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Missing terms: person was willing to make commitment and leave it to court to
fill in- Person wasnt insisting on that term
Ambiguous- courts will conclude it was not a commitment and no deal
1. Advertisements Advertisements are not offersthey are invitations to the shopper to make an offer. A
store sign that says Shirts $10 is not an advertisement. The sign invites the shopper to take the shirt to the
counter, offer $10, an offer that is accepted by the cashier ringing up the sale. Gives the store the right to
refuse to sell to a customer.
exceptions focus on whether ad is specific about how many ads are available and about who can
accept the ad
2. Missing Price Term Whether a contract that is missing a price term is an offer depends on whether the
UCC or common law governs the interchange
Common law not offer, must include the material term
UCC can be offer if the parties intended it to be so
3. Ambiguous Material Terms In this case the term is there, but it is ambiguous, or vague. Neither the
UCC nor CL considers this an offer. The material terms cannot be vague and still be considered an offer.
Ambiguity
Contracts must be sufficiently clear to be legally enforceable. Raffles v. Wifflehaus is the prime
example of ambiguous terms. The contract is for cotton to be shipped on the boat Peerless. The problem was
that there were 2 sailings of the ship Peerless. Each of the parties had different sailings in mind, and the court
could not establish an agreement for the parties. It was fatal ambiguity.
1. ambiguous term in contract
2. each party must have different meaning in mind
3. neither party knows or has reason to know of meaning attached by the other
If B knew that there were 2 sailings, it takes the case out of the Raffles realm. The situation is then legally
enforceable under the terms as understood by the other party.
4. Requirements Contracts Here the measure of the quantity of goods to be purchased by the buyer is
determined by the buyers needs. For example, you make a deal with a local supplier saying that Ill buy all
of my wine from youexclusivity agreement. In this case the quantity is not vague or ambiguous and the
offer is therefore valid.
If you increase your requirements under this type of agreement, it cannot be unreasonably
disproportionate. If you buy 10 bottles for the first 10 months, you cant increase your demand to
100 bottles for the last two. That is considered to be unreasonably disproportionate you have to
match what he asked for previously to what he asked for today.
o Is there a ceiling? YES, unreasonably disproportionate
o Increase must be proportionate to other demands
Contextwhat is the setting?
o Watch for the bargaining historyhistory of negotiations- that adds to argument that it is a
manifestation of commitment
o Watch for advertisements- generally ads are not offers but invitations to make an offer.
Once the offer is found, check to see if it has been terminated
Termination once an offer is terminated, its gone forever.
METHODS OF TERMINATION
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1. Lapse of Time the offer is open only so long as is specified by its terms, if not time is not included the
offer is open for a reasonable period of time
Look at when offer was made
How long a gap was there before offer was responded to?
2. Death of either party offer is terminated if not completed before either party dies
Offer dies with person a gap was there before offer was responded to
3. Revocation of offer
1) Offeror puts offer on table and changes his mind and takes it back
2) How does contract terminate? if the offeror later changes her mind and decides not to enter into deal,
whether the offer can be revoked depends on the offeree. The offer must be revoked before the offeree
accepts it. The offeree must also be aware of the revocation. Sharon Stone in the shower example.
Looking for words or conduct of offeror that was communicated to the offeree
Revocation is two player game
Essential offeree be aware of it
3) When does a revocation become effective? Its all about the timing
i.
must complete revocation before acceptance occurs
ii.
if revocation is sent through the mail, its not effective until its received
4) When it is impossible to revoke? Some offers cannot be revoked, and offeror is held to the offer
i.
Option contract If I offer to sell my caddy to you for $400 and you pay me $25 to hold the
deal open, I cannot revoke that offer. If there is consideration paid for a promise to keep an
option open it cannot be revoked.
ii.
Offer reasonably and foreseeably relied upon offer cannot be taken back. If X uses Ys bid
to bid on a contract and wins that contract, X has relied on Ys bid and can be held to the offer.
Bid=offer
Drennan Star Pavingit is irrevocable b/c reliance
Jaimes Bairdreliance does not make offer irrevocable
iii.
