CONTRACT LAW BARBRI OUTLINE

7 MAJOR CONTRACTS QUESTIONS Is there a deal? Was a deal or agreement made? If there is a deal, how do courts enforce deals? Assuming there is a deal, is there any reason for the court not to enforce that deal? What is the deal exactly? What was agreed to?(ea. side has their own version of the deal) Once we know what deal is, did anyone not do what he agreed to do? If someone didn’t do what he agreed to do, did he have an excuse? Does anyone other than the two guys who made the deal, have legal rights b/c of the deal?

Definitions1. Contract – legally enforceable agreement2. Express Contract – verbal—based solely on words3. implied contract – based at least in part on conduct, parties acting as though they have a deal

Unilateral contracts are usually (1) rewards or contests (such as $500 for finding my lost dog Fluffy) or (2) offer expressly requires performance

4. Quasi contract – equitable remedy (tells you that it is not contract law and rules of contract law have no application at all)

Since it is equitable remedy, and equity is about doing what is fair If it seems unfair to apply contract law on a question, add a paragraph discussing quasi K

5. Unilateral contract – contract results from offer that requires performance to accept.6. Bilateral contract – contract results from an offer that is open as to how it can be accepted.

Offeror doesn’t require specific way to be accepted.7. executory – means that it has not yet been performed

What is contract law? Case law or Common law—what courts say the law is Article 2 of UCC: some contracts are governed by this—2 basic questions

o When do I do article 2? It will never say use article 2 Must be sale of goods to use this article (never services) Goods=something that is moveable personal property (ex. can of coke) Fact pattern: mixed deal—lots of deals are like this

When pay for paint and labor of painter How do you deal with this? 2 part test

o All or nothing—apply it to whole deal or not at allo What is more important part of deal?

Is it a sale of goods or putting paint on wall more important? Painter—so use common law for whole deal

How do you determine whether it is a unilateral or bilateral agreement? You look to the nature of the offer If it requires a performance for acceptance, then it is a unilateral agreement If it is open as to how it can be accepted then it is a bilateral agreement.

QUESTION 1: Is there a deal?Issues to consider in formation questions:

Was there ever even a deal proposed? Did we even have an offer?

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Was the offer revoked/rejected or terminated? Was the deal for the offer accepted?

Applicable LawLooking to the applicable law is always the first step in answering a question. What law you look to depends on the subject matter of the contract. If the contract concerns the sale of goods the contract is subject to article 2 of the UCC. For anything other than the sale of goods, the contract is subject to common law.

Which law governs contract depends on subject matter of contract1. U.C.C. Article 2 – Sale of Goods2. Common Law – anything other than the sale of goods (land, services, etc) Formation of ContractsFirst find the agreement then look to whether it is legally enforceable.

OFFER AND ACCEPTANCEOffer—commitment—has it been terminated—words to offeree—indirect rejection—who accepted and how did they accept it

Offer – need manifestation of a commitment through words or conduct. Exam key: they will give information about what offeror intended but this is a red herring b/c not looking at intentions but manifestations. Look for the manifestations of the willingness to contract.

Commitment can be manifested through an individual’s words and actions indicating a willingness to be bound

Always include phrase “manifestation of mutual assent” on questions about formation. Offeror: person who makes offer Offeree: person to whom offer is made offeror revokes offer offeree rejects offer

Things to watch for Look for content to see if is an offer

o Terms “for immediate acceptance”- language suggest commitmento Fact pattern will give you what communication says

Look for missing terms—see if communication seems incomplete There is no longer requirement that communication contain all of the material terms—

there can be gaps and still be manifestation of commitment Look for missing price problem—will see this in context of communication relating to

proposed sale Under common law price term and description of real estate are essential or there is no

manifestation of commitment Article 2—communication can be an offer even though there is a missing price term

o Also look for an ambiguous term “fair” “reasonable” “appropriate”- indicate no commitment Missing v. ambiguous rule

Missing terms: person was willing to make commitment and leave it to court to fill in- Person wasn’t insisting on that term

Ambiguous- courts will conclude it was not a commitment and no deal

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1. Advertisements – Advertisements are not offers—they 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 termUCC – 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.

