contract law flashcards

8/7/2019 Contract Law Flashcards

http://slidepdf.com/reader/full/contract-law-flashcards 1/19

Common Law (CL) vs. UCC 2; 2 points \ UCC 2 governs the sale of goods. CL governs everything else. In

mixed transactions, look for the dominant idea behind the transaction.

Three Types of Contracts; 3 points \ Express, Implied-in-fact, and Quasi-contracts. Implied in fact:

Parties action imply existence of a contract. Quasi-contract: no contract at all, but equity requires a

contract be implied-in-law. (These are also known as implied-in-law contracts.)

Formation Patterns, Bilateral and Unilateral; 2 points \ BILATERAL: The offer and acceptance each

contain a promise for performance. UNILATERAL: The offer is a promise, but the offeree can only accept

through full performance of the duties or obligations. Under old CL, the offeror could revoke at any

time before full performance, but the modern view is that the offer becomes irrevocable (an option

contract) once performance begins (detrimental reliance providing the consideration). However, mere

preparation is not performance.

Formation Patterns, UCC 2; 1 point \ The UCC 2 is satisfied by formation, in any manner sufficient to

show agreement, including conduct by both parties which recognizes the existence of such a contract.

Formation Patterns, R2K \ Got rid of bilateral and unilateral distinction and replaced it with

Offer, definition, 4 Points \ 1) an objective manifestation (a reasonable, prudent person would believe

an offer was being made) by the offeror, 2) of intent to enter into a bargain (not invitation for

negotiation), 3) which creates a power of acceptance in the offeree, 4) being sufficiently precise inessential terms (see gap-fillers).

Offer, Miscommunication, 1 Point \ A mistake in communication, by principal or agent, is no defense to

formation unless the offeree should have known, or did know, of the mistake.

Offer, Indefiniteness and Gap-fillers, CL; 2 points \ Under Old CL, lack of essential terms in an offer

resulting in failure for indefiniteness. The Modern View CL is to use Gap-fillers where the gap-filler

would be a reasonable term. (UCC is similar to modern view CL.)

Offer, Reasonable Term; 5 points \ General Rule: The court may impose a reasonable term which is

not too presumptuous, i.e. will not create a new bargain for the parties. Look for 1) whether the partieswere truly silent on the term (not bargained-for and not merely ambiguous or contested) and 2)

whether the term may be fairly implied from a) the past dealings or custom and usage of the industry

and b) knowledge of the parties of such custom or usage. (a. precedent and b. knowledge of precedent )

UCC, Indefiniteness; 2 points \ Same as Modern View CL on indefiniteness mostly UCC 2-204(3) states

A contract for sale does not fail for indefiniteness if the parties have INTENT to make a contract and

there is a REASONABLY CERTAIN BASIS FOR A GIVING AN APPROPRIATE REMEDY.



Requirements Contract (Indefinite quantity); 2 points \ All that a Buyer may require in the good faith

course of business. Although indefinite, it is enforceable.

Output Contract (Indefinite quantity); 3 points \ All that a Seller can produce in the good faith course of

business. Although indefinite, it is enforceable. NOTE: The seller does not guarantee any minimum

quantity.

UCC on Requirement and Output Contracts; 1 point \ UCC 2-306(1) specifically allows requirements and

output contracts, but also specifically states that the quantity cant be unreasonably disproportionate

to prior dealings or any stated estimate.

Indefinite Quantity, CL and UCC; 2 points \ A missing quantity term will usually invalidate a contract,

under CL and UCC, because there is no basis to determine a reasonable term by which a court can give

an appropriate remedy (unlike price).

Indefinite Price Terms, CL \ Under Old CL, a contract required a price term, or it failed for indefiniteness.

The Modern View is divided. Some courts will imply a good faith attempt to set price and will supply areasonable term if one is not agreed upon.

UCC on Open Price Terms, 5 points \ Under UCC 2-305, if the parties so INTEND, they may form a

contract although the price is not fixed. By 1) silence, 2) agreement to agree later, or 3) by defined

mechanism in the future. If by defined mechanism, if mechanism fails, then prior intent of parties

governs whether there is a contract or whether the court should impose a reasonable term.

Termination of offer; An offer terminates in 7 ways \ 1) death or incapacity (only during offer stage), 2)

revocation directly or indirectly (by notice, even reliable third party information), 3) rejection (if the

offeree says no, offer ends until revived), 4) counteroffer (a counteroffer ends the power of acceptance

in the counterofferor, but not an inquiry), 5) supervening illegality, 6) destruction of subject matter of

bargain (only during offer stage), 7) lapse of time (very fact-specific, look to practices and

circumstances; end of conversation rule if offer made in conversation, acceptance must be during

conversation). Once terminated by any of the above means, the offer can only be revived by the

offeror.

Inquiry vs. Invitation \ An invitation for negotiation can be done by either party, but once negotiations

have began, either party may make inquiries which do not constitute offers or acceptances. Look to the

language and circumstances.

Option Contract; 3 points \ Def. a promise to keep an offer open for a stated period of time which issupported by consideration (under CL). Courts will generally accept nominal or sham consideration

(check your jurisdiction). Unlike an offer, an option is assignable the offeror has no control over who

the offeree is after the initial offer.

Option Contract and Promissory Estoppel; 3 points \ If the offeree relies on the offer to his detriment, an

option may be created requiring the offer to remain open. Ask whether 1) the offer was deliberately

made with the reasonable expectation of inducing the offeree to rely on it, 2) the offeree justifiably



relied on it, and 3) the offeree suffered some detriment as a result (damages). (foreseeable and actual,

detrimental reliance)

Ex) Yiyun says offer will be open for a week to buy her business, so Tracy quits his job just before Yiyun

revokes the offer. If Yiyun and Tracy meet the above three conditions, Yiyun must leave the offer open

the full week.

