Contracts c Outline

7/18/2019 Contracts c Outline

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Contracts C outlineI. ConditionsA. Express Condit io ns

1. Refers to an explicit contractual provision, explicitly specify connection betweenpromises & conditions, will be part of the contract & binding to both parties2. Express statement that in the contract providing that either

a. a party does not have a duty to perform unless some event occurs or fails tooccurb. if some event occurs or fails to occur, the obligation of a party to perform 1 ormore of his duties under the contract suspended or terminated

3. Whether a provision of the contract is a condition (obligation) is determined by theintent of the parties, Intent may be revealed by:

a. the words themselves (provided that or only if)b. parties relationship to the subject provision (if words used are those if theperformance, the provision is more likely an obligation, if words of the non-performing party, more likely a condition)c. custom and usage

4. Duty (under the contract from each side, depends on the condition)

1. satisfied2. breached remedy3. discharged restitution

5. Condition: uncertain future event upon which contractual duty depends1. satisfied -duty arises (100%) 2. fail -duty discharged3. excused -Waiver Duty arises: protects one side the side who benefits canwaive Prevention-duty arises both parties can ruin the deal DisproportionateForfeiture-duty arises Estoppel-duty arises goes with waiver usually, element ofreliance

6. Dutysatisfied-met

breached-faileddischarged-don’t have to do it anymore possible restitution

7. Example1. i promise to hire you for X job at X $ = yes

-contractual duty to hire and pay you if not then its a breach2. if you pass the bar i promise to hire you for X job at X $ = yes (focus on)

-cant be in breach if failed the bar, employer duty there is one, if passthen yes you have a duty to work, if the condition is met then both dutiesare met

3. if you pass the bar come by and lets talk about a job = ok-no contractual duty

8. Condition Precedent or Condition Subsequent

a. depends upon whether it triggers a duty (duty doesn't exist unless thecondition occurs)b. instead terminates a duty (duty exists but is extinguished if he condition doesnot occur)

9. Restatementsa. § 224 ConditionDefined



A condition is an event, not certain to occur, which must occur, unless itsnon‐ occurrence is excused, before performance under a contractbecomes due.

b. § 225. Effects of the Non‐ Occurrence of a Condition1. Performance of a duty subject to a condition cannot become dueunless the condition occurs or its non‐ occurrence is excused.

2. Unless it has been excused, the non‐

occurrence of a conditiondischarges the duty when the condition can no longer occur.3. Non‐ occurrence of a condition is not a breach by a party unless he isunder a duty that the condition occur.

c. § 226 How an event may be made a conditionAn event may be made a condition by the agreement of the parties or bya term supplied by the court

d. § 227 Standards Of Preference With Regard To Conditions1. In resolving doubts as to whether an event is made a condition of anobligor's duty, and as to the nature of such an event, an interpretation ispreferred that will reduce the obligee's risk of forfeiture, unless the eventis within the obligee's control or the circumstances indicate that he has

assumed the risk.2. Unless the contract is of a type under which only one party generallyundertakes duties, when it is doubtful whether

a. a duty is imposed on an obligee that an event occur, orb. the event is made a condition of the obligor's duty, orc. the event is made a condition of the obligor's duty and a duty isimposed on the obligee that the event occur, the first interpretationis preferred if the event is within the obligee's control.

10. Casesa. To satisfy the “special condition” ∆ was to do something, doesn't mean it was apromise rather than a condition, A condition can be an act to be done by one ofthe parties to the contract. (Morrison v. Bare)

b. The Defendant’s obligation to ship the rice in December was conditioned uponthe Plaintiff giving the Defendant two weeks’ notice of the place of delivery.Hence, the last day in December that the Defendant could have performed onthe agreement given the notice required was December 17th. When December17th passed and the Defendant did not hear from the Plaintiff, it had the right torescind the agreement. In other words, the Plaintiff giving two weeks’ notice ofthe place of delivery to the Defendant was a condition precedent to theDefendant’s delivery of the rice. The failure to give sufficient notice for theDefendant to complete delivery in December as required by the contract,constituted a failure to perform a condition precedent. Therefore, the Defendantproperly rescinded the contract. (Internatio-Rotterdam, Inc. v. River Brand RiceMills, Inc)

c. No waiver occurred. π failed to obtain all reasonable efforts t get the loan.(Renovest Co. v. Hodges Development Corp.)d. The meaning of language is a factual question, but the interpretation of adocument is a question of law rather than of fact. Turning to the interpretation ofthe contractual payment provision in the present case, it is not generally intendedthat payment by the owner of a building to the general contractor be a conditionprecedent to the general contractor’s duty to pay subcontractors. This is becausesmall subcontractors cannot afford to assume the risk of nonpayment by theowners to the general contractor. Therefore, summary judgment was appropriate



in these cases. The interpretation of a contract is a question of law, not fact(Peacock Construction Co, v. Modern Air Conditioning Inc)

B. Satisfact ion Condit ion s 1. One party’s contractual duty conditional on that party’s duty ( or 3rd party)“satisfaction” w/ the other party’s performance2. Good faith duty is applied

it will fail to be fulfilled only if the promisor’s lack of satisfaction is honest and ingood faith. Therefore, if the promisor refuses to examine the promisee’sperformance, or otherwise rejects the performance in bad faith, the condition ofsatisfaction will be excused .

3. Obligation that both parties determine the the condition has occurred or been satisfied4. the promisor is under no duty to pay unless she is satisfied .

a. Mechanical Fitness, Utility, or Marketabilitycondition of satisfaction is fulfilled by a performance that would satisfya reasonable person . It is therefore immaterial that the promisor was notpersonally satisfied if a reasonable person would have accepted andapproved the performance tendered. Has to be based on what if areasonable person would be satisfied

b. Personal Taste or Judgmenta condition of satisfaction is fulfilled only if the promisor is personal ly

satisf ied . For example, contracts for portraits, dental work, or tailoring allrequire the promisor’s personal satisfaction. where one party’sperformance (usually, pay for work) was conditioned upon his beingpersonally satisfied w/ the others work, can withhold such satisfaction ifthe authorized party had a good faith dissatisfaction w/ the work

must be done in good faith, and honestc. 3rd person

express condition requires the satisfaction of a third person rather than aparty to the contract; construction contracts often include a condi- tionrequiring the satisfaction of the owner’s architect or engineer. When the

satisfaction of a third person is a condition, most courts take the positionthat the condition requires the actual personal satisfact ion of the thirdperson. As in the case where a party’s personal satisfaction is required,however, a condition that requires a third person’s personal satisfactionwill be excused if the third person’s dissatisfaction is not honest and ingood faith

5. § 228 Satisfaction of the Obligor as a Condition **When it is a condition of an obligor’s duty that he be satisfied w/ respect to theobligee’s performance or w/ respect to something else, & it is practicable todetermine whether a reasonable person in the position of the obligor would besatisfied, an interpretation is preferred under which the condition occurs if such areasonable person in the position of the obligor would satisfied

6. Casesa. Improperly applied subj. standard and a genuine issue existed. Where aclause requires satisfaction as to such matters as commercial value or quality,operative fitness, or mechanical utility, dissatisfaction cannot be claimedunreasonably. Whether the performance would satisfy a reasonableperson. (Hutton v. Monograms Plus, Inc.)b. An objective standard is the appropriate standard to employ in a contract forthe construction of a commercial building. Therefore, General Motor’s rejection ofthe Defendant’s work on aesthetic grounds was unreasonable. An objective



standard of reasonableness is the proper standard to employ in a constructioncontract for commercial building. (Morin Building Products Co. v. BaystoneConstruction, Inc.)

C. Waiver & Excused of Condit ion 1. another tool available to avoid the harsh effects of a condition: excusing the conditionbased on a finding that the party who did not satisfy the condition would otherwise suffer

a forfeiture.2. Waiver

a. where a condition doesn't occur, the party whose obligation is subject tocondition may express/conduct herself so that she voluntarily relinquishes theright to insist on satisfactionb. is not a material part of the agreementc. doesn't constitute a material portion of the benefit to be received by thepromisor

3. Estoppel Where one party has indicated by words or conduct that will not require acondition to be satisfied, & the other materially changes his position in reliance,the 1st party is estoppel from insisting that the condition be satisfied. appears

differ from waiver in that reliance by the aggrieved party justifies excuse of amore material condition than the unilateral act of waiver

4. Prevention the party whose obligation is subject to a condition may not avoid maturing ofthat obligation into an absolute duty preventing the occurrence of the condition.where that party takes some action or (in action) which prevents satisfaction ofthe relevant condition, that condition is excused, & the wrongfully acting partiesobligation becomes an absolute duty

5. Forfeiture Courts will frequently interpret contract provisions as obligations rather than asconditions to avoid

6. § 229 Excuse of a Condition to Avoid Forfeiture

To the extent that the non-occurrence of a condition would causedisproportionate forfeiture, a court may excuse the non-occurrence of thatcondition unless its occurrence was a material part of the agreedexchange.

Comment b. Disproportionate forfeiture. The rule stated in thepresent Section is, of necessity, a fexible one, and its application is withinthe sound discretion of the court. Here, as in § 227(1), “forfeiture” is usedto refer to the denial of compensation that results when the obligee loseshis right to the agreed exchange after he has relied substantially, as bypreparation or performance on the expectation of that exchange. SeeComment b to § 227. The extent of the forfeiture in any particular case

will depend on the extent of that denial of compensation. In determining

whether the forfeiture is “disproportionate,” a court must weigh the extentof the forfeiture by the obligee against the importance to the obligor of therisk from which he sought to be protected and the degree to which thatprotection will be lost if the non-occurrence of the condition is excused tothe extent required to prevent forfeiture. The character of the agreementmay, as in the case of insurance agreements, affect the rigor with whichthe requirement is applied.

7. Cases



a. The court found that the ∆ would have suffered forfeiture since itmade substantial improvements to the property. The court also found that the∆ failure to renew the lease was due to “mere forgetfulness” and was not anintentional attempt to exploit a fluctuating real estate market. The court found thatit was unclear whether the π suffered a prejudice from the ∆’s oversight andtherefore a new trial should be granted. Where a tenant would suffer a forfeiture,

he is entitled to equitable relief where the default has not prejudiced the landlordand it is a result of an honest mistake. (J.N.A. Realty Corp v. Cross Bay Chelsea)

D. Implied Condit ion (Constru ct ive) 1. implied that the duty to render performance under a contract is conditional upon theoccurrence of some event or state of the world, even though the contract does notexplicitly so state. In that case, there is said to be an “implied” or “constructive” conditionthat the relevant event or state of the world must occur before the performance of one orboth parties comes due 2. even if it is not expressly included in a contract document by the contracting parties. In law, an unwritten requirement (that is deemed important in light of the facts andcircumstances of a contract) implies a condition (called condition precedent) of thecontract

example: if a quantity of umbrellas is ordered to be delivered before the rainyseason but they arrive only after the season has ended, that order may becancelable even if the words "Time is of the essence" are not included in theorder.

