contracts] [dow] [outline] [2008 fall] gottschalk

8/3/2019 Contracts] [Dow] [Outline] [2008 Fall] Gottschalk

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ntracts Outline - Fall 2011

NTRACT TYPES.....................................................................................................................................................................................................

NO COMPULSORY CONTRACTS........................................................................................................... ...................................... ....................................DEBTOR AGAINSTHIS WILL............................................................................................................................................ ...................................... ......

NTRACT TYPES.....................................................................................................................................................................................................

UNILATERAL, BILATERAL, & REQUIREMENTS K........................................................................................................................................... ........................

FER............................................................................................................................................................................................................................

ITATION TO MAKE AN OFFER: ADVERTISEMENTS & \.........................................................................................................................................

VOCATION/ MODIFICATION..................................................................................................................................................................................

FIRM OFFERS / OPTIONS............................................................................................................................... ..................................... .......................Merchants Written Offer to Another Merchant, Option K, & Detrimental Reliance......................................................................................

FLAGPOLE RULE..................................................................................................................................... ..................................... ............................Part Performance:..........................................................................................................................................................................................

CEPTANCE.................................................................................................................................................................................................................

MIRROR IMAGE RULE......................................................................................................................................................... ..................................... ..2-207 UCC...................................................................................................................................................... ...................................... ..........MAILBOX RULE.......................................................................................................................................... ...................................... .......................

ECTION/COUNTER-OFF.............................................................................................................................................................................................

NSIDERATION............................................................................................................................................................................................................

ADEQUACY................................................................................................................................... ...................................... ...................................Conditions, Seal, & Main Purpose Rule..........................................................................................................................................................

GRATUITOUS PROMISE.......................................................................................................................................... ...................................... ............... 90 Reliance (Promissory Estoppel) & Inducement.......................................................................................................................................

MORAL CONSIDERATION/RENEWED PROMISE & MATERIAL BENEFIT..........................................................................................................................................

USORY PROMISES & GOOD FAITH.......................................................................................................................................................................

ATUTE OF FRAUDS...............................................................................................................................................................................................

FRAUD....................................................................................................................................................... ...................................... ...................SURETYSHIP: MAIN PURPOSE RULE..................................................................................................................................... ..................................... ......SATISFACTIONBY PART PERFORMANCE: RELIANCE.......................................................................................................... ..................................... ................

CONSCIONABILITY....................................................................................................................................................................................................

ADJUSTMENT OF GOING DEALS...........................................................................................................................................................................MUTUALLY RESCIND + NEW K: DOCTRINEOF EXCUSE, ADVANCED PAYMENT, IMPOSSIBLETO PERFORM, & DURESS..................................................................................

ROL EVIDENCE RULE (AND RULES OF INTERPRETATION)....................................................................................................................................

MERGER CLAUSES & COLLATERAL AGREEMENTS...................................................................................................................... ...................................... .....

HIRD PARTY BENEFICIARY...................................................................................................................................................................................

SIGNMENT & DELEGATION...................................................................................................................................................................................

NOVATION..................................................................................................................................................... ...................................... .................

OBLEMS OF PERFORMANCE.................................................................................................................................................................................

MISTAKE, IMPRACTICALITY, FRUSTRATION, CONDITIONS: SUBSTANTIAL PERFORMANCE, PERFECT TEDNER, QUANTUM MERUIT, & MATERIAL BREACH...............................................

ADJUSTMENT OF GOING DEALS...........................................................................................................................................................................

MUTUALLY RESCIND + NEW K: DOCTRINEOF EXCUSE, ADVANCED PAYMENT, IMPOSSIBLETO PERFORM, & DURESS..................................................................................ADJUSTMENT OF GOING DEALS...........................................................................................................................................................................

UITABLE REMEDIES..............................................................................................................................................................................................

NJUNCTION & SPECIFIC PERFORMANCE..................................................................................................................... ..................................... ..................

LE OF GOODS (UCC REMEDIES)...........................................................................................................................................................................

LOST-VOLUMESELLER, BUYER'S REMEDIES, SELLER REMEDIES, ANTICIPATORY BREACH, NERVOUSNESS, MITIGATION, CONTROLLING LIABILITY......................................................

C PROVISIONS......................................................................................................................................................................................................


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I. ContractA. What is a Contract?A contract is formed in any transaction in which one or both parties make a legally enforceable promise. A promise is acommitment or undertaking that a given event will or will not occur in the future and may be express or implied from condor language and conduct. A promise is legally enforceable where: There is an Offer, Acceptance, and Consideration which was bargained for, or If there is no consideration, reasonably induced the promisee to rely on the promise to his detriment; or is deemed enforceable by a statute despite the lack of consideration.B. 3 Clichs First of all, I think it is important you understood some basics of my advice to you. I will be referring to thre

fundamental principles which the laws of contacts were founded on. Your hardest issues to resolve will be when the lawclashes with these principles because there is uncertainty in outcome when principles collide. Many judges in the past hasettled these types of collisions with what we call thaumatrope anlalytics, which is simply when one imperfect princis used to give the allusion that all principles are in balance and there is no collision, when in fact this is just an illusion, just lithe illusion of a bird in a cage in a thaumatrope. There may appear to be a bird inside a cage, but each side of the conly contains one of those objects, not both. These three principles are quite rational. They are:

1. There are No Compulsory Contracts which means acceptance must be volitional (cant be silence). (Hv. Eddingfield)

a. Not entirely true - in your paycheck the government takes out taxes. This is compulsory.2. There must be a Meeting of the Minds between the parties so they both agree there is a contract, athey do agree, theyre agreeing to the same terms. This principle is that theIntentions of the Parties Controlcourts do acknowledge that there is always asymmetry in knowledge between the parties, however, so this wiprevent enforcement of the K. Current law favors an objective standard for determining a party's intent to becontractually bound. Thus, in general, communications are given the meaning that the recipient of the communicshould have reasonably understood.The courts will use a reasonableness standard to interpret your actions

This means they will ask what the reasonable person would have thought you meant or intended. Your subjectintent is mostly unnecessary.

a. Unless information one party lacks is such that there isnt really assent to agreement (continuum btwnmeeting of minds & mistake)3.Lastly, no party can make another a Debtor Against his Will (Noble v. Williams). Mutuality Principle - until

both are bound, neither is boundb. Not entirely true: in Somners (made the school board a debtor) and Cotnam v. Wisdom (Wisdom made

estate a debtor)B. Main Rule

Now, onto the actual laws contracts, the basic formula is that a contract is a legally enforceable agreement. Acontract requires there be an offer, acceptance, and consideration to be legally binding. Without one of these elementsthere can be no contract

II.Contract TypesA. Unilateral K- an exchange of a promise for performanceB. Bilateral K- an exchange of promises (The modern view: Assume all bilateral unless expressly stated in offer or offer f

reward)C. Requirements K - A requirement contract is one in which the term of quantity to be delivered is measured by the need

the buyer. In such contracts, the buyer is not permitted to buy from a third-party supplier; the seller must deliver therequired amount of product to the buyer but any excess produced may be sold to third parties. (Explicit amount not required);

1. The purchaser operating a business with predictable requirements (seller could reasonably estimate how mneeds to be supplied), and

2. The purchaser acts in good faith regarding amount required (May be minimum and maximum req. (strongere = Reasonable estimate))

3. If neither (a) nor (b), then the buyer is not actually required to do anything, therefore it lacks mutuality & is aillusory promise.

D. Output k- An output contract measures the contract quantity by the output of the seller. The seller is not permitted to any of its products to a third party; the buyer must purchase all of the seller's output but may purchase from third partysuppliers any excess it needs beyond the seller's output.E. Types of ContractsContract may be of the following types:1) Express an agreement manifested by words

2) Implied-in-fact an agreement manifested by conduct3) Implied-in-law ("quasi-contract") not a true contract but an obligation imposed by a court despite the absence of apromise in order to avoid an injustice

III. OfferA. Main Rule

An offer is something that creates the power of acceptance and is clear, definite, and explicit such that when tofferee accepts, a reasonable person knows what there is a contact is for.

B. Only the offeree can accept the offer. However, offeree cannot accept if they are aware that the offer is no lonen.

1. Need reliable info it has been 1) accepted by someone else, 2) revoked, 3) offeree knows he is not included, ow oor joking/crazy


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C. Invitation to make an offer: broad, general offer, kind of at large (to a large group of people or the public, like a silenauction, in which case the person

making the invitation to offer is not bound by any of the acceptances he might get to his original invitation, becthey are all just offers,

which he may accept or reject, rather than acceptances of his offer. If ambiguous, it must be interpreted to theofferees advantage.