AmbiguityContracts 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 contract2. each party must have different meaning in mind3. 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 buyer’s needs. For example, you make a deal with a local supplier saying that I’ll buy all of my wine from you—exclusivity 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 can’t 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 disproportionateo Increase must be proportionate to other demands

Context—what is the setting? o Watch for the bargaining history—history of negotiations- that adds to argument that it is a

manifestation of commitmento 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 terminatedTermination – once an offer is terminated, it’s gone forever.

METHODS OF TERMINATION1. 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?

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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 back2) 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? It’s all about the timingi. must complete revocation before acceptance occursii. if revocation is sent through the mail, it’s not effective until it’s received

4) When it is impossible to revoke? Some offers cannot be revoked, and offeror is held to the offeri. 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 Y’s bid to bid on a contract and wins that contract, X has relied on Y’s bid and can be held to the offer.

Bid=offer Drennan Star Paving—it is irrevocable b/c reliance Jaimes Baird—reliance 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 it’s 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 revoked—MUST HAVE ALL OF THESE EXACTLY

3 month ceiling to it—only impt. when writing says it will keep it open for 6 monthso 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 “I’ll 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 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

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Exception—implied contracts Fact pattern where words don’t 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 rule—common law rule only I accept and is a rejection Something new is added I accept if/provided…no express contract common law or UCC Different from I accept and…not insisting on this term but throwing it out as proposal

o In common law, still no express contracto Acceptance can’t add anything to offer—mirror image rule

i. CL – Mirror image rule requires that the acceptance look just like the offerii. 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 don’t 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 1Look 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 there’s no problem with rejection, you must then look to the acceptance.

4 Fact patterns regarding acceptance to watch for Mailbox rule—where 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 performanceo Start of performance is acceptance is viewed as implied promise to perform so it is enough to

make dealo Gives us manifestation of mutual assent

Where offer requires performance to accept—this does not create a bilateral contract Notice of acceptance—2 rules to apply

o Acceptance by promise has to be communicated to offeroro Acceptance by performance—whether facts are such that the person would reasonably know you

have performed Must give notice when other party wouldn’t know that you have started performing

Sale of goods question—where facts are that buyer offers to buy goods and seller sends the wrong stuff—2 consequences

o That creates a deal—sending wrong stuff is acceptanceo Can now sue for breach

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o Accommodation exception—sends wrong stuff with explanation Doesn’t create contract, simply a counteroffer

1. Who accepted the offer1) Must be person to whom offer is made. The offer is person specific.2) Offers are not assignable3) Need manifestation of personal assent—only assented to sell to specific person4) In rewards and contests, the offeree must know of the offer at the time he accepts. He must know of the

award when he catches the dog2. How acceptance occurs—offeror can control how acceptance happens

1) Return promise – most offers can be accepted by merely a promise2) Start of performance only – if you start performance, have you accepted the offer? You have to look at

the nature of the offer. If the offer is a unilateral one accepted only by performance, partial performance does not constitute an acceptance. If the offeror revokes the offer after partial performance, you are under no obligation to finish the performance. In the case of unilateral contracts, full performance is required for acceptance. However, once you begin performance the offer becomes irrevocable. If the offer doesn’t say anything about the method of acceptance, a bilateral contract, then starting performance is an acceptance and creates the contract. If the offer is made, the work is started, but is not completed, look to the nature of the offer to determine whether offer had been accepted.i. Uni – start, irrevocable, can walk away, not actual acceptance, can only be accepted by

performanceii. Bi – start is acceptance, duty to complete, can be accepted in any way

Presumption is it is bilateral Unless expressly required performance, it is bilateral

Unilateral/bilateral not used today

3. Mailbox rule – only applies to acceptance. Where reasonable to respond to offer by mail, fax, or FedEx and response is so done, the acceptance dates from the time the acceptance is sent, the time placed in mailbox. This concept is usually tested with a revocation of the offer.Example – I offer to sell you my Caddy for $400 via mail. On Tuesday I change my mind and mail you another letter revoking the offer. The letter of revocation doesn’t arrive until Friday. (The revocation is only good once it is received, unlike the acceptance that is good once it enters the mailbox.) If you mail a letter of acceptance on Wednesday, when acceptance is good when posted, what happens when you receive the revocation? The offer was not terminated so long as the right person accepted it. You don’t have a contract, but it is legally enforceable.

QUESTION 2—how do courts enforce deals?

