contracts2

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***How to determine which type of K? Shipment or destination: usually shipment K. Look for FOB (free on board). If FOB followed by city where S is, means shipment K. Any other city means destination K
What is a delegation?:: party to a K transferring work under that K to 3rd party. **Note, can make an assignment and delegation at the same time (i.e. gives rights AND delegate duties!
Damages Rules for Sales of Goods:: who breached, who has goods
bids are offers from subcontractors.: do not accept when use in contract BUT does not count as acceptance, does not have to accept those 2 parties as vendors!!!
Insecurity (look for in sales of goods Ks): If words or conduct of one party give reasonable grounds for insecurity, other can demand adequate assurance and if it is commercially reasonable can suspend performance until gets adequate assurance
LESS avoidable damages: damages that could have been avoided w/o undue burden on P
B breaches, S has goods:: contract price MINUS mkt price at time and place of delivery OR contract price MINUS resale price (provable lost profits in some situations) ***Lost profits for lost volume seller: store Ks to sell clothing to C for $1000. B breaches, S sells clothing to another person. **can recover provable loss!!!!
Parties Words and the Parol Evidence Rule:: (triggering facts; written K that is final agreement + oral stmt made at time the K was signed OR earlier oral or written statements by the parties to the K)
S breaches, S keeps:: mkt price at time of discovery of breach MINUS contract price OR replacement price MINUS contract price
how do 3rd party beneficiary interest vest?: one of ways 3rd parties interests vests is under detrimental reliance!. memorize this if one part of K breached, other part is suspended- no requirement to give anything to 3rd party if had not breach, have rights as 3rd party beneficiary b/c of detrimental reliance if 3rd party beneficiary didn't know about rights, have not vested.
right to modify K w/o 3rd party permission?: YES have right to modify K w/o 3rd party permission
Effort to cancel or modify when 3rd party beneficiary?: Test is whether 3rd party KNOWS of and has relied on or assented as requested. If so, rights vested and K can't be canceled or modified w/o consent
A.R. can sue BEFORE date due: if executory on one side (still something to do like deliver deed)
Contradicting the written deal,: NO P.E. w/ exception. Regardless of whether complete or partial. Exception: mistake in integration (i.e. mistake in reducing to writing): evidence about earlier agreements that contradict is admissible
Assignment of rights/delegation of duties.: Delegation- added AFTER contract. 2 simple rules: 1, when rights assigned, assigning party can receive NO FURTHER BENEFIT once you assign right, can never sue for payment when you assign right to receive payment, but continue to do work, can sue you for K breach (i.e. using wrong paneling) 2, when rights delegated, delegating party remains 2ary liable. Nicholls has right to receive payment, CAN sue delegator, they remain 2ary liable.
Reclamation:: right of unpaid seller to get goods back 1) buyer must be insolvent at time received 2) S demand return w/in 10 days of receipt. 3) B still has goods
K to become distributor (exclusive distributorship): is NOT a K for sale of goods, Art 2 does not apply!
Excuse by Reason of a Later Contract:: Rescission (cancellation): is performance still remaining? If YES: rescission valid, can't later recover If NO: Rescission NOT valid, can recover
Risk of Loss: Arises when k formed, before B receives goods, goods are damaged or destroyed AND neither B nor S is to blame.
