefit retain after gaining capacity = reaffirming

          2. Exception: minor has quasi-k liability for necessities (food, clothing, med care, shelter); quasi K liabilities = obligation to pay for reasonable value of necessaries;

        3. Mental Incapacity (insane persons), Intoxication (other party should’ve reasonably known), duress (improper threat and no reasonable alt/vulnerable), coercion

      3. Defenses to Enforcement

        1. Statute of Frauds (MY LEGS)

          1. Applications – these Ks must be in writing to be enforced.

            1. MarriagePromise made in consideration of marriage.

              1. More than a promise to marry Ex: need, H promised to renounce all his property rights if W married him

            2. Year – Service K not “capable” of being performed w/in 1 yr from date of contract

              1. Tasks w/o mentioning time/Lifetime deals – never SOF

              2. Does not matter if revocation is capable w/in a yr, only if performance is “capable” w/in 1 yr

            3. Land – Transfer of interest in real estate for MORE than 1 year

            4. Executor – Promise of executor to pay debts from own funds.

            5. Guarantee – Promise to pay if debtor does not

              1. Main Purpose Exception: SOF does not apply when debt being guaranteed is to benefit guarantor

              2. MP Ex: S sells P paint on credit to paint C’s house, S alleges C would pay if P failed to = does not fall in SOF

            6. Sale of Goods for $500 or more (UCC) (> $500)

          2. Satisfaction of SOF

            1. Performance

              1. Full Performance req’dService K

                1. Full Performance by either party satisfies the SOF (and no longer makes it an available defense)

                2. Quasi-K & Restitution remedy still avail

              2. Part Performance sufficient

                1. Real estate – need 2 of: payment, possession, improvements

                2. Quasi K and Restitution still available

                3. Delivered Goods or Special Goods

                  1. Custom Goods: goods specially made for Buyer; and Seller has made a “substantial beginning” that makes it clear the goods are custom, no SOF defense.

                  2. Ordinary goods: part perf satisfies SOF only to extent of part perf (i.e. SOF is still a defense as to undelivered goods, but not delivered goods)

                  3. Sale of goods – part payment or acceptance and receipt of part of goods takes K out of SOF

            2. Writing

              1. CLmaterial terms (who + what) and signed by D (person against whom agreement being enforced).

              2. UCC 2-201Quantity term, signed by D (party to be charged/sued).

            3. Confirmatory Memo Rule (both merchants): (1) Both parties are merchants; and (2) memo w/ quantity term; and (3) no objection w/in 10 days = SOF Satisfied against recipient

            4. Judicial Admission of existence of K– D (asserting the SOF defense) admits, under oath, in pleading or testimony that he entered into a K w/ P = SOF Satisfied)

          3. Application of SOF to other cases

            1. Authorizations

              1. Equal Dignity Rule: Authorization (to sign a K on behalf of s/o else) must be in writing, if underlying K falls under SOF

            2. K Modifications

              1. If modified K w/in SOF, THEN need writing for modification.

              2. If og K terms prohibit oral modifications/require writing:

                1. CL – Ignore term prohibiting modifications

                2. UCC term prohibiting oral modification is effective unless waived.

        2. Unconscionability -Unfair terms at time K made

          1. Procedural Unconscionability = fine print/unfair surprise

          2. Substantive Unconscionability = unfair bargaining power

        3. Ambiguity in Words of Agreement

          1. No K if: (i) material term is open to 2 reasonable interpretations; (ii) each party attaches different meaning to the term; and (iii) neither party knows or has reason to know there are 2 reasonable interpretations

            1. Ex: K required delivery on a boat called “Peerless” and there were 2 boats named “October Peerless” and “December Peerless’

        4. Mistake of Fact

          1. Mutual Mistake of Fact: Both parties under mistake of material fact = No K

          2. Unilateral Mistake of Fact (Cts reluctant of unilateral mistake):

            1. One party under material mistake of fact = K UNLESS unmistaken party knew, or had reason to know, THEN voidable by mistaken party

  2. TERMS OF CONTRACT

    1. Parol Evidence Rule – CANNOT use prior oral/written stmts or contemporaneous oral stmts to vary, contradict, or modify K terms (regardless of type of integration).