Specific performance—court will order person to do what person agreed to do This is equitable remedy—must say this Only applied where money damages are inadequate Real estate deals fall under this category Sale of goods only when dealing with unique goods (art, antique or custom made) Never do it in services or employment contracts Negative specific performance—where someone has agreed to work with you and breached the contract

o Can’t force them to work for youo Can get negative specific performance by preventing them from working for competitors

Money damages—most exam questions

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Punitive damages—never for breach of contract Liquidated damages—this is phrase that describes contract provision that tries to fix or set the way of

fixing damageso General rule is that liquidated damages are recognized—valid way of fixing damageso Exception—parties cannot by agreement set out an amount of damages that would be penaltyo Issue will always be is this liquidated damages clause some kind of disguise for penalty

Expectation damages—general standard for damageso Trying to make the world same as it would have been had contract been performedo Judicial efforto 3 steps

ask yourself, what would Π now have if the contract had been performed? What does Π actually have? What does it take to get her from 2 to 1 (from what actually have to what supposed to

have)?o Hawkins v. Mcgee —doctor promised perfect hand

What is value of perfect hand? What is value of gross hand received?o 3 limitations on expectation damages

rule with respect to avoidable damages—they are not recoverable 2 different fact patterns that raise avoidable damages

o fact pattern 1: an agreement followed by a breach, followed by continuing performance by non breaching party

must mitigate damages watch for following two things

was there clear breach? or was it ambiguous? Is this a situation in which it can be fairly argued that

continuing to perform decreases the damages rather than increases them?

o fact pattern 2: employment contract argument that Π could’ve gotten comparable job judgment call whether comparable or not Shirley MacClaine case Not taking comparable job to reduce damages

Rule of consequential damages Rule is that they are recoverable only if foreseeable (in contemplation) by both

parties at time of contract Hadley v. Baxendale : mill in small village where mill breaks

o Contract to transport milling machineryo Transporting company took far too long and they agree they breached the

dealo Mill had to be closed b/c of them taking so longo Not reasonably foreseeable by both parties here

Consequential damages are where Π is saying b/c you breached contract with me, something else bad happened—special damages which don’t arise in every situation

Economic waste Peevinghouse and Groves v. John Wunder

o contracts involving work done on lando unrestored land has same market value as restored land

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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 restoredo Π will argue that it will cost $75,000 to restore my land now

QUESTION 3—any reason not to enforce the deal?

WHO MADE DEAL?did Δ have capacity? Does he have legal right to disaffirm

Capacity Agreement is not enforceable if party lacks capacity

o Person under age of majorityo Intoxicationo Mental incompetence

Must mention “disaffirm” in this type of questiono Ability to get out of agreements that he has madeo With infancy, only requirement is age

2 exam exceptions to capacity rule implied affirmation—enter into agreement when 17 years old

o that person continues to retain benefits of agreemento by continuing to retain benefits of contract after gaining capacity, just like

you made a new deal necessaries

o most common test questiono food, clothing, shelter, health careo situation where 17 year old rents apartmento even though lacks capacity, if necessary, legally obligated to payo not contract obligation though—quasi K obligationo not agreed to pay agreed upon amount but fair and appropriate amount

2.2 – Capacity

Each of the agreeing parties must have capacity. The following group of persons are not held capable of being held to contracts:

1. Infants (under 18) one fact rule2. Mental incompetents one fact rule3. Intoxicated two fact rule

1. intoxication2. significance of persons need to know of it

There is a specific rule for necessaries. We want everyone to be able to get what they need to survive, so we do require those persons lacking competence to pay for necessaries. The agreement to provide an infant, mental incompetent, drunk with a necessary is not a contract (they do not have the capacity to contract) but a quasi-contract. The only thing that can be recovered from this group of individuals is the

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value of the performance to that person and not necessarily the contract price. Which person? The contractor or the incompetent?