Part performance of an offer to enter into unilateral contract unilateral contracts require
performance for acceptance of a contract. Once a unilaterally contracted party begins starts
performance, the offeror can no longer revoke the offer. However if all the party has done is buy
paint in preparation to perform, there has been no partial performance and the offeror can revoke
the offer. Use quasi-contract law to recover for money spent on reliance of the contract.
Start of performance pursuant to offer to enter into unilateral contract
Fact pattern: this offer can only be accepted by performance=unilateral
Will never get direct rejection as a question
iv.
Firm offer rule special UCC rule only applicable if its for the sale of goods. If a merchant
puts promise to keep offer open in a signed writing, then the promise cannot be revoked. This is
only applicable in the sale of goods. There is no consideration required because we assume that
a business woman knows what she puts into writing and its implications.
Sale of goods and writing signed by a merchant that not only promises to buy or sell,
this writing must expressly promise that offer will not be revokedMUST HAVE
ALL OF THESE EXACTLY
3 month ceiling to itonly impt. when writing says it will keep it open for 6 months
o even if writing says it is irrevocable for 1 year, still only open for 3 months
4. Rejection if the offeree turns offer down, the offer is terminated.
There are three forms of indirect rejections:
1) Counteroffer offer is killed. Offer for $400 with the reply Ill only give you $200. This is a
rejection and takes the offer completely off of the table. There is a fuzzy fact line between a counter
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offer and bargaining. A bargain would consist of the following reply to the $400 offer Will you take
$200? By asking you are clearly bargaining and the offer is still there. It shows that you understand
the difference between counteroffers and bargaining.
2) Conditional acceptance I accept, if ... is a rejection.
No mutual assent
This is changing the deal so you are killing the deal
Exceptionimplied contracts
Fact pattern where words dont connect up
3) I accept, and... whether an offer is accepted with the addition of additional terms depends on whether
you are dealing with the UCC or CL
Additional terms rulecommon law rule only
I accept and is a rejection
Something new is added
I accept if/providedno express contract common law or UCC
Different from I accept andnot insisting on this term but throwing it out as proposal
o In common law, still no express contract
o Acceptance cant add anything to offermirror image rule
i.
CL Mirror image rule requires that the acceptance look just like the offer
ii.
UCC 2-207 The Battle of the Forms allows additional terms so long as they are merely added
and not insisted upon. To insist makes it a conditional acceptance, which is actually a rejection.
Most often UCC code tested
Sale of goods where communications dont match up
iii.
Hypo if offer falls under UCC 2-207 and the acceptance attaches additional terms. There is
an offer and an acceptance, but which one governs the deal? The offer says X and the
acceptance says X+Y. Which one is binding? That determination depends on whether both
people are business people, whether new terms materially alter the deal, whether the new terms
were objected. If the new terms were objected to and they did create a material difference, there
is still an acceptance and the terms that govern the deal are those in the original offer.
Did other guy agree to deal? 3rd part to question 1
Look at fact pattern and it will go in terms of two possible issues of acceptance
Look at who is accepting
How they are accepting
Acceptance once the offer has been made and theres no problem with rejection, you must then look to the
acceptance.
4 Fact patterns regarding acceptance to watch for
Mailbox rulewhere parties are contracting from distance
o Adams v. Lindsell
What has happened is the offer is made, and then in response to offer, person to whom offer was made,
starts performance
o Start of performance is acceptance is viewed as implied promise to perform so it is enough to
make deal
o Gives us manifestation of mutual assent
Where offer requires performance to acceptthis does not create a bilateral contract
Notice of acceptance2 rules to apply
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o Transporting company took far too long and they agree they breached the
deal
o Mill had to be closed b/c of them taking so long
o Not reasonably foreseeable by both parties here
Consequential damages are where is saying b/c you breached contract with me,
something else bad happenedspecial damages which dont arise in every
situation
Economic waste
Peevinghouse and Groves v. John Wunder
o contracts involving work done on land
o unrestored land has same market value as restored land
o assume that deal was that land will be completely restored and appraisers
say that if it was completely restored it will be worth $100,000--if not
restored, only worth $80,000
o contract is breached and land is not restored
o will argue that it will cost $75,000 to restore my land now
Capacity
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Each of the agreeing parties must have capacity. The following group of persons are not held capable of being
held to contracts:
1.