Option Contract and Subcontractor Bids \ A subcontractor bid is an option contract because the General

Contractor relies on it in submitting his bid. The subcontractor cannot withdraw his bid once the

General Contractor SUBMITS his bid at SUBMISSION justifiable reliance is complete.

Revocation, Offer or Option? \ An offer is revocable at any time, even if offeror promised to leave it

open, so long as there is no consideration (option) or foreseeable and actual detrimental reliance

resulting in harm (promissory estoppel).

UCC, Offers, and Options The Firm Offer Rule, 4 points \ UCC 2-205: Def. an offer can be irrevocable

even without consideration if 1) the offer to buy is made by a merchant, 2) the offer is in writing signedby the offeror, 3) there is an assurance to the offeree that the offer will be held open. If no specific time

is included, then the courts will impose a reasonable time.

Advertisements as Offers, 4 points \ General Rule: Ads are generally invitations to deal. The

advertisement is only an offer where it is 1) definite in its terms (what terms?), 2) leaves nothing to

negotiate, 3) seems objectively reasonable, and 4) is unlikely to be over-accepted.

Auctions and Offers \ If the auction is with reserve, then the auctioneer is the offeree, and he need not

accept the offer (the bid). If the auction is without reserve, then the auctioneer is the offeror, and he

cannot avoid the acceptance of his offer (the highest bid).

Acceptance, definition \ An acceptance is 1) an objective manifestation 2) by the offeree 3) to be bound

4) by the precise terms of the offer.

Mirror-image acceptance \ An expression of present, unequivocal, unconditional assent by the offeree

to each and every term of the offer before the termination of said offer (CL).

Acceptance, When \ The offeree must communicate acceptance during the life of the offer (beforetermination).

Acceptance, from Whom \ Only the person addressed by the offeror may effectively accept. An offer

extended to an agent may be accepted by the agent or by the principal.

Acceptance, Mistake of Identity \ The offeree need not necessarily be the person intended by the

offeror, so long as the offer was still addressed to the mistaken person face-to-face and a reasonable



expectation arose in offeree. If the offeree knew, or should have known, of the mistake, there is no

acceptance. If it was NOT face to face and the offeree has not yet acted in detrimental reliance, there is

no acceptance.

Acceptance, Means of Communication, CL and UCC \ Under old CL, the same mode of communication

by which the offer was communicated is impliedly authorized for communication of the acceptance.The modern view is that any reasonable means of communication may be used to accept an offer. The

UCC is the same, inviting acceptance by any medium reasonable in the circumstances.

Acceptance, Silence, CL and UCC \ Silence cannot constitute acceptance, absent the following

circumstances: 1) previous dealings where silence has constituted acceptance, 2) retention of goods

without objection will constitute acceptance, unless it is an unsolicited good requesting payment or a

donation (in which case it is a gift). (The second exception is not quasi-contract, because the terms of

the offer control.) Silence can constitute acceptance of an assignment of rights and duties: If accepted

without protest by delegate, he is deemed to have implicitly promised to assume legal liability.

Acceptance, when effective \ In any case (Old and New CL, UCC), the default rule is that the acceptance

is effective upon dispatch.

Rejection and Revocation, when effective \ Upon receipt by other party.

Acceptance, Mailbox Rule \ At a distance, the time between dispatch and receipt raises a legal issue of

when acceptance becomes effective. General Rule: Acceptance is effective upon dispatch, rejection is

effective upon receipt; The Mailbox Rule; the rule may be changed by the terms of the offer. Also,

revocation is effective upon receipt.

Acceptance, confused offeree \ If the offeree sends a rejection, then sends an acceptance, the

acceptance is not effective upon dispatch anymore, but the first to be received by the offeror will

govern. ??If the offeree sends an acceptance, then sends a rejection (before acceptance is received),

then the first received by the offeror governs (unless there is no detrimental reliance, than the last sent

governs in some jurisdictions).??

UCC and Acceptance, 2 points \ Does not require mirror-image acceptance, but only definite and

seasonable acceptance by any medium reasonable under the circumstances. A mirror-image

acceptance may still be required by offeror, however.

UCC and Additional or Different Terms \ Under the UCC, between merchants, an acceptance with

different or additional terms can still create a contract.

UCC and Additional Terms in Purported Acceptance \ An additional term of acceptance does not

frustrate the acceptance unless it materially alters the contract, or unless the offeror objects to the

additional terms within a reasonable time. If it is not a material alteration, and if it is not objected to,

the additional terms simply become part of the contract. The test for material alteration is not provided



in UCC, but courts look to how the parties would have understood the significance of the changes, and

the shifts in advantage, risk, prejudice, or remedies.

UCC and Different Terms in Purported Acceptance \ Differing terms in the purported acceptance have

been dealt with by the courts in three ways (UCC is ambiguous on this point): 1) Throw out material

alterations (treat differing terms the same as additional terms); 2) Throw out the different terms in theacceptance; 3) the differing terms in both the offer and acceptance knock each other out, and the

court uses general provisions as gap-fillers.

Consideration, definition \ Bargained-for exchange of something of legal value (a detriment or benefit).

The adequacy of the consideration is not at issue, only its existence. Bargained-for-Exchange. The

consideration must be proffered in exchange for the others consideration. Legal Detriment. Each party

must change his or her legal rights or liabilities by a promise, act or forbearance. Motive is irrelevant.

Even if a person would have acted or refrained in any case, it is still consideration if offered in exchange

for other valid consideration (unless it was pursuant to an actual duty, i.e. he was being forced in any

case to act or refrain).

Gifts vs. Consideration \ Gifts are of value, but if it is not a bargained-for-exchange, it is not contractual.

