1st: Was there an OFFER?

2nd: Was the offer terminated or withdrawn?

3rd: Was the offer ACCEPTED?

Generally: Offers can be revoked any time BEFORE acceptance.

EXCEPTIONS: Option, Foreseeable reliance, (MS) starting to perform in a unilateral K, (UCC) Firm Offer

• Timing: Revocation effective upon RECEIPT.

• promise to keep an offer open
• UCC: Irrevocable in sale of goods when made by merchant in signed writing
  
  • 3 month time limit

Multi-state: YES, consideration required.

NY: No consideration required if promise to not revoke is made in a signed writing.

• CL: constitutes rejection + counteroffer
  
  • Mirror Image Rule -- acceptance must mirror the offer
• UCC: constitutes acceptance
  • whether addt'l terms included only if:
    • BOTH parties are MERCHANTS
    • Term is NOT a material change, and
    • No objection w/i reasonable time
      

Death of a party prior to acceptance - EFFECT on offer

• Revocable offers = REVOKED
• Irrevocable offers = not revoked, may still be accepted

Method of ACCEPTANCE

• Offeror controls
• Starting Performance
  • Unilateral contracts: NOT acceptance... only performance = acceptance
    • MS: BUT... oferror can not revoke after perforamnce begins
  • Bilateral contracts: beginning performance = acceptance, creats implied promise to finish performance
    

• CL: Simultaneous ACCEPTANCE + BREACH
• UCC: Simultaneous ACCEPTANE + BREACH, UNLESS seller is sending the goods as an accomodation to buyer

• Acceptances = effective WHEN MAILED
• Exceptions:
  • offer provides otherwise
  • Irrevocable Offers
  • Offeror RELIES on overtaking rejection
  • Rejection sent FIRST

• Lack of Capacity
• Economic Duress (e.g. threat to break an existing K w/ lack of reasonable alternative)
• Misrepresentation / Non-Disclosure of a MATERIAL Fact
• Ambiguity/Misunderstanding
• Mistake
• Lack of Consideration
• Public Policy (e.g. covenant not to compete, exculpatory clause)
• Unconscionability
  

Defenses against Formation:

LACK OF CAPACITY

• Incapacitated D may disaffirm the K
• applies to minors, intoxicated, mentally incompetent
• Implied Affirmation: retaining the benefit of a K w/o complaint after re/gaining capacity
• EXCEPTION: Incapacitated parties = liable for NECESSARIES on a quasi-contract basis
  

Defenses against Formation:

AMBIGUITY / MISUNDERSTANDING

• Where neither party has reason to know of the misunderstanding, result = NO K due to no meeting of the minds
• Where one party does have reaso to know: K on the innocent party's terms

• MUTUAL Mistake about a MATERIAL Fact = defense to formation.
  • Mistake as to VALUE is NOT MATERIAL, not defense to formation
    
• UNILATERAL Mistake is NOT a DEFENSE to formation.
  

Defense to Formation:

LACK OF CONSIDERATION

• Consideration = bargained-for legal detriment/benefit
• PAST CONSIDERATION: (MS) NOT consideration; (NY) IS consideration if expressly stated in signed writing
• Illusory Promise = UNENFORCEABLE... (e.g. I agree that I can buy as many of X as I want for $1... but requirements K is NOT illusory)
• Partial Payment of Debt: if debt = disputed, then partial pymt = consideration.
  • NY: No consideration required where agreement to forgive debt is in signed writing.
• Time-Barred Debt: signed, written promise to pay debt barred by S/L = enforceable w/o consideration
• Promissory Estoppel as SUBSTITUTE for Consideration: foreseeable reliance makes promise enforceable even w/o consideration (e.g. agreement to extend lease = enforceable w/o consideration where tenant makes improvements in reliance)
  

• CL: New consideration REQUIRED to modify K
  • performing a pre-existing duty NOT sufficient
  • pretty much any addt'l work suffices as new consideration
  • NY: NO consideration needed if modification made in signed writing
• UCC: Consideration NOT required to modify BUT modification must be made in GOOD FAITH.
  