D. The more terms that are left open, the less likely it will be construed as an offer. When parties fail to limit quantity, inot likely to be construed as an

offer. Same goes for failure to limit recipients. Public proposals, like advertisements, are also usually not offersbut might be if the proposal itself

limits liability, like 10 available, first come first served. (Exception: Requirements K). The objective standard is uto identify any missing terms.E. Offeror is the master of his offer, however he cannot specify that his offer is to be accepted by silence (unless by

custom). Cannot offer to do somethingalready performed,already has the duty to perform, or future promise (tomorrow I will promise to sell you X).

F. If it is contested as to whether the offeror meant his statement to be an offer, under the subjective theory, it is a quesof intent, resolved by asking ifa

reasonable person would have thought an offer was extended. However, any time the offeror says it was meant to be an offer, it can be

interpreted that it is not an offer, and the court is often reluctant to construe it as a binding offer.G. Offer may invite acceptance by promise or performance. Where an offer invites A by performance, can be accep

only by performance, not a promiseH. An offer can be revoked before A initiated. (cant refuse to A performance when oee shows up to tender performa

having already begun to do so)1. An offer is valid upon receipt, including when offeree is told of it by another person (if its a reliable source).

I. In the sale of goods, the purchaser is the offeror, in general.J. Duration of Offer: If the offer has a stated time within which the acceptance must be made, any attempted acceptanafter the expiration of that time will fail and will merely constitute a counteroffer by the offeree. Ifno specific time is statwithin which the offeree must accept, it is assumed that the offeror intended to keep the offer open for a reasonable periodtime, to be determined based on the nature of the proposed contract, trade usage, prior dealings and other circumstanceswhich the offeree knows or should know.

1. Generally, the time for accepting an offer begins to run from the time it is received by the offeree. If there was delay in delivery of the offer of which the offeree is aware, the usual inference is that the time runs from the date which the offeree would have received the offer under ordinary circumstances.

IV. Revocation/ ModificationA. Main Rule Until the moment of A, the offeror has power of revocation and power to modify his offer (though he canno

ke changes after A).B. Revocation - Terminates the offerees power of acceptance and is effective upon receipt or when published.

1. Must be reasonably calculated to reach the offeree. This requires it be communicated in same or superior mannthan offer

2. Can be communicated by Offeror OR a 3rd party, but it must be reliable information (rumors/suspicions do notcount)

3. Firm Offers / Optionsa. A merchants written offer to another merchant is irrevocable for a reasonable or expressly stated

time, without consideration.b. An option K is irrevocable provided that the promise to keep the offer open is supported by additional

consideration.c. Detrimental Reliance Substitute for the additional consideration in an otherwise unenforceable option

where a party hasreasonably and foreseeably detrimentally relied upon the belief that the offer would be open for

certain time. [Carbolic Smokeball Co.]4. Flagpole Rule [Perez Example]

a. In a unilateral contract, the offer becomes irrevocable once the performance has begun & offerors poof revocation is

suspended for a reasonable amount of time to allow completion; however, the offeree mayterminate any time.

1. Upon commencement of performance, the offeror must give the offeree the amount of timespecified in the offer (or, in the absence of a specified time, a reasonable time) in which to compthe bargained-for promise. However, the offeree's mere preparation to perform does not precludthe offeror from revoking.

b. Part Performance: preparation to perform does not constitute part performance; however, if reasonablforeseeably relied to your

detriment on the O of a unilat. contract, that reliance substitutes for the C that would haveoccurred with performance.

C. Modification - Offeror can modify his offer before acceptance, but cant after acceptance propose new or arbitraryditions not in the original offer


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V. AcceptanceA. Main Rule

Acceptance occurs when an offeree assents to the terms of the offer by actual communication. There are variousways to accept. In general, the offeree must accept in a manner provided by the offeror because the offeror is the Masof the Offer and can dictate how the offeree accepts. We must look to what the offer said.

B. Mutuality Principle Until BOTH are bound, NEITHER is boundC. Offeree can not accept if they aware that the offer is no longer open:

1. Does the offeree have reliable information that the offera. 1) has been accepted by someone else,b. 2) revoked, orc. 3) offeree knows he is not included

2. Is the offeror serious/crazy (and does the offeree know it?)D. Means of Acceptance

1. There must be actual acceptance (word, written or spoken, or some overt act) to be considered a valid accepta2. Bilateral K

a. In a bilateral contract, the offers empower the offeree to only accept by return promise.Bilateral contracts are formed upon the giving of the promise to perform an obligation in the future, andfailure to fulfill such promise results in breach.b. To accept, do what offeror specifiesc. Ifno mode of acceptance specified, accept in a mode reasonable calculated to reach offeror

i. Always reasonable if in same mode as offerii. Generally reasonable if in more reliable mode to offeriii. Likely not reasonable if less reliable than the offer.

d. Any objective manifestation of the offerees counter-promise through words or acts is sufficient

e. UCC must communicate acceptance.3. Unilateral K

a. In a unilateral contract, the offer empowers the offeree to only accept by complete performance of thepromise. The offeree's failure to perform does not constitute a breach since no contract is formed until theofferee renders full performance.

b. Performance is acceptance and no notification is necessary, unless:i. There is no way that the offeror could have known about acceptance/performance, ORii. If the offeror expressly requires notification

4. When uncertainty arises whether the oor sought promise or performance, one must examine his actions/wofirst, but most times Bilateral

a. 2nd restatement abandoned distinction between Unilateral and Bilateral (because its not helpful)i. Presumption that mode of acceptance is a promise, and not an actii. Creates contract at earliest moment, immediately protecting both parties (mutuality principle

b. In all cases, an offeree is required to accept in a manner prescribed by an offeror (always reasonablemanner)

E. Mirror Image Rule (Common Law)1. The offerees acceptance must literally mirror that offer, otherwise it is a rejection & counteroffer.

a. Mirror Image Rule an acceptance must conform to the terms set forth in the offer. No contract is formethe acceptance contains terms that are different from or additional to those set forth in the offer. Suchcommunication merely constitutes a counter-offer. The formation of a contract is generally precluded evethe discrepancy is trivial, although courts are now increasingly giving effect to an acceptance if theadditional or different terms relate to an immaterial detail.

F. 2-207 UCC (Modern Law) - Eliminate Mirror Image Rule - abolishes last shot doctrine (FOR SALE OF GOODS ONLY!)1. (Applies to Everyone) In contracts where at least one party is a non-merchant, if the offeree unambiguousaccepts but states additional terms, the terms are construed as mere proposals for modification and the teof the existing contract are those set forth in the offer.

a. UNLESS A is expressly made conditional on assent to the additional terms2. (Applicable to Merchants ONLY) Where both parties are merchants, the additional terms become part of the

tract unless:a. O expressly limits A to terms of Ob. Proposals materially alter Oc. Notification of objection to proposals has already been given or is given within reasonable time after n

of them is received

3. Conduct by both parties which recognizes the existence of a contract is sufficient to establish a contract.a. In such a case the terms of the particular K consist of those terms on which the writings of the partie

agree, together with any supplementary terms incorporated under any other provisions of this Act.G. Method of acceptance

1. Acceptance should be made either by the same method as the offer was communicated, or by a methodthat was invited by the offer.

H. Mailbox Rule1. Acceptance is effective upon DISPATCH (the magic moment at which both parties are bound)2. Valid only when acceptance sent first3. If offeree sends an acceptance, and then a rejection, the acceptance is effective

a. UNLESS Offeror receives the rejection first and relies on it to their detriment (not liable for breach)


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4. EXCEPTION: If Rejection or Counter-Offer sent FIRST (or at same time as A), whichever gets there first is effec(Mailbox not apply)

VI. Rejection/Counter-OfferA. Rejection

1. Once an offer has been rejected, the Offeree no longer has the power of acceptance2. Effective upon receipt

B. Counter-Offer - Where the acceptance does not mirror the offer, it functions as rejection & counteroffer.1. Exception - Option K

a. Option keeps the offer open for a specific period time, the offer is not terminated by the counterofferb. Offeree can still accept the original terms of the offer within a reasonable time.

VII. Consideration C = (BP(benefit to promisor) (or) DPe (Detriment to promisee) and BF (bargained for)A. Main Rule

The purpose of consideration is to show that the parties intended to be bound. Consideration is either a benefit topromisor or a detriment to the promisee and is bargained for. A benefit is receiving something you are not entitled to (wfuzzies dont count), and a detriment is doing something you do not have to do or refraining from something you areentitled to do. Lastly, bargained for means to induce another to do something.