However, if it can be shown that the gift-giver is expecting a legal benefit in exchange for the gift, then

it is bargained-for-exchange, and it is contractual. A restriction on a gift cannot constitute consideration

- because the donee had no right to the gift in the first place the restriction cannot be a legal detriment.

Contract formation is favored over gifts, so if the court can find that the offer of the gift 1) induced the

offeree to detrimentally change position in any way 2) that was foreseeable to the offeror, then it will

find a contract over a gift.

(Find hypos for this one)

No consideration is needed where \ 1) the value was not bargained-for-exchange, e.g. past payment

or value (bonus), or moral obligation; 2) the object bargained for has no legal value (is not a legal

detriment or benefit) e.g. a pre-existing duty would force the detriment in any case, e.g. an Officer to

catch the bad guy, promise to pay existing debt; 3) in Accord and Satisfactions, 4) in Revivals of

discharged obligations, including the exercise of voidable contract, and a new promise to pay a

discharged debt, 5) Promissory Estoppel (arguably consideration, b/c bargained-for-exchange), 6)

Promises against estate for moral consideration (no bargained-for-exchange). (One-sided

modifications DO require consideration, unless an equitable modification.)

Promissory Estoppel as Consideration, 4 points \ In the event there is no consideration to support a

contract, the agreement can still be enforced if: (R2K 90) 1) The promisor should reasonably expect his

or her promise to induce reliance; 2) the promise does in fact induce the promisees detrimental

reliance; 3) Justice requires enforcement of the promise.



Illusory Promise \ A promise in which there is no consideration, because there is no legal detriment,

because one of the parties retains an unlimited election to perform or not.

Illusory promise, cure \ An illusory promise is cured by complete performance (which provides the

consideration). Part performance does not cure the want of consideration, and there is no obligation to

perform on the part of the other party.

Illusory Promises and Conditional Promises \ Conditional promises are illusory if the promisor has the

power to prevent the satisfaction of the condition. Conditional promises are not illusory where the

promisor LACKS the power to prevent satisfaction of the condition, even where the independent

fulfillment of that condition is very unlikely there is still consideration.

Moral Consideration \ A moral obligation is not consideration because it lacks the bargained-for-

exchange element (except in the enforcement of promises against an estate).

Promises against an estate for moral consideration \ Some courts hold that a promise is enforceable for

moral consideration against an estate where: 1) the deceased received a material benefit during hislifetime which motivated the promise (detriment), 2) the promisee began performance in accordance

with the terms of the promise (detriment, or reliance?), 3) the promisor died without repudiating the

promise, 4) there were not superior moral claimants to the benefits of his or her estate. The R2K view is

that this should be enforced only to the extent necessary to prevent injustice. Considerations: Is this

promise a gift?; Is there detrimental reliance?; Is there at any point a return promise by promisee?

Ex) Joe saves Marks life, then Mark wills to Joe 10K. Joe dies leaving wife with only 25K, 10K of which

goes to Joe. Wife still wants to give 10K to Joe, and agrees with Joe in a written agreement to wait until

after wife dies to receive the 10K. Upon wifes death, Joe sues for 10K. Will he get it?

Promises to forbear from litigation \ Old CL held that a promise to forbear to sue was consideration only

if 1) the party making it had a subjective good faith belief in the merit of the claim and 2) the claim was

at least legally colorable. Under the modern view a promise to forbear to sue is consideration even if it

is not legally colorable, so long as there is an honest, subjective belief in the claims merit. Policy-

prevent use of litigation as scare tactic (how does this make sense?)

Nominal consideration \ Still appears in many contracts. Because courts dont look to the adequacy of

consideration, nominal consideration may be valid. HOWEVER, nominal consideration given just for the

sake of making an agreement enforceable, that is not bargained-for-exchange, is not really

consideration. The court may look to the amount of consideration to determine whether it was truly

bargained-for-exchange. If it is not bargained-for-exchange, then it is sham consideration, and is notenforceable.

Token or Sham consideration \ Cannot make an otherwise unenforceable gift a contract.

CL Modification, new consideration \ One-sided modification requires new consideration. Two-sided

modification is probably bargained-for-exchange of legal value.



UCC Modification, no new consideration \ Under UCC 2-209(1), parties to an existing contract are free to

modify its terms, and such modifications do not require any further consideration to be binding. The

modification must be 1) demanded in good faith, and 2) the other party has to agree to it. If the two

conditions are met, the modification is binding without consideration.

Equitable modification \ When a party 1) makes a good faith attempt to perform under contract, and 2)runs into unforeseen and unforeseeable difficulties which threatened substantial hardship unless an

adjustment was made, then the modification does not require consideration.

Accord and Satisfaction \ The modification of a debt agreement where there is Accord 1) the creditors

claim is unliquidated (there is a good faith contest of the debt by the debtor about a) the binding nature

of the debt, b) the amount owed, c) the time of payment, d) or the type of obligation), and 2) a new

agreement is struck under which the debtor promises to pay and Satisfaction - the debtors

performance per the terms of the new agreement. The original debt is suspended until satisfaction, at

which point the original debt (whatever it was) is discharged. If the accord is breached, then the

creditor may revive and sue under the original agreement or sue under the accord. No consideration is

required.

Revival of discharged or voidable obligations \ When a debt is discharged through a statute of

limitations, and the debtor revives his obligation, this does not require new consideration, nor does the

choice to exercise a voidable contract by a minor (usually 18 or younger) or mentally disabled person.

Such revivals operate on the terms of the new promise (kind of l ike a modification without

consideration). Some states require the new promise to be in writing. A contract by a minor or disabled

person is not voidable if it is a contract for necessaries. A contract with a minor is only voidable at the

minors election.