• Covenants-not-to-Compete: Invalidated/narrowed in so far as operates as unreasonable constraint on trade
  • Scope and Need of Covenenat considered when determining if reasonable
• Exculpatory Clause: clauses eliminating liability for gross negligence or intentional torts are NOT enforceable
  

• Generally NOT a valid defense against enforcement
• SUBSTANTIVE Unconscionability: terms themselves are unfair
• PROCEDURAL Unconscionability: bargaining process was unfair (e.g. imbalance in bargaining power)
  

Statute of Frauds:

When is a writing required?

• Transfer of Interst in Real Property
• Performance cannot be completed within 1 year
• Sale of Goods for $500 or more (NY: Lease of Goods for $500 or more)
• Suretyship
• Contract Modification (when K as modified is w/i SoF)
• NY only:
  • Assignment of Insurance Policy
  • Promise to pay discharged debt
  • Agreement to pay broker's commission (EXCEPT: atty, autcioneer, real estate agent)
    

• UCC: Quantity term + signed by party to be charged
• All other contracts: All material terms + signed by party to be charged

• Real Property:
  • Leases for less than one year
  • Part "Performance" Exception: 2 of 3 already occurred -- buyer in possession, buyer made some payment, buyer made improvements
• Sale of Goods $500 or more
  • Goods Accepted/Paid for by Buyer
  • Custom-Made Goods (where seller has made substantial start and goods are not suitable for sale in ordinary course of seller's biz
  • Judicial Admission
  • Merchant's Confirmatory Memo: one party can use its own signed writing to satsify SoF against other party IF
    • BOTH parties are merchants
    • writing claims a prior oral agreement
    • writing is signed and includes a quantity
    • no written objection w/i 10 days
• Suretyship: where surety's main purpose benefits the party guaranteeing the debt, no writing required
  

• Merchant's Confirmatory Memo: one party can use its own signed writing to satsify SoF against other party IF
  • BOTH parties are merchants
  • writing claims a prior oral agreement
  • writing is signed and includes a quantity
  • no written objection w/i 10 days

• Keeps out evidence of a prior/contemperaneous agreement that contradicts a later writing.
  • does not affect admissibility of evidence of a SUBSEQUENT agreement
    
• EXCEPTIONS:
  • Correcting clerical error/typo
  • Establishing a defense against formation
  • Interpreting vague/ambiguous term
  • Supplementing a partially integrated writing
  • 
    

• Remember: PER bars admission of prior/contemperaneous evidence to interpret later K in writing.
• Course of PERFORMANCE: what parties did under the K in question
  • most persuasive
    
• Course of DEALING: what parties did under prior Ks w/ each other
• Usage of Trade: what others in the trade do in similar K's
  • least persuasive
    

• Sellers = liable for breach of express warranties if a basis of the bargain
  (buyer could rely on the warranty)
• Examples of express warranties: stmts of fact, promises, descriptions of goods, use of sample/model; NOT opinions, subjective stmts

• Warranty of Merchantability: merchant sellers who regularly deal in goods like those being sold warrant that goods are fit for their ordinary purpose
• Warranty of Fitness for a Particular Purpose:
  • Seller warrants that goods are fit for the buyer's particular purpose when...
    • Buyer has special purpose in mind
    • buyer is relying on seller to pick out suitable goods, and
    • seller knows it

• Disclaimers: seller can disclaim IMPLIED but NOT express warranties
• 
  

• Risk of Loss determined by following hierarchy:
  • Agreement of parties
  • BREACH: in absence of agreement, breaching party bears ROL even if loss unrelated to breach
  • Delivery by Common Carrier: ROL shifts to buyer when seller completes delivery obligation
    • Shipment K: ROL shifts when seller gives goods to common carrier
    • Destination K: ROL shifts when seller gets goods to a specified destination
    Non-Common Carrier cases
    • seller = MERCHANT: ROL shifts when buyer takes possession
    • seller =/= merchant; ROL shifts when seller tenders the goods to buyer
      

• PERFECT TENDER RULE
  • If tender is not perfect, buyer can REJECT the goods.
  • Option to Cure: seller who fails to make perfect tender has option to cure IF TIME TO PERFORM HAS NOT EXPIRED
  • EXCEPTION: Installment K's -- buyer may reject only for substantial impairment
  • Consequence of Rejection/Revocation:
    • Return: buyer can return goods at seller's expense
      