3. satisfied -duty arises (substantial performance) fail -duty dischargedexcused -Waiver Duty arises: protects one side the side who benefits canwaive Prevention-duty arises both parties can ruin the deal DisproportionateForfeiture-duty arises Estoppel-duty arises goes with waiver usually, element ofreliance4. Cases

a. 3 covenants. 1. mutual and independent – each party can sue the other forbreach, but one party cannot cite a breach of the other party’s covenant as an

excuse for his own breach. 2. conditions and dependent – the performance ofone depends on the performance of another and the duty to perform does notarise until the prior condition is performed. 3. mutual conditions – the conditionsmust be performed at the same time and the failure of one party to perform is aground for alleging breach. (Kingston v. Preston)

II. Performance and Breach: Common LawA. Implied Conditions and Performance Responsibilities

1. Mutual & Independent Promiseswhere either party may recover damages from the other, for the injury he mayhave received by a breach of the covenants in his favor, and where it is noexcuse for the defendant, to allege a breach of the covenants [by] plaintiff.

2. Conditions & Dependent

the performance of one depends on the prior performance of another, and,therefore, till this prior condition is performed, the other party is not liable to anaction on his covenant.

3. Mutual & Simultaneous Conditionsmutual conditions to be performed at the same time; and in these, if one party

was ready, and offered, to perform his part, and the other neglected, or refused,to perform his part, he who was ready, and offered, has fulfilled his engagement,and may maintain an action for the default of the other[,] though it is not certainthat either is obliged to do the first act.”

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4. Cases

a. 1. mutual and independent – each party can sue the other for breach, but oneparty cannot cite a breach of the other party’s covenant as an excuse for his ownbreach. 2. conditions and dependent – the performance of one depends on theperformance of another and the duty to perform does not arise until the priorcondition is performed. 3. mutual conditions – the conditions must be performed

at the same time and the failure of one party to perform is a ground for allegingbreach. (Kingston v. Preston)b. Equity and fairness dictate that one who unintentionally commits a trivial wrongwill not be condemned to a fate so clearly out of proportion with thetransgression. To permit Defendant to recover the cost of replacement of the

pipe would be unduly oppressive. Instead, Defendant will be adequately compensatedby recovering the difference in value of a home with the Reading pipe and thevalue of the home, as it exists, with a different kind of pipe. (Jacob & Youngs v.Kent)

B. Substantial Performance or Material Breach1.

Nonmaterial Non breaching partymust keep performance

sue later

Breach Material (partial) Non breaching party w/hold performance for achance to cure

accept & sue later

Total Cant or fail to cure orrepudiation

Cancel K or sue later

2.

3. § 233 Performance at one time or in installments

1. Where performances are to be exchanged under an exchange of promises, &the whole of one’s performance can be rendered at one time, it is due at onetime, unless the language or the circumstance indicate the contrary2. Where only a part of one’s performance is due at one time under subsection 1,if the other party’s performance can be so apportioned that there is a comparablepart that can also be rendered at that time, it is due at that time, unless thelanguage or the circumstance indicate the contrary

4. § 234 Order of Performances

Satisfied

Duty Breach nonmaterial

material total

Discharged something the other side does



1. Where all or part of the performances to be exchanged under an exchange ofpromises can be rendered simultaneously, they are to that extent duesimultaneously, unless the language or the circumstances indicate the contrary.2. Except to the extent stated in Subsection 1, where the performance of onlyone party under such an exchange requires a period of time, his performance isdue at an earlier time than that of the other party, unless the language or the

circumstances indicate the contrary.5. § 235 Effect of Performance as Discharged & Non-performance as Breach

1. Full performance of a duty under a K discharges the duty2. When performances of a duty under a K is due any non-performance is abreach

6. Material Breach a. When one fails to perform 1 of their obligation under the K that is so significantthat the other party can call them out & sueb. If the obligee does not receive the subst antial benefi t of her b argain as aresult of failure to perform or defective performance, the breach is consideredmaterial. If the breach is material, the consequences are more severe. Thenonbreaching party (i) may treat the contract as at an end, i.e., any duty of

counterperformance owed by her will be discharged, and (ii) will have animm ediate right to all remedies for breach of the entire contract, including totaldamages.

7. Substantial (Minor)a. The defense when one says they didn't perform, its a minor varianceb. A breach of contract is minor if the obligee gains the substantial benefit of herbargain despite the obligor’s defective performance. Examples would beinsignificant delays in completing performance or small deficiencies in the qualityor quantity of performance when precision is not critical. The effect of a minor(immaterial) breach is to provide a remedy for the immaterial breach to theaggrieved party. The aggrieved party is not rel ieved of her duty of performanceunder the contract.

8. Casesa. whether performance is substantial, the following considerations aresignificant: 1. the extent to which the injured party will be deprived of the benefitthat he reasonably expected; 2. the extent to which the injured party can beadequately compensated for the part of that benefit of which he will be deprived;3. the extent to which the party failing to perform or to offer to perform will sufferforfeiture; 4. the likelihood that the party failing to perform or offer to perform willcure his failure, taking account of all the circumstances, including any reasonableassurances; and 5. the extent to which the behavior of the party failing to performor to offer to perform comports with standards of good faith and fair dealing. Nohe did not materially breach the K on getting power to them. They could not doso because π did not full fill their end. (Roberts Contracting Co. v. Valentine-

Wooten Road Public Facility Bd.)b. the contract is states that the π should have received crowns made ofporcelain on gold. Although the crowns were better they were not what wasasked for or what was stated in the contract. ∆ did not perform her part of thecontract. (Khiterer v. Bell)

C. Partial or Total Breach1. Material Breach

a. The aggrieved party acquires the right to suspend or withhold her ownperformance until the breaching party substantially performs (e.g., the owner



does not yet have to pay the construction contractor who has materiallybreached).b.The breaching party may be able to cure the breach within a reasonable timeby furnishing the missing performance, by re-performing, or by repairingdefective performance, in order to furnish at least substantial performance.c. If the cure is successful enough to alleviate the material breach, then the

aggrieved party no longer has the right to suspend or withhold performance2. Total Breach

a. The aggrieved party retains both the right to damages for any injury and theright to suspend or withhold her own performance, because of the materialbreach;b. The aggrieved party acquires the right to cancel the contract, eliminating anyfurther performance duties held by any parties to the contract; andc. After notifying the breaching party of cancellation, the aggrieved party can hiresomeone else to complete the performance once owed by the breaching party.

3. § 236 Claims for damages for total & partial breach1. A claim for damages for total breach is one for damages based on all of the

injured party’s remaining rights to performance

2. A claim fro partial breach is one fr damages based on only part of the injuredparty’s remaining rights to performance

4. § 237 Effect on Other Party’s Duties of a Failure to Render PerformanceExcept as stated in § 240, it is a condition of each party’s remaining duties torender performances to be exchanged under an exchange of promises that therebe no uncured material failure by the other party to render any such performancedue at an earlier time.

5. § 238 Effect on Other Party’s Duties of a Failure to Offer PerformanceWhere all or part of the performances to be exchanged under an exchange ofpromises are due simultaneously, it is a condition of each party’s duties to render

such performance that the other party either render or, with manifestedpresent ability to do so, offer performance of his part of the simultaneous

exchange.6. § 240 Part Performance as Agreed Equivalents

If the performance to be exchanged under an exchange of promises can beapportioned into corresponding pairs of part performance so that the parts ofeach pair are properly regarded as agreed equivalents, a party’s performance onhis part of such a pair has the same effect on the other’s duties to renderperformance of the agreed equivalent as it would have if only that pair ofperformances has been promised

7. § 241 Circumstances Significant in Determining Whether a Failure is Material **In determining whether a failure to render or to offer performance ismaterial, the following circumstances are significant:

a. the extent to which the injured party will be deprived of the benefit

which he reasonably expected;b. the extent to which the injured party can be adequately compensatedfor the part of that benefit of which he will be deprived;c. he extent to which the party failing to perform or to offer to perform willsuffer forfeiture;d. the likelihood that the party failing to perform or to offer to perform willcure his failure, taking account of all the circumstances including anyreasonable assurances;



e. the extent to which the behavior of the party failing to perform or tooffer to perform comports with standards of good faith and fair dealing.

8. § 242 Circumstances Significant in Determining When Remaining Duties areDischarged **

In determining the time after which a party’s uncured material failure to render orto offer performance discharges the other party’s remaining duties to render

performance under the rules stated in § 237 and 238, the followingcircumstances are significant:

a. those stated in § 241;b. the extent to which it reasonably appears to the injured party that delaymay prevent or hinder him in making reasonable substitute arrangements;c. the extent to which the agreement provides for performance withoutdelay, but a material failure to perform or to offer to perform on a statedday does not of itself discharge the other party’s remaining duties unlessthe circumstances, including the language of the agreement, indicate thatperformance or an offer to perform by that day is important.

9. § 243 Effect of a Breach by Non Performance as Giving Rise to a Claim forDamages for Total Breach

1. With respect to performances to be exchanged under an exchange ofpromises, a breach by non‐ performance gives rise to a claim for damages fortotal breach only if it discharges the injured party’s remaining duties to rendersuch performance, other than a duty to render an agreed equivalent under § 240.2. Except as stated in Subsection (3), a breach by nonperformance accompaniedor followed by a repudiation gives rise to a claim for damages for total breach.3. Where at the time of the breach the only remaining duties of performance arethose of the party in breach and are for the payment of money in installments notrelated to one another, his breach by non‐ performance as to less than the

whole, whether or not accompanied or followed by a repudiation, does not give rise to aclaim for damages for total breach.4. In any case other than those stated in the preceding subsections, a breach by

non‐

performance gives rise to a claim for total breach only if it so substantiallyimpairs the value of the contract to the injured party at the time of the breach thatit is just in the circumstances to allow him to recover damages based on all hisremaining rights to performance.