Explaining term in the written deal.: again, regardless of whether complete or partial, can admit evidence of earlier agreements to resolve ambiguities in written K
ID 3rd party beneficiary prob:: 2 parties contracting w/ intent to benefit 3rd party 3rd party beneficiary NOT party to K
FOUR major areas to know for Art 2: 1, shipment of nonconforming goods. Most popular area. normally shipment = acceptance + breach, except if there is letter of modification. if accept nonconforming goods- NO DAMAGES for remaining shipment (i.e. if only sent 40 and had to get 60 more at higher price, no damage recovery for that) 2, battle of forms look for changed terms that are so significant that change whole deal 3, K modification w/o consideration under Art 2, no consideration necessary CAN MODIFY but MUST BE in WRITING!!!! 4, merchants
Contractual Limitations on Warranty Liability: 1) Disclaimer: eliminates IMPLIED warranties **express warranties CANNOT be disclaimed! Disclaimed by either: conspicuous language OR "as is" or "with all faults" 2) Limit of remedies: does NOT eliminate warranty, simply limits or sets recovery for any breach of warrant. (ex: warranty liability limited to replacement parts) possible to limit express general test is unconscionability prima facie unconscionable if breach of warranty on consumer goods causes personal injury
Rejection of Goods:: 1) distinguish rejection of offer from rejection of goods. ex: S offers to sell B 120 green widgets for $1,200. B says hell no. NO contract! 2) if seller does not meet perfect tender std, B has option to (1) retain and sue or (2) reject all or (3) reject any commercial unit and sue **limited by cure, or installment K or acceptance
repudiate offer-: can recover incidentals plus contract price- mkt or resale price
PLUS foreseeable consequential (special) damages:: damages arising from Ps special circs. recoverable ONLY IF D had reason to know AT TIME of contract
Delivery obligations of S of Goods if Delivery by Common Carrier (depends on type of K): Shipment K: seller completes delivery obligation when 1) gets goods to common carrier 2) makes reasonable arrangements for delivery 3) notifies buyer Destination K: seller does not complete until goods arrive where buyer is
Excuse by reason of other party's Anticipatory Repudiation:: A.R.: unambiguous stmt or conduct indicating: 1) will not perform 2) made prior to time that performance was due
Warranties of Quality: Express: Express: words that promise describe or state facts or use of sample or model vs more general sales talk. all steel; guaranteed to operate for 2 yrs, S showing B a sample= express. top quality= NOT EXPRESS
What if 3rd party does not perform?: delegating ALWAYS remains liable. Delegatee liable ONLY IF receives consid from delegating party
Excuse b/c other guy's Improper Performance: Common law and material breach rule Art 2 and perfect tender rule: 1) damages can be recovered for ANY breach 2) Only a material breach excuses performance 3) whether breach is material is a fact ? 4) If subst performance then breach IS NOT MATERIAL 5) Some examples:. P contracts to paint 10 apts for $10,000, breaches after painting 3. P sues O for payment, O is excused! (less than half is NOT substantial) BUT, if paid per apt, right to recover for 3 that he did paint (divisible K)
What is effect of AR?: Excuses performance of other party. Generally, gives rise to an immediate claim for damages: **BUT NOT immediate, if work already done. (if finished, NO RIGHT to recover until AGREED DATE in K) Can be reversed or retracted. Duty to perform reimposed, but performance can be delayed (if no material change in position by other party)
quasi K (vs promissory estoppel): quasi k used in cases of unjust enrichment
Assignment of Rights:: Person Trying to Enforce a K He/She did NOT MAKE:
ID 3rd party beneficiary fact patterns.: at time of formation, there are 3 parties in contract itself!! Focus in on: when do 3rd parties rights vest?? b/c until they vest, they have no rights at all under K distinction between creditor and donee beneficiary!!!
3rd party beneficiary-: in K VS assignment transfer of rights, NOT in K
Requirements for Assignment: generally, consideration NOT required. but gratuitous assignments can't be watch for present assignment and not promise to collect and pay or promise to assign
What duties are delegable:: Generally, contractual duties are delegable Permitted UNLESS K prohibits delegations or prohibits assignments OR K calls for very special skills OR person to perform K has a VERY SPECIAL reputation note: even if major league baseball player delegates to another player, NOT OK!. must be novation (mutually agreed upon)
3rd party beneficiary, no right beyond what original King parties have,: so if one breach, out of obligation to any 3rd parties
Restitution Interest:: pay P by putting D in same economic position as if K had never happened (focus on what D GOT!). Ex: K btwn P and O to paint O's house for $1000. P anticipates $200 profit, uses $100 of paint. P can show that value of paint work is $150. damages: $150