HOW WAS DEAL MADE? look for following Duress—not just physical duress but economic duress too

o Looking for 2 things in economic duress Improper threat by Π—did person who is trying to enforce deal do something improper Δ—is he left with any reasonable alternative? Improper threat standard

o Watch for 2 fact patterns Fact pattern #1: involving changing the deal—modification in contracts

Look at litigation settlement where Π settled for less than she had previously acknowledged that she would

Undue influenceo Unfair threat not improper—milder standard for Πo Look at Δ—tougher standard—must be under domination of Πo Must talk about duress and undue influenceo Looking for prob with how deal was doneo Look at Δ and see if he was under the domination of Πo Looking at a weaker Δo Culpability is harder on Π in duress

Misrepresentationo When only reason deal was made was b/c of misrepresentationo Looking that I understand contract law concept of misrep and tort law concept

Tort—looking for negligence or intent Contract—don’t need to show intentional or careless

Must show misrep, that it was material and that it was relied on Mistake

o Guys who made deal didn’t understand surrounding factso Not language of deal but surrounding factso Sherwood v. Walker

Rose the cow who both owner and buyer thought was barren Where there is mutual mistake, about a “basic material fact” then deal is not enforceable To trigger this rule, need mistake that is basic and material

If mistake about what something is (the nature of what it is) then this qualifies If mistake about what it is worth, that is never material!!

Never ground for not enforcing dealMistakes 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.

It’s 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 – I’m 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.

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Mutual Mistake – the contract can be rescindedUnilateral 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 other’s mistake, they cannot take advantage of them.

Things to Look forOffer, 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 Thomas—since that case it is common law tooo Now ucc and common/case law

What the 2 issues are that we need to discusso How the deal was made?

procedural unconscionability whether terms were hidden or clearly expressed get into bargaining laws flaws in bargaining process—disparity of bargaining power or surprise in terms

substantive unconscionability “oppressive terms” problems with the terms themselves

UnconscionabilityThis concept was introduced with the UCC, but now it is generally included in all contracts, including

those covered by common law.Major Points1. Court can refuse all or part of agreement because the terms are oppressive or presented in a way that they

unfairly surprised the other party2. 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.

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, that’s a benevolent gift that is not enforceable.

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“If you stop listening to Barry Manilow I’ll 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. Sidway4 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 promiseeo Promisor Δ who made the promiseo Promisee Π

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 exchangeo Will be asking for 1 of 4 things in exchange

Performance—to wash car for example Promise to perform Forbearance—Willy my boy

o Person who made promise must be asking for something in returno Willie my boy—if bargaining for return promise and person does not perform then no

consideration4. Is there some new benefit or detriment?

o Thing she was bargaining for, was it benefit to promisor and detriment to promisee?o Need benefit to promisor and detriment to promiseeo 3 situations where issue of detriment needs to be discussed in answering question

past consideration can’t bargain for anything already done must have bargain for new benefit and detriment There is no such thing as past consideration. Past consideration is no

consideration at all. (Generally) If you are grateful for someone saving your life and you promise to pay them $100, this is not a legally enforceable promise. There is no consideration for the promise. You cannot bargain for something that you have already done. An agreement is not the same thing as a contract. Things must happen before an agreement

Pre-existing legal duty Doing something you are already legally obligated to do is not consideration for

promise to pay you more money to do it 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 discussed—peppercorns 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

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Since you have legal obligation already for the whole amount, it is no new detriment to me to pay smaller amount

CONSIDERATION SUBSTITUTES—3 of themPromissory Estoppel (#1) 6 step approach

1. what is the promise in question2. label promisor and promisee3. what did promisee do after promise was made? what was reliance?4. was this thing, action or inaction, that promisee did, was it induced or caused by, did it happen b/c of

promise? Tells you whether you are doing consideration or promissory estoppel No one has asked promisee to do what she is doing—she is doing b/c of the promise Ex. I hold the mortgage on your house. I promise I will not foreclose your mortgage for 5 years.

(promise in question)a. I try to foreclose anyway. But after you have painted house. There is no consideration

for my promise, but under promissory estoppel it may be.b. Is it legally enforceable?

i. I wasn’t asking for anything, simply making promise not to foreclosec. In Willy, if uncle just promised money for being a good person and Willy chose to refrain

from smoking—that wasn’t asked for After promise, promisee does something that was caused by the promise but not asked for (like

refraining from smoke5. Should guy who made promise anticipated this action? was it reasonably foreseeable?

Should mortgage holder have anticipated that mortgagee would paint house?6. Would it be unjust not to enforce this promise?

Promissory estoppel1) Four elements of PE

1. promise2. reasonably relied on to the actor’s detriment3. only way to avoid injustice

MORAL OBLIGATION (#2) may make a promise legally enforceable 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 §89—enforceable 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”

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o need to use this phraseo 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 claims2) 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 buyerb. possession by the buyerc. 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

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 don’t have them all it’s not worth having any, is there anything that can be done in that instance?)

