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CONTRACTS
Contracts
Formation Performance Remedies
Third Party Beneficiaries/Assignments/
Delegation
Contract Formation
Formation
Mutual Assent
Offer Acceptance
Consideration
Bargained for Exchange
Promissory Estoppel
Restitution/Quasi
Contract
Defenses to Formation
Mutual Assent
Offer Still Open/UCC 2-205
Merchants Firm Offer
Offer Made
Objective intent to be bound
Contains all material terms
Communicated to Identified Offeree
Acceptance
Common Law Mirror Image
UCC 2-207 Additional Terms Contained in the
Acceptance
UCC2-206 Shipment of Non-
Conforming Goods
Mutual Assent
Is The Offer Still Open? The Mailbox Rule
Rules: 1. An ACCEPTANCE is effective upon DISPATCH 2. A REVOCATION or REJECTION is effective upon RECEIPT
Mail Acceptance
Call to Reject Offer or Revoke
Acceptance
(call received after letter sent but
before received.)
There is a Contract:
Acceptance was dispatched before
Revocation or Rejection Received.
Always Look to See what Came First: Acceptance or Rejection/Revocation. As long as the Acceptance was dispatched before the rejection/revocation was received, the acceptance will take precedence. EXCEPTION: If the rejection was received prior to the acceptance and relied upon, it will take precedence over the otherwise effective acceptance.
What Happens If Additional Terms Are Included in the Acceptance of a Contract for the Sale of Goods?
Apply UCC 2-207 and Ask Yourself Two Questions:
1=Yes 2=No contract formed
by the communications
between the parties
1. Is the potential acceptance a definite and seasonable expression of acceptance?
2. Is the potential acceptance expressly conditioned on agreement to the additional or different terms? IF YOU ANSWER:
Then Look to 2-207(2) to see what happens to the Additional Terms. If You Answer in ANY OTHER COMBINATION, then no contract arises from the communications between the parties, and you need to look at 2-207(3) to determine the outcome.
ACCEPTNCE CONTAINS ADDITIONAL TERMS: 2-207(2)
If You Answered Yes to Question 1 and No to Question 2, then a contract is formed by the communication of the parties. 2-207(2) now lets you know what happens to the additional terms in this situation.
Are Both Parties Merchants?
Yes
Additional or different terms automatically become part of
the contract UNLESS
The offer expressly limits acceptance to the original
terms
Or: The additional or different terms materially alter the
contract
Or: The offeror objects to the additional or different terms within a
reasonable time
No
Additional terms will NOT become part of the contract unless the offeror ASSENTS
1. Is the potential acceptance a definite
and seasonable expression of
acceptance? IF YOU ANSWER
YES or NO
2. Is the potential acceptance expressly
conditioned on agreement to the
additional or different terms? IF YOU
ANSWER:
YES
No Contract arises from the
communications of the parties.
Acceptance Contains Additional Terms: UCC 2-207(3)
If the conduct of the parties is sufficient to indicate the existence of the parties then a contract will exist, and the terms of the contract will consist of any terms upon which the communications agree while conflicting terms are knocked out. Any gaps in the terms of the contract will be filled using UCC gap-filler rules.
Contract Modifications UCC 2-209
What is Required for a valid modification?
Under The Common Law?
Under the UCC?
Is Mutual Assent Required?
Yes Yes
Is Consideration Required?
Yes (Look out for Unanticipated Difficulties Exception.)
No, as long as the modification is requested in good faith.
If the Contract states that it can only be modified in writing, is oral modification allowed?
Yes, unless the contract as modified falls within the Statute of Frauds. In this case, it must be in writing or otherwise satisfy the statute.
No. (also, if the contract as modified falls within the Statute of Frauds, it must be in writing or otherwise satisfy the statute.
DEFENSES TO FORMATION
Formation Defenses
Writing
Statute of Frauds
Parol Evidence
Rule
Public Policy
Fraud/Mistake Capacity
Statue Of Frauds Ty
pe
of C
ontr
act?
Contracts subject to the statute include:
1. Contracts that, by its terms, cannot be completed within a Year,
2. Contracts for the sale of any interest in Land,
3. Contracts for the sale of Goods over $500, &
4. Suretyships (Contracts guaranteeing the debt of another.)
Is I
t In
Wri
ting
? Yes: Enforceable
No: Unenforceable, Unless an Exception Applies.