3rd Party Beneficiary: Person Trying to Enforce a K He/She did NOT MAKE:
Multiple assignments: all gratuitous assignments: counter-intuitive "last in time rule" assignments for consideration: generally, 1st assignee for consideration wins Exception: very limited. later takes priority ONLY IF does not know of earlier assignment, AND is 1st to obtain payment, judgment, novation, or indicia of ownership
FOUR RoL rules (go through in order): 1) Agreement: agreement of parties control *if no agreement, look for... 2) Breach: breaching party liable for uninsured loss EVEN THOUGH breach is unrelated to prob (i.e. 2 wks late in delivering) *if no breach, look for 3) Delivery by common carrier: other than seller. RoL shifts from S to BN at time that the S completes delivery obligations (shipment K: Bs prob) 4) No agreement, no breach, no delivery by carrier: **determining factor is whether the SELLER is a merchant (buyer is IRRELEVANT) RoL shifts from Merchant S to B on B's receipt of goods (buyers physical possession) RoL shifts from non-merchant S when he/she tenders goods
Novation (substituted person): Novation: agreement between BOTH parties to an existing K to substation of new party Who is liable? excuses performance of party who is substituted or replaces vs delegation, which does not require agreement of both, does NOT excuse
K provisions regarding damages (i.e. liquidated damages): will be validity issue. concern is whether provision is too high. damages difficult to forecast at time K made and provision is a reasonable forecast
Standard for satisfying express condition: general rule: strict compliance w/ conditions!!!!! (vs immaterial improper performance)
Getting out of a written deal.: regardless of whether complete/partial, ct not prevented from admitting evidence of earlier words for lmted purpose of whether there is defense such as misrep, fraud, duress
not accepting offer at very last minute-: fall back on PRIOR DEALINGS of parties. failure to reject w/in reasonable time = acceptance
Rights of good faith purchaser in entrustment:: good faith purchaser from 3rd party cuts off rights to original owner! (vs if someone steals your watch, rather than you entrusting it to them, then you can get back from BFP)
Accord and Satisfaction (substituted performance):: Accord and Satisfaction: ? will have agreement by parties to an already existing obligation to accept a different performance in satisfaction of the existing obligation. (ex: deliver widgets THEN $1000 debt excused) Effect: if new agreement (accord) is performed (satisfaction), then performance of original is excused if accord is NOT performed, then party can sue on either the original obligation, OR accord (not both)
Installment Sales Contracts:: REQUIRES or AUTHORIZES: 1) delivery of goods in separate lots 2) to be separately accepted. B right to reject installment only if substantial impairment (really bad wrong- no cure)
PLUS incidental damages: (costs incurred in finding replacement perf- ALWAYS recoverable
Warranties of Quality: Implied: 1) Implied warrant of merchantability: KEY FACT: seller is a MERCHANT (= deal in goods of that kind for these purposes) Warranty: goods are fit for ordinary purpose. i.e. buy car from jewelry store, no implied warrant!!! 2) Implied warranty of fitness for a particular purpose: KEY FACT: b has particular purpose; b relying on seller to select suitable goods; S has reason to know of purpose and reliance Warranty: goods fit for particular purpose.
Acceptance of the Goods:: 1) Effect of acceptance: CANNOT LATER REJECT. 2) Effect of payment: payment w/o opp for inspection is NOT ACCEPTANCE buy something online, pay w/ cc. has not accepted when shipped. 3) Look for B keeping goods w/o objection!
Limitations on assignment K provisions that prohibit and invalidate: 1) cts favor assignability of K rights, reluctant to enforce 2) Turns on whether: prohibits or invalidates. Prohibits: takes away right to assign, NOT power to assign ("rights hereunder are not assignable") SO assignee who does not know can enforce Invalidates: takes away right AND power ("all assignments are void"), so assignee CANNOT enforce
Certainty limitation:: fact pattern involving new business or new business activity.
B breaches, b has goods:: CONTRACT PRICE
Modification (substituted agreement).: Agreement by parties to an existing obligation to accept a different agreement in satisfaction of existing obligation (ex: deliver widgets INSTEAD of paying $1000 that owes) CANNOT recover on original
Cure:: S sometimes given a 2nd chance. 1) S's reasonable ground to believe would be OK: look for prior deals (judgment call) 2) Time for performance has not yet expired (more likely to see this)
catalog sent in response to specific inquiries including deliver terms: = offer
"reduce agreement to writing": tells you that does not have to be in writing AND that THERE IS A VALID binding oral contract.