No Consideration: Pre-existing duty, Moral duty (no bargained-for-exchange); Illusory Promise (no legalvalue); one-sided modification (requires new consideration).

Consideration: Accord and Satisfaction, Promissory Estoppel, Equitable Modification, promise to forbear

from lawsuit, revival of discharged obligations

Excusable Non-performance, Impossibility \ Impossibility is when barriers arise which make

performance objectively impossible. It is very hard to claim under CL. The elements are that a)

subsequent to formation, b) factors arise which were neither foreseen nor reasonably foreseeable, c)

which render performance objectively impossible (no person could perform). REMEDY: If these

elements come into existence, both parties are immediately excused from performance and

performance is not unilaterally renewable by substitute performance. NOTE: If the risk was allocated,

then it was evidently foreseen, and impossibility does not apply. In such as case there will be no excuse

of performance risk allocation stands.



Excusable Non-performance, Impracticability \ The elements are 1) an unexpected contingency must

arise after formation, 2) the risk was not allocated to the party seeking excuse either by custom or

contract, 3) the consequence must have rendered performance objectively commercially impracticable

(nobody could perform). If the party seeking excuse did not purchase insurance that was available, the

excuse will not be granted. RESULT: Non-completed duties of the parties are excused and contract is

discharged. There is a quasi-contractual remedy available to protect restitution interests. No protection

of the reliance interest.

Excusable Non-performance, Frustration of Purpose \ When an unforeseen and unforeseeable event has

completely or almost completely destroyed the entire reason or purpose for which one of the parties

entered into the contract (the value of the other partys performance (renting the hall) has been totally

destroyed (is no longer needed)). RESULT: Non-completed duties of the parties are excused and

contract is discharged. There is a quasi-contractual remedy available to protect restitution interests. No

protection of the reliance interest.

Excusable Non-Performance, Illegality, i.e. impossibility \ When 1) the subject-matter of the bargain, or

2) participation by one or both of the parties, becomes illegal. This can result in a) making the contract

void (if illegality was prior to offer), b) precluding formation (if illegality occurred after offer but before

acceptance), or c) making non-performance excusable, i.e. impossibility (if illegality occurs after

acceptance).

Excusable Non-Performance under the UCC \ (NOT INCLUDED, pg 144 of Kaplan Outline book)

General Categories of Defenses \ 1) Defective formation (Indefiniteness and Mistake), 2) Capacity, 3)

Societal Prohibition (Illegality, unconscionability, adhesion), 4) Coercion/deception (duress, fraud), 5)Form. Also there are excusable non-performance defenses (Impossibility, Impractibility, Frustration of

Purpose, Material Breach).

Two more Categories of Defenses \ 1) Real Defenses a) there never was a contract, b) may be asserted

any time, e.g. ; 2) Personal Defenses a) voidable if asserted in a timely manner, b) must be asserted,

c) third persons cannot assert it, d) cannot be asserted against assignees i) without knowledge, ii)

without notice, e.g.

Formation Defense, Ambiguity \ Ambiguity means a word or phrase has more than one meaning.

Ambiguity arises as an issue where each party ascribes a different meaning to the ambiguous term. If

the ambiguous term is an essential term, then formation is precluded and there is no contract unless

fault can be prescribed to one of the parties. If fault can be prescribed, the contract remains in force per

the innocent partys interpretation.

Formation Defense, Mutual Mistake of the Parties \ Must go to the very heart of the exchange. It must

be a fundamental assumption of both parties regarding either 1) the subject-matter or 2) the rights of

the owner. The mistake must be discovered within a reasonable time following the execution of the



contract. If the above is true, the contract is rescinded, or cancelled, and neither party retains any rights

against the other. If the above is not true, then the contract will be enforced. Mistake as to what will

happen in the future is never a ground for relief.

Formation Defense, Unilateral Mistake \ Unilateral Mistakes are not immediate threats to formation,

but may become so. Two types of unilateral mistakes: 1) Mechanical miscalculations and 2) Errors of business judgment. Mechanical miscalculations only preclude formation if 1) the non-mistaken party

should have been aware of the mistake under an objective standard of reasonability, or 2) he was

subjectively aware that the bargain was too good to be true. The idea of the doctrine is to protect

commercially reasonable expectations, not to help people snatch up others mistakes, so it wont be

applied in the latter case. Errors of business judgment never preclude formation the contract stands.

Formation Defense, mistake in integration \ The secretary's error in typing $4,000 instead of $5,000

would be viewed as a mistake in integration, or a "scrivener's error." Reformation is available to cure a

mistake of this sort. Thus, if it can be determined that the parties intended that the final agreement

contain a sale price of $5,000, that is the price the manager will be required to pay.

Formation Defense, Mistake of Agent in Communication \ Same rules as if done in-person if

reasonable expectation arises in receiver, then the contract is binding. But if receiver should have

known (objective reasonable person), or did know, of the mistake, the sender (principal) may avoid

liability with a formation defense (real defense) or with a personal defense. But a personal defense

wont work if reasonable expectation arises because

Formation Defense, Illegality \ When 1) the subject-matter of the bargain, or 2) participation by one or

both of the parties, becomes illegal. This can result in a) making the contract void (if illegality was prior

to offer), b) precluding formation (if illegality occurred after offer but before acceptance), or c) making

non-performance excusable, i.e. impossibility (if illegality occurs after acceptance).

UCC, Illegality \ UCC-2-614: If an agreed-upon means or manner of payment fails because of domestic or

foreign governmental regulation, the seller may withdraw unless the buyer can provide a commercially

equivalent and legal substitute.