2. How do you satisfy the SOF? Full performance is a way of satisfying that there was an agreement and you followed through with its

terms Look at what question tells you about what writing says

Not enough that there is a writing—there are requirements for writing In order for writing to satisfy statute of frauds, all material terms must be in writing (not for sale of

goods b/c that is UCC)o From the writing alone you can tell

Who the contracting parties are

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What did each agree to do If sale of goods, all the writing must say is quantity

Doesn’t have to name partieso Look at who signed the writing unless it is sale of goods question which would be UCC

In order to satisfy statute of frauds it must’ve been signed by Δ—if common law UCC special rule for sale of goods of $500 or more there is situation under 2-201 in which all that is

needed is signing by Π This would happen when both are merchants and Δ received notice of the contract and never

answered the letter If don’t answer the letter, assumed that you are on board with deal

o Situations where performance can satisfy statute of frauds Ignore for exam

What type of writing does it need to be?What type of writing depends on the type of contract in consideration.1. Common Law

1. material terms2. signed by person against whom you are trying to enforce agreement

All material terms must be included in the writing. “Your offer on November 9, 1999 is accepted” is not an adequate writing. There is no indication of who they are and what they are intending to do. It is important to look at who signed the writing, because only those who signed their name to the document can be held to what it says. Example – A contract for K&S and Marsha Clark for a 3-year term at $400,000 a year exists. This contract was signed by K&S, but not by Marsha Clark. Marsha can sue K&S (who did sign the contract) on the contract even though she did not sign her name to it. K&S, on the other hand, cannot sue Marsha on the contract because she did not sign her name to the terms. She may have agreed to the terms, but it’s not binding and she has an SOF claim.

2. UCC1. Quantity term2. Signed

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 agreement—superiority 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

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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 doesn’t 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 judge’s 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?

4. How different from the Statute of Fraud? The SOF is brought up when you are deciding whether you have a legally enforceable agreement. Triggered by the phrase there was an ORAL agreement. For Parol Evidence, you are past that stage and you are considering the terms of the contract. There must be a WRITTEN contract.

3 basic points1) where you have an integrated agreement, parol evidence can never contradict it2) What if parol evidence doesn’t contradict the integrated agreement but simply adds terms to it?

o When will the court consider parol evidence here?o Ques. for court--Need to find out if this is a complete integration?

3) even if it is a complete integration, parol evidence can be used to explain ambiguous terms

parol evidence rule: can’t contradict, can supplement and can explain

CONTRACT INTERPRETATIONwhat does the deal mean?course of performance

all about what these people have previously done under this very duty persuasive form of extrinsic evidence as to what the deal means

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same people, same dealcourse of dealings

not as persuasive what these very people have done under earlier similar deals same people, similar deal

custom and usage what different people have done under different but similar deals relevant and some evidence but not as persuasive as first two

GAP FILLERS what if deal is more than what party has said? Fact pattern governed by common law Implied duty of good faith Wood v. Lucy Lady Duff Gordon UCC it is sale of goods question you are encountering UCC is great to fill gap

o Implied obligation of good faith—good faith is made part of performance of any sale of goods contract

Sale of goods—always do article 2 Firm offer rule

o Implied warranty of merchantability Situation in which a person who regularly sells goods of that kind, sells something and it

turns out to be defective Ex. anytime jewelry store sells jewelry, even though no discussion of quality, you have to

assume it is ok Seller must be in business of selling goods of that kind, then law imposes obligation on

that seller Adds a term to the contract—the goods must be okay—must be fit for ordinary purposes

QUESTION 5—DID SOMEONE NOT DO WHAT HE AGREED TO DO? Yes obviously

QUESTION 6—DOES THE PARTY HAVE AN EXCUSE FOR NOT DOING WHAT THEY AGREED TO DO?Excuses for not doing what you agreed to do1) situation in which there is an unmet condition of performance

Performance was conditional and one condition was unmet Ex. B contracts to build building for O—there are progress payments

o Payment of progress payments is conditioned on an architects certificateo If an architect doesn’t approve a month of work, don’t have to make the payment b/c you are

excusedo Ok not to perform b/c condition not met

Ex. will buy house if appraised at 100,000 but it was only appraised at 90,000—no need to buy Must look for express condition in fact patterns

o Look for words “if” “provided that” “so long as”o Anything short of the phrase “on condition that” you are going to add statement to answer, “if

there is any doubt about whether the contract language creates an express condition, that the preferred interpretation is no condition”