      1. Final written version controls unless:

        1. Show Typographical Mistake (to allow reformation)

        2. To Show Condition Precedent

        3. Explain/Interpret Ambiguous Words (not to change)

        4. Establish a Defense to K formation (duress, misrep, fraud, illegality)

        5. Subsequent Modifications

        6. Add Consistent Terms ONLY if partial integration (written is final but K not complete) OR consistent terms would normally be in a separate K

          1. If complete integration can consider PE for terms that would “naturally and normally” found in separate agmnt

    2. Interpretation of Terms/Other Sources of K terms – can be used to explain or supplement K (order of importance):

      1. Course of Performance – same ppl, look to course of performance in current K, (E weighted heaviest)

      2. Course of Dealing – same ppl, diff K but similar conduct (E weighted 2nd)

      3. Custom and Usage – diff but similar ppl, diff but similar K’s (what others have done under similar K’s) (weighted 3rd heaviest)

    3. Modification

      1. CL – add’l consideration required for modifications

      2. UCC – no consideration needed so long as good faith

    4. UCC Delivery Terms – when is delivery obligation satisfied?

      1. No common carrier/no place of delivery specified in K

        1. Merchant sellerB receives goods at S’s place of business OR location of goods known to B.

        2. Non-merchant sellerS tenders goods (tells B where it is and how to get it)

      2. Common Carrier (place of delivery specified)

        1. Determining whether Shipment K or Destination K

          1. Shipment K = FOB followed by City where S is located or Goods are located

          2. Destination K = FOB followed by any other city

        2. Shipment K (S’s obligation is complete before B’s gets delivery of goods)

          1. S must: (i) get goods to common carrier; (ii) make reasonable arrangements for delivery; (iii) notify B

        3. Destination K S’s obligation is not complete until goods arrive where B is

          1. S’s obligation = goods arrive where B is.

    5. UCC – Risk of loss – determined, in priority, by:

      1. Agreement of the parties

      2. Breach – Breaching party liable for any uninsured loss even if breach unrelated to problem

      3. Common Carrier Delivery – Seller has risk of loss until completion of delivery obligation then it shifts on Buyer

        1. Delivery by CC other than S (and Shipment K): risk shifts from S to B when S completes (above) delivery obligation

        2. Destination K – S bears risk of loss until goods arrive where B is

      4. No common carrier:

        1. Merchant seller has risk of loss until buyer actually receives the goods

        2. Non-merchant seller has risk of loss until seller tenders (tells B where stuff is and how to get it)

    6. Warranties of Quality

      1. Express Warrantieswords or conduct (i.e. show sample) that promise, describe or state a fact (not mere “puffing”)

      2. Implied Warranty of Merchantabilitygoodsfit for ordinary purpose for which goods are ordinarily used

      3. Implied Warranty of Fitnessgoods fit for particular purpose + reliance upon seller’s expertise + seller knows of purpose

    7. Disclaimers – K provisions that eliminate warranties

      1. Cannot disclaim express warranties;

      2. Can disclaim implied warranties by use of “as is” or “w/ all faults” or conspicuous language (i.e. diff type of font)

    8. Limitations of Remediespermitted to limit remedies even for breach of express warranties unless limitation unconscionable at time of K.

      1. Prima facie UN if breach of warranty causes PI (cannot limit so one cannot recover for personal injury = unconscionable)

  1. PERFORMANCE

    1. Conditions – something that must occur b/4 someone’s performance is due.

      1. Types: precedent, concurrent, subsequent

    2. UCC – Performance of K for Sale of Goods

      1. Perfect Tender – S performs obligation under a K for the sale of goods upon delivering Perfect Tender – i.e. perfect goods and perfect delivery