10. § 244 Effect of Subsequent Events on duty to pay damagesa party’s duty to pay damages for total breach by non-performance is dischargedif it appears after the breach that there would have been a total failure by theinjured party to perform his return promise

11. § 245 Effect of a breach by non-performance as excusing the non-occurrenceof a conditionwhere a party’s breach by non-performance contributes materially to be non-occurrence of a condition of one of his duties the non-occurrence is excused

12. § 246 Effect of acceptance as excusing the non-occurrence of a condition1. except as stated in section 2, an obligator’s acceptance or his retention for anunreasonable time of the obligee’s performance, w/ knowledge of or reason toknow of the non-occurrence of a condition of the obligor’s duty, operates as apromise to perform in spite of that non-occurrence2. if at the time of its acceptance or retention the the obligee’s performanceinvolves such attachment to the obligor’s acceptance or retention of thatperformance operates as a promise to perform in spite of the non-occurrence of



the condition, only if the obligor’s w/ knowledge of or reason to know of thedefects manifest assent to the performance

13. § 247 Effect of acceptance of part performance as excusing the subsequentnon-occurrence of a condition

an obligator’s acceptance of part of the obligee’s performance, w/ knowledge orreason to know of the non-occurrence of a condition of the obligor’s duty,

operates as a promise to perform in spite of a subsequent non-occurrence of thecondition under 84 to the extent it justifies the obligee in believing the subsequentperformances will be accepted in spite of that non-occurrence

14. § 248 Effect of insufficient reason for rejection as excusing the non-occurrence of a condition

where a party rejecting a deceptive performance or offer of performance gives aninsufficient reason for rejection, the non-occurrence of a condition of his duty isexcused only if he knew or had reason to know of that non-occurrence & thenonly to the extent that the giving of an insufficient reason substantially contributesto a failure by the other party to cure

15. Casesa. Repudiation is justified where a material or total breach has occurred. In the

instant case, the court found that the Plaintiff’s failure to tender the balance dueunder the contract constituted a material breach. Repudiation of a contract is

justified only where the breaching party’s breach. A breach of total or partialdepends on the materiality. (Sackett v. Spindler)b. Modern courts favor finding that promises in an agreement are mutuallydependent. Mutually dependent promises are those in which performance ofobligations by one party is conditioned on performance of obligations by the otherparty. Mutually dependent promises can be precedent, subsequent, orconcurrent. In this case, the bulldozer damage constituted a material breach ofthe promise to perform in a “workmanlike manner.” Therefore, the Plaintiff was

justified in withholding installment payments. Because Plaintiff’s refusal to paythe installments was justified, Defendant wrongfully repudiated the agreement by

discontinuing performance. An injured party may treat nonperformance as apartial breach, and continue to allow the breaching party to perform the rest ofthe contract. In this case, by allowing the Defendant to work after the bulldozeraccident, the Plaintiff treated the breach as partial. Because Plaintiff was justifiedin refusing to make an installment payment, Defendant breached their agreementfurther by stopping performance. The failure of one party to render substantialperformance on an agreement may allow the other party to refuse to performsome or all of his obligations under the contract. (K & G Construction Co. v.Harris)

D. Divisible v. Severable Contracts1. K that are divided into two or more parts, each which can stand “free-standing” K2. Court will ask separately if: accomplished substantial performance or materially or

total breach3. Test of Divisibility:

a. whether the parties intended that the agreement be divisibleb. whether the K “by its terms, nature & purpose,is susceptible of division &apportionment (is it possible to determine the price of each separateperformance) &c. Whether the division harms the value of performance reasonable expected byeach party (can the injured party make full use of the incomplete performance?has the injured party received the full value for its payments to date?



E. Repudiation

1. A contracting party’s words or a action that indicate an intention not to perform the Kin the future a threatened breach

2. Indicating she will not perform the K or will not perform it further3. If done in response to a total breach by the other party purported repudiation is reallya justified cancellation of the K

4. § 250 When a Statement or an Act is a Repudiation A repudiation is

a. a statement by the obligor to the obligee indicating that the obligor willcommit a breach that would of itself give the obligee a claim for damagesfor total breach under § 243, orb. a voluntary affirmative act which renders the obligor unable orapparently unable to perform without such a breach.

5. § 251 When a Failure to Give Assurance May be Treated as a Repudiation 1. Where reasonable grounds arise to believe that the obligor will commit abreach by non-performance that would of itself give the obligee a claim fordamages for total breach under § 243, the obligee may demand adequateassurance of due performance and may, if reasonable, suspend any

performance for which he has not already received the agreed exchange until hereceives such assurance.2. The obligee may treat as a repudiation the obligor’s failure to provide within areasonable time such assurance of due performance as is adequate in thecircumstances of the particular case.

6. § 253 Effect of a Repudiation as a Breach and on Other Party’s Duties 1. Where an obligor repudiates a duty before he has committed a breachby non‐ performance and before he has received all of the agreed exchange for

it, his repudiation alone gives rise to a claim for damages for total breach.2. Where performances are to be exchanged under an exchange of promises,one party’s repudiation of a duty to render performance discharges the otherparty’s remaining duties to render performance.

7. § 254 Effect of Subsequent events on duty to pay damages 1. A party’s duty to pay damages for total breach by repudiation is discharged if it

appears after the breach that there would have been a total failure by theinjured party to perform his return promise

2. A party’s duty to pay damages for total breach by repudiation is discharged if tiappears after the breach that the duty that he repudiated would have

been discharged by impracticability or fruition before any breach by non-performance

8. § 255 Effect of a repudiation as excusing the non-occurrence of a condition Where a party’s repudiation contributes materially tot he non-occurrence of acondition of one of his duties, the non-occurrence is excused

9. § 256 Nullification of repudiation/basis for repudiation

1. The effect of a statement as constituting a repudiation under § 250 or thebasis for a repudiation under § 251 is nullified by a retraction of the statement ifnotification of the retraction comes to the attention of the injured party before hematerially changes his position in reliance on the repudiation or indicates to theother party that he considers the repudiation to be final.2. The effect of events other than a statement as constituting a repudiation under

§ 250 or the basis for a repudiation under § 251 is nullified if, to theknowledge of the injured party, those events have ceased to exist before he materially



changes his position in reliance on the repudiation or indicates to the other partythat he considers the repudiation to be final.

10. Casesa. In order for a party to recover on a claim of anticipatory breach of contract, theother party must have unequivocally refused to perform, or have made clear andaffirmative statements indicating that he is unable to perform. (McCloskey & Co.

v. Minweld Steel Co.)F. Anticipatory Repudiation

1. If repudiation occurs before the date on which the K performance is due2. repudiation of a contractual duty before the time for performance, giving the injuredparty an immediate right to damage for total breach, as well as discharging the injuredparty’s remaining duties of performance3. UCC § 2-610 Anticipatory Repudiation

When either party repudiates the contract with respect to a performance not yetdue the loss of which will substantially impair the value of the contract to theother, the aggrieved party may

a. for a commercially reasonable time await performance by therepudiating party; or

b. resort to any remedy for breach . . . , even though he has notified therepudiating party that he would await the latter’s performance and hasurged retraction; andc. in either case suspend his own performance or [take other measures tomitigate damages].

4. UCC § 2-611 Retraction of Anticipatory Repudiation1. Until the repudiating party’s next performance is due he can retract hisrepudiation unless the aggrieved party has since the repudiation cancelled ormaterially changed his position or otherwise indicated that he considers therepudiation final.2. Retraction may be by any method which clearly indicates to the aggrievedparty that the repudiating party intends to perform, but must include any

assurance justifiably demanded under the provisions of this Article (Section2-609).*3. Retraction reinstates the repudiating party’s rights under the contract with dueexcuse and allowance to the aggrieved party for any delay occasioned by therepudiation.

5. UCC § 2-609. Right to Adequate Assurance1. A contract for sale imposes an obligation on each party that the other’sexpectation of receiving due performance will not be impaired. Whenreasonable grounds for insecurity arise with respect to the performance ofeither party the other may in writing demand adequate assurance of dueperformance and until he receives such assurance may if commerciallyreasonable suspend any performance for which he has not already

received the agreed return.4. After receipt of a justified demand failure to provide within a reasonabletime not exceeding thirty days such assurance of due performance as isadequate under the circumstances of the particular case is a repudiationof the contract.

6. UCC § 2-612 "INSTALLMENT CONTRACT"; BREACH1. An "installment contract" is one which requires or authorizes the delivery ofgoods in separate lots to be separately accepted, even though the K contains aclause "each delivery is a separate contract" or its equivalent.

http://www.law.cornell.edu/ucc/2/2-105#Lot_2-105

http://www.law.cornell.edu/ucc/2/2-105#Lot_2-105



2. The buyer may reject any installment which is non-conforming if the non-conformity substantially impairs the value of that installment and cannot be curedor if the non-conformity is a defect in the required documents; but if the non-conformity does not fall within subsection (3) and the sellergives adequateassurance of its cure the buyer must accept that installment.3. Whenever non-conformity or default with respect to one or more installments

substantially impairs the value of the whole contract there is a breach of thewhole. But the aggrieved party reinstates the contract if he accepts a non-conforming installment without seasonably notifying of cancellationor if he bringsan action with respect only to past installments or demands performance as tofuture installments.

7. Casesa. If two parties enter into a contract to be performed at a designated timein the future, and one party refuses to perform the contract before thedesignated time the parties agreed to perform, the other party may suebefore the contract was to be performed. That party need not wait untilthe time for performance has passed (Hochster v. De la Tour)b. One party may demand assurances from another party when there are

reasonable grounds for insecurity regarding that party’s performance and thedemanding party may suspend its performance until it has received suchassurances (Hornell Brewing Co. v. Spry)

G. Performance & Breach under UCC1. UCC § 2-601. Buyer’s Rights on Improper Delivery

Subject to the provisions of this Article on breach in installment contracts(Section 2-612) and unless otherwise agreed under the sections on contractuallimitations of remedy (Sections 2-718 and 2-719), if the goods or the tenderof delivery fail in any respect to conform to the contract, the buyer may

(a) reject the whole; or(b) accept the whole; or(c) accept any commercial unit or units and reject the rest.

2. UCC § 2-602. Manner and Effect of Rightful Rejection 1. Rejection of goods must be within a reasonable time after their delivery ortender. It is ineffective unless the buyer seasonably notifies the seller.2. Subject to the provisions of the two following sections on rejected goods(Sections 2-603 and 2-604),

a. after rejection any exercise of ownership by the buyer with respect toany commercial unit is wrongful as against the seller; and (b) if the buyerhas before rejection taken physical possession of goods in which he doesnot have a security interest under the provisions of this Article, he is

under a duty after rejection to hold them with reasonable care at the seller’sdisposition for a time sufficient to permit the seller to remove them; butc. the buyer has no further obligations with regard to goods rightfully

rejected.3. The seller’s rights with respect to goods wrongfully rejected are governed bythe provisions of this Article on Seller’s remedies in general (Section 2-703).

3. UCC § 2-508. Cure by Seller of Improper Tender or Delivery; Replacement 1. Where any tender or delivery by the seller is rejected because non-conforming and the time for performance has not yet expired, the seller mayseasonably notify the buyer of his intention to cure and may then within thecontract time make a conforming delivery.

http://www.law.cornell.edu/ucc/2/2-103#Buyer_2-103

http://www.law.cornell.edu/ucc/2/2-103#Seller_2-103

http://www.law.cornell.edu/ucc/2/2-106#contract_2-106

http://www.law.cornell.edu/ucc/2/2-106#Cancellation_2-106

http://www.law.cornell.edu/ucc/2/2-106#Cancellation_2-106






2. Where the buyer rejects a non-conforming tender which the seller hadreasonable grounds to believe would be acceptable with or without moneyallowance the seller may if he seasonably notifies the buyer have a furtherreasonable time to substitute a conforming tender.

