Common law or UCC? (if UCC, are they merchants?)

Contract formation problems

* Offer? (had essential terms - parties, subject matter, price, time for performance?) [only really need a price in a common-law sales contract] [discuss outputs ("all, only, exclusively, solely"!) contracts here]

* Acceptance?

* Consideration? Or substitute?

* Statute of Frauds?

* Defenses? (impossibility, impracticability...)

Contract performance problems

* Terms of contract? (express or implied conditions? parol evidence issue? 3rd party issues?)

* Has duty to perform matured? Is it discharged?

* If breach, is it minor or material? ("receive substantial benefit of the bargain?")

Remedies

* Remedies if contract found, Remedies if not found...

* Foreseeable?

* Certain?

* Could mitigate?

* [Mention incidental and consequential ("must be foreseeable at time the parties entered into K") damages]

* Other defenses? (laches? hardship?)

Special UCC rule allowing merchants to hold out an option, w/o consideration.

Requires:

• Party is a merchant
• Offer to buy or sell goods
• Signed, written promise to keep the offer upon (up to 3 months) [if not a good, no such time limit]

A way to satisfy the Statute of Frauds

After an oral agreement, if one sends:

* a signed writing with a quantity term

* and the other fails to respond w/in 10 days of RECEIPT (remember, this is not an acceptance), then Statute is satisfied!

• Is there an acceptance? (Yes, if doesn't make new terms a condition of acceptance)
• Is the additional term a part of the contract?
•      At least one is not a merchant? Then merely a proposal to be separately rejected or accepted
•      Both are merchants? Then additional term is part of contract UNLESS (1) it materially changes offer OR (2) offeror objects to the change w/in Rz time

Consequences of part performance in different contexts:

1. in response to an offer for an executory contract?

2. in response to an offer for a unilateral contract?

3. after an oral contract has been formed for goods greater than $500?

1. Acceptance (implies promise to perform)

2. IF beyond "mere preparation," then makes offer irrevocable for Rz time, BUT it's not an acceptance!

3. Statute of Frauds problem.

Buyer part performing = Statute is satisfied to the extent of part performance

Seller delivering only some of goods = Statute is satisfied to the extent of part performance, IF multiple items...

     - if single item or specially manufactured good w/ a "substantial beginning," Statute is fully satisfied!

Before becoming a valid acceptance, notice to offeror may have been required.

Need to notify IF:

1. Offer requires it, OR

2. Offeree has reason to believe offeror won't learn of the performance/acceptance (e.g. far away)

A loans $1,000 to B, due on December 2.

On December 3, B apologizes to A and asks if he can still pay the balance. A agrees, and B pays $1,000. Valid?

YES - consideration was given, and it's a valid modification. In exchange for allowing B to pay less, B paid in advance.

Contract fulfilled.

There'd be a problem if loan was both past due and undisputed.

1. Promise

2. Rz and foreseeable reliance

3. Detriment to promisee

4. Enforcement necessary to avoid injustice

Surety = promise to answer for (GUARANTEE) the debts of another.

Also, promisor must NOT be the beneficiary.

This is a promise we don't trust - it's within the Statute of Frauds.

A contract for goods over $500 is validly modified. Does the modification need to be in writing?

What if the original contract required that all modifications be in writing?

If new deal falls w/in Statute of Frauds, then need a writing.

If original contract required written modifications...

then [if goods contract / Article 2] requirement holds, must be in writing.

BUT if common law - ignore contract language, go by default rule above

How do we interpret terms of the agreement, if:

Mutual mistake of material fact (and what are the requirements?)

Unilateral mistake of material fact (and what are the requirements?)

MUTUAL MISTAKE OF MATERIAL FACT:

* Both parties mistaken

* Basic assumption of fact

* Materially affects the agreed exchange (involving something's nature, NOT its $ value)

* Not a risk that the party trying to get out of deal bears [we place burden on land sellers of land to know if there are valuable ores underneath]

Remedy: reflects neither party's intention. reform the contract to reflect their intent

UNILATERAL MISTAKE OF MATERIAL FACT

* Courts reluctant to allow excuse

BUT if other party had reason to know of mistake (and it would've affected decision), then excuse unknowing party

CONTRADICTING THE WRITTEN DEAL

Excluded, unless to correct a clerical error (mistake in integration) [mutual mistake fact patterns]

GETTING OUT OF THE WRITTEN DEAL (show it's invalid)

YES, for limited purpose of finding a defense to enforcement (e.g. misrepresentation, fraud, duress...)

EXPLAINING TERM IN THE WRITTEN DEAL

If ambiguous term, then YES

ADDING TERM TO THE WRITTEN DEAL

If writing a partial integration OR the terms would normally be in a separate agreement, YES

If a complete integration, NO (highly persuasive: "this is the complete and final agreement")

Consider in this order:

#1. Agreement's terms

#2. Breaching party is liable (even if unrelated to damage)

#3. When delivery is by a common carrier who is not the seller: Risk of loss shifts when seller completes its duties (shipment or destination contract? FOB __?)