        1. Buyer’s Options if goods not perfect:

          1. Reject all goods and sue for $ damages

          2. Accept all goods and sue for $ damages

          3. Accept some, reject nonconforming and sue for $ damages;

        2. Proper Rejectionseasonably notify S of rejection w/in reasonable time after delivery but b/4 acceptance;

      2. Cure – Seller has option to cure if:

        1. Time for performance hasn’t expired; or

        2. S had reasonable grounds to believe improper tender would be accepted (even if time expired) Look for prior dealings

      3. Installment Sales K(K authorizes installments); B can reject an installment delivery only if substantial impairment that can’t be cured (if minor, B must accept)

        1. Distinguish: Installment K (w/ multiple deliveries and separate pymts); from buying something on credit and making monthly pymts

      4. Acceptance of the goods once B accepts cannot later reject

        1. Payment before opp to look at goods NOT acceptance

        2. Keeping goods w/o objection IS acceptance (if B complains after more than 2 weeks – 1 mo.→ acceptance)

      5. Revocation of Acceptance – B can revoke acceptance if: nonconformity substantially impairs value of the goods + excusable ignorance or reasonable reliance on S’s assurance of satisfaction + revocation w/in reasonable time after discovery (after acceptance)

      6. Payment Performance B may pay by check, S may reject check (thereby giving B add’l reasonable time to meet payment obligation)

      7. Payment for Goods w/ Goods – Who is the Seller? whichever party brings the dispute is the B and opposite party is the seller

    3. Specific Performance and Injunction for unexcused non-performance

      1. SP and Injunction = equitable remedies = only available if no adequate remedy at law

        1. K for the Sale of Real Estate

          1. S K’s to sell BA to B and S breaches SP available

          2. S K’s to sell BA to B but instead sells it to BFP C No SP, but damages

        2. K for the Sale of Unique Goods

          1. Unique Goods = antique, art, custom made

            1. S K’s to sell art to B and breaches = SP available

            2. S K’s to sell art to B but sells to BFP C No SP, but damages

        3. K for Services

          1. No SP; Possible Injunction

            1. A breaches K to lecture for B’s program = No SP

            2. A breaches K to lecture for B’s program = Possible injunction to prevent A from competing w/ B’s program

    4. Reclamation for unexcused performance of a goods K

      1. Reclamation = S’s right to reclaim his goods from B

        1. Requirements: (i) B insolvent when he received the goods; (ii) S demands return w/in 10 days of B receiving the goods; (iii) B still has goods @ time of demand

    5. Performance of CL K – Substantial Performance

      1. Effect: if Substantial Performance, can recover for work done but not for uncompleted work; if no Specific Performance, cannot recover for work done b/c material breach

      2. Damages offset to compensate for incomplete perform

      3. Material breach = no compensation; Substantial Performance is a constructive condition precedent to pymt obligation

      4. Divisible K Exception: must have Substantial Performance for each divided unit (not entire K) and can obtain pymt for work completed;

      5. Performance of Constructive Condition:if K is silent as to time of payment, then Substantial Performance req’d b/4 payment made

    6. Performance of an Express Condition – Strict Compliance if EC not strictly satisfied then obligations under K excused

      1. EC terms:if,” “provided that,” “so long as,” “in the event that,” “until,” “unless,” “when,” “on condition that”

      2. Distinguish: EC v. Conditional Acceptance EC uses the above language

      3. True condition vs. condition coupled w/ express or implied covenant (implied – conditioning event subject to influence by person protected by condition)

      4. Precedent vs. Subsequent

      5. Exception – EC based on subjective approval of a contracting party treated as satisfied if a RP would approve UNLESS subject matter is Art, or other inherently discretionary matters

      6. Excuse of EC

        1. Waiver – (i) made after conditioning event to occur; (ii) by party it was meant to protect

        2. Estoppel (i) stmt by protected party; (ii) made before conditioning event to occur; and (iii) requires reliance (change of position)

        3. Prevention – (i) if protected party hinders or prevents the occurrence of the EC (to avoid the K); (ii) then EC is excused and K must be performed

        4. Avoidance of Forfeiture EC can be waived to protect party not protected by the EC think of home built w/ Cohoe pipe instead of Reading pipe

    7. Standards of Compliance.

      1. EC = strict compliance.

      2. Constructive Conditions = Substantial Performance and Divisible k.

      3. Sale of goods = perfect tender.

    8. Implied Covenant of Good Faith and Fair Dealing every K has an implied condition that the parties will deal w/each other fairly and in good faith