4. UCC § 2-606. What Constitutes Acceptance of Goods 1. Acceptance of goods occurs when the buyer

a. after a reasonable opportunity to inspect the goods signifies to theseller that the goods are conforming or that he will take or retain them inspite of their non-conformity; or (keep anyway)b. fails to make an effective rejection (subsection (1) of Section 2-602),but such acceptance does not occur until the buyer has had a reasonableopportunity to inspect them; or (fails to reject)c. does any act inconsistent with the seller’s ownership; but if such act iswrongful as against the seller it is an acceptance only if ratified by him.(Pets example)

2. Acceptance of a part of any commercial unit is acceptance of that entire unit(have to accept the WHOLE unit)

5. UCC § 2-607. Effect of Acceptance; Notice of Breach; Burden of Establishing

Breach After Acceptance; Notice of Claim or Litigation to Person Answerable Over 1. The buyer must pay at the contract rate for any goods accepted.2. Acceptance of goods by the buyer precludes rejection of the goods acceptedand if made with knowledge of a non-conformity cannot be revoked because of itunless the acceptance was on the reasonable assumption that the non-conformity would be seasonably cured but acceptance does not of itself impairany other remedy provided by this Article for non-conformity.3. Where a tender has been accepted

a. the buyer must within a reasonable time after he discovers or shouldhave discovered any breach notify the seller of breach or be barred fromany remedy; andb. if the claim is one for [intellectual property] infringement or the like . . .

and the buyer is sued as a result of such a breach he must so notify theseller within a reasonable time after he receives notice of the litigation orbe barred from any remedy over for liability established by the litigation.

4. The burden is on the buyer to establish any breach with respect to the goodsaccepted

6. UCC § 2-608 Revocation of Acceptance in Whole or in Part 1. The buyer may revoke his acceptance of a lot or commercial unit whose non-conformity substantially impairs its value to him if he has accepted it

a. on the reasonable assumption that its non-conformity would be curedand it has not been seasonably cured; orb. without discovery of such non-conformity if his acceptance wasreasonably induced either by the difficulty of discovery before acceptance

or by the seller’s assurances.2. Revocation of acceptance must occur within a reasonable time after the buyerdiscovers or should have discovered the ground for it and before any substantialchange in condition of the goods which is not caused by their own defects. It isnot effective until the buyer notifies the seller of it.3. A buyer that so revokes has the same rights and duties with regard to thegoods involved as if he had rejected them.

7. UCC § 2-507 EFFECT OF SELLER'S TENDER; DELIVERY ON CONDITION



1. Tender of delivery is a condition to the buyer's duty to accept the goods and,unless otherwise agreed, to his duty to pay for them. Tender entitles the seller toacceptance of the goods and to payment according to the contract. 2. Where payment is due and demanded on the delivery to the buyer of goods ordocuments of title, his right as against the sellerto retain or dispose of them isconditional upon his making the payment due.

8. UCC § 2-605 WAIVER OF BUYER'S OBJECTIONS BY FAILURE TOPARTICULARIZE

1. The buyer'sfailure to state in connection with rejection a particular defect whichis ascertainable by reasonable inspection precludes him from relying on theunstated defect to justify rejection or to establish breach

a. where the sellercould have cured it if stated seasonably; orb. between merchants when the seller has after rejection made a requestin writing for a full and final written statement of all defects on which thebuyer proposes to rely.

2. Payment against documents made without reservation of rights precludesrecovery of the payment for defects apparent on the face of the documents.

Non-Conforming Tender

Accept Timing is important

2-606 failure to reject,signify non conformingis ok, any actinconsistent

A. Revoke Acceptance2-608 Substantialimpairment, reasonabletime after discovery

B. Notify the seller ofdefects and sue 2-607

C. If fail to do A & B pay

K price, pay full price &no damages 2-607

Reject 2-602 sellers cure 2-508 if cured cant reject has to be perfect

9.

10. Limitationsa. Section 2-601 says the rule does not apply to installment contracts or tocontracts in which the parties agree the buyer will not have such a remedyb. A buyer is not permitted to seize on a technical defect in order to reject (whichwould be operating in bad faith)c. if the contract involves a so-called “shipment contract,” which means the

seller’s tender responsibilities involve delivering the goods to a carrier, onlycertain seller’s breaches in transporting the goods give buyer the right to rejectd. Most important, if the buyer rejects the goods, the seller often has a right (notduty) to cure the non-conformity by repairing defective goods orreplacing them w/ conforming goods

11. Casesa. A buyer can reject goods for non-conformity, but the rejection does notautomatically terminate the contract. With appropriate time given to the seller to


http://www.law.cornell.edu/ucc/2/2-105#Goods_2-105





















fix the non-conformity, if not fixed, the buyer may rescind the contract. (Ramirezv. Autosport

III. Excused DefensesA. Impossibility

1. must be “objective” 2. must arise after the contract has been entered into

3. If the facts giving rise to impossibility already existed when the contract was formed,the question is not really one of “discharge of contractual duties.” Rather, it is a “contractformation” problem, namely, whether the contract is voidable because of mistake4. If a contract is discharged because of impossibility, each party is excused from dutiesarising under the contract that are yet to be fulfilled. Either party may sue for rescissionand receive restitution of any goods delivered, payments made, etc.5. If the performance to be rendered under the contract becomes only partiallyimpossible, the duty may be discharged only to that extent . The remainder of theperformance may be required according to the contractual terms. This is so even thoughthis remaining performance might involve added expense or difficulty.6. Temporary impossibility suspends contractual duties; it does not discharge them.7. Specific Situations

a. Death or the physical incapacity of a person necessary to effectuate thecontract serves to discharge it. b. supervening illegality may serve to discharge a contract

c. If the contract’s subject matter is destroyed or the designated means forperforming the contract are destroyed, contractual duties will be discharged.

8. Casesa. When a situation arises, through no fault of either party to a contract, thatmakes it impossible to perform under the contract, both parties are excused fromperforming their respective duties under the agreement. (Taylor v. Caldwell)b. § 460 “(1) Where the existence of a specific thing or person is, either by theterms of a bargain or in the contemplation of both parties, necessary for theperformance of a promise in the bargain, a duty to perform the promise (Unke v.Thrope)

B. Frustration of Purpose1. reason entered into the K no longer exist2. Reason courts have been reluctant

a. by using frustration of purpose, courts are implying terms into a contract, whichcould obscure the actual intentions of the partiesb. the aggrieved party is often left with uncompensated damages, because itsability to perform is unimpededc. courts are disinclined to grant relief for parties’ misassumptions about thefutured. courts cannot easily determine at what point payment should be excusedbased on the lost value of performance

e. freedom of contract and other policies driving contract law encourageperformance and therefore weigh against a court’s decision to excuseperformable contract duties

3. Casesa. A party’s duties are discharged where a party’s purpose is frustrated withoutfault by the occurrence of an event, which the nonoccurrence of which was abasic assumption on which the contract was made (Krell v. Henry)



b. found that a lessor could foresee that its supermarket tenant might bring anaction to enforce a radius restriction in the lease to keep him from leasingproperty to another supermarket chain (Adbar, L.C. v. New beginnings C-Star)

C. Impracticability 1. expands the category of cases in which relief may be granted based on unanticipatedcircumstances

2. Rarely successful3. § 261 Discharge by Supervening Impracticability

Where, after a contract is made, a party’s performance is made impracticablewithout his fault by the occurrence of an event the non-occurrence of which wasa basic assumption on which the contract was made, his duty to render thatperformance is discharged, unless the language or the circumstances indicatethe contrary.

Elements1. event that was nonoccurrence of which is a basic assumption of K(after formation)2. event makes the performance of the party seeking dischargeimpracticability

3. party seeking discharge of duty doesn't bear the risk of event4. § 269 Temporary Impracticability or Frustration

Impracticability of performance or frustration of purpose that is only temporarysuspends the obligor’s duty to perform while the impracticability or frustrationexists but does not discharge his duty or prevent it from arising unless hisperformance after the cessation of the impracticability or frustration would bematerially more burdensome than had there been no impracticability orfrustration

5. § 270 Partial Impracticability Where only part of an obligor’s performance is impracticable, his duty to renderthe remaining part is unaffected if

a. it is still practicable for him to render performance that is substantial,

taking account of any reasonable substitute performance that he is undera duty to render; orb. the obligee, within a reasonable time, agrees to render any remainingperformance in full and to allow the obligor to retain any performance thathas already been rendered

6. § 271 Impracticability as Excuse for non-occurrence of a condition if the occurrence of the condition is not a material part of the agreed exchangedand forfeiture would otherwise result

7. § 272 Relief Including Restitution 1. either party may have a claim for relief including recitation under the rulesstated § §240 & 23772. If those rules together w/ the rules will not avoid injustice, the court may grant

relief on such terms as justice requires including protection of the parties relianceinterests

8. UCC § 2-615. Excuse by Failure of Presupposed Conditions subject to the preceding section on substituted performance:**a. Delay in delivery or non-delivery in whole or in part by a seller whocomplies with paragraphs (b) and (c) is not a breach of his duty under a contractfor sale if performance as a greed has been made impracticable by theoccurrence of a contingency the non-occurrence of which was a basicassumption on which the contract was made or by compliance in good faith with



any applicable foreign or domestic governmental regulation or order whether ornot it later proves to be invalid.

9. Casesa. A legal impossibility, which renders a contract voidable, is defined as a thingthat is not practicable or in other words, only done at an excessive andunreasonable cost (Transatlantic Financing Corp. v. United States)

b. A force majeure clause does not protect against the ordinary risks of acontract, but rather, it excuses performance where something beyond the parties’ control occurs that prevents performance (Northern Indiana Public Service Co. v.