#4. If seller is a merchant, then risk shifts when buyer receives. Otherwise, it's when seller tenders (does what's needed)

What warranties apply in a sale of goods?

Does seller have to make these warranties?

Express warranties, and these 2 implied warranties

Implied warranty of merchantability

* IF merchant that deals in goods of that kind

* Goods are fit for the ordinary purpose for which such goods are used

Implied warranty of fitness for a particular purpose

* Buyer has particular purpose

* Buyer is relying on seller to select suitable goods

* Seller has reason to know of purpose and reliance

Seller can disclaim IMPLIED warranties with:

* CONSPICUOUS language of disclaimer, mentioning merchantability, OR

* "as is" or "with all faults"

What are buyers options if doesn't receive Perfect Tender? What are 2 exceptions?

When can a seller cure?

Various damage rules for sale of goods?

1. Seller breaches (gives crap), buyer keeps the goods

2. Seller breaches (doesn't deliver), seller has the goods

3. Buyer breaches (doesn't give $), buyer keeps the goods

4. Buyer breaches (doesn't buy), seller has the goods

1. Seller breaches, buyer keeps the goods:

Difference btwn:

value of goods delivered and

value they would've had if no breach

2. Seller breaches, seller has the goods

(Cover) Difference btwn:

contract price and

market price at time of breach (or price of actual cover)

3. Buyer breaches, buyer keeps the goods

(Gimme the money) Contract price

4a. Buyer breaches, seller has the goods

("Seller's cover") Difference btwn:

contract price and market price at time and place of delivery (or resale price)

4b. BUT if a lost volume seller (can provide as many goods as it can sell), he has "lost volume" - above may be inadequate

List price less cost to dealer

"Related damages, not typical for this type of breach, that a Rzable person would have foreseen at the time of contract formation."

Builder is building house for Owner, and uses super-shoddy materials. Result?

Regarding the applicable rule, what is its exception?

Builder committed a material breach by not delivering "substantial performance." Owner is excused. (restitution possible though)

If it were a divisible contract, then measure substantial performance for each divisible part. Distinguish divisible contracts from progress payments - must be some relationship between part of performance done and the amount of payment.

What are the elements of anticipatory repudiation?

What are a contractual party's remedies in the event of anticipatory repudiation?

How can repudiator retract the repudiation?

Anticipatory repudiation

* Unambiguous statement or conduct

* That party will not perform

* Made prior to the time performance was due

This is breach!

Nonbreaching party can:

* Not perform - he or she is excused.

* Can suspend performance and until receives adequate assurance.

* Can sue now!

Repudiating party can retract, if:

* No material change in position of other party

What are the rules regulating how contracting parties can change one party's obligations?

Accord and Satisfaction... and Modification

Accord and Satisfaction

* Accord: agreement by the parties to accept a different performance (alternative) ("if... then") (e.g. if you do this other thing for me, then you don't have to pay back debt)

* Satisfaction: performance of the accord

Compare to Modification

Accord offers an alternative way to fill obligation - Modification extinguishes the previous obligation)

* Beneficiary knows of contract, AND EITHER:

1. Brings suit to enforce the promise

2. Materially changes position in justifiable reliance on contract

3. Assents in manner invited or requested (incl. being told and not opposing)

The 2 kinds of contractual language restricting the right to assign rights in a contract?

Similar contractual language restricting the right to delegate duties?

"Prohibiting" assignments (favored) ['you can't do this']:

Assignor has right to assign, but not POWER to assign. Assignee who doesn't know a/b prohibition can still enforce.

"Invalidating" assignments ['assignments are void']:

'Assignor' has neither the right nor the power to assign. Oblivious 'assignee' CANNOT enforce

If K prohibits delegating duties, this restriction is enforced!

Do you need consideration to assign rights to a contract?

Are such assignments treated differently?

No.

Gratuitous assignments are the only ones that can be revoked.

Assignments for consideration are irrevocable, and can no longer sue obligor. Also, assignee can sue both you and the obligor.

Only the promisor.

BUT if it is a creditor beneficiary, can sue promisee for preexisting debt (this right existed already).

Rules regarding multiple gratuitous assignments?

How about multiple assignments for consideration?

Gratuitous:

* Assignee with:

     - a writing

     - some indicia of ownership

     - Rz, foreseeable, and justifiable reliance

* If not, then last assignee

For consideration: (is kinda like "race-notice" rule)

* FIRST assignee who:

     - didn't know of earlier assignment, AND

     - is the first to obtain payment, judgment, novation, or indicia of ownership

* If not, then first assignee

What rights and obligations does a delegatee have?

What about the obligee?

*IF* received consideration, can sue delegator, and has duties to obligee.

Obligee can always sue delegator. Now, delegatee is primarily liable, and delegator is secondarily liable.