      1. Failure to comply is a breach

  1. EXCUSE/DISCHARGE – Has duty to perform been excused/Discharged?

    1. Excuse

      1. Failure of EC

        1. Nonoccurrence of EC (held to strict compliance)

      2. Excuse by reason of Other Party’s Breach

        1. UCCless than perfect tender;

        2. CLmaterial breach (CL requires substantial performance)

      3. AnticipatoryRepudiation – (i) unambiguous statement (or conduct) that repudiating party will not perform or inability to perform; (ii) made prior to time perf due, and (iii) executory (unperformed) duties on both sides of bi-K

        1. Options:

          1. Generally gives rise to immediate claim for damages from breach party UNLESS claimant has finished their performance then must wait for pymt date

          2. Suspend own performance and wait until perform due to sue,

          3. Treat repudiation as offer to rescind and treat K as discharged, or

          4. Ignore repudiation and urge performance

        2. Retraction of AR: AR may be retracted until non-repudiating party has accepted or detri relied on AR

      4. Insecurity: Prospective Inability or Unwillingness to Perform

        1. Reasonable grounds to believe other party will be unable or unwilling to perform when performance due (raises doubt)

        2. Effect of Prospective Failure – innocent party may suspend own performance until receives adequate assurances of performance. Otherwise, may treat failure as repudiation.

      5. Excuse by Substantial Performance (constructive conditions only)

      6. Excuse of Condition by Waiver or Estoppel

        1. Estoppel: stmt by person protected by condition BEFORE conditioning event to occur and requires change of position (reliance)

        2. Waiver: stmt by person protected by condition AFTER conditioning event to occur and does not require change of position.

        3. Condition coupled w/ implied covenant: where conditioning event subject to influence by person protected by condition. If protected person does not perform, other party may sue for breach of implied covenant.

      7. Excuse by Impossibility, Impracticability or Frustration of Purpose

        1. Ask: (i) which party is arguing for perf excuse; (ii) what is arguing party’s performance; (iii) did post-K occurrence affect ability to perform beyond mere cost

        2. Ask: is K SM replaceable?; who has the ROL and what’s their ability to perform?

        3. Illegality: does subsequent law: make perf illegal, or frustrate the purpose of the K

    2. Discharge

      1. Rescission (cancellation): for rescission to be valid, must be executory on both sides (i.e. neither party has finished) AND writing required if: SOF K or UCC K w/ express writing required for rescission/modification.

        1. Look to quasi-K for payment for partial perform

      2. Accord and Satisfaction (substituted performance)

        1. Accord: agreement to accept a diff performance in satisfaction of existing obligation;

        2. Satisfaction: performing alternate performance; if no satisfaction, other party can sue on og obligation or the accord

      3. Modification (substituted agreement): agreement by parties to an existing oblig to accept a diff agreement in satisfaction “instead of” of existing oblig.

        1. CL: requires consid; UCC: requires good faith

        2. Possible SOF issue

      4. Distinguish: Accord/Satisfaction v. Modification

        1. Accord/Satisfaction = “if” . . . “then” language

        2. Modification = “instead of” language

      5. Novation (substituted person): mutually agreed upon substitution of a party (same performance, diff party)

        1. Extinguishes contractual duties as b/w og parties (excuses person replaced from any liability for nonperformance)

      6. Later unforeseen event

        1. Impossibility – performance is rendered objectively impossible. Does not excuse duty to pay if ROL on B

          1. Death/Sickness/Injury of Special Party – famous, specially talented, skilled, unique service. If person special→ perf excused.