2.
3.
Mistakes of Fact
Sherwood v. Walker is a prime example of a mutual mistake of fact. The case involved the sale of a cow
believed to be barren, but wound up being fertile and with calf. The court determined that there was no
contract, because the contract was for a barren cow that did not exist. When the parties make a mistake about a
material fact, there is no contract.
Its not enough just to have a mutual mistake. There must be a mutual mistake of material fact. Value is
not considered a material fact.
Example Im selling you a painting that we both believe to be an authentic Warhol. If it turns out that it is not,
that is a material fact that would invalidate the contract. If I am selling you a Warhol that we believe is worth
$10K but winds up only being worth $1K, that is a question of value and is not considered a material fact.
Mutual Mistake the contract can be rescinded
Unilateral Mistake is not a basis or defense for contract formation
Exception if it is an obvious mistake where the other side knows or has reason to know of the others
mistake, they cannot take advantage of them.
Things to Look for
Offer, manifestation of commitment
Revocation know how offers are revoked
***Unconscionability
always decided by judge but fact driven
Need to know where it comes from
o UCC 2-302: Williams v. Walker Thomassince that case it is common law too
o Now ucc and common/case law
What the 2 issues are that we need to discuss
o How the deal was made?
procedural unconscionability
whether terms were hidden or clearly expressed
get into bargaining laws
flaws in bargaining processdisparity of bargaining power or surprise in terms
substantive unconscionability
oppressive terms
problems with the terms themselves
Unconscionability
This concept was introduced with the UCC, but now it is generally included in all contracts, including
those covered by common law.
Major Points
1. Court can refuse all or part of agreement because the terms are oppressive or presented in a way that they
unfairly surprised the other party
2. Whether terms are oppressive is tested as of the time the contract was entered into. This is important in
long-term contracts. What was reasonable 20 years ago may not be reasonable today (option to buy)
3. Issues of unconscionability always go to the judge. They are questions of law.
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CONSIDERATION
In order for a contract to be valid, there must be consideration or consideration substitute.
Legal Detriment the promisee must show that he suffered some bargained for legal detriment. Detriment
entails doing something, promising something, promising to forbear or refraining from doing something there is
a legal right to do.
If you come by my house I will give you my Caddy. If I am trying to get you to come over to my house as
my objective, and nothing else worked (such as listen to music, come over for dinner, drinks), then my giving
you my Caddy is a bargained for detriment. If I just want to give the car away, and you just happened to be
walking by at the time I wanted to do so, thats a benevolent gift that is not enforceable.
If you stop listening to Barry Manilow Ill pay you $100. That is a bargained for detriment because you have
a legal right to listen to Barry Manilow, and if you give up that right then there is legal detriment. Hamer v.
Sidway
4 step approach to consideration
1. what is promise in question?
o Promise that is in dispute is one to focus on
2. Identify promisor and promisee
o Promisor who made the promise
o Promisee
3. What was the promisor asking for in exchange for the promise? What bargaining for in exchange?
o Concept of consideration is a concept of exchange
o Will be asking for 1 of 4 things in exchange
Performanceto wash car for example
Promise to perform
ForbearanceWilly my boy
There is no legal detriment in doing something that you are already obligated to
do. There is no PELDR in the UCC.
Example When sports stars renegotiate their contracts, there is usually a
different term of years in the new contract. If there were 3 years left in the
original contract, the renegotiated contract would be for 4 years. Otherwise, the
contract would be subject to the pre-existing legal duty rule.
Amount of consideration is not discussedpeppercorns will suffice
Part payment on debt
Question is usually obtuse as to what the problem is
Promise in question will often be the creditor promising to release the rest of the
claim
Part payment of a debt that is due and undisputed, is not consideration for a
release
Since you have legal obligation already for the whole amount, it is no new
detriment to me to pay smaller amount
situation in which worker injures himself saving his employers life and employer promises to
pay employee
no consideration for modifications
Modification of Contract does a modification of a contract have to be in writing? You have to look to the
contract as modified. If after you made the contract, it still falls within the SOF the modification must be in
writing. If the contract no longer falls within the SOF, the modification does not have to be in writing.