Carbon County Coal Co)D. Force Majeure Clause

1. specify how particular risks are allocated between the parties & may also help definehow the excuse defense will be applied2. Serve one or more of the following

a. Specifying and clarifying aspects of the excuse doctrine:i. which events the parties will not occur & why this non-occurrence arebasic assumptions on which the K was madeii. payor’s principal purpose (relevant for frustration of purpose)

iii. which risks are allocated to one of the parties &iv. how much difficulty of performance is necessary to find impracticability

b. doing events that can serve as excuses: strikes, economic downturns,technology failurec. “contracting out” of the default rules on excuse

IV. RemediesA. Remedies at law (Damages)

1. § 344 Purpose of Remedies judicial remedies under the rules stated in this restatement serve to protect 1 ormore of the following interests of a promisee:

a. his :expectation interest”, which is his interest in being reimbursed forloss caused by reliance on the K by being put in as good a position as he

would have been in had the K not been madeb. his “reliance interest” which is his interest in being reimbursed for losscaused by reliance on the K by being out in as good a position as hewould have been in had the K not been madec. his “restitution interest” which is his interest in having restored to himany benefit that he has conferred on the other party

2. § 345 judicial Remedies AvailableJudicial remedies available for the protection of the interest stated in §344include a judgement/order

a. awarding a sum of money due under the K or as damagesb. requiring specific performance of a K or enjoining its nonperformancec. requiring restoration of a specific thing to prevent unjust enrichment

d. awarding a sum of money to prevent unjust enrichmente. declaring the rights of the parties &f. enforcing an arbitration award

3. § Availability of damages1. the injured party has a right to damages for any breach by a party againstwhom the K is enforceable unless the claim for damages has been suspended ordischarged



2. if the breach caused no loss or if the amount of the loss is not proved underthe rules stated in this chapter, a small sum fixed w/o regard to the amount ofloss will be awarded as nominal damages

B. Expectation damages Common Law1. Get the aggrieved party to the level where they would be if full performancehad occurred

a. DirectExpectation, Reliance measure caused by the breach

b. Indirect: awarded for secondarily loss resulting from breachIncidental and Consequential

i. Incidental: extra costs incurred by the aggrieved party dealingw/ the breach or mitigating losses from the breach

Seller has to reclaim goods"They would also get any incidental damages thatoccurred from the breach”

ii. Consequential: other losses arising as a consequence of thebreach, may be loss profits, lost customers, lost business volume& other breaches from the breach

Indirect losses from the breach.Subtract any monies that were saved by thebreach

2. Casesa. In cases of substantial performance, compensation for defects of trivial orinappreciable importance has been developed. (Jacobs and Youngs v. Kent)b. When substantial performance has been rendered, the remedy is the cost ofthe completion or correction, unless that cost is grossly and unfairly out ofproportion to the good to be attained. When that is true, the measure is thedifference in value.(Khiterer v. Bell)c. The proper measure of damages in cases involving the breach of aconstruction contract is the difference between the amount due on the contract

and the amount necessary to properly complete the job or to replace thedefective construction, which is appropriate.. When the contractor’s breach wasunintentional and constituted substantial performance in good faith, andremedying the defective performance would result in unreasonable economicwaste damages should be based ipon the difference between the value of theproperty as constructed and the value if performance had been properlycompleted. (Lyon v. Belosky Construction)d. When the title of goods has not passed to the buyer, and the seller has theproperty in his possession, the measure of damages upon the buyer’s breachwhere there is an available market is the difference between the contract price ormarket price. In absence of the market price, then whatever the difference isbetween the contract price and price obtained on resale (Sackett v. Spindler)

e. Damages for breach of contract cannot be so excessive that they causeeconomic waste (Peevyhouse v. Garland Coal & Mining)

C. Incidental Damages (indirect)1. are extra cost incurred by the aggrieved party in dealing w/ the breach or trying toprevent (mitigate) further losses2. Include cost of storing/reshipping/reselling defective/repudiated goods, boarding up &paying extra insurance on a building eft behind by vendor, handling a defective delivery,arranging the purchase of substitute goods, paying a broker to find a sub buyer, orspending employee time negotiating a replacement K w/ a new party



3. UCC § 2-710 Seller’s incidental damages

Incidental damages to an aggrieved seller include any commercially reason-ablecharges, expenses or commissions incurred in stopping delivery, in thetransportation, care and custody of goods after the buyer’s breach, in connectionwith return or resale of the goods or otherwise resulting from the breach.

4. UCC § 2-715. Buyer’s Incidental . . . Damages.

1. Incidental damages resulting from the seller’s breach include expensesreasonably incurred in inspection, receipt, transportation and care and custody ofgoods rightfully rejected, any commercially reasonable charges, expenses orcommissions in connection with effecting cover and any other reasonableexpense incident to the delay or other breach

5. For attorneys fees to be included1. They are specified as recoverable in the parties’ agreement2. They are granted by statue3. The lawsuit is frivolous or in bad faith

D. Consequential Damages1. Indirectly a result of the breach2. downstream losses

3. lost profits, lost customers, lost business value,3. Aggreived party must prove the consequential damage was caused by the breach4. may be recovered only if, at the time the contract was made, a reasonable person

would have foreseen the damages as a probable result of a breach.5. UCC § 2-715. Buyer’s Incidental and Consequential Damages.

1. Incidental damages resulting from the seller’s breach include expensesreasonably incurred in inspection, receipt, transportation and care and custody ofgoods rightfully rejected, any commercially reasonable charges, expenses orcommissions in connection with effecting cover and any other reasonableexpense incident to the delay or other breach2. Consequential damages resulting from the seller’s breach include

a. any loss resulting from general or particular requirements and needs of

which the seller at the time of contracting had reason to know and whichcould not reasonably be prevented by cover or otherwise; andb. injury to person or property proximately resulting from any breach ofwarranty.

6. Casesa. The damages to which a non-breaching party is entitled are those arisingnaturally from the breach itself or those that are in the reasonable contemplationof the parties at the time of contracting. Hadley v. Baxendaleb. A non-breaching party is only entitled to damages within the contemplation ofthe parties at the time of contracting. Kenford v. County of Erie

E. Sellers Remedies Buyers Breach1. Mitigation of damages: preventing the damages from becoming worse, try to cover or

buy from another seller2. § 2-703. SELLER'S REMEDIES IN GENERAL

Where the buyer wrongfully rejects or revokes acceptance of goods or fails tomake a payment due on or before delivery or repudiates with respect to a part orthe whole, then with respect to any goods directly affected and, if the breach is ofthe whole contract, then also with respect to the whole undelivered balance, theaggrieved seller may

a. withhold delivery of such goodsb. stop delivery by any bailee as hereafter provided ;



c. proceed under the next section respecting goods still unidentified to theK;d. resell and recover damages as hereafter provided 2-706;e. recover damages for non-acceptance 2-708 or in a proper case theprice 2-709;f. cancel.

3. § 2-704 Seller’s right to ID goods to the K notwithstanding breach or salvageunfinished goods

1. An aggrieved seller under the preceding section maya. identify to the K conforming goods not already identified if at the timehe learned of the breach they are in his possession or control;b. treat as the subject of resale goods which have demonstrably beenintended for the particular K even though those goods are unfinished.

2. Where the goods are unfinished an aggrieved seller may in the exercise ofreasonable commercial judgment for the purposes of avoiding loss and ofeffective realization either complete the manufacture and wholly identify thegoods to the K or cease manufacture and resell for scrap or salvage value orproceed in any other reasonable manner.

4. § 2-705 SELLER'S STOPPAGE OF DELIVERY IN TRANSIT OR OTHERWISE.1. The seller may stop delivery of goods in the possession of a carrier or otherbailee when he discovers the buyer to be insolvent (2-702) and may stop deliveryof carload, truckload, planeload or larger shipments of express or freight whenthe buyer repudiates or fails to make a payment due before delivery or if for anyother reason the seller has a right to withhold or reclaim the goods.2. As against such buyer the seller may stop delivery until

a. receipt of the goods by the buyer; orb. acknowledgment to the buyer by any bailee of the goods except acarrier that the bailee holds the goods for the buyer; orc. such acknowledgment to the buyer by a carrier by reshipment or aswarehouseman; or

d. negotiation to the buyer of any negotiable document of title coveringthe goods

3. a. To stop delivery the seller must so notify as to enable the bailee byreasonable diligence to prevent delivery of the goods.

b. After such notification the bailee must hold and deliver the goodsaccording to the directions of the seller but the seller is liable to the baileefor any ensuing charges or damages.c. If a negotiable document of title has been issued for goods the bailee isnot obliged to obey a notification to stop until surrender of the document.d. A carrier who has issued a non-negotiable bill of lading is not obliged toobey a notification to stop received from a person other than theconsignor.

5. § 2-706 SELLER'S RESALE INCLUDING CONTRACT FOR RESALE.1. the seller may resell the goods concerned or the undelivered balance thereof.Where the resale is made in good faith and in a commercially reasonable mannerthe seller may recover the difference between the resale price and the K pricetogether with any incidental damages allowed under 2-710, but less expensessaved in consequence of the buyer’s breach.2. Except as otherwise provided in subsection (3) or unless otherwise agreedresale may be at public or private sale including sale by way of one or morecontracts to sell or of identification to an existing contract of the seller. Sale may



be as a unit or in parcels and at any time and place and on any terms but everyaspect of the sale including the method, manner, time, place and terms must becommercially reasonable. The resale must be reasonably identified as referringto the broken contract, but it is not necessary that the goods be in existence orthat any or all of them have been identified to the contract before the breach.3. Where the resale is at private sale the seller must give the buyer reasonable

notification of his intention to resell.4. Where the resale is at public sale

a. only identified goods can be sold except where there is a recognizedmarket for a public sale of futures in goods of the kind; andb. it must be made at a usual place or market for public sale if one isreasonably available and except in the case of goods which areperishable or threaten to decline in value speedily the seller must give thebuyer reasonable notice of the time and place of the resale; andc. if the goods are not to be within the view of those attending the sale thenotification of sale must state the place where the goods are located andprovide for their reasonable inspection by prospective bidders; andd. the seller may buy.

5. A purchaser who buys in good faith at a resale takes the goods free of anyrights of the original buyer even though the seller fails to comply with one or moreof the requirements of this section.6. The seller is not accountable to the buyer for any profit made on any resale. Aperson in the position of a seller (2-707) or a buyer who has rightfully rejected or

justifiably revoked acceptance must account for any excess over the amount ofhis security interest, as hereinafter defined (2-711(3)).

6. § 2-708 SELLER'S DAMAGES FOR NON-ACCEPTANCE OR REPUDIATION. 1. respect to proof of market price, the measure of damages for non-acceptanceor repudiation by the buyer is the difference between the market price at the timeand place for tender and the unpaid K price together with any incidentaldamages, but less expenses saved in consequence of the buyer's breach.

2. If inadequate, to put the seller in as good a position as performance wouldhave done then the measure of damages is the profit (including reasonableoverhead) which the seller would have made from full performance by the buyer,together with any incidental damages, due allowance for costs reasonablyincurred and due credit for payments or proceeds of resale.

7. § 2-709 ACTION FOR THE PRICE. specific performance 1. When the buyer fails to pay the price as it becomes due the seller mayrecover, together with any incidental damages under the next section, the price

a. of goods accepted or of conforming goods lost or damaged within acommercially reasonable time after risk of their loss has passed to thebuyer; andb. of goods identified to the K if the seller is unable after reasonable effort

to resell them at a reasonable price or the circumstances reasonablyindicate that such effort will be unavailing.

2. Where the seller sues for the price he must hold for the buyer any goods whichhave been identified to the K and are still in his control except that if resalebecomes possible he may resell them at any time prior to the collection of the

judgment. The net proceeds of any such resale must be credited to the buyerand payment of the judgment entitles him to any goods not resold.3. After the buyer has wrongfully rejected or revoked acceptance of the goods orhas failed to make a payment due or has repudiated, a seller who is held not



entitled to the price under this section shall nevertheless be awarded damagesfor non-acceptance under the preceding section.