          2. Damage/Destruction of K Subject Matter

            1. Seller’s ROL –B does not have to pay, but B cannot sue for failure of delivery b/c of inability to perform if SM of K was unique (i.e. not fungible)

            2. Buyer’s ROL – performance not imposs b/c there is still $ in the world.

            3. Fungible items – no excuse bc easily replaceable

        2. Impracticability – extremely difficult and expensive to render performance.

        3. Frustrationofpurpose – later unforeseeable happening or supervening event not the fault of the party seeking discharge – destroys the purpose of the contract

        4. Subsequent law or regulation (makes performance illegal or frustrates K’s purpose

  1. BREACH

    1. Occurs when one of parties to K does not perform and that performance was not excused.

    2. Material v. Minor Breach

      1. Material – non-breaching party does not receive substantial benefit of her bargain

        1. Options: non-breaching party may: (1) treat K as at an end, and (2) has immediate right to all remedies for breach.

      2. Test for Materiality: factors ct look to:

        1. Amt of benefit received by innocent party

        2. Adequacy of compensation for damages to injured party

        3. Extent of part performance by breaching party

        4. Hardship to breaching party

        5. Negligent/Willful behavior of breaching party

        6. Likelihood breaching party will perform remainder of K

      3. Failure to perform w/in time stated– not a material breach if performance rendered w/in reasonable time. UNLESS, timely performance essential or time is of the essence or argue failure of express condition

  1. REMEDIES

    1. Duty to Mitigate – non-breaching party must take reasonable steps to mitigate damages.

    2. Damages

      1. Compensatory – put P in the same position as if the contract had been performed and the breach not occurred. The P must prove (1) Causation, (2) forseeability, (3) certainty, and (4) mitigation – Includes:

        1. Expectation damages – amount that would permit P to buy substitute

        2. Incidental – hassle damages resulting from breach

        3. Consequential damages – indirect results of D’s breach that are special to P and were foreseeable to D at time of K formation – must be certain and definite

      2. Liquidated Damages – damages specified in the contract

        1. liquidated damages clause ok if damages are:

          1. (i) Difficult to ascertain (at time of formation); and (ii) are a reasonable forecast (amt) of compensatory damages

          2. Too large of Amt = penalty = void

      3. Punitive – generally not allowed for breach of K.

      4. Nominal – awarded to serve to establish or vindicate P’s rights where the P has no actual injury

    3. CL Damages = Expectation + Incidental + Consequential – Avoidable

      1. Generally expectation damages (puts party in as good as position had there been performance) +

      2. Incidental damages (damages incurred in dealing w/ breach) +

      3. Foreseeable consequential damages (special damages contemplated by parties at time of K) –

      4. Avoidable damages (no recovery for loss that could’ve been avoided)

        1. Employment K’s: same kind of job in same city (geographic area)

    4. UCC damages

      1. S breaches & B keeps goods = [FMV if perfect – FMV as delivered]

      2. S breaches & S keeps goods = [Cover price – K price] or [FMV – K price]

      3. B breaches & B keeps goods [K price]

      4. B breaches & S keeps goods

        1. Good not unique: [K price – FMV @ time of delivery] or [K price – resale price]

        2. Lost profits: [K price – resale price + lost profit]

    5. Breaching Party Sues for Partial Performance

      1. BP Partial Performance Damages = Reasonable Value for Partial Performance – Damages caused by Breach

    6. Lost Volume Seller: (high volume seller (unlimited supply) can recover lost profits from breach –resale would be inadequate to put him in same position

    7. Quasi Contract (Unjust Enrichment and Restitution)

    8. If K fails. Quasi-K relief requires that:

      1. One party has conferred benefit on the other

      2. Conferring party has reasonable expectation of being compensated

      3. Benefits conferred at implied request of other party;

      4. Unjust enrichment would result if D allowed to retain benefits

    9. Equitable Remedies

      1. Specific Performance = no adequate remedy at law.

        1. “Cha Cha Is My Favorite Dance”

        2. Legal remedy inadequate when SM of K is rare or unique good (i.e. land, art, custom, antique).

        3. Not available for service K’s or regular goods.

      2. Reclamation – recovery of goods by unpaid S from B who was insolvent at time of delivery of goods. Demand made w/in 10 days of B’s receipt, B still in possession.

      3. Entrustment – owner entrusts goods w/ a person who sells goods of that kind, who wrongfully sells goods to 3p. Good faith purchase from dealer cuts off rights of og owner. O can sue seller.