Example Enter into lease for 2 years, it has to be in writing. If the amount paid in rent changes, the
modification must be reflected in the writing. If you change the length of the lease to just 1 year, then
the modification does not have to be reflected in the lease. Why would you not put it in writing, when
you really trust the person?
UCC 89enforceable modification contracts made in good faith even if no consideration
Statute of Frauds (#3)
certain agreements have important subject matter or susceptible to fraudulent claims
within the statute of frauds
o need to use this phrase
o above phrase only means statute of frauds applies
1. Which contracts fall within the SOF?
The SOF is concerned with contracts that are so important or so susceptible to fraud that we need special
proof of their existence.
1) Personal services contracts not capable of being performed in 1 year
a. Contract to cut down all trees on your land. It is capable of being done in one year regardless of
size with enough men and saws.
b. If I hire you to work for me for the rest of your life, this too could only last for one year. You
could die within the year.
c. If I hire you to work for me for 2 years SOF applies. Granted, you could still die tomorrow,
but then you would not have completed performance.
d. If I hire you to perform at my wedding on July 1, 2002, the contract cannot be performed within
one year and is subject to SOF.
1. full performance by either party satisfies the SOF, it provides needed proof that this was what the
agreement was
2. part performance does not satisfy SOF, but you can be quick to add quasi-contract claims
2) Transfers of interest in real estate If the interest in real estate is for one year or less, the contract
does not fall within the SOF. For example a 12-month lease would not fall under the SOF, but a lease
for 13-months would.
Regardless of dollar amount
Key is that it has to be real estate interest that has a term of duration of more than a year
B orally agrees to buy Blackacre from S. Part performance can satisfy the SOF in real estate
dealings if two or more of the following occur:
a. partial payment by the buyer
b. possession by the buyer
c. improvements made by the buyer
3) Sale of goods of $500 or more (UCC 2-201)
Article 2 applies regardless of if you are a merchant and dollar amount does not apply
Specially manufactured goods for goods that are custom made the start of performance satisfies the
SOF
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Ordinary goods partial performance of a contract for the sale of goods satisfies the SOF, but
only to the extent of partial performance. Example you contract to sell me 1000 widgets
for $1000. You deliver 400 widgets. You can recover for the 400 widgets because you
partially performed. But the deal was for 1000 widgets, what about the other 600? I cannot
recover those, but I must pay for the 400 delivered. (what if there was reliance on the entire
1000 being delivered? If you dont have them all its not worth having any, is there anything
that can be done in that instance?)
Unlike the common law requirement for all material terms, under the UCC a valid writing only needs
quantity term to complete, the UCC will fill in the rest.
There is a special rule that applies if both parties are merchants. If one of the parties sends a letter to the
other claiming that the other has entered into a contract, the notified party has 10 days to respond or else the
contract becomes legally binding.
PAROL EVIDENCE RULE
Impact of a written agreementsuperiority of written agreement
Impact a writing has on earlier agreements
o Even if earlier agreements are in writing
Parol evidence: evidence of some agreement made prior to this writing
o Does not have to be oral
Integrated agreement: it is written, intended by parties to be their last word
o Written and final word
Complete integration: it is a writing that is final and complete
Partial integration: it is written, final as to what it covers but it may not be the whole deal
Merger clause: shorthand way of describing a contract provision that says this is the complete deal
o To determine if complete or partial
Parol Evidence Rule
There is a contract, but what are the terms? Rule of contract law about what the terms of the contract are. Four
issues to know: what the rule is, what facts trigger the rule, possible issues, how the rules are different from
statute of frauds. Often the two are confused and tested together.
1. Parol evidence rule when there is a WRITTEN contract that is intended by the parties to be their final
agreement, then you CANNOT use earlier agreements to change the terms of that written contract.