1. Should be able to flip these around and find benefit/detrimenton the other side2. Past Consideration is no consideration because that consideration doesn't induce the party to act or contr3. If it is a unilateral contract, then there is only ONE promisor, but there still needs to be a benefit/detriment o

each sideB. Adequacy

1. Main Rule - Courts of law do not normally inquire into the value of the consideration, thus consideration can benominal

a. EXCEPTION: this is NOT permitted where the value of what is exchanged is determinate and Promisorintention is to enforce a gratuitous promise with nominal consideration (i.e., exchanging $1 f$100) (destroys freedom for promise and Intentions of Parties Control)

b. Motive of promisor in making the exchange is not of central concern as long as it is apparent that heintended to exchange his promise for something else (promise of skiis in exchange for promto quit smoking)

2. Conditions of a gratuitous promise cannot be consideration either. Where the act requested is merely a condinecessary to receive the promise, like holding out your hand(or coming to FL), the action is not bargained forsought to be induced by the promisor. In determining if a requested action is consideration or merely conditionask if the action benefits the Por (Would a reasonable person conclude that the satisfaction of the Pors appardesire is being fulfilled; ex: asking street statue to hold out hand). The ultimate deciding factor though, is whethe act is what was bargained for.

3. Even when the thing being bargained for has no real value, if it is what the promisor really wants, because hefalsely believes it has value or for any other reason, it can be sufficient consideration. Court can rule either wa1) No consideration because there never was a valid claim, or 2) There was C, because promisor wanted it.

4. Seal or putting an agreement in writing can substitute for consideration, which is to show deliberateness and deter imprudence when entering a contract,

a. Consideration is as much a form as a sealb. It can at least showpresumptive evidence of intention to be bound, and if someone clearly desir

to be bound, should be able to.c. Merchants are usually bound by promises in writing?

5. Main purpose rule- If main purpose of a promise is to benefit oneself, then theres a benefit to promisor forconsideration. If the promise is just roughly equivalent to a gratuitous transfer, then main purpose is not topromisor, and therefore is no consideration (at least no benefit, may still be detriment) (Ex is if you back up a on a business you will get if principal borrower defaults, so you make the promise for a potential benefit for selrather than just for benefit of principal borrower.)

C. Gratuitous Promise

1. 90 Reliance - Promissory Estoppel Main Rule -a. (1) A promise which the promisor should reasonably expect to induce action or forbearanc

the part of the promisee or a third person and which does induce such action or forbearance is bindinginjustice can be avoided only by enforcement of the promise.The remedy granted for breach may be limited as justice requires.(2) A charitable subscription or marriage settlement is binding under Sub. (1) without proof the promiinduced action or forbearance.

b. Reliance can include taking action under the promise or foregoing action that one might haveotherwise taken.


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c. Promissory Estoppelis the idea that this reliance makes an otherwise gratuitous promise anenforceable, binding contract, despite a lack of consideration. It estops the promisor from claiming a of consideration as a defense for being bound by the K.

d. If a person promises to do something or agrees to enter into a trust, he is not bound to fulfill thatpromise; but once he begins to perform or enters the trust, he is bound to perform what he agreed to,because the other person is relying on him to do so.

e. A claim of reliance is strengthened when the action taken was specifically requested by thepromisor. Where the Pee relies on a promise by doing an act the Por has requested (going to Europhe can usually recover.

f. Counter-principle to reliance, at least for non-commercial agreements, like family, is that it uproconsideration, and cannot be

acknowledged. Consideration must exist.

g. Similar to reliance, when the Pee subjects itself to a duty at the request or implied request of the the K becomes binding, whether from reliance, or from a bilateral K, since promises have been made both, even though one was implied.

h. Three circumstances under which reliance would NOT have been justified1. When there is no promise2. When pee knows or has reason to know the bid is a mistake

3. when the por states or clearly implies that the bid is revokable

2. Inducement related to gratuitous promisesa. When parties are already legally bound, a promise between them to induce action is void, because t

were already bound to do it.

b. A promise made to another person can have consideration though, when it is to forego the right tomutually rescind their agreement. While one party may be bound to the other, they can mutuallyrescind together, and agreement to forego this right produces new consideration.

D. Moral Consideration/Renewed Promise1. Generally promises made only out of a sense of moral responsibility are NOT enforceable

a. Actions must be done at D's requestb. Promise must INDUCE action

i.Ex. Promise to support ones child is insufficient because didn't take on any greater responsib& por didn't have to pay

2. Past Consideration is no consideration because that consideration doesn't cause the party to act or contraa. If acts have been previously performed by the promisee at the promisors request, a new promise wi

enforceable.3. Preexisting legal obligation which has been made inoperable by law is consideration for a new promise (ex:

statute of limitationsdoes not destroy debt)

a. Need evidence of New Promisei. A person makes a part payment of the debt, where this part payment can be construed as

acknowledgement of the debt.ii. New Promise to pay only a portion of the debt is enforceableiii. Measure of liability determined by the new promise and not the old debtiv. Confession, acknowledgment, or denying not enoughv. These subsequently enforceable promises should be made in writing and signed.

b. A new promise supported by contemporaneous consideration need not be in writing4. Material Benefit

a. Moral obligation is sufficient consideration to support executory promise where an actual matbenefit is received and

is one he has promised to pay for (exception to past consideration)b. Where promisee cares for, improves, and preserves property or the promisor, done

without request, it is sufficientconsideration

i. Ex. Saving someone's life and suffering as a result (savee promises to pay rest of li

VIII. Illusory Promises & Good FaithA. Illusory Promises

1. Main Rule When the promise is conditional on an event or performance is entirely within the promisors control, and th

contract imposes no apparent obligation on him, it is said to be illusory, lacking mutuality and thereforeunenforceable.

a. Lack of Mutuality (counter Intentions of the Parties Control)2 Possible Outcomes:a. Traditional holding There is no K, since the Por would not be liable if they did nothing.b. New trend (Cardozo) Intention to make K enforceable is recognized, requiring:


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i. Good Faith effort, orii. Even an implied return promise of reasonable efforts by Por to perform his part of the

agreement (=Mutually Liable)3. If K appears illusory, always argue under O that it was not C, D, & E

B. Good Faith1. Main Rule Every contract for the sale of goods imposes an obligation of good faith dealing on all parties in its performance aenforcement. [UCC 1-203] All parties, including nonmerchants, are subject to UCC 1-201(19) which defines "go

faith" as "honesty in fact in the conduct or transaction concerned." Merchants are subject to an additional good fastandard, set forth in UCC 2-103(1)(b), which requires "honesty in fact and the observance of reasonablecommercial standards of fair dealing in the trade."2. A promisor cant take advantage of the promisees failure to perform if the promisor is the principal reason thepromisee was unable to perform the contract.

a. Promisor must give the Promisee an opportunity to perform when he attempts to tender payment operformance

b. If promisee knows promisorjoking, which is to say if both parties to the contract know that the offer ismeant in jest or is in no way

reasonable, then there is no contract, and the one cant hold the other liable for itc. Contracts made within the marriage relationship, and related to it, cannot be sued on.

IX. Statute of FraudsA. Main Rule

Agreements that appear enforceable are sometimes not, so in order to prevent parties from denying valid contracor asserting nonexistent contracts, they must comply with the statute of frauds, which requires certain contracts to be i

writing. This includes:1. Promises of executors pertaining to debts of estates2. Promises to pay the debt of another (suretyship provision)3. In consideration ofmarriage4. Transfer ofland (sale or lease)5. Contracts not performable within one year6. Contract for sale of goods in excess of $500 (according to the UCC)B. Texas SoF (Section 26.01) 8 categories: 1) executor; 2) pay debts of another; 3) marriage; 4) sale of real esta

5) K for lease of RE that lastslonger than a year; 6) agreements not performable in 1 yr; 7) obligation to pay commissions for oil/gas/minera

leases; 8) K for health care.(+sale of goods > $500)

C. Requirements to Satisfy the Statute1. Form of Memorandum

a. Must contain central terms of agreementb. Any writing or series of writings.c. Can be made before or after the formation of the K.d. Must include:

i. Identify the parties to the K.ii. Indicate nature of K and subject matter.iii. State essential elements of the K (quantity, duration, etc.)