What Constitutes a Sufficient Writing? Common Law: Signed by defendant; contains all essential terms. UCC: Signed (except between merchants, it can be signed by the sender); quantity term.
Is T
here
An
Exc
epti
on?
If an exception applies, the contracts does not have to be in writing in order to be enforceable:
Exceptions:
Goods: merchant's confirming memo exception, Land: part performance (money plus improvements or money plus possession,) Year: Detrimental reliance exception, Suretyship: main purpose rule
Certain Types of Contracts Must Be In Writing in Order to Be Enforceable.
Parol Evidence Rule Once a contract is reduced to writing it will control.
Is t
her
e a
wri
ting?
Yes: The Parol Evidence will prohibit introduction of prior or contemporaneous oral agreements that differ or contradict the terms of a writing that is considered to be a “total integration.”
Is I
t a
Tota
l In
tegra
tion
?
Corbin “Surrounding Circumstances.”The court will admit evidence on the issue of integration to determine whether the writing is a total integration.
Williston ”Four corners" rule. Taking the document as a whole, does it, on its face, appear to be a total integration?
Is T
her
e an
Exc
epti
on?
1. Collateral agreements
2. Consistent additional terms (partial integrations, both common law and UCC)
3. Explain the meaning of terms (even in a total integration under the UCC)
Performance
Performance
Conditions Discharge Breach
Conditions
Conditions?
Are there any Conditions?
Express, Implied, or
Constructive
If yes, Have they been satisfied?
If yes, but not satisfied, are they excused?
Waiver, Breach, or Forfeiture
Discharge
Discharge
Impossibility
Illigality Death Destruction (Risk of Loss)
Severe Impracticability
Frustration of Purpose
Breach
Breach
Anticipatory Breach
Adequate Assurance Under the UCC
Retraction under the UCC
Present Breach
Minor (No
Remedy) Material
Relief for the Breachor
Material (Time to
Cure)
Minor (substantial
Performance)
Total
Divisible Contract Restitution
Remedies
Remedies
Damages Restitution Injunction Rescission Reformation
Damages
Damages
Liquidated Expectation
Natural Standard
Real Property
Seller = K price – market price
Buyer = Market
Price – K price
Goods
Seller = K price, market price, cover
Buyer = K Price, Market Price, Cover
Employment
Employee: Lost
Wages - Earnings
Employer: Extra Cost
Construction
Builder: Profit & Costs
Owner: (1) Cost of
Completion and (2)
Diminution in Value.
Consequential
Reliance
General Measure of Damages = Natural + Consequential + Incidental – Cost Avoided – Loss Avoided (Mitigation)
Restitution (Value of Benefit Conferred)
Restitution
Grounds
Mistake Breach Unenforceable Contract
Measure of Recovery
Breach
Aggrieved Party (Relief is Value
to the Breachor)
Breachor (measure is
value conferred – damages)
Unenforceable Contract
Injunction, Rescission, and Reformation
Injunction
Specific Performance
Definite & Certain K
Inadequate Remedy at
Law
Feasible Decree
Mutuality of Remedy Defenses
Rescission Reformation
Third Party Beneficiaries
Third Party Beneficiaries
Formation
Intended
Creditor Donee
Incidental
Performance
Modify/Rescind
Vested Not Vested
Remedies
A v. B
Creditor: YES
Donee: No $ Damages
C v. B
Promisor’s defenses Good against TPB
C v. A
Creditor YES on underlying
promise
Donee NO A = Promisee B = Promisor C = TP Beneficiary
Assignment of Rights
Assignment of Rights
Formation
Effective Prohibition
Increase of Obligor’s Duty/Risk
Existing or Expected
Future Rights
Performance
Effect of Assignment
Revocation And
Priorities
Remedies
A v. B C v. B
Direct Cause Of
Action YES
B has same Defenses against C
as against A
C v. A
Implied Warranties
YES A = Obligee/Assignor B = Obligor C = Assignee
Delegation of Duties Delegation
Formation
Delegable Duties
Consideration
Performance
What is effect of the
delegation?
Remedies
B v. A
Delegation YES
Novation NO
B v. C
Direct Cause Of Action
YES
Delegatee’s defenses are the same as against A
since B stands
in A’s shoes.
A v. C
General breach Issue. A = Obligor/Delegator
B = Obligee C = Delegatee