Defense, Illegality \ When 1) the subject-matter of the bargain, or 2) participation by one or both of the

parties, becomes illegal. This can result in a) making the contract void (if illegality was prior to offer), b)

precluding formation (if illegality occurred after offer but before acceptance), or c) making non-

performance excusable, i.e. impossibility (if illegality occurs after acceptance).

Defense, Duress (coercion) \ Duress is coercive force used or threatened to induce consent. Two types:1) physical, 2) economic. 1) Physical To victim or third party for purpose of overmastering the will of

the victim; Voids the contract with rescission as the remedy. 2) Economic Victim must show a) other

party was guilty of i llicit act or threat of illicit act against the victims property or business interests,

thereby creating pressure on victim, b) Pressure left victim with no reasonable alternative but to submit

to terms of other party. There is no economic duress for driving a hard one-sided bargain (e.g seller



desperately needs to sell house, offer 40%; compare to adhesion). REMEDY is to refuse to perform, or

rescission and restitution.

Defense, Fraud (deception) \ Three types: 1) Real Fraud, 2) Fraud in the inducement, 3) Fraud in the

execution. 1) Real Fraud does not even know contract is in contemplation (Real defense). 2) Fraud in

the inducement Consent is induced by lies or deliberate half-truths (Personal defense, REMEDY:Voidable). 3) Fraud in the execution agrees to one thing orally, signs a fraudulent written copy (There

is a duty to read the contract, REMEDY: courts wont allow recovery for this fraud.)

Defense, Unconscionability (Public Policy) \ A bargain that is so unfair or one-sided so as to threaten

important societal values. E.g. Penalty clauses (because contract remedies are about compensation not

punishment), Damage Limitation clauses (especially under UCC where not bargained-for, as in adhesion

contracts, because compensation for breach must be preserved for consumers), Disclaimer of

warranties (especially under UCC, because all products are implicitly guaranteed to be merchantable).

REMEDY: Simply sever the unconscionable clause.

Defense, Adhesion \ A take-it-or-leave-it proposition extended by a party in a superior bargaining

position to a weaker party who needs the subject matter. Usually a standard form contract. Not per se

unconscionable, but they arent bargains in the true sense of the word either. Must be grossly out of

line with market expectations (e.g. credit terms, price terms, collections), or seek to curtail standard

protections (unfair surprise:inclusion of undisclosed one-sided terms). REMEDY: Refusal to enforce

entire contract; sever or limit offensive clauses; put burden on dominant party to prove knowledge by

weaker party of clauses.

Defense, Public Policy \ Similar to illegality, looks to the subject matter or the parties participation. If a

court determines that the contract threatens the values or institutions of society, then their response

will be made to fit with the circumstances. REMEDY: Void, Voidable, or Sever the offensive terms.

Defense, Material Breach of other party \ If one of the parties materially breaches the terms of his or

her promise, the other party need not perform. REMEDIES:

Defense, Minority Contract \ Under the modern law of most states, an "infant" or minor - that is, a

person under the age of eighteen (18) - may enter into a contract; however, barring certain limited

exceptions(???), the contract is voidable at the option of the minor. The minor may, however, ratify the

contract upon reaching the age of majority. Thus, a minor who enters into a contract has the power to

disaffirm the contract. Upon exercising the right to disaffirm a contract, the minor is obligated to return

to the other party any goods received under the contract. Here, given that the student was only sixteen

years old when he entered into the agreement with the plumber for the sale of the vinyl record, the

contract was voidable at the option of the student. Because the student exercised his power to disaffirm

the contract, it cannot be specifically enforced by the plumber. As such, this answer is correct.

[What about a minority who enters into a fraudulent contract (where the minor instigated the fraud),

and minor sues other party for performance? Then other party may void the contract for fraud. And if

transaction closed and other party only realized fraud afterwards, and brought suit against minor?



Statute of Frauds, definition \ A legal doctrine which provides that certain categories of contracts will

not be enforced unless 1) they are in writing, and 2) signed by the party against whom enforcement is

being sought.

Oral Contracts \ Other than those outlined in the Statute of Frauds, Oral contracts are enforceable (if

they can be proven).

Statute of Frauds, MYLEGS \ Marriage (Marriage as consideration), Year (if it MUST go over one year, i.e.

there is no chance it will be less than one year in duration), Land (sale or transfer in interest of land),

Estates (Executor and Administrator agreements and Wills and Trusts as documents that wont be

performed within the promisors lifetime), Guarantee (or Suretyship), Sale of Goods ($500 or more,

unless an exception of either 1) must pay where performance on oral contract is completed 2) must

deliver on oral contract where goods are paid already paid for, 3) goods not suitable for resale are

enforceable on oral contract, 4) where between two merchants an oral agreement is made and a letter

of confirmation of terms is sent to one who knows or has reason to know of the oral agreement, and no

objection is made within 10 days.

Statute of Frauds, Consequences \ If the one party fails to satisfy the statute, the other party have have

a legal excuse not to perform. If a party being sued on an oral contract does not raise the defense in a

timely manner (in the responsive pleading), he or she waives it. Third parties cannot rely on the Statute

of Frauds as a defense.

Statute of Frauds and Promissory Estoppel \ If a party promises to reduce the contract to writing, and

the other relies on it, and then the obligated party both fails to reduce it to writing and breaches the

contract, some courts will apply promissory estoppels and allow the relying party to recover.

Statute of Frauds and Equitable Estoppel \ If the application of the Statute of Frauds will result in unjust

enrichment, then fairness requires that the application of the Statute of Frauds be estopped.

Statute of Frauds and Part Performance \ Part performance may be used as evidence of the allegedly

existing oral agreement in place of a signed writing. But the performance must unequivocally refer to

the contract and not merely the possibility of some other understanding.