Nonmonetary Remedies:: 1) SP 2) Reclamation
can recover actual or liquidated damages,: NOT both
Revocation of Acceptance of the Goods:: in lmtd circs, B can effect a cancellation by revoking acceptance of goods. Requirements: 1) Noncomformity substantially impairs value 2) Excusable ignorance of grounds for revocation or reasonable reliance on S's assurance of satisfaction 3) Revocation w/in reasonable time of discovering noncomformity Example: sleeping bag that is supposed to be insulated bought in July
Vocab:: 1) integration: written agreement that ct finds is final, triggers P.E.R 2) partial integration: written and final but not complete (usually not right answer) 3( complete integration: written and final and complete (again, usually not right answer) 4) merger clause: "this is complete and final agreement" highly persuasive but NOT CONCLUSIVE 5) parol evidence: words of parties before integration oral or written 6) reformation: equitable action to modify written K to reflect actual agreement
S breaches, B keeps goods:: FMV if PERFECT MINUS FMV as delivered
Expectation examples: Ex: K to paint house for $1000 (pays in advance). Painter breaches, has to pay another $1400. damages: $1400 Ex: P contracts to paint O's house for $1,000, payable when complete. P anticipates making $200 profit from K. O breaches after P started work and used $100 of paint. Measure of damages: $300! Ex: S Ks to sell blackacre for $100,000. S breaches before B pays. FMV of blackacre is $120,000. damages: $20,000
look for mutual mistake in K bids-: if accept even though know there is a mistake, considered on notice
Delegation of Duties:: Disputes Arising from a Person's Performing a K she did not make:
Defenses under 3rd party beneficiary:: if 3rd party sues promisor, promisor can assert any defense that he would have had if sued by promisee
Right of Assignee: 1) CAN recover from obligor. 2) Assignor for consideration, CANNOT recover from obligor. 3) Obligor has same defenses against assignee as it would against assignor. . 4) When obligor knows of assignment, payment to assignor no longer effective. implied warranties of assignor IN an assignment for value
look for modern trend re: preexisting duty.: Majority rule is that can't recover b/c already had preexisting duty BUT modern trend: preexisting duty where duty owed to 3rd person
Who can sue whom under 3rd party beneficiary?: 1) beneficiary can recover from promisor (person making promise, i.e. insurance co.). 2) promisee (person who obtains promise that benefits, i.e. who took out ins. policy) can recover from promisor. 3) donee beneficiary CANNOT recover from promisee 4) creditor beneficiary (prior obligation) CAN recover from promisee BUT ONLY on pre-existing debt.
Common law:: bars assignment that substantially changes duty of obligor. 1) assignment of right of payment: NEVER substantial change 2) assignment of right to K performance: usually substantially changes
Adding to written deal (complete/partial matter here!!): evidence of earlier agreements as source of consistent, add'l term NOT ok UNLESS written agreement is partial and add'l terms would ordinarily be in separate agreement.
how can condition be excused?: 1) good faith/avoidance of forfeiture. 2) waiver/estoppel: estoppel based on person protected by condition before conditioning event to occur and requires reliance. waiver based on stmt by person protected by condition AFTER conditioning event was to occur does not require reliance waiver ex: B contracts to build office building for O. K provides for monthly progress payments, conditioned on certificate. O says B not necessary to obtain certificates, but refuses to make progress payment: this is excuse by reason of estoppel, waiver RELIED UPON
Specific performance/injunction:: equitable remedy contracts for sale of real estate: land is special!. contract for sale of unique goods. contract for services: NO specific performance! (possible injunctive relief)
Perfect Tender:: 1) applies ONLY to sales of goods 2) means that S's performance must be perfect: perfect goods, perfect delivery 3) less than perfect tender by S gives buyer option of rejection
Excuse by Reason of a later, unforeseen event:: Requirements: 1) something that happens after K formation but before completion of K performance 2) That was unforeseen 3) AND that makes performance impossible or commercially impracticable or frustrates purpose of performance (ALL TURNS ON THIS)
**6 Sales of Goods Performance Concepts: 1) perfect tender. 2) rejection of goods. 3) cure. 4) installment sales contract. 5) acceptance of goods. 6) revocation of acceptance of goods
look for detrimental reliance on subcontractor bid,: legally held to offer.
Conduct and Course of Performance:: conduct can be source of K terms. 1 of 3 forms (in order). 1) Course of performance: same people, same K (i.e. installment K). 2) Course of dealing: same people, different but similar contract. 3) Custom and usage: different but similar people, different but similar K
mailbox rule: does not apply if offer says acceptance not effective until received
Assignment:: transfer of rights under a K in 2 steps: 1) K between only 2 parties; and 2) one of parties later transfers rights under that K to a 3rd party assignor: transfers rights; assignee: not party to K, gets assignment; obligor: other party
**common law: counterpart in common law (to perfect tender): is substantial performance
favorite fact pattern. agreement in writing to repay debt. doesn't pay, then after SoL says "if you pay me $600, I will forgive.": technically no consideration BUT court might find "moral consideration" for 2nd agreement.(memorize this- was a debt, barred b/c of SoL, then promise to pay lesser amount- that WILL BE enforceable (lesser) b/c of moral consid)
minors can DISAFFIRM: (look for this word- this is what discharges liability)

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