2. Signaturea. Must sign (NOT enough to promise to sign must actually do it)b. If a promise to sign is written and signed, then the original agreement is enforceable tooc. Must at least be signed by party against whom enforcement is sought.d. May be made by the partys agent.e. If memo consists ofseries of several writings, signature requirement must be met with respect to t

entire memo. This applies if:i. All memos are signed and relate to same transaction, orii. If one signed memo incorporates or specifically refers to other writings to show connection, oiii. If only one of several is signed, but there is a sufficient connection between the papers

established by a reference in them to the same subject matter or transaction.(Crabtree v. Elizabeth Arden)

D. If an agreement is within the Statute of Frauds, it is enforceable by the Statute of FraudsE. Modifications:

1. If a promise has to be in writing to be enforceable, then that promise is within the statute. The fact that apromise is within statute, doesnt

mean every modification to it must also be in writing. (Imperator Realty Co. v. Tull)2. Test for determining whether a modification has to be in writing is whether its effect on original obligation is to

move it into or outside of thestatute. If it pulls the agreement out of statute, it doesnt have to be in writing. If it takes something that w

outside of statute and putsit in, then it does have to be in writing. If modification is made to contract already within SOF, and then, aft

modification the contract is


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still in SOF, the modification has to be in writing too.a. Exception: Where effect of modification is to eliminate all rights and duties under original rule. If it

eliminates all elements withinstatute, oral agreement is enforceable.

3. Mutual rescission of a K is not within the SOF. So a K that is in the statute can be mutually rescinded withouwriting (usually).

F. Fraud1. Designed to counteract denial that promises had been made or assertion of promises never made. No cause o

action will lie if not in writing.2. Argue against its use in fraud case: purpose of the statute, to avoid fraud, and argue that pretty much an

action should be taken, if it avoidsfraud, and that any action that allows the statute to perpetuate fraud is misusing the statute, and should not

upheld in ct.G. Suretyship

1. A promise to answer for the duty of another.a. Promise must be made to the lender to guarantee the principleb. Effect is that both Surety AND principle are liable.

2. Examples that are NOT suretyships:a. I promise to pay Neil if he mows Dustins lawn. I alone am liable, and I am not a surety for Dustin if hedoesnt pay, because hes not

a principal.b. If Dustin owes Neil a debt and I promise to pay his debt or otherwise satisfy it for him, there is no

suretyship, because Dustin is nolonger principally liable, but I am solely liable now, because this is a novation.

c. When the promise is made directly to the borrower. It is a suretyship if the promise is made to the lenbut not if its made to the

borrower.3. Examples that are suretyships, but are not within statute:

a. When obligee (to whom debt is owed) neither knew nor had reason to know that promisor was a suretyb. If surety is already under a duty to render the specified performance irrespective of a promise to be a

surety.4 Main Purpose Rule

a. If the main purpose is an economic advantage to the surety rather than the benefit of the principal,contract doesnt have to be in

writing (Not under the SoF). This is because the advantage sought is consideration for the promise,writing is not needed to

show intent to be bound.b. If main purpose is to benefit the principal, (consistent with consideration rule) it has to be in writing (if

gratuitous) (Is under SoF).H. One Year Provision

1. Contracts that are to take more than a year to complete, from making of the contract to completion of

performance. If any promise of either party cannot be performed within a year, the contract is within the statua. Relates only to whether, by the terms of the K, promise can be performed within a year. If K is to cut down a

trees in California,this cant realistically be done in a year, but since that possibility is not negated by the terms of

K, its not within statute.

b. If the K is of indefinite duration but performance within a year is possible by its terms (whetherpractically possible or not) then the K is not within the statute.

c. If performance can be rendered in 2 or more ways, K is not in statute if any of them can be done a year under terms.

d. If K relies on an event that may occur in a year, it is not in statute. Ex: K to insure for 5 years is nSOF, because the fire may happen within a year. This always includes Ks contingent on death, wcan occur any time.

i. The doctrine of excuse is related to this. Where the promise is a negative one, one to refrafrom doing something, rather than to do something, it is never within the statute, because if tparty should die, he would have fulfilled the K. Another way of saying this is that if death willleave the K unperformable, it is in the statute, but if death would leave it fully performed, it is

(Doyle v. Dixon).I. Satisfaction by Part Performance land only

1. In exceptional situations, part performance can be taken to provide the evidence of the agreement that the stawas designed to provide,

and in turn give the party an argument for recovery in spite of the statute. (dropping legal charges.)a. Where consideration has changed hands, this act may be taken as admission of an agreement, preven

use of the statute tonullify the agreement, since this would be counter to its purpose.

i. Reliance is in the next section, but it is far less certain where no consideration has changed haIf consideration has

been given and accepted, the party should be able to recover in spite of the SOF.


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b. If only part of the goods in an agreement are accepted, the party might only be held liable for that partthe accepted

goods. If it is not clearly divisible, the party may be held liable for the whole contract.c. Reliance

I. A party is generally only allowed to recover whatever they have lost directly to the defendantand not other expenses

incurred to third parties or elsewhere. If the defendant did not directly benefit (i.e. waunjustly enriched),

then the plaintiff may not be able to recover.II. When no restitution would otherwise be available, the party might be able to argue for the co

to estop the defendantfrom using the statute to bar enforcement. This seems to fundamentally and complete

undermine the statute,but it also is said to prevent the statute from opposing its purpose by allowing people t

deny Ks that were made.

III. Reliance traditionally requires equitable estoppel to bar the statute, which is reliancebased on misrepresentation.

However, prom. estoppel is used sometimes, when injustice can be avoided only byenforcement of promise.

X. UnconscionabilityA. Main Rule

A contract may appear enforceable, but sometimes it isnt because it is unconscionable, whereby the offeree lackmeaningful choice and the terms of the contract unreasonably favor one party. Factors include dramatically unequalbargaining power, hidden or difficult to understand terms, and a perception that one party is taking advantage of anotherparty in a way that was not necessary for a party to protect its economic interests. The result is something like the inverse quasi-contract: there are all the elements of a contract, but it is so unreasonable that courts may refuse to enforce it.B. POLICY counter-argument: There must always be Freedom of Contract, and both parties volitionally entered into it, so it

should be enforced.C. Requires:

1. Lack of meaningful choicea. determined by deciding if the party had an alternative. While there is always the option not to buy or

enter the K, necessary goodsmight leave no alternative, or there might be nowhere that you could buy the goods without un

terms. This leaves thequestion of which goods are necessary open to subjective discussion. i.e. All airlines have $50 b

fees.2. Unreasonably favorable terms to the one party (no formula) Difficult to tell. In order to assess, you might

at:a. Radically unequal bargain (gross overpricing may not be enough though need more signs of unfair

oppression )

b. Really complicated agreement (or tiny print) (that even strikes judge as an obscure provision)c. Some flavor of predatory behavior by seller to take advantage of buyer

D. UCC Section:2-302 provides for a moral sense of community in commercial transactions and if a clause of a contract isunconscionable at the time it was made, the court may refuse to enforce the contract. The UCC applies to the price term ofcontract.E. Contract of Adhesion: Where the terms of the contract are set and there is no negotiating, take it or leave it.

i.e: Credit Card applications, etc.

XI. Readjustment of Going DealsA. Main Rule

A contract may be changed and still have consideration so as to be enforceable, despite past consideration beingconsideration, if the parties do one of a few things to show that there is consideration for the new termsB. Method to argue around Consideration problem

1. Mutually rescind + new agreement - They must know what they were doing and manifested their intent toreadjust

a. Prove that the original contract was mutually rescinded and the new agreement is a new contract2. Doctrine of Excuse - Excused from performance due to circumstances out of ones control that makes performa

impossible. (Mistake/Impos)a. A person can argue that due to some set of circumstances, like members of a ships crew abandoning

ship, the job he signed upfor (1/10th of the crew duties) no longer exists because his job has become 1/5th of the duties, so

is excused from thatjob, and in its place assumes a new responsibility, which is the 1/5 th of the duties, which must h

a new agreement, withnew consideration.

3. Advanced Payment - Person in debt may accept a lesser sum of money because money paid in advance may bejust as beneficial


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4. Impossible to Perform - Rescind as a matter of law because contract is impossible to performC. Duress

1. A party is not permitted to overwhelm a persons will and extract a bargain he would be unable to extract withooverwhelming his will.

Duress exists when a party is induced to make a contract under circumstances which deprive him of his fwill.

2. Some courts insist that duress suffered must have its source solely in the threat of the other party, and not berooted in the circumstances of

the person being threatened, and that if they are in the difficult position due to their own plight then durcannot exist.

a. If something is obtained by duress, then it has no consideration, because the action was not bargainedsince the action of the

Pee was not induced by the promise of the Por, but rather by the threat of the Por. This goesagainst the reasoning of who

is at fault for the circumstances leading to duress though, since in that instance the agreement still without induced

consideration. An offer you cant refuse may not be an offer at all.b. Counter - Another problem with that view is that it takes us back to the subjective approach of the

or position of the parties intheir intent, since we must know what position each is in to gage the existence of duress.