Parol Evidence, Totally-Integrated Writing \ Parol Evidence is evidence of a prior or contemporaneous

agreement that is inadmissible because it would vary or contradict the terms of a totally integrated

(final, all-inclusive) writing. First, determine whether the writing is totally integrated that is, whether

the writing is intended by both parties to be a final, all-inclusive reflection of the agreement. Total

integration can be determined by 1) an integration clause so stating, or 2) extrinsic evidence. If it is

determined that the writing is not integrated, then it is may be varied or contradicted by any extrinsic

evidence the parol evidence rule does not apply. Second, if it is an integrated writing, determine

whether the evidence being proffered will add to, vary, or contradict the writing. If it does, it is parol



evidence and will not be permitted. Parol evidence may be used however to clarify ambiguities (but not

to create ambiguity).

Parol Evidence, cannot be used? \ 1) to add to, vary, or contradict the integrated writing, 2) to create

ambiguities (but it can be used to clarify ambiguities), 3) to clarify a term which is already defined within

the integrated writing.

Parol Evidence, can be used? \ 1) to prove trade customs or course of dealings between the parties, 2)

to show that the entire agreement was subject to the satisfaction of an oral or written condition

precedent before it could take force, 3) to offer proof of partial integration and 3a) if it is a partial

integration, to add to, vary, or contradict parts of the writing which are not integrated.

Parol Evidence, Partially-Integrated Writing and Collateral Agreement \ The conclusion that a writing is

only partially integrated invites the possibility that there was a collateral agreement to fill the gaps.

Upon a finding of partial integration, 4 hurdles must be overcome to introduce evidence of a collateral

agreement: 1) that the agreement is, in fact, collateral, i.e. of lesser importance in subject matter, than

the integrated writing, 2) that no term of the collateral agreement contradicts any provision of the

integrated writing, 3) that the subject of the collateral agreement is sufficiently distinct from that of the

integrated writing such that it would be natural that person in a writing frame of mind would not have

included it as part and parcel of a single bargain, 4) that the collateral agreement have all the elements

of an independent contract, including consideration.

Parol Evidence and Subsequent agreements \ Agreements that arise after the integrated writing are not

covered by the Parol Evidence Rule and are therefore admissible.

Conditions, definition \ A condition is a contingency that either 1) must be satisfied before the parties

are obligated to perform OR 2) the happening of which will extinguish one or more contractual

obligations. Parties are free to create whatever condition they like. No consideration is necessary so

long as condition is not illusory. Denoted by words such as upon condition provided that unless or

if.

Conditions vs. Covenants \ A covenant is what must be performed in order to discharge contract duties.

Failure results in breach. A condition determines when and if duties (which are defined in covenants)

must be performed. Failure results in no duty to perform. (Conditions must be outside the control of

the parties or become illusory; thus failure in a condition never results in breach.) If ambiguous whether

condition or covenant, covenant prevails.

Types of Conditions: Precedent, Concurrent, Subsequent \ 1) Precedent: A condition that one party will

not be bound to perform absent the fulfillment of the condition. 2) Concurrent: A condition that neither

party will be obligated to perform absent the mutual exchange of performances. Ideally the exchange

would occur simultaneously, but a) in cases where one partys performance takes more time, that party

must perform before the other is obligated to perform, b) in cases where one performance has a fixed



date, that party must perform before the other is obligated to perform. 3) Subsequent: A condition

which terminates an already enforceable duty or current requirement to perform. E.g. One party

declared that they would no longer be liable for continued performance if a certain condition occurs,

contingency on approved zoning as a multiple-year process.

Promissory Condition \ A condition which is in the control of the promisor (though the control is notabsolute or illusory). Such a condition implies the use of the best efforts of the promissor to satisfy the

condition.

Conditions of Satisfaction \ Two Types: 1) Personal Satisfaction and 2) Satisfaction of a Third Party. 1)

With personal satisfaction, there is a risk of an illusory contract. To avoid this, the courts imply a

standard of objective good faith a reasonable person standard wherever possible. Some Personal

Satisfaction clauses are truly personal a matter of taste, aesthetics, etc. These are upheld by the

courts despite the complete control of the condition-promisor. (Risk of the Bargain, which risk was

assessed by the other party). 2) With third-party satisfaction, the third-party must be truly neutral, and

make his decision based solely on the grounds stated in the contract, with good faith. If the third-party

acts in bad faith, (or in some courts, with gross error), the condition is excused and performance

required.

Satisfaction, Excuse, Prevention, or Waiver of Condition \ The only ways to get rid of a condition

precedent or concurrent is by 1) satisfying the condition (in construction contracts substantial

performance of the condition), 2) excusing the condition (both parties must excuse condition, then both

must perform), 3) excuse by prevention (when other party frustrates the satisfaction of the condition,

the condition is excused and the contract enforceable), 4) waiver (a voluntary relinquishment of a

known and appreciated right (covenant or condition) under the contract (usually by acceptance of prior

insufficient satisfaction or performance)). Once waived, cannot be renewed! Waiver vs Excuse?

Conditions and Estoppel \ If the advantaged party lets the other party know that a condition does not

need to be satisfied, and the other party relies on this representation, the other party will be estopped

from enforcing the condition.

Anticipatory Repudiation \ If a party makes it definitely, defiantly, unequivocally, and unyieldingly clear

that he will not perform as promised, the other party can immediately sue for breach of contract OR the

other party can wait until the due date of performance in hopes that the party still performs.

UCC and Anticipatory Repudiation \ If the repudiating party decides once again to perform, he may do

so unless 1) the aggrieved party has materially changed position in detrimental reliance on the

repudiation or 2) the aggrieved party has accepted the repudiation as final. The aggrieved party has a

duty to mitigate damages.