8. § 2-710 SELLER'S INCIDENTAL DAMAGES.Incidental damages to an aggrieved seller include any commercially reasonablecharges, expenses or commissions incurred in stopping delivery, in thetransportation, care and custody of goods after the buyers breach, in connection

with return or resale of the goods or otherwise resulting from the breach9. § 350 AVOIDABILITY AS A LIMITATION ON DAMAGES

1. Except as stated in Subsection (2), damages are not recoverable for loss thatthe injured party could have avoided without undue risk, burden, or humiliation.2. The injured party is not precluded from recovery by the rule stated inSubsection (1) to the extent that he has made reasonable but unsuccessfulefforts to avoid loss.

10. § 351 UNFORESEEABILITY AND RELATED LIMITATIONS ON DAMAGES conseq.1. Damages are not recoverable for loss that the party in breach did not havereason to foresee as a probable result of the breach when the contract wasmade.

2. Loss may be foreseeable as a probable result of a breach because it followsfrom the breach

a. in the ordinary course of events, orb. as a result of special circumstances, beyond the ordinary course ofevents, that the party in breach had reason to know.

3. A court may limit damages for foreseeable loss by excluding recovery for lossof profits, by allowing recovery only for loss incurred in reliance, or otherwise if itconcludes that in the circumstances justice so requires in order to avoiddisproportionate compensation.

11. § 352 UNCERTAINTY AS A LIMITATION ON DAMAGESDamages are not recoverable for loss beyond an amount that the evidencepermits to be established with reasonable certainty.

12. § 353 Loss due to emotional disturbance almost never grantedRecovery for emotional disturbance will be excluded unless the breach alsocaused bodily harm or the contract or the breach is of such a kind that seriousemotional disturbance was a particularly likely result.

Seller remedies

2-703 No consequential damages inBuyer's Breach - because it doesnot cause problems downstreamif it occurred.

4 Main Remedies

2-706(1) Resale resell the goods to someone else

measure the damages for theseller: K price - Resale price

if resell price is higher, seller canonly sue for incidental cost

Commerically reasonable



Seller remedies

doesn't fit if price goes up

2-708(1) Market pricedifferential

K price - market price

based on location, tender etc.

doesn't fit if price goes up

2-708(2) Loss Volume Seller the neri v, retail marine case

lost profits from high volumesales

direct damage, because it costthe seller a sale

no consequential damages

2-709 Action on price sue for the money, goods haveperished

just want them to pay

buyer must have received thegoods

2-710 Incidental charges

13.

14. Cases

a. Repudiation of a contract is justified only where the breaching party’s breachconstituted a total or material breach, not merely a partial breach. Sackett v.Spindlerb. The measure of damages owed to a wrongfully discharged employee is theamount of salary agreed upon for the period of employment reduced by theamount the employer proves the employee has earned or with reasonable effortmay have earned from other employment. Parker v. Twentieth Century-Fox FilmCorp.

E. Reliance Damages1. Puts the aggrieved party in the same position had the K never been entered2. Used when other damages are to speculative, cant figure what would have been3. maybe award when a promise is enforced under § 90

4. available only under reasonable expenses, may not recover if damages could havebeen mitigated or avoided5. § 349 Damages Based On Reliance Interest

As an alternative to the measure of damages stated in § 347, the injured party

has a right to damages based on his reliance interest, including expendituresmade in preparation for performance or in performance, less any loss that theparty in breach can prove with reasonable certainty the injured party would havesuffered had the contract been performed.

http://web2.westlaw.com/find/default.wl?rp=%2ffind%2fdefault.wl&vc=0&DocName=REST2DCONTRs347&FindType=Y&AP=&fn=_top&rs=WLW6.09&mt=LawSchoolPractitioner&vr=2.0&sv=Split






6. Cases

a. If damages from lost profits are impossible to calculate, the aggrieved partymay be entitled to recover reliance expenditures Security Stove & Mfg. Co. v.American Ry. Express Co.b. If a party acts to his detriment on the affirmative assurances of another, thatparty can be protected by estopping the other party from alleging anything in

opposition to the natural consequences of his own course of conduct. 2) Yes.Reliance damages are proper under promissory estoppel Goodman v. Dicker

F. Restitution Damages1. relief that seeks to return the parties to their pre-K position, as if the K had occurred2. requiring each party to restore to the other party any benefits conferred by that otherparty that it would be unjust to retain3. 2 forms

a. Damagespaying the value of benefits conferred

b. Specifc Restitutionan order in equity to restore a particular object to the rightful person

4. Comes in when a K has been rescinded

5. either party can get thisconstruction guy doesn't finish the job, he breaches, do you get to keep thekitchen? the amount the kitchen adds to your home? calculated in different ways

6. § 371 MEASURE OF RESTITUTION INTEREST If a sum of money is awarded to protect a party's restitution interest, it may as

justice requires be measured by eithera. the reasonable value to the other party of what he received in terms ofwhat it would have cost him to obtain it from a person in the claimant'sposition, orb. the extent to which the other party's property has been increased invalue or his other interests advanced.

7. § 373. Restitution When Other Party Is In Breach 1. Subject to the rule stated in Subsection (2), on a breach by non-performancethat gives rise to a claim for damages for total breach or on a repudiation, theinjured party is entitled to restitution for any benefit that he has conferred on theother party by way of part performance or reliance2. The injured party has no right to restitution if he has performed all of his dutiesunder the contract and no performance by the other party remains due other thanpayment of a definite sum of money for that performance.

8. § 374 § 374. Restitution In Favor Of Party In Breach1. Subject to the rule stated in Subsection (2), if a party justifiably refuses toperform on the ground that his remaining duties of performance have beendischarged by the other party's breach, the party in breach is entitled torestitution for any benefit that he has conferred by way of part performance or

reliance in excess of the loss that he has caused by his own breach2. To the extent that, under the manifested assent of the parties, a party'sperformance is to be retained in the case of breach, that party is not entitled torestitution if the value of the performance as liquidated damages is reasonable inthe light of the anticipated or actual loss caused by the breach and the difficultiesof proof of loss.

9. § 377 Restitution in cases of Impracticabilty, frustration, non-occurrenceA party whose duty of performance does not arise or is discharged as a result ofimpracticability, frustration of purpose, non-occurrence or disclaimer by a



beneficiary is entitled to restitution for any benefit that he has conferred on theother party by way of part performance or reliance

10. Casesa. A breaching party is entitled to restitution in excess of the loss caused by thebreach. Lancellotti v. Thomas

b. he measure of recovery for quantum meruit is the reasonable value of the

performance . . . and recovery is undiminished by any loss which would havebeen incurred by complete performance . . . While the contract price may beevidence of reasonable value of the services, it does not measure the value ofthe performance or limit recovery. Rather, the standard for measuring thereasonable value of the services rendered is the amount for which such servicescould have been purchased from one in the plaintiff’s position at the time andplace the services were rendered” Blanton v. Friedberg

G. Liquidated Damages1. can agree on the dollar amount of (or formula for computing) damages for a particulartype of breach2. UCC § 2-718. Liquidation or Limitation of Damages

1. Damages for breach by either party may be liquidated in the agreement but

only at an amount which is reasonable in the light of the anticipated or actualharm caused by the breach, the difficulties of proof of loss, and theinconvenience or non-feasibility of otherwise obtaining an adequate remedy. Aterm fixing unreasonably large liquidated damages is void as a penalty.

elements: 1. reasonable amount 2. difficult/non-foreseeable 3. none3. § 356. Liquidated Damages And Penalties

1. Damages for breach by either party may be liquidated in the agreement butonly at an amount that is 1. reasonable in the light of the anticipated or actualloss caused by the breach and the 2. difficulties of proof of loss. A term fixingunreasonably large liquidated damages is unenforceable on grounds of publicpolicy as a penalty.

4. Cases

a. the test. RS 356(1) to see if the clause is reasonable under totality of thecircumstance. Wassenaar v. Panos

H. Punitive Damages1. rarely award for K cases2. there must be a tort action also3. § 355 Punitive Damages

Punitive damages are not recoverable for a breach of contract unless theconduct constituting the breach is also a tort for which punitive damages arerecoverable.

I. Buyer Remedies1. § 2-711 BUYER'S REMEDIES IN GENERAL; BUYER'S SECURITY INTEREST INREJECTED GOODS.

1. Where the seller fails to make delivery or repudiates or the buyer rightfullyrejects or justifiably revokes acceptance then with respect to any goods involved,and with respect to the whole if the breach goes to the whole K, the buyer maycancel and whether or not he has done so may in addition to recovering so muchof the price as has been paid

a. "cover" and have damages under the next section as to all the goodsaffected whether or not they have been identified to the K; orb. recover damages for non-delivery.

2. Where the seller fails to deliver or repudiates the buyer may also



a. if the goods have been identified recover them; orb. in a proper case obtain specific performance or replevy the goods

3. On rightful rejection or justifiable revocation of acceptance a buyer has asecurity interest in goods in his possession or control for any payments made ontheir price and any expenses reasonably incurred in their inspection, receipt,transportation, care and custody and may hold such goods and resell them in like

manner as an aggrieved seller2. § 2-712 COVER"; BUYER'S PROCUREMENT OF SUBSTITUTE GOODS.

1. After a breach within the preceding section the buyer may "cover" by makingin good faith and without unreasonable delay any reasonable purchase of or K topurchase goods in substitution for those due from the seller.2. The buyer may recover from the seller as damages the difference between thecost of cover and the K price together with any incidental or consequentialdamages as hereinafter, but less expenses saved in consequence of the seller'sbreach.3. Failure of the buyer to effect cover within this section does not bar him fromany other remedy.

3. § 2-713 BUYER'S DAMAGES FOR NON-DELIVERY OR REPUDIATION.

1. Subject to the provisions of this Article with respect to proof of market price,the measure of damages for non-delivery or repudiation by the seller is thedifference between the market price at the time when the buyer learned of thebreach and the K price together with any incidental and consequential damages,but less expenses saved in consequence of the seller's breach.2. Market price is to be determined as of the place for tender or, in cases ofrejection after arrival or revocation of acceptance, as of the place of arrival.

4. § 2-714 BUYER'S DAMAGES FOR BREACH IN REGARD TO ACCEPTED GOODS.1. Where the buyer has accepted goods and given notification, he may recoveras damages for any non-conformity of tender the loss resulting in the ordinarycourse of events from the seller’s breach as determined in any manner which isreasonable.

2. The measure of damages for breach of warranty is the difference at the timeand place of acceptance between the value of the goodsaccepted and the value they would have had if they had been as warranted,unless special circumstances show proximate damages of a different amount.3. In a proper case any incidental and consequential damages under the nextsection may also be recovered.