2. What triggers the rule?
a. There MUST be a WRITTEN CONTRACT (if there is nothing in writing you never get to the parol
evidence rule). Effect the written contract has, the importance of the terms included.
b. It MUST be the contract that the parties intended to be the final agreement. (Integrated agreement
writing intended to be the final agreement)
c. There MUST have been some earlier agreement, oral or written. Effect of agreement has on earlier
agreements, the effect is that you cannot use the previous agreements to change the terms.
3. Possible issues
a. Does the parol evidence rule apply (Was it an integrated agreement? This is a question of law for the
judge.)
b. Was there a merger clause? a contract provision stating that this is our final agreement.
c. Is there an applicable exception to the parol evidence rule?
1) You can always introduce evidence to establish a defense to the existence of the contract. (i.e. argue
fraud, duress)
2) You can introduce the earlier agreement to show a mistake in reducing the agreement to this final
writing. (i.e. evidence through partial writings, oral conversations)
3) The earlier agreement doesnt change the terms of the written agreement, but it adds terms to the
written agreement. Was the writing intended by the parties to be their complete and final agreement?
(was it partial integration?) ARE NOT TRYING TO CHANGE THE WRITING. It is at the judges
discretion as to whether the contract is integrated or partially integrated. Did the parties mean for the
writing to be their final and complete agreement?
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if agreement provides for these installments, a problem with one installment, so long as
not substantial problem, will not excuse payment
it can be adjusted in future installments
if common law contract, not a sale of goods and one guy is arguing that one guy breached so dont have to
perform, must do a material breach rule (major screw up rule)
when will one parties non performance excuse the other?
o Ex. H hires P to paint his housedeal is that house must be painted in two coats with Sherwin
Williams paint
This is common law contract
Turns out that painter you hire is big fan of Price
So he paints your house purple
Dont have to pay b/c material breach
What if painter buys different brand of paint instead by accident?
It is a breach but still have to pay b/c not a major screw up or material breach
2 exceptions to material breach rule
o language of condition exceptionif contract said I will pay you 1000 for painting my house
white on the condition that you use Sherwin Williams paint
this requires strict compliance b/c condition
o divisible contract exception
ex. H has huge house 20 roomsH hires P painter to paint whole house for 4000P
only paints 3 of the 20 rooms
is this material breach? YES
is H excused from paying? YES
if unfair, go to quasi K (equity)
ex. H hires P to paint 20 different apartments for 200 each
this is divisible
if painter paints 3 of the apartments, law would say this is divisible so you did
perform with respect to the 3 apartments
3)anticipatory repudiation
o I tell you before you finish that Im not going to pay you
o Excuse for stopping work
o Excuse of non performancegives right to stop performance and sue immediately if told youre not
going to be paid
4)
o and in order to have this excuse, must have both accord AND satisfaction so that if I
dont actually clean house, can still sue me on original promise to pay money
IMPOSSIBILITY, FRUSTRATION OF PURPOSE, IMPRACTICABILITY
Another excuse for non performance
easy facts to watch for are time sequence
deal was made and later, after the deal something happened
what happened was unexpected (unless it is totally unexpected there is no excuse)
harder facts to watch for
whether either party had assumed the risk in some way
did it make the performance impossible?