XII. Parol Evidence Rule (and Rules of Interpretation)A.Main Rule (WRITTEN Ks only)

Because virtually all language is ambiguous, the parol evidence rule uses integration, roughly equivalent tocompleteness, to determine how a written contract shall be interpreted. A fully integrated contract is one that is a final andcomplete expression of all the terms agreed upon between the parties. The written agreement must explain itself and stanalone. Therefore, if the contract is deemed to be fully integrated, evidence, Parol or otherwise, of any prior orcontemporaneous negotiations will not be admitted, not even to explain the document (intent usually apparent by a mergeclause).

A partially integrated contract is one that is a final and complete expression of all the terms contained in thatagreement, but not a final and complete expression of all the terms agreed upon between the parties. Therefore, if thecontract is only partially integrated, parol evidence is admissible to supplement or explain the contract, though not tocontradict it.

If the contract is not integrated, the rule bars no evidence.B. Determine Level of Integration - Two Views:

1. Look at four corners of the K, to see if the contract looks on its face to be complete and exclusive statementterms (Willistons View), OR

2. All circumstances, including prior negotiations, should be included in determining the level of integration (Corbiview)

C. Breakdown:1. Fully (Completely) Integrated - Parties have intended written agreement to be a complete and exclusive

expression of all termsa. If Fully Int., NO parol (extrinsic) evidence allowed (best evidenced by merger clause Farnsworth

thinks no Merger Clause = part. int. )b. Collateral and subsequent evidence allowed (antecedent is NOT allowed)

2. Partially Integrated Parties do not intend it to be complete and exclusive, but rather a final expression the terms it contains

a. If Partially Integrated, extrinsic evidence is ALLOWED, but only as a supplement to explain or clarify, nto contradict a term of the

written agreement. This must be consistent with the written agreement3. Unintegrated Neither above applies - If Unint., parol evidence can be used to supplement or contradict (if u

obligations can be added)D. Where Parol Evidence CAN be used:


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1. Fraud, accident, or mistake - PROBLEM: fraud exception could swallow the rule any agreement that is clear cstill be avoided

a. Ex: Ct upheld home sale where seller claimed he had not inspected/no damage to his knowledge2. Clear up ambiguities (ambiguities are just ONE criteria to determine degree of integration)

a. Patent Ambiguities - Omissions where the writing is incomplete on its face (essential term should alwabe included is missing)

b. Latent Ambiguities - Not obviously ambiguous without parol evidence, and these may or may not beadmitted

3. Other exceptions: if parties created K intending to leave out terms/different from real agreement to deceivesomeone else, PER Permitted. (Zell v. American Seating Co.)

E. Where Parol Evidence can not be used:1. Subsequent agreements (party can always argue that after written agreement was executed, question of fact

uninfluenced by PER)2. Assertions by the one side or the other side that there is not in fact a K at all

F. POLICY- The rule of substantive K law operates by preventing parties from coming forward with certain kinds of evide1. Like SoF, purpose is prevent fraud or injury by baring proof of prior agreements, negotiations, or understanding

if you signed it, you read it)2. Corbin view Parol Evidence grew out of skepticism over a jurys ability accurately to assess credibility

a. Main issue is intent, which is normally a fact issue, but Parol Ev. Issues are questions of law (avoid jub. Application of rules can be determined on the basis of pleadings (dont need evidence)c. In Corbins view, until the Court decides whether its fully, partially, or unintegrated, PE rule doesnt

operate at all. This has beenembraced in Jurisdictions hostile to PE rule, and rejected in jurisdictions disposed to using PE ru

G. Merger Clauses1. Clause in a K stating that the contract is final, complete, and exclusive expression of all terms, thereby designa

itself as fully integrateda. Best evidence of Fully Integrated (theres no more, we agree to this writing and that is IT!)b. Bars Parol Evidence.c. Upheld as long as they are conspicuous (bold, large font)???

2. Fraud this has been overruled in instances of fraud (=make offer you know will & does induce a person; and was untrue and you know it)

a. Policy reasons to deny evidence of fraud would undermine the policy the rule was created to combatb. Not always so mere assertions of fraud that allow you to introduce otherwise inadmissible, banned

evidencec. Crawford rule (allow PER for hotel construction overbilling) was very narrow and anything broader (like

sale of house with nodamage) would undermine the purpose of parole evidence rule.

d. Some judges think that fraud in inception affects everything that follows, so its always assertable, eveit undermines PER

H. Collateral Agreements1. Parol agreements made independent of the written agreement with separate consideration

3. Where it is made wholly or partly in consideration of the simultaneous written agreement, the two may benecessarily bound together.

4. It can be used even if agreement is fully integrated, and substance rather than form is the test:a. Separate C? (0+A+C) if YES, then it is probably collateralb. Not contradict express or implied provisions in the written contractc. Would a reasonable jurist expect the parties to have included terms of this agreement within 4 corn

of the main k? (intent Q)5. POLICY (Farmsworth) Collateral Agreements should only apply where there is merger clause (If none, you can

prevail on Partially Integrated)I. Interpretations [Look up Mistake]

1. Goal is to discern what the parties meant when the K was made, not what they say it means at the time of thedispute

2. If Strictly Objectivist point of view is taken matters not they meant, just what words mean, or what reas. perswould interpret it to mean

a. Problem might make the K mean one thing, but both parties meant something else (conflict withIntentions of the parties control)

3. If both parties mean the same thing then that is what it will mean in the K4. If one party knows they have different things in mind, or should know, and doesnt clear it up, hes subject to noof the other party in the K

5. When parties mean different things and neither knows:a. View 1 - there is no K, for lack of assentb. View 2 person bringing suit has the burden to show the word meant what he says it meant (same

outcome as above, just differentrationale.)

XIII. Third Party Beneficiary [Use Parole Evidence to prove 3PB intent]A. Main Rule

A third party beneficiary is created when the contract between two parties is made with the intention of benefitingand therefore creating an enforceable right in that third party.


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B. Requirements:1. Parties must have intended to create an enforceable right in the party outside the contract at the time of the

agreementa. Beneficiary need not be identified when agreement is made to be intended, just must be identified by

of performanceb. Threshold to establish this intent is very high/ there is a powerful presumption 3PB are

unintended/incidental rather than intended2. 3PB CAN have a K with one party But does NOT need a K to be 3PB (If K btwn 3PB & party in the K, they mig

considered an ASSIGNEE.i. It is much better to be a 3PB rather than Assignee because Assignee can only sue the assig

3PB can sue both parties.C. Types of Beneficiaries

1. Intended ( listed below is used today as more of a criteria for showing intent)a. Creditor - Parties have an understanding that promisor is paying promisees debt to someone else

(Lawrence v. Fox)i. Promisee agrees to pay the debt to someone else. Obligee k1

(obligor ) k2ii. There is always a promise between the obligee (3PB) and the promisee (obligor) 3rd party

Pee Porb. Donee beneficiary of a Gratuitous Promise (intended at time of benefit)

i. The two parties must intend to benefit the third party and the 3PB is created.ii. The expression of the intention has to be 100% clear.

2. Incidentala. Anyone who is not an intended beneficiary - Incidental beneficiaries acquire no rights

b. In determining whether a person was an intended beneficiary, it might be helpful to ask if the Pors actwas to be taken directly to

the beneficiary, or just to the Pee.D. 3PB would want:

1. One of the parties to support his claim and say it was intended2. Actions or words by the parties that show (objectively) they were aware and meant it to be 3PB3. Parol evidence If intent is not governed by their express words in the K, use Parol Evidence (if applicable) to

determine if 3PB was intended4. ARGUMENT AGAINST: If 3PB, missing C in some cases, but even if you have C, there is no O and A.