5. § 2-715 BUYER'S INCIDENTAL AND CONSEQUENTIAL DAMAGES.1. Incidental damages resulting from the sellers breach include expensesreasonably incurred in inspection, receipt, transportation and care and custody ofgoods rightfully rejected, any commercially reasonable charges, expenses orcommissions in connection with effecting cover and any other reasonableexpense incident to the delay or other breach.

2. Consequential damages resulting from the seller’s breach includea. any loss resulting from general or particular requirements and needs ofwhich the seller at the time of contracting had reason to know and whichcould not reasonably be prevented by cover or otherwise; andb. injury to person or property proximately resulting from any breach ofwarranty.

6. § 2-716 BUYER'S RIGHT TO SPECIFIC PERFORMANCE OR REPLEVIN.1. Specific performance may be decreed where the goods are unique or in otherproper circumstances.



2. The decree for specific performance may include such terms and conditions asto payment of the price, damages, or other relief as the court may deem just.3. The buyer has a right of replevin for goods identified to the K if afterreasonable effort he is unable to effect cover for such goods or thecircumstances reasonably indicate that such effort will be unavailing or if thegoods have been shipped under reservation and satisfaction of the security

interest in them has been made or tendered.7. § 2-717 DEDUCTION OF DAMAGES FROM THE PRICE.

The buyer on notifying the seller of his intention to do so may deduct all or anypart of the damages resulting from any breach of the K from any part of the pricestill due under the same contract.

8. § 2-719 CONTRACTUAL MODIFICATION OR LIMITATION OF REMEDY.1.Subject to the provisions of subsections (2) and (3) of this section and of thepreceding section on liquidation and limitation of damages,

a. the agreement may provide for remedies in addition to or in substitutionfor those provided in this Article and may limit or alter the measure ofdamages recoverable under this Article, as by limiting the buyer’sremedies to return of the goods and repayment of the price or to repair

and replacement of non-conforming goods or parts; andb. resort to a remedy as provided is optional unless the remedy isexpressly agreed to be exclusive, in which case it is the sole remedy.

2. Where circumstances cause an exclusive or limited remedy to fail of itsessential purpose, remedy may be had as provided in this Act.3. Consequential damages may be limited or excluded unless the limitation orexclusion is unconscionable. Limitation of consequential damages for injury tothe person in the case of consumer goods is prima facie unconscionable butlimitation of damages where the loss is commercial is not.

9. § 2-723 PROOF OF MARKET PRICE: TIME AND PLACE.1. If an action based on anticipatory repudiation comes to trial before the time forperformance with respect to some or all of the goods, any damages based on

market price shall be determined according to the price of such goods prevailingat the time when the aggrieved party learned of the repudiation.2. If evidence of a price prevailing at the times or places described in this Articleis not readily available the price prevailing within any reasonable time before orafter the time described or at any other place which in commercial judgment orunder usage of trade would serve as a reasonable substitute for the onedescribed may be used, making any proper allowance for the cost of transportingthe goods to or from such other place.3.Evidence of a relevant price prevailing at a time or place other than the onedescribed in this Article offered by one party is not admissible unless and until he

has given the other party such notice as the court finds sufficient toprevent unfair surprise.

Buyer Remdies

2-711

2-712 Cover go to another seller forthe items

not always an option

Elements



Buyer Remdies

1. good faith2. not unreasonable3. substitutive

purchase

4. price cover-price K+incidental +consequential

3. something close cantnot buy a pruis and goget a BMW

2-713 Market Value market value-K price +incidental +consequentials

market value is whenthe buyer learned of thebreach

non-delivery orrepudiation

2-714 non conforminggood or Breach ofWarranty

value promised goods-actual goods+incidentals +

consequentials

have to keep thegoods and noftiy the

seller even if only kept 1/2

2-716 SpecificPerformance

1. goods are unique2. other proper

circumstances(inability to cover)

order a custom car to get the item not themoney

10.

J. Specific Performance1. Orders a party to perform the unfulfilled promises rather than payment the other partyreceives performance rather than payment2. most common in real estate3. Elements

a. uniqueb. irreplaceable

4. § 359. EFFECT OF ADEQUACY OF DAMAGES1. Specific performance or an injunction will not be ordered if damages would beadequate to protect the expectation interest of the injured party.2. The adequacy of the damage remedy for failure to render one part of theperformance due does not preclude specific performance or injunction as to theK as a whole3. Specific Performance or an injunction will not be refused merely because thereis a remedy for breach other than damages, but such a remedy may beconsidered in exercising discretion under the rule in 357

5. § 360 FACTORS AFFECTING ADEQUACY OF DAMAGESIn determining whether the remedy in damages would be adequate, the followingcircumstances are significant:

a. the difficulty of proving damages with reasonable certainty,b. the difficulty of procuring a suitable substitute performance by meansof money awarded as damages, andc. the likelihood that an award of damages could not be collected

6. § 362 Effect of Uncertainty of terms



Specific performance or injunction will not be granted unless the terms of the Kare sufficiently certain to provide a basis for an appropriate order

7. § 364 Effect of Unfairness1. Specific performance or an injunction will be refused if such relief would beunfair because

a. the contract was induced by mistake or by unfair practices, b. the relief would cause unreasonable hardship or loss to the party inbreach or to third persons, or c. the exchange is grossly inadequate or the terms of the contract areotherwise unfair.

2. Specific performance or an injunction will be granted in spite of a term of theagreement if denial of such relief would be unfair because it would causeunreasonable hardship or loss to the party seeking relief or to third persons.

8. § 366 Effect of Difficulty in Enforcement/SupervisionA promise will not be specifically enforced if the character & magnitude of theperformance would impose on the court burdens in enforcement or supervisionthat are disproportionate to the advantages to be gained from enforcement & tothe harm to be suffered from its denial

9. § 367 Contracts for personal service/supervision1. a promise to render personal service will not be specifically enforced2. a promise to render personal service exclusively for 1 employer will not beenforced by an injunction against serving another if its probable result will be tocompel a performance involving personal relations the enforced continuance ofwhich is undesirable or will be to leave the employee w/o other reasonablemeans of making a living

10. Casesa. Where legal remedies are not practicable or adequate, specific performancemay be an adequate remedy to enforce a contract, even when the contract hasleft terms open for future negotiation. Ammerman v. City Stores Co.b. Specific performance may be ordered under the proper circumstances where

the remedy at law is not adequate. Laclede Gas v. Amoco OilV. Third Party Rights & DutiesA. 3rd Party

1. rights and duties of persons who are not in “privity” (that is, not parties) to the originalK, but who acquire rights or duties by assignment (of contract rights), by delegation (of Kduties), or by being third-party beneficiaries of contracts made by other parties2. Which 3rd parties can sue?

a. intended beneficiaries3. § 302. Intended And Incidental Beneficiaries

1. Unless otherwise agreed between promisor and promisee, a beneficiary of apromise is an intended beneficiary if recognition of a right to performance in thebeneficiary is appropriate to effectuate the intention of the parties and either

a. the performance of the promise will satisfy an obligation of thepromisee to pay money to the beneficiary; orb. the circumstances indicate that the promisee intends to give thebeneficiary the benefit of the promised performance

2. An incidental beneficiary is a beneficiary who is not an intended beneficiary.3. Elements

a. Is X a 3rd party? intent of parties, relationship between promisee & 3rdparty, creditor or donee promisee-debt to TPB or Promisee-gift to the

TPB b. Effect TPB



4. Determine the promisee’s Intend

a. Language of Kwas the name in the K, who was intended to be paid/get benefits

b. factorsi. expressly designated in the Kii. is the performance to be made directly to the 3rd party?

iii. rights in the Kiv. relationship to the promisee

5. Rights of the Beneficiary Vest? §311 a. manifest assent to the promiseb. brings suits to enforce the promisec. materially changes position in justifiable reliance on the promise

6. § 311 Variation of a duty to a beneficiary1. Discharge or modification of a duty to an intended beneficiary by conduct ofthe promisee or by a subsequent agreement between promisor and promisee isineffective if a term of the promise creating the duty so provides.2. In the absence of such a term, the promisor and promisee retain power todischarge or modify the duty by subsequent agreement.

3. Such a power terminates when the beneficiary, before he receives notificationof the discharge or modification, materially changes his position in justifiablereliance on the promise or brings suit on it or manifests assent to it at the requestof the promisor or promisee.4. If the promisee receives consideration for an attempted discharge ormodification of the promisor’s duty which is ineffective against the beneficiary,

the beneficiary can assert a right to the consideration so received. The promisor’sduty is discharged to the extent of the amount received by the beneficiary.

7. § 309 Defenses against the beneficiary1.A promise creates no duty to a beneficiary unless a contract is formed betweenthe promisor and the promisee; and if a contract is voidable or unenforceable atthe time of its formation the right of any beneficiary is subject to the infirmity.

2. If a contract ceases to be binding in whole or in part because of impossibility,illegality, non‐ occurrence of a condition, or present or prospective failure ofperformance, the right of any beneficiary is to that extent discharged or modified.3. Except as stated in Subsections (1) and (2) and in § 311 or as provided by thecontract, the right of any beneficiary against the promisor is not subject to thepromisor’s claims or defenses against the promisee or to the promisee’s claimsor defenses against the beneficiary.4. A beneficiary’s right against the promisor is subject to any claim or defensearising from his own conduct or agreement.

8. § 304 Creation of Duty to BeneficiaryA promise in a K creates a duty in the promisor to any intended beneficiary toperform the promise, & the intended beneficiary may enforce the duty

9. § 305 Overlapping duties to beneficiary & promise1. A promise in a K creates a duty in the promisor to the promisee to perform thepromise even though he also has a similar duty to an intended beneficiary2. Whole or partial satisfaction of the promisor’s duty to the beneficiary satisfiesto that extent the promisor’s duty to promisee

10. Donee v. Creditora. Creditor can sueb. donee no but there is an exception



1. detrimental reliance-If the prom isee tel ls the donee beneficiary of thecontract and should foresee reliance by the beneficiary, and thebeneficiary reasonably rel ies to her detriment, the beneficiary can suethe promisee directly under a promissory estoppel/detrimental reliancetheory (see III.D., supra), even though the beneficiary cannot sue thepromisee as a third-party beneficiary.

12. § 313 Government Contracts2. In particular, a promisor who contracts with a government or govern-mental agency to do an act for or render a service to the public is not subject tocontractual liability to a member of the public for consequential damagesresulting from performance or failure to perform unless

a. the terms of the promise provide for such liability; orb. the promisee is subject to liability to the member of the public for thedamages and a direct action against the promisor is consistent with theterms of the contract and with the policy of the law authorizing thecontract and prescribing remedies for its breach.