o Easy case: Taylor v. Caldwell: concert hall burning down
o This is post contract occurrence, unforeseeable, and so it was impossible
o This is destruction of subject matter of the contract
o Variations are often on exams
Homeowner contracts to build housewhen house is 90% complete it burns down
Neither party assumed risk
Relationship between unforeseen occurrence and performance
Not impossible to rebuild house
Is guy excused from performing? NO
May be excused from being late but still must build house
Not impossible nor impractical
Rule of thumbif all that happens is that there is a later unforeseen occurrence, that makes performance more
expensive, the tough luck rule, it is not impossibility or impracticability
Some situations in which even if it is not impossible that the burden may be so great that it will be excused
usually judgment call
Impracticability
Frustration of purpose is similar and different from impossibility
Krell v. Henry: guy who rented a flat to watch the coronation parade
o Parade gets canceled and he wants out of the deal b/c his whole reason for renting the flat was to
see the parade so his purpose has been frustrated
o He can still use flat though
o Where both guys know of the purpose of the deal at the time the deal is made and there is
something that happens after the deal, it doesnt affect ability to perform, it affects reason of
performance
o Non performance will be excused
Impossibility is in UCC
No UCC provision for frustration of purpose
o May apply to sale of goods
Sometimes people who were not parties to contract have rights under the contract
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ASSIGNMENTS
Ex. Batman makes contract with Gotham to provide security services
o Later, Batman comes to Robin, and tells Robin he can collect the money from the contract
To make that a third party beneficiary
How do you tell when he wants you to talk about TP bene or assignment
3rd party, all 3 people are involved in contract from beginningintent to benefit from the beginning
if Robin was brought in from the beginning and told Gotham to pay Robin, then 3rd party bene
assignor would be Batmanmakes contract and later assigns his rights to someone else
assignee is Robindidnt make contract but can enforce it
obligorGotham
effect of assignmentassignee can sue obligorif Batman does work, Robin can come in and sue Gotham for
payment
common law limitation on making of assignments
cannot make an assignment that substantially changes the duties of the obligor
ex. assume Batman makes contract with Gotham to provide security services and assigns right of
payment to Robin
o no prob b/c havent changed duties of Gotham (the obligor)
o just as easy to pay Robin
o assignment of a right to payment is never a problemnever substantially changes duties
ex. Batman makes contract with Gotham to provide security services, Metropolis wants Batman to
defend their city so Gotham gives Batman to them
o Batman=obligor
o Gotham=assignor
o Metropolis=assignee
Here we have changed Batmans dutieshe was supposed to protect Gotham, not Metropolis
Assignments get combined with delegation on exams. In real life, assignments and delegations get
combined, especially in the sale of a business. Often referred to in total as assignment.
PRIOR OUTLINE NOTES
Sale of Goods can effect the terms of the contract
2-207 Battle of the forms. Mismatching offer and acceptance. Each business has its own form and they
arent all identical. Which sheet of paper controls?
1. Doesnt have to be the mirror image, it can be a seasonable expression of acceptance
2. Everything in the offer is in the contract
3. In the acceptance form different forms that contradict the original terms are kicked out. They are objected
to.
4. In the acceptance form (only if both parties are merchants), the new terms are accepted UNLESS they are
objected to or if it is a material change. The additional terms do make it into the contract.
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5. In an acceptance form and both parties ARE NOT both merchants, the new terms are proposals, it is added
only if it is separately agreed to by the other party. If the new terms are insisted upon, its a conditional
acceptance and there is no acceptance.
6. Article 2 is a source of terms.
Warranties 21. Express warranty words of the party that describe the goods, state facts, or make promises with respect to
the goods being sold. (distinguish from puffing (sales call) general, opinion i.e. unbelievable price, high
quality structure, as opposed to a representation of fact - warranty specific, all steel structure)
2. Implied warranty of merchantability
a. when you buy something from someone in the business world, part of the deal is that it is merchantable
for ordinary purposes. Go to jewelry store for gold chain, put it on and head falls off, you can sue for
breach. Add a term to the contract, nothing bad will happen to you because you wear it.
b. If you buy something from someone that is in the business and nothing is said about the quality, you can
sue for breach of contract if it is defective.
3. Implied warranty for fitness for a particular purpose
a. A buyer that has a particular purpose and is relying on the seller to provide that good and the seller
knows of the buyers need and reliance on the sellers expertise. Test will have to tell you why the buyer
is buying the good and that the seller is AWARE. Go to the shoe store because you need mountain
climbing boots, but shoe sales man sells you Converse tennis shoes. Adds term, I know what you want,
I know what you need, here it is.
I.