      4. Reformation – changing/reforming written K.

        1. Fraudulent misrep as to what’s in the agreement.

  1. THIRD PARTY RIGHTS & OBLIGATIONS

    1. 3rd Party Beneficiaries

      1. Intended v. Incidental beneficiary?

        1. Intended Benef – have K rights; (usually) named in K;

          1. Ex: party who receives life insurance proceeds

        2. Incidental Benef – not named in the K and don’t have K rights

        3. Promisor – party whose promise benefits TPB

          1. Ex: life insurance co.

        4. Promisee – party who obtains promise to benefit TBP

          1. Ex: insured

      2. Creditor v. Donee beneficiary?

        1. Donee Benef – person promisee intends to benefit

        2. Creditor Benef – person to whom debt owed by promisee (3p already a creditor of promisee)

      3. Cancellation/Modification – have TPB rights vested?

        1. To make agmnt not capable of being cancelled, need: knowledge by 3p w/ EITHER detrimental reliance OR assent (or constructive assent – TPB brings claim to enforce b4 mod/cancel)

        2. If TPB rights have vested and can’t be cancelled/modified w/o consent unless K provides otherwise, if not vested then mod/cancel ok w/o TPB consent

      4. Who can sue?

        1. TPB can recover from Promisor – once rights have vested TPB can sue Promisor for breach

          1. Promisor can raise defenses avail against promisee (i.e. promisee’s breach is valid defense against TPB)

        2. Promisee can recover from Promisor – existing parties still have rights and can sue each other for breach

        3. Creditor Benef can recover from Promisee (only on existing debt)

          1. Creditor Benef – can sue promisee on pre-existing debt but not as TPB

        4. Donee Benef cannot recover from Promisee

          1. Donee Benef – cannot sue promisee

    2. Assignment of Rights (transfer of rights/benefits of K)

      1. Vocab:

        1. Assignor – party who transfers rights under K to another

        2. Assignee: not a party to the K, can enforce rights under K b/c of assignment

        3. Obligor: other party to the K

      2. 3 steps: (i) K b/w 2 parties (no mention of another person); (ii) 1 of parties later transfers rights under K to 3p (not mentioned in K); and (iii) provides notice to the obligor

      3. Valid upon Notice – once obligor given notice of assignment, obligor is bound to render performance (pay) to the assignee. B/4 notice, payments made to assignor not considered breach of perform.

      4. Must have present assignment language (not future or mere promise); i.e. “I promise to assign” → not ok.

        1. Writing req’d if > 5K. Oral assignments ok if < 5k.

      5. Gift assignments valid but revocable absent detrimental reliance

      6. Restrictions

        1. K provision prohibits assignment (takes away the right to assign, but not the power to assign)

          1. Meaning assignee who doesn’t know of prohibition can enforce assignment

        2. K provision invalidates assignment (assignment is void)

          1. Assignee cannot enforce the assignment; breach by assignor

        3. Court imposed/Common Law Limitations:

          1. CL bars assignment that substantially changes duties of obligor.

            1. Assignment of right to payment→ ok

            2. Assignment of other K performance rights→ not ok

            3. Personal service K where service unique→ not ok

            4. Requirements and output Ks where assignee will substantially vary quantity→ not ok.

      7. Gratuitous Assignment v. Assignment for Consideration

        1. Assignment for Consideration cannot be revoked

        2. Gratuitous Assignment can be revoked UNLESS: (i) expressly prohibited in the K; (ii) foreseeable detrimental reliance on part of Ass’ee; or (iii) Ass’ee received some from ownership

      8. Assignment for Consideration Implied Warranties

        1. Rights actually exist; (2) not subject to defense by O’or; (3) Ass’or will not impair the value; However, no warranty for O’or’s actions

      9. Multiple assignment problems.

        1. Gratuitous Assignmentslast assignment wins unless: detri reliance; revocation is expressly prohibited; some form of ownership

        2. Assignments for Considerationfirst assignee for consideration wins unless later assignee did not know of earlier assignment and actually collects (more than notice) b/4 obligor learns of earlier assignmnt