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If you determine that there is language of condition, the general test for conditions is conditions must be strictly complied with

o If the house is appraised at only $90,000o Jacobs & Young v. Kent

Owner wanted Reading pipe but builder used a different kind of pipe Court said this was not language of express condition Homeowner did not say I will only pay you if you use reading pipe Different result if language was an express condition

o Courts try to conclude that there isn’t a condition If there is any way to conclude that there is not an express condition, that is way court will go

2) Breach by the other party as an excuse for non performance I don’t have to perform b/c other guy didn’t do what he was supposed to do Remember to look to see what law to apply Article 2 differs most from common law here

o Article 2 has perfect tender standard Anytime the seller of goods is less than perfect, not exactly what buyer wants, buyer is

excused from performing b/c seller did not do perfect tender General standard for sale of goods is perfect tender That standard is subject to 2 big exceptions

o 1. cure: in certain limited situations, b/c perfect tender standard is so high and demanding, give seller second chance

watch for situation in which the seller sends the wrong stuff early!! Must give delivery deadline in this fact situation If seller can still get right stuff there by deadline, then no problem

o 2. installment sale contract: where parties in their agreement have agreed that there will be deliveries in several separate installments

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 don’t 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 house—deal 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 Don’t 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 exception—if 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 conditiono divisible contract exception—

ex. H has huge house 20 rooms—H hires P painter to paint whole house for 4000—P only paints 3 of the 20 rooms

is this material breach? YES

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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 repudiationo I tell you before you finish that I’m not going to pay youo Excuse for stopping worko Excuse of non performance—gives right to stop performance and sue immediately if told you’re not

going to be paid

4) later agreement—2 forms novation :

o both of the guys who made first deal agree that another person can performo other person is a no showo initial guys performance is excused by later agreement of ally mcbeal doing it

accord and satisfaction: o change in what is going to get doneo agreement to clean house instead of paying money (that is the accord—agreement to do

something different than first agreed to do)o by actually cleaning house, that is satisfactiono “and” in order to have this excuse, must have both accord AND satisfaction so that if I

don’t actually clean house, can still sue me on original promise to pay money

IMPOSSIBILITY, FRUSTRATION OF PURPOSE, IMPRACTICABILITYAnother 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 downo This is post contract occurrence, unforeseeable, and so it was impossibleo This is destruction of subject matter of the contracto Variations are often on exams

Homeowner contracts to build house—when 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

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Rule of thumb—if 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 thougho 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 doesn’t 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

3rd party beneficiaries Contract between two people and both intend for a third party to benefit from the contract Life Insurance contract—insured bought the contract, insuror is company and someone else will benefit Where contract was made with intent to benefit you, you can sue to enforce it Not purely insurance law Intended third party beneficiary

3 rd party beneficiary : didn’t make contract but intended to be benefitedpromisor: guy whose promise goes to 3rd party beneficiary

Guy who’s promise goes to the 3rd party bene Insurance company

promisee: guy who takes out insurance policy

creditor beneficiary or donee beneficiary rule of thumb—if in doubt, call it donee only time creditor beneficiary is when third party was previous a creditor of promisee

o ex. I owe Heidi 1000—I say I’ll name her in life insurance policy instead—she is creditor beneficiary

o donee beneficiary is if I felt sorry for Heidi and said I would name her in policy 3rd party bene can always sue the promisor!!

Rights of third party do not depend on provision of consideration or not—they are simply the intended beneficiary

Promisor liable to 3rd party beneficiary

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If 3rd party bene was a creditor bene, he can also sue promisee on original debt

DELEGATION

You start with contract between 2 people—later one of them gets someone else to do the work what are consequences of a delegation?

o what if third person doesn’t do work, can still sue person who initially should’ve done the work b/c not mutually agreed upon substitution—only delegation

o delegations do not excuse—delegating party remains liable

limitations on delegation—some duties are not delgable if contract says you can’t delegate or, subject matter of contract—some duties require special skills

o can’t delegate special skills—Salvador Dali cannot delegate to me to paint picture he was supposed to

most duties are delegable

ex. H hires P to paint his house contract says nothing about delgation P gets X to do work instead If X doesn’t do work, H can still sue P X does the work—what result? Issue of the question is is the duty delegable? YES