Performance Obligation
A. Makes certain that the terms have been complied with. It turns on the terms of the contract.
B. Conditions
1. Modifies the obligation to perform (i.e. I will buy your house if it appraised at $100,000). That
is beyond the parties control
2. An express condition must be strictly complied with. (i.e. if $95,000 you are not legally
obligated to buy)
3. I will pay if I am satisfied (requires the approval of one of the contracting parties
a. It is not illusory, it is legally enforceable
b. If the subject matter of the contract is such that it involves personal taste and individual
judgment, then it is read literally. (if the person is not satisfied, they dont have to pay). For
example, if I contract a person to paint my portrait, satisfaction is based on my subjective
satisfaction.
c. If it a more ordinary contract (i.e. paint house), then even though the contract language says
I it is read as if a reasonable person would be satisfied. Objective standard.
C. Seller of Goods Performance Obligations - UCC
1. There must be a perfect tender. The seller is obligated to deliver exactly what the terms call for.
(Contract for 100 widgets, 99 is a breach. This only applies in article 2)
2. Rejection of the goods if the seller does not make a perfect tender, the buyer has the option to
reject the goods.
a. there is a difference between a rejection of an offer (no contract cant sue) and a rejection
of the goods (still contract can sue)
3. Revocation of acceptance of the goods tested with rejection
a. The buyer is acting immediately and the buyer can reject the goods if they are anything less
than perfect.
b. If there was a substantial problem with the goods that was difficult to discover early on, they
can still revoke the contract
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II.
Excuse of Nonperformance
A. Nonperformance is sometimes excused, 5 grounds for excuse
B. If there was a conditional obligation and the condition wasnt met (Buy house if appraised at $120K,
but turns out $118 excused)
C. The other parties breach (UCC perfect tender the items are not perfect). A material breach excuses
the other party from performing. Painting house for $1K, get paint on the windows, can get away
without paying $1K? Probably, but will have to pay something. If I paint if purple rather than
white, then payment would be excused because that is a material breach.
D. Anticipatory repudiation early revocation. The other party is excused.
E. Later agreement that excuses nonperformance
1. Novation two people make a contract and later both agree that a new party can perform the
contract. If that third party breaches, you cant sue because it excuses the other party (Cant sue
the originally contracted party? yes, the original party is excused, agreement to substitution is
critical)
2. Accord and Satisfaction the excuse requires both the accord and the satisfaction. It changes the
deal with the same two parties. (i.e. Owe $1000. Paint house instead)
a. Accord = new agreement, does not affect the original agreement. Breach results in suing on
either condition money or paint house.
b. Satisfaction = actual act
c. Does agreement as modified fall within the SOF?
d. When do we need consideration for changes in contract? Not UCC because there is no
PELDR, but it is required in common law cases.
F. Later unforeseen occurrence
1. Impossibility - Where there is a later unforeseen occurrence that is no ones fault, the nonperformance is excused. Taylor v. Caldwell concert hall lease, after agreement made the hall
burned down. Taylor sued for breach of contract, cant use concert hall.
2. Frustration of Purpose performance isnt impossible, but it takes away the purpose of the
contract. The agreement is unenforceable. Krell v. Henry guy wants to see the coronation
parade. Flu epidemic and parade called off. Its not impossible, but the purpose for agreement is
frustrated by later occurence.
III.
Breach Remedies
A. Liquidated damages the parties have agreed what the damages are to be. They are valid if
1. The contract is uncertain as to what the possible damages might be
2. They are a reasonable measure of what these uncertain damages might be.
These are tested as to the time that the agreement is made, when no one knows what the damages
are. If you are told what damages actually made it is irrelevant, that info was not available at the
time of the agreement. Was this a reasonable way to deal with it?
B. There are NO PUNITIVE DAMAGES IN CONTRACT LAW or UCC. Contract law is not
interested in punishing breaching parties. Torts allow punitive.
C. Consequential damages recoverable only if reasonably foreseeable by both of the parties at the
time of the contract. Hadley v. Backsendale(?) English mill in small village. No one knew how to
fix the Crank Shaft. Inexcusable delay. Because you breached, something else bad happened to me.
These are indirect damages and only recoverable if reasonably foreseeable by both of the parties at
the time of the contract. (Lose money because delay in painting caused owner to miss the season to
sell the house, costing $5000. For recovery, this must have been foreseeable by both parties.)