      10. Who can sue whom?

        1. Assignee → Obligor

          1. Assignee steps in shoes of assignor and can sue obligor

          2. Obligor can raise defenses available against assignor

        2. Assignee → Assignor for wrongfully exercising right to revoke

          1. K prohibited/invalidate it

          2. Subsequent donee assignment w/ DR

          3. Subsequent assignee for consideration

        3. Obligor→Assignor if K prohibited/invalidated assignment

        4. Assignor for Consideration cannot sue Obligor – bc Ass’or assigned away his rights for consideration

        5. Gratuitous Assignor can sue Obligor if valid revocation

    3. Delegation of Duties – Transfer of work under contract to 3p (terms “assignment” and “delegation” used interchangeably on MBE)

      1. Distinguish:

        1. Assignment = transfer of ‘rights or benefits’

        2. Delegation = transfer of ‘duty or burdens’

      2. Allowed unless (perform of K can be delegated unless):

        1. K specifies no delegation or no assignments.

        2. Personal service K calls for very special skills.

        3. Person to perform has a very special reputation.

        4. Output/Requirement K where Ass’ee will substantially vary the output

      3. Consequences of Delegation

        1. Delegating party ALWAYS remains liable

        2. Delegatee liable ONLY IF receives consid from delegating party

        3. Delegation for consid creates a new TPB

      4. What if 3p does not perform?

        1. Delegation w/o consideration: creates no new obligation (can’t sue 3p), but can sue og contracting party

        2. Delegation for consideration: 3p can be sued if there was consid

          1. Consideration not required, but delegate not required to perform.

      5. Who can sue whom?

        1. Obligee → Delegator (Delegating party may be sued by obligee). Original contacting party always liable even if it was a delegation for consid.

        2. Obligee→ Delegatee only if he received consid from delegating party (bc the consideration b/w d’or and d’ee made obligee TPB

      6. Compare novation:

        1. Novation substitutes a new party for an og party to the K.

          1. Requires assent of all parties and completely releases og party.

Rule Statements

  1. Applicable Law:

    1. The UCC governs K’s for the sale of goods. Goods are tangible movable objects. This K involves the sale of X. Because X are tangible movable objects, the UCC will govern.

    2. Merchants—In addition, the UCC has special rules, which apply when merchants are involved. Merchants are those that regularly deal in the particular goods. Here, both A and B are merchants b/c they regularly buy and sell X. Thus, the special rules for merchants will apply to this K

    3. CL governs service contracts or real property contracts.

  2. Offer: An offer is a communication to an identified offeree, which manifests a present intent to enter into a binding contract with definite and certain material terms.

    1. Revocation: A revocation occurs when the offeror manifests a clear intention to terminate the offer. A rev is effective only upon receipt. Certain offers are irrevocable.

  3. Acceptance: An acceptance is an agreement to be bound by the terms of the offer. Under the CL, the acceptance must mirror the offer. Under the UCC, however, any seasonable assent to the offer is a valid acceptance. An offeree can accept an offer by performance or by a promise to perform.

  4. Consideration: To be valid, a K must be supported by consideration. Consideration is a bargained for exchange of legal detriment or benefit.

  5. Terms of the K:

    1. Parole Evidence: When parties to a contract have reduced their agreement to writing and the writing is intended as a final integration of their terms, any prior or contemporaneous statements are inadmissible to alter the terms of the writing. Parol evidence is admissible to interpret the terms of the K where there is an ambiguity or to reform writing when there was a typographical error.

    2. Modifications: Modifications are valid under the CL so long as there is consideration provided. Under the UCC, modifications are valid b/w merchants w/o consideration so long as they entered into in good faith.

  6. Performance – under the UCC, a seller performs by delivering perfect tender. The CL requires substantial performance.

    1. Anticipatory Repudiation – if prior to the time performance is due, a party to a contract makes an unequivocal statement or implies thorough conduct that she cannot or will not perform her obligations under the agreement, the other party can treat the repudiation as a breach and sue for damages immediately.

  7. Breach

    1. A breach occurs when one of the parties to a K does not perform and that performance was not excused.

    2. Material Breach – a material breach occurs when the non-breaching party does not receive a substantial benefit of her bargain

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