E. Rights of the Parties1. Rights of the 3PB

a. Third party has a right against the promisor, and can enforce that right without joining with thepromisee

b. Third party also maintains his right he had against the promisee before the Kwas made with tpromisor

c. 3PB can recover against either against por or psee because no duties are discharged in the Kbetween the Por and the Pee,

i. 3PB can get both, but is only entitled to one satisfactiond. 3PB also not subject to the claims against the party whos shoes theyre standing in .e. 3PBs may be able to recover for negligence when the party who was to perform the act to benefit the

fails to do so properly2. Rights of Promisee Promisee maintains his rights against the promisor3. Modifying/Rescinding The two original parties can rescind the agreement and 3PB cannot stop it (screwed)

a. BUT, cannot rescind if intended to create 3PB and the 3PB materially changed their position becauthey relied to their detriment

i. LIMIT: material change of position only relevant when 3PB already informed and THEN othersdecided to change or end K

ii. Always argue against: you cant rely on a promise that you have no ability to insure remainsenforceable

3. Defenses to 3PB Claims:a.3PBs claim IS subject to the defenses that por has against pee IN THE FORMATION OF the K

(b/c 3PB steps into Pees shoes inthat K only)

i. Includes: lack of consideration, policy, SoF, incapacity, mistake, duress, misrepresentation, etc(IDEA: if no K, no 3PB!!)

ii. Exception: if 3PB was reasonably not aware of the lack of a K, there is a good chance he will nbe subject to defenses

iii. Exception: if the other parties let the K go on anyway, and then later tried to raise a defense,not subject

A. LATCHES if you sit on a claim for so long, you cannot claim it later (equitable doctb. 3PBs claim is NOT subject to the defenses that por has personally against pee OUTSIDE TH

or in PERFORMING the Ki. includes: partial consideration, actions/breaches ofother contracts, etc

F. Policy reasons for the limitations on 3PB (Intended/Incidental rules):


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1. Unlike other developments, 3PB was sudden and complete it sprung into existence in 1859 no developmentsatisfies urge to be moral)

2. Policy Counter-argument: Its hard to reconcile with no compulsory contracts because its forcing anagreement that it is not a party to

a. This violates the mutuality principle/symmetry principle (until both are bound, neither is bound)b. We should just deal with the injury to 3rd party in other areas of lawc. This is the socialization of contract law steady erosion of the autonomy principle

i. Autonomy principle: parties deciding when they enter into a contractual relationship, and they

determine the termsd. 1st part seems to be true (decide if they want to be in a K); but the 2nd part eroded (law tells what dutie

assume and what to do)e. PROBLEM: 3PB has potential to swallow up the rest of the toolbox could destroy K law. NEED LIMITS

i. LIMIT: material change of position only relevant when 3PB already informed and THEN othersdecided to change or end K

Obligee k1 (obligor ) k23rd party Pee Por Third-Party Beneficiary Contracts: Rights andDefensesRights & Defenses Intended Donee/Creditor Beneficiary Incide

talCan the 3PB sue the P/or? Yes (can do so without joining promisee) NoCan the 3PB sue the P/ee? Yes (for rights he had before the new K) NoCan the P/or assert against the3PB thedefenses that the P/or could

haveasserted against the P/ee?

DependsYes - defenses to formation (hes aware of) of the K (SoF, C,fraud, duress, etc)

No defenses outside of the K (from prior Ks/personal mattersoutside this K)

N/A

XIV. Assignment & Delegation [Use Third Party Beneficial in suingdelegee and Parol Evidence in intent]

A. Main Rule A third party can be assigned rights or delegate duties by an original party to a contract. If the assignment works,

an effective assignment, or an effective delegation. Even when there is an effective delegation, the delegator continues tohave a performance obligation to the obligee. Original obligee can sue either one and theyre both fully liable generally.

1. You can reject delegation, but cant reject an assignment unless it would significantly burden you to pay otherparty rather than original party.

2. Parties must have intended to create an enforceable right in the party outside the contract at the time of theagreement

B. Assignment Obligor k1 (obligee ) k2 (new obligee)1. Rights of an Assignee Asor Aseea. Do you have more rights as a assignee? NO - You have same rights as the person whos shoes yourb. Normally, if there is only assignment, either assignee or assignor can sue the original obligor directly,

only one can recover.2. Exception: Novation: Transferring a contract right to a third party. This right can be for all or part of the

performance due by the obligor.a. This transfer is not a promise to pay the asee once the asor has been paid, not a promise to assign la

not an order for obligor todirectly pay third person debt owed to obee, but it is the transfer of a right of direct performanc

be made to the asee.b. When an effective assignment is made, the assignee has a right against the obligor - same right assign

hadc. If theres a novation, obligee cannot sue obligor, because he has no rights to performance. Only assign

can sue obligor now.3. Limitations

a. Cannot materially change the duties of the obligor (besides just the fact that he now was to perform fodifferent party).

b. Cannot material change the burden or risk of obligor, even if it doesnt material change his duty.c. The terms of the K can prohibit assignment.

4. Assignment of Future Rightsa. Assignment to a right expected to arise out of an existing employment or other continuing business

relationship is effective in thesame way as an assignment of an existing right.

b. Except as stated immediately above, a purported assignment of a right expected to arise under a K noexistence operates only as

a promise to assign the right when it arises as a power to enforce it.5. Liabilities

a. The assignee steps perfectly into assignors shoes, and is subject to same defenses (he is not subject suit for breach if duties not

delegated to him, in next section).


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i. Assignee is also subject to any claims to recoup whatever Oor might owe him only to the extethat it diminishes or

extinguishes the assignees claim, but they cant be used to impose liability on the assignee unduties were delegated

C. Delegation Obligee k1 (obligor ) k2 (new obligor)1. Conferring the power to perform a duty to another person. Deor

Deee2. Normally, original obligee can sue the delegatee or the original obligor if there is only a delegation

a. Becaues hes now an intended 3PB from the contract between the obligor and the delegatee.3. Exception: Two circumstances where Obee loses ability to act against original Obor:

a. K1 Discharged: The duty defined by K1 is discharged (in fact performed)b. Novation: When (around time K2 is executed), obligee agrees that it will look only to the delagee for

performance. This is a novation.i. Novation is like a modification of K1 PROBLEM: Lack Consideration???ii. When theres novation, the obligee can only sue the new obligor and not the original obligor w

delegated duty away4. Certain duties are not delegable: (if it is not an effective delegation, the obligee is entitled to insist on performa

by the delegating party)a. Deor dissolving business (hell be insolvent so not fair to obee b/c he cant sue) (if delegated, THEN g

bnkrpt, can sue Deee)b. Obee contracted to have duty performed by a particular person (Delectus persone choice (ice) OR

reas. Person stan.(van gogh))c. Obee has a setoff available to it that would not be available to it that would not be available to Obor

i. ex: J assigns Deb right to get paid 100 for mowing, but J has a set off with Talia, he CANT assito Deb cuz shed get < 100

d. Proving: Most sure way to express intent is words in the contract. If, not apparent of face of agreemetry to use Parol Evidence.

5. Liabilitiesa. The delagee steps perfectly into delagors shoes, and is subject to same defenses and is subject to su

breach of not performing.i. Delagee is subject to obligees claims, which can be used to impose liability on the delagee

becaues duties were delegatedD. Rule

2-210. Delegation of Performance; Assignment of Rights.(1) A party may perform his duty through a delegate unless otherwise agreed or unless the other partyhas a substantial interest in having his original promisor perform or control the acts required by thecontract. No delegation of performance relieves the party delegating of any duty to perform or anyliability for breach.(2) Unless otherwise agreed all rights of either selleror buyer can be assigned except where theassignment would materially change the duty of the other party, or increase materially the burden orrisk imposed on him by his contract, or impair materially his chance of obtaining return performance. A

right to damages for breach of the whole contract or a right arising out of the assignor's dueperformance of his entire obligation can be assigned despite agreement otherwise.(3) Unless the circumstances indicate the contrary a prohibition of assignment of "the contract" is to beconstrued as barring only the delegation to the assignee of the assignor's performance.(4) An assignment of "the contract" or of "all my rights under the contract" or an assignment in similargeneral terms is an assignment of rights and unless the language or the circumstances (as in anassignment for security) indicate the contrary, it is a delegation of performance of the duties of theassignor and its acceptance by the assignee constitutes a promise by him to perform those duties. Thispromise is enforceable by either the assignor or the other party to the original contract.

(5) The other party may treat any assignment which delegates performance as creating reasonagrounds for insecurity and may without prejudice to his rights against the assignor demand assurances fthe assignee (Section 2-609).

XV. Problems of Performance/Breach [Use Interpretation of PER & Excuse Readj. OGoing Deals for Mitake/Impossibility]

A. Conditions - Main Rule A condition is a predicate to a partys obligation. It is something that must occurbefore a duty can arise.

1. Must not be something certain to occur. So if a condition does not occur, performance is not due.2. Ex: if my dog loses in a footrace to your pig, I will sell the dog to you for $2. If it doesnt lose, then I have no dut

sell it.B. Mistake [Look up Interpretation under Parol Evidence] + [Readj. Of Going Deals]

1. Main Rule Parties have varying assumptions concerning facts that exist at the time a contract ismade, so different mistakes can be made.