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D. Reformation need to conform the written contract to what it is that the party actually agreed to. We
agree its the 19 south acres, but the written agreement comes out 19 southeast acres. Conform to
meet the parties agreement.
E. Specific performance court order directing the parties to do what they contracted to do. Equitable
remedy that is only used when the legal remedies are not sufficient. All equitable remedies are only
available when money damages are not enough.
1. land sales land is unique, transfer of ownership
2. sales of unique goods (antiques, works of art, made to order)
3. personal services contracts NO SPECIFIC PERFORMANCE
4. Negative specific performance or injunctive relief stops you from doing something. Pat Riley
under contract to coach the Knicks, but he doesnt want to. They cant sue him to force him to
coach, but they can get an injunction disallowing him from coaching another team.
F. Money damages
1. The goal is to put the non-breaching party in the same position that she would have been in had
the contract been performed. Expectation damages.
a. Identify the non-breaching party
b. What would the person receive if the contract had been properly performed
c. What would it take to award damages that would have been due?
2. Examples
a. breach contract for $1000 for painting house. New painter charges $1500. If breaching party
pays $500, thats where the person would be had the contract been performed
b. Ive bought the paint in preparation and you breach. How measure the damages? Give costs
and provable lost profits. What about unilateral contract acceptance by performance?
c. Sale of goods sell Caddy thats in mint condition, but its not in mint condition. You want
to keep the car, but you want some of the money back because its not in mint condition.
Delivered in $1500 condition, had it been in mint condition it would be worth $5000. Trying
to put the innocent in the same condition as if the contract had been performed would have
had car worth $5000, but you have car worth $1500. Consequential damages recoverable
only if reasonably foreseeable by both parties
IV.
b. Happens in steps two parties make a contract, THEN one of the parties assigns his rights to
a third party
c. Simply substitutes one party for another party
3. Delegations two people make an agreement and then later one of them gets somebody else to
do the work
a. When possible
1) contract provisions always control
2) if no provisions, you can generally delegate duties unless you are talking about a situation
that involves special skills or a person involving a special reputation
b. Consequences
1) the delegating party remains liable
2) delegatee he is only legally obligated if he received consideration
c. Compare delegation and novation
1) When you delegate, if you ask the other party and they agree, it becomes a novation
2) Under delegation, you remain liable.
3) Under novation, you can sue the delegatee.
d. Connection between 3rd party bene and delegation
1) if the delegatee receives consideration from the delegating party, it is a delegation for
consideration AND a third party bene.
What happens if the SOF is not satisfied?
The SOF is a defense to contract formation. When you have a situation that falls within the SOF, and
the SOF is not complied with its a defense that needs to be presented and proved to prevent enforcement. If you
cant sue on the contract, always look for a quasi-contract remedy.
Equal Dignity Rule this concerns when it is necessary to have written authority for a third party to act on
behalf of someone else in a contract. Authorization must have the same degree as the contract the person is
entering the other into. An agent needs written authority to enter into a contract for another when the contract
is required by the SOF to be in writing. This issue turns on whether the SOF requires the contract to be in
writing and usually occurs in real estate dealings. In order to enter into a lease for another person, do I need
written authority to do so? If the contract is over 1 year I do need written authority.
Illegality
If there is a question of illegality, the issue turns on knowing the difference between a contract with
illegal subject matter and an illegal purpose.
1. If X contracts with Y to kill Z for $5000, neither X nor Y can enforce the agreement. The contract deals
with illegal subject matter and is therefore void.
2. If Y contracts with a cab driver to take him to the spot to kill Z, the cab driver can recover from Y because
their contract dealt with illegal purpose, and the cab driver is more than likely unaware of Ys purpose in
going to the spot.
Rejection - Counter offer, conditional acceptance, adds terms under common law
Terms of Contract
The terms of a contract are found in what is written and what is said. You can also find them in the
terms of previous dealings, if there has been a course of dealings between the two parties. The custom of the
industry is relevant and can dictate the terms and what they mean.
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Prior dealings how these people did their deals together, person specific
Custom and usage info about how deals with other people in the industry were done
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