Adequate Assurance of Performance \ When reasonable grounds for insecurity arise with respect to

future performance, the concerned party can ask for adequate assurance of performance. If the other

party fails to give the requested assurance within a reasonable time, such a failure is considered a

repudiation, and the concerned party can cancel the contract.



UCC and Adequate Assurance of Performance \ UCC 2-609: When reasonable grounds for insecurity

arise with respect to future performance, the concerned party can ask for adequate assurance of

performance. Until the concerned party receives such assurance, he may, if commercially reasonable,

suspend any performance for which he has not received any agreed return. If the adequate assurance

of performance fails with respect to a will ingness and a capacity to perform, there is a material breach.

The assurance is measured by courts by looking to the nature of the duties and the reasonable

expectations of the concerned party Commercial standards.

Third-party Beneficiary, definition \ A third-party beneficiary is one who, during formation of a contract,

was intended by the parties to be a beneficiary of the contract. Motive is irrelevant. A third-party

beneficiarys rights must vest before the other parties can no longer modify or rescind the contract.

Rights vest when 1) the third party detrimentally relies on the promise, 2) the third party sues one of the

parties for failure to perform as promised, 3) the third party expresses consent to receive the

performance when the consent is requested by EITHER of the parties (cant be merely volunteered).

The third party may sue at law or in equity.

E.g. A delegator assigns his rights and duties UNDER A CONTRACT to a delegate. The non-delegating

party is a third-party beneficiary, and may sue the delegate upon breach under this theory (if he cannot

get him under the assumption of liability by delegation).

DEFENSES: 1) That third-party is not really a third-party beneficiary, or, 2) that contract is not

enforceable for whatever reason.

NOTE: Conditions must still occur before contract is legally enforceable.

Assignment, terms \ Assignor, assignee. Obligor is non-assignor, non-assignee party. Assignor is also

obligee.

Assignment, definition \ Assignment is the transfer of contractual rights (not necessarily duties, as per

delegation, though it is sometimes used this way) to another party. In general, rights are freely

assignable. It is common for rights for payment under a contract to be assigned. The assignor may

transfer these rights orally, by action, or by writing. The assignor must 1) intend to transfer all right, title

and interest 2) immediately in the present 3) to a clearly identified assignee. Partial assignment is

permissible 1) to others if to non-competing assignees, or 2) to partially retain and partially transfer the

balance.

Assignment, Obligor Obligations \ Whenever there is a valid assignment (all the elements of assignment

exist without risk to the non-assigning party), the obligor must perform to the assignee or be in breach.

If the obligor never received notice of the assignment, he has a valid defense for failure to perform, and

the assignee must go after assignor. There is still a valid assignment even without notice to obligor.



Assignment, future rights \ The assignor may assign presently future rights under a contract, so long as

he undertakes to fulfill the contract in good faith. Assignees take rights to a contract subject to the

satisfaction of the same conditions which existed with the assignor.

Assignment, Restraints on Freedom of Assignment \ The assignment which 1) materially alters the

contract duties of the non-assigning party (different time, place, or manner; thereby increasing the risk),or 2) otherwise materially expands the risk of the non-assigning party, is inoperative. Three types of risk

must be considered: 1) effect of assignment on conditions of the contract; 2) effect of assignment on

assignors performance of his duties after assigning his rights to assignee; 3) effect of assignment on the

non-assigning partys ability to perform. E.g. a personal service contract is not assignable to another,

requirement and output contracts are not assignable under CL (but are under UCC, so long as

assignment is reasonably proportionate to states demand or prior conduct).

Assignment, Assignment Provisions \ Provisions which prohibit assignments are presumptively limited to

prohibit only the delegation of duties. Only the clearest possible language can compel a court to

prohibit the assignment of rights, especially with the assignment of payments, because it is so unlikely to

be a significant burden.

Assignment, Loophole \ If there is a provision of non-assignment, and the assignor assigns the contract

to an unknowing assignee, and the assignee pays value for the assignment, then the innocent assignee

will hold a valid assignment despite the non-assignment provision. Whenever there is a valid

assignment, the non-assigning party must perform to the assignee or be in breach. But the non-

assigning party will have a cause of action against the assignor for breach of the covenant not to assign.

Assignment and UCC \ UCC 2-210(3): The right to damages for breach of contract may be assigned,

regardless of clause stating otherwise. UCC 9-318(4): Also, any term purporting to limit the assignment

of the payment of money is invalid.

Assignment, Revocable and Irrevocable \ Any assignment made for consideration (where the assignee

has paid value) is IRREVOCABLE. An oral, gratuitous assignment is REVOCABLE. An oral, gratuitous

assignment is revoked 1) by notice to the assignee or to the non-assigning party, or 2) by creating a

subsequent, conflicting assignment (constructive notice).

But even an oral, gratuitous assignment may become IRREVOCABLE when 1) the assignment is put in

writing and delivered to assignee, 2) delivery of symbolic document to assignee takes place (e.g. stock

certificate), 3) assignee changes position in detrimental reliance (estoppel), 4) the assignee obtains

performance from the assigning party.

Delegation of Duties \ A delegation of duty begins with one of the contracting parties wanting another

person to perform his or her duties under the contract. They may delegate with or without an

assumption of primary liability. Without assumption: Requires 1) clearly identify the intended delegate,

and 2) express consent to the delegate that the delegate perform all or part of the duties owed. With

assumption: Requires 1) that delegator bargain for a promise from the delegate and 2) support that

promise with valuable consideration. The language I hereby assign my contract is recognized by R2K



the non-breaching party must mitigate damages. The non-breaching party may sue for loss of bargain

(Expectation?) damages caused by the breach. Or the non-breaching party may sue for an equitable

remedy of specific performance or injunctive relief.