2. Mutual Mistakea. Main Rule If both parties are under the same erroneous perception of the facts, a mutual

mistake has been made. In a mutual mistake, a party may avoid the contract if the mistake goes tthe very basic assumption on which the contract was made, had a material effect on the fairness othe deal, and the party trying to rescind did not bear the risk of this mistake.
http://www.law.cornell.edu/ucc/2/2-106.html#contract_2-106http://www.law.cornell.edu/ucc/2/2-103.html#Seller_2-103http://www.law.cornell.edu/ucc/2/2-103.html#Seller_2-103http://www.law.cornell.edu/ucc/2/2-103.html#Buyer_2-103http://www.law.cornell.edu/ucc/2/2-106.html#contract_2-106http://www.law.cornell.edu/ucc/2/2-106.html#agreement_2-106http://www.law.cornell.edu/ucc/2/2-106.html#contract_2-106http://www.law.cornell.edu/ucc/2/2-106.html#contract_2-106http://www.law.cornell.edu/ucc/2/2-609.htmlhttp://www.law.cornell.edu/ucc/2/2-609.htmlhttp://www.law.cornell.edu/ucc/2/2-103.html#Seller_2-103http://www.law.cornell.edu/ucc/2/2-103.html#Buyer_2-103http://www.law.cornell.edu/ucc/2/2-106.html#contract_2-106http://www.law.cornell.edu/ucc/2/2-106.html#agreement_2-106http://www.law.cornell.edu/ucc/2/2-106.html#contract_2-106http://www.law.cornell.edu/ucc/2/2-609.htmlhttp://www.law.cornell.edu/ucc/2/2-106.html#contract_2-106


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b. A party more likely to be allowed to avoid the contract if it would have a particularly adverse effect on party and

excessively advantageous to other. (Sherwood v Walker) (notWood v. Boynton b/c knew risk &anyway)

3. Unilateral Mistakea. Main Rule When only one party is mistaken, courts will generally not allow them to escape

from the contract because asymmetrical knowledge is to be expected in all transactions. They wouhave to show the same requirements for mutual mistake and enforcement of the contract is

unconscionable, OR the other party had reason to know of the mistake or caused it.i. If the other party represents that something exists which does not exist, and they know or sho

know from reasonable diligence that it does not exist, there is an enforceable contact and they cannovoid the contact for mistake (theyve breached)

4. In analyzing the intentions of the parties control, note there is a Continuum btwn meeting of minds stake

C. Impossibility [Use Interpretation of PER and Doctrine of Excuse Readj. Of Going Deals forMitake/Impossibility]

1. Main Rule A party is excused from performance when some superseding act or event makesperformance impossible or impracticable.

2. Illegal or Death - if the contracted performance becomes illegal before time for performance has come, or ifsomeone dies. (por is excused)

3. Destruction of Implied Condition - something necessary to performance is destroyed or otherwise ceases to exiwithout the fault of either

party, before the risk of loss passes to the promisee. The continued existence of the thing becomes animplied condition of the thing,

which, once impossible to be fulfilled because of the things destruction, excuses the party. (Taylor - nomore music hall)4. Failure of a Third Person Middleman can not get his source to supply goods he needs for the buyer, he might

able to argue impossibility. Ifthe K specifies a source, more likely to show impossibility. If K does not specify a source or middleman fa

to make a K with a statedsource, the middleman has born the risk he would be unable to procure goods. (Canadian didnt supply

molasses, but bore risk)5. Impracticality Main Rule Performance is excused when made impracticable by the occurrence of

contingency the non-occurrence ofwhich was a basic assumption on which the contract was made.To excuse, the event or condmust:

a. Make performance as agreed impracticable.i. Not more difficult or more expensive, but impracticable (which may include extreme increas

expense)ii. Multiple alternatives for performance = impracticability of one of them will not excuse him i

others available (Suez Canal)

b. The nonoccurrence must have been a basic assumption on which the contract was made. (must bshared by both parties)

c. The impracticability must result without being the fault of the party seeking to be excused(burning your own crops)

6. If the event relegating performance impracticable is reasonably foreseeable, then the party will not be excuse(Controlling Liability )

D. Frustration Main Rule If the objective of the contract is frustrated, in that the reason or purpose for thecontract no longer exists, a party is excused

even if performance is not impossible.1. The event or nonoccurrence of the event must have substantially frustrated the parties principal purpose in

ering the contract.a. The less foreseeable the event, the more likely performance will be excusedb. If the parties implicitly allocated the riskto the promisor, the court will not excuse performancec. The more complete the thwarting of benefit, the more likely the court is to excuse performanced. Major fault on the part of the party seeking discharge will normally bar use of the defense

E. Controlling Liability

1. Parties can sign away warranties or transfer liability, but to do so legally they must be aware or have a reasonaopportunity to be aware (bybig bold letters or something) of their act. They cant sign away liability without knowing they are doing so

intending to do so, or atleast have an opportunity to know and intend such.

2. This is an exception to if you sign it youve read it.3. Like 3PBs, you can sue someone you dont even have a K with if you have a K with their agent, who stands in t

shoes. (Chrysler)D.

XVI. Readjustment of Going Deals (Option to Modify if Problem Arises)A. Main Rule A contract may be changed and still have consideration so as to be enforceable, despite past

consideration being no consideration, if the parties do one of a few things to show that there is consideration forthe new terms


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B. Method to argue around Consideration problem1. Mutually rescind + new agreement - They must know what they were doing and manifested their intent to

readjust2. Doctrine of Excuse - Excused from performance due to circumstances out of ones control, but still need new

agreement w/ new C (Mist/Impos)3. Advanced Payment - Person in debt may accept a lesser sum of money because money paid in advance may be

just as beneficialC. Duress A party is not permitted to overwhelm a persons will and extract a bargain he would be unable to extract with

overwhelming his will.1. Some courts insist that duress suffered must have its source solely in the threat of the other party, not just you

circumstancesa. If something is obtained by duress, then it has no C, b/c action was not bargained for. An O you cant

refuse may not be an O at all.2. Counter - Problem w/ view is that it takes us back to the subjective approach of the will or positio

the parties in their intent

XVII. Breach & Post-Breach OptionsA. Material vs. Immaterial Breach (Tautology= if material breach, then by definition cant be Sub. Per)

1. Material Breach: Obligations under K can be suspended. If breach continues long enough, other pacan terminate K altogether.

a. In order to suspend the performance though, the breach must be sufficient to warrant such aresponse. (big Dow)

b. If injured party terminates the K, he is said to treat the other partys breach as total. If not terminabreach ispartial.

2. Bound to pay at the end of a K- If performed good or service is not exactly as directed (Jacobs v Young), pa

can only refuse performancewhere the breach was material, meaning significant enough to amount to the nonoccurrence of a

constructive condition of exchange.a. If it is immaterial, he cant suspend, and may only claim damages for partial breach.

i. If a party interrupts performance by suspending performance due to a mere immaterial breahe committing a breach.

ii. Material breach is the converse of substantial performance. Sub Perf is performancewithout a material breach, and a

material breach results in performance that is not substantial.3. There are big terms, small terms, and no terms. If a term is big, then the breach of that term gives the Pe

the right to stop performance(excuses his performance (norrington v wright)) Small terms, when breached, do not excuse performanc

but still supports an actionfor breach. If no term, cant sue and win or stop performance.

4. Issues: 1) Waited too long, cant sue (Latches); 2) only a small term was breached (nominal damages); 3) bigterm = susp/terminate (sue big)

a. Is no principle to decide whats a big term and what is small, and if it really matters, you should put thgravity of the term in the K.

B. Perfect Tender Rule (UCC 2-601)1. Performance must be given exactly as outlined in the agreement, or else the Pee can reject the performance.2. This is subject to a number of exceptions, and can also be subject to the seller's right to cure underU.C.C.

508.3. Different from Breach? dont need to prove they brought it home or level of importance (material) to reje4. Options under Perfect Tender Rule:

a. Buyer can reject, but seller still has the opportunity to cure (Take it away! I dont want that shit!b. Buyer can partially accept (Ill take the good shit, but send me replacements for the bad shit prompt

C. Substantial Performance Rule (Tautology= if sub. Per, then by definition cant be a material breach)1a. Performance must substantially meet the terms of K in order to comply, and can only be rejected if they fa

to do so.D. Assurance about Whether Other Party Will Perform Imperfect Solution):

a. (2-609 : adequate assurance of performance: one may suspend performance until he has received adequateassurance of performance. After

receipt of justified demand, failure to exchange within reasonable time (not to exceed 20 days) constitut

repudiation. So they cancover. However, if you fraudulently assure performance, and later repudiate, you will be held li

for exemplary damages. b. 2-316. Exclusion or Modification of Warranties(1) Words or conduct relevant to the creation of an express warranty and words or conduct tending to negate

limit warranty shall be construed wherever reasonable as consistent with each other; but subject to theprovisions of this Article on parol or extrinsic evidence (Section 2-202) negation or limitation is inoperatto the extent that such construction is unreasonable.