13. Casesa. A promise made for the benefit of another may be enforced by the person for

the benefit of whom the promise was made. Lawrence v. Foxb. Any third person, for whose direct benefit a contract was intended, can sue onit. Seaver v. Ransomc. 1. Under the third-party contract beneficiary doctrine in this state, a third partycan recover on the contract if shown to be an "intended beneficiary" under eitherthe "intent to benefit" or the "duty owed" test. This court adopts the intendedbeneficiary approach set out in Restatement (Second) of Contracts § 302 2.Unpaid subcontractors and materialmen on a private property project are notintended third-party beneficiaries under the defaulting general contractor'sperformance bond. Cretex v. Construction leadersd. a person is a donee only if the promisee’s contractual intent is either to make agift to him or to confer on him a right against the promisor Martinez v. Socoma

B. Assignment1. A & B enter K, one of the parties seeks to transfer rights/duties under the K to a 3rd2. a transfer of a right is called an “assignment” 3. Main issues

a. what rights may be assigned?b. what is necessary for an effective assignment?c. is the assignment revocable or irrevocable?d. what are the rights & liabilities of the various parties?e. that problems exist if there have been successive assignments of the sameright?

4. Rights to be assigned: all contractual rights may bea. exceptions:

i. assigned rights would substantially change obligor’s duty; service K(lawyer or doc), requirements & output Ksii. Rights assigned would substantially alter obligor’s riskiii. assignment of future rightsiv. assignment prohibited by lawv. express contractual provision against assignment

5. Elements to an effective assignmenta. requirements of writing: can be oral, writing is must: wage assignment, interestof land, intended as security interests



b. adequate descriptionc. present words of assignmentd. consideration not needed

6. § 317 . Assignment of a Right1. An assignment of a right is a manifestation of the assignor’s intention totransfer it by virtue of which the assignor’s right to performance by the obligor is

extinguished in whole or in part and the assignee acquires a right to suchperformance.2. A contractual right can be assigned unless

a. the substitution of a right of the assignee for the right of the assignorwould materially change the duty of the obligor, or materially increase theburden or risk imposed on him by his contract, or materially impair hischance of obtaining return performance, or materially reduce its value tohim, orb. the assignment is forbidden by statute or is otherwise inoperative ongrounds of public policy, orc. assignment is validly precluded by contract.

7. § 322 Contractual Prohibition Of Assignment **

1. Unless the circumstances indicate the contrary, a contract term prohibitingassignment of “the contract” bars only the delegation to an assignee of theperformance by the assignor of a duty or condition.2. A contract term prohibiting assignment of rights under the contract, unless adifferent intention is manifested,

a. does not forbid assignment of a right to damages for breach of thewhole contract or a right arising out of the assignor’s due performance ofhis entire obligation;b. gives the obligor a right to damages for breach of the terms forbiddingassignment but does not render the assignment ineffective;c. is for the benefit of the obligor, and does not prevent the assignee fromacquiring rights against the assignor or the obligor from discharging his

duty as if there were no such prohibition.8. § 323 Obligor’s Assent to assignment or delegation

1. a term of a K manifesting an obligor’s assent to the further assignment of aright or an obligee’s assent to the future delegation of the performance of a dutyor condition is effective despite any objection2. a manifestation of such assent after the formation of a K is similarly effective ifmade for consideration or in circumstances in which a promise would be bindingw/o consideration or if material change of position takes place in reliance on themanifestation

9. § 324 Mode of assignment in generalit is essential to an assignment of a right that the obligee manifest an intention totransfer the right to another w/o further action or manifestation of intention by the

obligee. The manifestation may be made to the other or to a 3rd person on behalfand except as provided by statue or K, may be made either orally or writing

10. § 327 Acceptance/disclaimer by the Assignee1. A manifestation of assent by an assignee to the assignment is essential tomake it effective unless

a. 3rd person gives consideration for the assignmentb. the assignment is irrevocable by virtue of the delivery of a writing to a3rd person



2. an assignee who has not manifested assent to an assignment may, w/nreasonable time after learning of it existence and terms render it inoperative fromthe start by disclaimer

11. § 328 Interpretation of Words of Assignment; Effect of Acceptance ofAssignment

1. Unless the language or the circumstances indicate the contrary, as in an

assignment for security, an assignment of “the contract” or of “all my rights underthe contract” or an assignment in similar general terms is an assignment of theassignor’s rights and a delegation of his unperformed duties under the contract.2. Unless the language or the circumstances indicate the contrary, theacceptance by an assignee of such an assignment operates as a promise to theassignor to perform the assignor’s unperformed duties, and the obligor of theassigned rights is an intended beneficiary of the promise.

12. § 329 Repudiation by assignor & novation w/ assignee1. the legal effect of a repudiation by an assignor of his duty to the obligor of theassigned right is not limited by the fact that the assignee is a competent person &has promised to perform the duty2. if the obligor w. knowledge of the repudiation accepts any performance from

the assignee w/o reserving his rights against the assignor a novation arises bywhich the duty of the assignor is discharged & similar duty of the assignee issubstituted

13. § 334 Varation of obligor’s duty by assignment1. if the obligor;s duty is conditional on the personal cooperation of the oringalobligee or another person, an assignee’s right is subject to the same condition2. if the obligor’s duty id conditional on cooperation which the obligee couldproperly delegate to an agent, the condition may occur if there dis similarcooperation by an assignee

14. §336 Defenses against an assignee1. By an assignment the assignee acquires a right against the obligor only to theextent that the obligor is under a duty to the assignor; and if the right of the

assignor would be voidable by the obligor or unenforceable against him if noassignment had been made, the right of the assignee is subject to the infirmity.2. The right of an assignee is subject to any defense or claim of the obligor whichaccrues before the obligor receives notification of the assignment, but not todefenses or claims which accrue thereafter except as stated in this Section or asprovided by statute.3. Where the right of an assignor is subject to discharge or modification in wholeor in part by impossibility, illegality, non‐ occurrence of a condition, or present orprospective failure of performance by an obligee, the right of the assignee is tothat extent subject to discharge or modification even after the obligor receivesnotification of the assignment.4. An assignee’s right against the obligor is subject to any defense or claim

arising from his conduct or to which he was subject as a party or a prior assigneebecause he had notice.

15. § 338 Discharge of an Obligor after Assignment 1. Except as stated in this Section, notwithstanding an assignment, the assignorretains his power to discharge or modify the duty of the obligor to the extent thatthe obligor performs or otherwise gives value until but not after the obligorreceives notification that the right has been assigned and that performance is tobe rendered to the assignee.



2. So far as an assigned right is conditional on the performance of a returnpromise, and notwithstanding notification of the assignment, any modification ofor substitution for the contract made by the assignor and obligor in good faith andin accordance with reasonable commercial standards is effective against theassignee. The assignee acquires corresponding rights under the modified orsubstituted contract.

3. Notwithstanding a defect in the right of an assignee, he has the same powerhis assignor had to discharge or modify the duty of the obligor to the extent thatthe obligor gives value or otherwise changes his position in good faith andwithout knowledge or reason to know of the defect.4. Where there is a writing of a type customarily accepted as a symbol or asevidence of the right assigned, a discharge or modification is not effective

a. against the owner or an assignor having a power of avoidance, unlessgiven by him or by a person in possession of the writing with his consentand any necessary endorsement or assignment;b. against a subsequent assignee who takes possession of the writingand gives value in good faith and without knowledge or reason to know ofthe discharge or modification.

C. Delegation1. transfer of contractual duties2. Main issues

a. what duties may be delegated?b. how does one make a valid delegation?c. what are the rights/liabilities of the various parties where there has been avalid delegation?

3. TerminologyX and Y have a contract. Y delegates duties thereunder to Z. Y is the obl igor

because Y is the one with the duty to perform the obligation. Y also is thedelegator (sometimes called the delegant) because Y delegated the duty. Z isthe delegate (sometimes called the delegatee) because Z is the one to whom

the duty was delegated. X is called the obligee , because X is the one for whomY or Z is obligated to perform.

4. All contractual duties may be delegated, written/oral, manifest present intentionexception

i. duties of personal judgment or skillii. “special trust” iii. change of obligee’s expectancyiv. contractual restriction on delegation

5. UCC § 2-210. Delegation of Performance; Assignment of Rights1. A party may perform his duty through a delegate unless otherwise agreed orunless the other party has a substantial interest in having his original promisorperform or control the acts required by the contract. No delegation of

performance relieves the party delegating of any duty to perform or any liabilityfor breach.2. Except as otherwise provided in Section 9-406, unless otherwise agreed, allrights of either seller or buyer can be assigned except where the assignmentwould materially change the duty of the other party, or increase materially theburden or risk imposed on him by his contract, or impair materially his chance ofobtaining return performance. A right to damages for breach of the whole

contract or a right arising out of the assignor’s due performance of his entireobligation can be assigned despite agreement otherwise.



4. Unless the circumstances indicate the contrary a prohibition of assignment of“the contract” is to be construed as barring only the delegation to the assignee ofthe assignor’s performance.**5. An assignment of “the contract” or of “all my rights under the contract” or anassignment in similar general terms is an assignment of rights and unless thelanguage or the circumstances (as in an assignment for security) indicate the

contrary, it is a delegation of performance of the duties of the assignor and itsacceptance by the assignee constitutes a promise by him to perform thoseduties. This promise is enforceable by either the assignor or the other party to theoriginal contract.6. The other party may treat any assignment which delegates performance ascreating reasonable grounds for insecurity and may without prejudice to his rightsagainst the assignor demand assurances from the assignee (Section 2-609).

6. § 318. Delegation of Performance of Duty1. An obligor can properly delegate the performance of his duty to another unlessthe delegation is contrary to public policy or the terms of his promise.2. Unless otherwise agreed, a promise requires performance by a particularperson only to the extent that the obligee has a substantial interest in having that

person perform or control the acts promised.3. Unless the obligee agrees otherwise, neither delegation of performance nor acontract to assume the duty made with the obligor by the person delegateddischarges any duty or liability of the delegating obligor.

7. § 319 Delegation of performance of condition1. where a performance by a person is made a condition of a duty, performanceby a person delegated by his satisfies that requirement unless the delegation iscontrary to PP or terms of the agreement2. Unless otherwise agreed an agreement requires performance of a condition bya particular person only to the extent that the obligor has a substantial interest inhaving that person perform or control the acts required

D. Cases

1. that where a person contracts with another to do work or perform service, and it canbe inferred that the person employed has been selected with reference to his individualskill, competency, or other personal qualification, the inability or unwillingness of theparty so employed to execute the work or perform the service is a sufficient answer toany demand by a stranger to the original contract of the performance of it by the otherparty, and entitles the latter to treat the contract as at an end, notwithstanding that theperson tendered to take the place of the contracting party may be equally well qualifiedto do the service British Wagon v. Lea2. Since the terms of the contract were undefined, the seller would be obligated to obeythe demands of the assignee. The demands would create a new measure of ice to besupplied and a new term in the agreement that the seller never bound itself to perform.Crane ice cream v. terminal freezing & heating

3. A contract is assignable except when there is some reason why the non-assigningparty would find performance by the other party unsatisfactory. Sally Beauty Co. v.Nexxus Products Co.





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Contracts c Outline