Breach of Contract, Minor or Partial \ A minor or partial breach does not seriously disappoint the

reasonable expectations of the non-breaching party. The contract remains in effect because there hasbeen substantial performance, and the non-breaching party must still perform. Some courts allow the

non-breaching party to suspend performance to incentivize the breaching party to come into line.

Having performed, the aggrieved party may sue the breaching party for the difference in value between

the contract performance and the actual performance. What kind of damages is this called?

Expectation?

Breach of Installment Contracts \ The law will usually isolate the breach to a single installment rather

than find a material breach of the whole contract. Unless the court finds a material or total breach of

the whole contract, the non-breaching party can sue to recover damages only for the failed installment,

while the balance of the contract remains in effect. To find a material breach of contract, the non-

breaching party must be prepared to show that the consequences of the missed installment(s) have

defeated expectations with respect to the entire bargain, or severely hampered his ability to carry out

his own contract obligations. The policy of CL and UCC is to keep an installment contract alive. The non-

breaching party has a duty to mitigate harm and courts today impose a duty to cooperate in curing the

defect. NOTE: A non-breaching party may waive a single installment of the others performance.

UCC and Installment Contracts \ Skipped, pg 150, Kaplan Outline book

Breach of Contract for Personal Services \ If employer breaches an employment contract, the employee

must mitigate the damages by seeking out substantially similar employment. Substantially similar

means of similar pay-grade, similar nature, and similar location (if desired). The employer has burden toprove that employee ignored replacement opportunities.

UCC and Mitigation of Damages \ skipped, pg 151

Remedies in equity vs in law \ Remedies at law are usually money damages aimed at making a party

whole. Equitable remedies are sought in those cases 1) when money damages will not make a party

"whole" in the eyes of the law (special performance or injunction), i.e. does not produce a just result, or

2) where the other party has been unjustly enriched (may be money damages). E.g. if Joseph cannot

prove that there even was a contract, but can prove that the other party has been unjustly enrichedwhile he has been impoverished, he has a right to a remedy in equity.

Damages, Goal \ To compensate non-breaching party, not to punish the breaching party, regardless of

moral blame. Thus, punitive or exemplary damages are not recoverable.

Damages, Interests \ 1) Reliance Test (before performance): The non-breaching party has not

performed, but has incurred expenses and foregone opportunity in reliance on contract. Goal: Restore



non-breaching party from unjust enrichment incurred from expenses and foregone opportunity made in

reliance (not formation expenses, however). 2) Restitution Interest (after performance): The non-

breaching party has wholly or partially performed. Goal: Restore non-breaching party from unjust

impoverishment incurred from performance . (If breaching party has been unjustly enriched?). 3)

Expectation (Compensatory) Interest: The non-breaching party need not necessarily have performed or

incurred reliance expenses, and there need not be unjust enrichment or impoverishment. Goal: Recover

the disappointment of expectation of future wealth that the non-breaching party would have received

had the contract been executed loss-of-bargain measure.

Damages, Reliance \ Remedy at law. Used where expectation damages are too speculative. Can never

be more than expectation damages would be. Goal: To restore the non-breaching party to the position

he would have occupied had the contract never been formed. The damages must be generally or

specially objectively foreseeable.

Damages, Restitution \ Distinct concept from contract law. Can be used where no contract exists, where

contract is unenforceable, or where there has been breach of the contract. Restitution is figured by one

of the following two formulae: a. Substantive - the recapture of a benefit (performance) conferred on

the D. by the Pl. through which the D. has been unjustly enriched (and Pl unjustly impoverished?). b.

Remedial - recoveries that are measured by the amount of a D.'s unjust enrichment, according to its

value to him. The latter is Kaplans default, but courts are split on what to do if the value to D is less

than the cost to P. R2K gives the judge the choice.

Damages, Loss-of-Bargain, Expectation Measure of Money Damages \ Remedy at law. Goal: To restore

the non-breaching party to the position he would have occupied had there been full performance, i.e.

expectation interest, i.e. enough to buy substitute performance. This is figured by the following

formula: promised condition - present condition = damages. The damages must have been generally or

specially objectively foreseeable, i.e. a consequence of the damages. The damages must be reducible to

a specific dollar amount.

Rescission \ the non-breaching party may simply rescind the contract in the event of a material breach,

and then pursue a remedy in quasi-contract to recover any performance it had rendered.

Damages must be a consequence of Breach (foreseeable) \ General objective foreseeability is self-

explanatory any consequence that the reasonable person would have foreseen stemming from the

particular contract and circumstances. Special objective Foreseeability is where special needs and

elements of damage were communicated to the breaching party during formation thereby increasing

the scope of foreseeable harms. This can greatly increase potential damage rewards in the event of breach.

Damages, nominal \ nominal damages may be awarded where a breach is shown but no actual loss is

proven.

Equitable intervention (Expectation interest fulfilled in equity) \ Where the market provides

replacement opportunities, the presumption is that remedy at law is adequate (the presumption may be



rebutted). Where the market cannot provide a substitute, because the subject-matter is unique, or

there is no market for the subject-matter, the inadequacy of the legal remedy is presumed. If the equity

court does accept jurisdiction it may 1) decree specific performance, or 2) enjoin (injunctive relief) the

breaching party that it cannot sell to anyone else (does this if there are enforcement difficulties).

Performance of Breaching Party Towards Damages \ The performance of the breaching party prior to itsbreach may be used to offset the non-breaching partys claim for loss of bargain.

Stipulated Remedies Provision \ Parties can agree within the terms of the contract to a correct measure

of damages, called liquidated damages, so long as 1) they agree that a loss of bargain remedy would not

be available, and 2) the provision fairly compensates the non-breaching party and does not penalize the

other.

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