(2) Subject to subsection (3), to exclude or modify the implied warranty of merchantability or any part of it thlanguage must mention merchantability and in case of a writing must be conspicuous, and to exclude omodify any implied warranty of fitness the exclusion must be by a writing and conspicuous. Language toexclude all implied warranties of fitness is sufficient if it states, for example, that "There are no warrantiwhich extend beyond the description on the face hereof."
http://law.scu.edu/FacWebPage/Neustadter/contractsebook/main/UCC/ucc2-508.htmlhttp://law.scu.edu/FacWebPage/Neustadter/contractsebook/main/UCC/ucc2-508.htmlhttp://law.scu.edu/FacWebPage/Neustadter/contractsebook/main/UCC/ucc2-508.htmlhttp://law.scu.edu/FacWebPage/Neustadter/contractsebook/main/UCC/ucc2-508.htmlhttp://www.law.cornell.edu/ucc/2/2-202.htmlhttp://www.law.cornell.edu/ucc/2/2-202.htmlhttp://law.scu.edu/FacWebPage/Neustadter/contractsebook/main/UCC/ucc2-508.htmlhttp://law.scu.edu/FacWebPage/Neustadter/contractsebook/main/UCC/ucc2-508.htmlhttp://www.law.cornell.edu/ucc/2/2-202.html


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(3) Notwithstanding subsection (2)

(a) unless the circumstances indicate otherwise, all implied warranties are excluded by expressions like "as"with all faults" or other language which in common understanding calls the buyer'sattention to theexclusion of warranties and makes plain that there is no implied warranty; and

(b) when the buyer before entering into thecontract has examined the goods or the sample or model as fuas he desired or has refused to examine the goods there is no implied warranty with regard to defects wan examination ought in the circumstances to have revealed to him; and

(c) an implied warranty can also be excluded or modified by course of dealing or course of performance or

usage of trade.

E. Repudiation (UCC 2-610)a. Main Rule Telling other party that you will not or cannot make performance still due under the K, or conduct t

says the same.b. Requirements:

i. Must be sufficiently positive to understand that breach will actually occur, not just expression of doubt.ii. Must be communicated to a party of the K, not just to some stranger, and done so before the time of

performance (if @performance = breach)

iii. Must be deliberate and purposeful rather than inadvertent or beyond the promisors control (really apwhen he does nothing at

all, but a change in circumstances makes it likely that a breach will occur. [E&E, not Dow]c. Nonbreacher can respond by:

i. Treating contract as terminated and claim damages, even if he told repudiator he would await theirformance

ii. Attempting to save dealiii. Ignore repudiation and await time of performance for a commercially reasonable time

d. Rights and Duties of Injured Party:i. Must show, absent repudiation, he could have performed as required.ii. Nonbreacher no longer has to perform once repudiation is communicated. All his duties are discharge

the repudiation.iii. Nonbreacher can treat it as a mere rescindment, and can allow it to be final, or:iv. Usually, injured party can sue as soon as he learns of the repudiation, even before the time of

performance has come.v.The ant. Breachers ability to retract is lost as soon as injured party notifies that the repudiation has

been accepted.[E&E, not Dow]A. This notice isnt even necessary if injured party takes action in reliance on the ant. Breach. [E

not Dow]vi. This is not always the case though, and sometimes ct may rule that no action can be brought until afte

time for performance, whenthere has been official breach, which is often adhered to with respect to sale of real estate.

vii. He can also sue after the time for performance has come, BUT HE IS PUNISHED as he cannot receive damages (see below)

viii. Damages: If a person continues performance after the K has been clearly repudiated, he can receivmore damages for work

done after communication insisting that performance cease, but can only receive damagesavailable to him at the time the

repudiation was communicated.e. UCC 2-610. Anticipatory Repudiation.

When either party repudiates thecontractwith respect to a performance not yet due the loss ofwhich will substantially

impair the value of the contract to the other, the aggrieved party may(a) for a commercially reasonable time await performance by the repudiating party; or(b) resort to any remedy for breach (Section2-703or Section2-711), even though he hasnotified the repudiating party

that he would await the latter's performance and has urged retraction; and(c) in either case suspend his own performance or proceed in accordance with the provisions ofthis Article on the

seller's right to identify goodsto the contractnotwithstanding breach or to salvageunfinished goods (Section2-704).

F. Rejection 2-602a. Must do so in a reasonable amount of time time, or else he is deemed to have accepted the goods.b. To reject, buyer must seasonably notify seller of rejection and reason for rejection.d. Cannot reject after you accept, but can only sue for breach.e. Rejection for Breach of Warranty

i. If goods are rejected effectively for breach of warranty, burden of proof that warranty was satisfied is oer, but if they

are accepted, burden of breach of warranty is on buyer.
http://www.law.cornell.edu/ucc/2/2-103.html#Buyer_2-103http://www.law.cornell.edu/ucc/2/2-103.html#Buyer_2-103http://www.law.cornell.edu/ucc/2/2-103.html#Buyer_2-103http://www.law.cornell.edu/ucc/2/2-106.html#contract_2-106http://www.law.cornell.edu/ucc/2/2-106.html#contract_2-106http://www.law.cornell.edu/ucc/2/2-105.html#Goods_2-105http://www.law.cornell.edu/ucc/2/2-106.html#contract_2-106http://www.law.cornell.edu/ucc/2/2-106.html#contract_2-106http://www.law.cornell.edu/ucc/2/2-106.html#contract_2-106http://www.law.cornell.edu/ucc/2/2-703.htmlhttp://www.law.cornell.edu/ucc/2/2-703.htmlhttp://www.law.cornell.edu/ucc/2/2-703.htmlhttp://www.law.cornell.edu/ucc/2/2-711.htmlhttp://www.law.cornell.edu/ucc/2/2-711.htmlhttp://www.law.cornell.edu/ucc/2/2-103.html#Seller_2-103http://www.law.cornell.edu/ucc/2/2-105.html#Goods_2-105http://www.law.cornell.edu/ucc/2/2-105.html#Goods_2-105http://www.law.cornell.edu/ucc/2/2-106.html#contract_2-106http://www.law.cornell.edu/ucc/2/2-106.html#contract_2-106http://www.law.cornell.edu/ucc/2/2-704.htmlhttp://www.law.cornell.edu/ucc/2/2-704.htmlhttp://www.law.cornell.edu/ucc/2/2-103.html#Buyer_2-103http://www.law.cornell.edu/ucc/2/2-103.html#Buyer_2-103http://www.law.cornell.edu/ucc/2/2-106.html#contract_2-106http://www.law.cornell.edu/ucc/2/2-105.html#Goods_2-105http://www.law.cornell.edu/ucc/2/2-106.html#contract_2-106http://www.law.cornell.edu/ucc/2/2-703.htmlhttp://www.law.cornell.edu/ucc/2/2-711.htmlhttp://www.law.cornell.edu/ucc/2/2-103.html#Seller_2-103http://www.law.cornell.edu/ucc/2/2-105.html#Goods_2-105http://www.law.cornell.edu/ucc/2/2-106.html#contract_2-106http://www.law.cornell.edu/ucc/2/2-704.html


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ii. If a seller gets a banks letter of credit with an absolute obligation to pay, he is insulated from rejectionbuyer

under the perfect tender rule, because the bank has to pay him on delivery without inspection ntter what,

and can only bring suit for breach later.G. Cure 2508 (only used if the contractual delivery date has NOT passed)

a. Serves to mitigate the harshness of the perfect tender rule by giving the seller a second chance to bring the gointo conformity with the K.

(1) Where any tender or delivery by the seller is rejected because non-conforming and the time forperformance has not yet

expired, the seller may seasonably notify the buyer of his intention to cure and may then withincontract time make

a conforming delivery.(2) Where the buyer rejects a non-conforming tender which the seller had reasonable grounds to belie

would be acceptable withor without money allowance the seller may if he seasonably notifies the buyer have a further

reasonable time to substitutea conforming tender.

b. If right to cure is not available, argue the buyer didnt operate under Good Faith and fair dealing when he rejectthe goods.

H. Acceptance of the Goods/tender 2-606a. Automatically are said to accept iffail to inspect goods/tell seller they conform within reasonable timeb. Automatically are said to accept i

contracts] [dow] [outline] [2008 fall] gottschalk

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