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 beginning—intent 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 Batman—makes contract and later assigns his rights to someone elseassignee is Robin—didn’t make contract but can enforce itobligor—Gotham

effect of assignment—assignee can sue obligor—if 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 Robino no prob b/c haven’t changed duties of Gotham (the obligor)o just as easy to pay Robino assignment of a right to payment is never a problem—never 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

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o Batman=obligoro Gotham=assignoro Metropolis=assignee

Here we have changed Batman’s duties—he 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 NOTESSale 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 aren’t all identical. Which sheet of paper controls? 1. Doesn’t have to be the mirror image, it can be a seasonable expression of acceptance2. Everything in the offer is in the contract3. 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.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, it’s a conditional acceptance and there is no acceptance.

6. Article 2 is a source of terms.

Warranties §2-1. 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 buyer’s need and reliance on the seller’s 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 ObligationA. 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

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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 partiesa. It is not illusory, it is legally enforceableb. 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 don’t 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 - UCC1. 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 – can’t 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

II. Excuse of NonperformanceA. Nonperformance is sometimes excused, 5 grounds for excuseB. If there was a conditional obligation and the condition wasn’t 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 can’t sue because it excuses the other party (Can’t 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 actc. 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 one’s fault, the non-performance is excused. Taylor v. Caldwell – concert hall lease, after agreement made the hall burned down. Taylor sued for breach of contract, can’t use concert hall.

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2. Frustration of Purpose – performance isn’t 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. It’s not impossible, but the purpose for agreement is frustrated by later occurence.

III. Breach RemediesA. 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 be2. 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.)

D. Reformation – need to conform the written contract to what it is that the party actually agreed to. We agree it’s 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 ownership2. sales of unique goods (antiques, works of art, made to order)3. personal services contracts – NO SPECIFIC PERFORMANCE4. Negative specific performance or injunctive relief – stops you from doing something. Pat Riley

under contract to coach the Knicks, but he doesn’t want to. They can’t 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 partyb. What would the person receive if the contract had been properly performedc. What would it take to award damages that would have been due?

2. Examplesa. breach contract for $1000 for painting house. New painter charges $1500. If breaching party

pays $500, that’s where the person would be had the contract been performedb. I’ve 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 that’s in mint condition, but it’s not in mint condition. You want

to keep the car, but you want some of the money back because it’s 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

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IV. Third Party ProblemsA. Third party beneficiaries – two people contract with each other with the intent of benefiting a third

party. The third party has legal rights and can enforce it (i.e. buy life insurance policy, you agree to pay payments, they agree to pay son at your death. Son can enforce the contract.)1. Third person bene – person not a party to the contract but can still enforce it because the other

parties made the contract with the intent of benefiting them.a. creditor beneb. donee bene – most 3rd party benes. It is a donee bene UNLESS the 3rd party was already a

creditor of the promiseec. canceling or modifying

i. contract language controlsii. the contract can’t be canceled or modified until the 3rd party knows and assents

d. the 3rd party can sue the promisor and the promisee can sue the promisore. the 3rd party can sue the promisee if the 3rd party is a creditor bene.f. Promisor = the person who is promising to do something for the 3rd party (insurance

company)g. Promisee = other party to the contract

2. Assignments – an agreement between two people and one of the parties to the original contract transfers away (assigns) his rights to a 3rd partya. The assignee can sue the obligor. The assignee steps in the shoes of the assignor.b. Happens in steps – two parties make a contract, THEN one of the parties assigns his rights to

a third partyc. 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 worka. When possible

1) contract provisions always control2) 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 reputationb. Consequences

1) the delegating party remains liable2) delegatee – he is only legally obligated if he received consideration

c. Compare delegation and novation1) When you delegate, if you ask the other party and they agree, it becomes a novation2) Under delegation, you remain liable. 3) Under novation, you can sue the delegatee.

d. Connection between 3rd party bene and delegation1) 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 can’t 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

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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.

IllegalityIf 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 Y’s purpose in going to the spot.

Rejection - Counter offer, conditional acceptance, adds terms under common law

Terms of ContractThe 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.

Prior dealings – how these people did their deals together, person specificCustom and usage – info about how deals with other people in the industry were done

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