    • Refund: buyer can get back any money paid for the goods
      
    • Damages: buyer gets damages from seller for breach of K
      
  • Acceptance: Buyer can waive breach by accepting the goods...
    • Implied Acceptance = buyer keeps goods w/o complaint AFTER opportunity to inspect
    • Consequence: once buyer accepts, can no longer reject
    • Revocation of Acceptance: generally not allowed
      • EXCEPTION: revocation permitted where substantial impairment AND defect difficult to detect
        

• Other Party's Breach:
  • UCC: Failure to make perfect tender excuses performance... buyer chooses to accept/reject/accept part
  • CL: only material breach excuses performance
• Anticipatory Repudiation (may be retracted if other party has not relied on the repudiation)
• Failure to Give Adequate Assurance (where other party has reasonable grounds for being insecure about other party's performance and requests adequate assurance in wriring)
• Later Agreement: 3 flavors
  
  •  Rescission: parties agree to cancel the K (effective only if both parties have some performance remaining)
  • Modification: agreement to replace existing K with new K (takes effect immediately)
    
  • Accord and Satisfaction: agreement b/w parties to accept performance in future satisfaction of an existing duty + performance... takes effect only when the accord is satisfied (performance occurs)
  • Novation: agreement to substitute a new part for existing one
  • Impossibility: see flash card
  • Frustration of Purpose [buyer's excuse]: buyer's purpose in entering K = frustrated by unforeseen subsequent event AND seller knew buyer's purpose
  • Failure of EXPRESS Condition: Express conditions must be COMPLETELY satisfied or performance is excused
    • Excusing conditions... person protected by the condition may waive or (through in/action) excuse the condition
      • failure to cooperate = excuse of condition
        

• Real Property: SP = usual remedy... property = unique
• SoG (UCC): SP available ONLY if goods are UNIQUE or "other proper circumstances" exist (e.g. inability to buy substitute goods in market)
• Service K's: SP NOT available (though negative injunction to prevent competition, serving another may be)
  

• Generally not available
• EXCEPTION: Buyer = insolvent when received goods AND seller makes demand w/i 10 days of delivery to reclaim goods
• EXCEPTION: Seller can reclaim goods at ANY time if buyer misrepresented its solvency to seller in writing w/i 3 months of delivery.

Availability of PUNITIVE Damages

• Upheld if (1) damages difficult to calculate at time of K and (2) is a reasonable forecast of probabl damages, BUT cannot serve as penalty.
• per diem damages more likely to be valid than lump sum
• if liquidated damages clause invalidated, P gets ACTUAL damages

Availability of

EXPECTATION DAMAGES

• PURPOSE = Put injured party in as good a position as if full performance had occurred
• USUAL REMEDY for breach
• CL: Expectation damages INCLUDE LOST PROFITS
• UCC:
  • Seller's Damages: Four Options
    
    • Cover Damages: K price less the resale price if seller resells in good faith
    • Market Damages: K price less the market price if seller does not resell in good faith or does not resell at all
    • Lost Profit: if seller = volume dealer,
    • Contract Price: if seller can't resell the goods
  • Buyer's Remedies: Three Options
    
    • Cover Damages: cover price less contract price if buyer covers in good faith
    • Market Damages: market price less contract price if buyer does not cover in good faith or at all
      
    • Loss in Value: value as promised less value as delivered if buyer keeps the non-conforming goods
      

Availability of

INCIDENTAL DAMAGES

• Costs to injured party of transporting/caring for goods after breach and arranging substitute transaction

Availability of

CONSEQUENTIAL DAMAGES

• Defined: Damages sepcial to the plaintiff that were reasonably foreseeable at time of K
• UCC: NOT AVAIlABLE TO SELLER

Third-Party Beneficiary and...

RESCISSION / Modification

• Promisor and promisee can rescind/modify a K UNTIL rights of TPB have VESTED
  • TPB rights vest when TPB LEARNS of and RELIES on the K
• EXCEPTION: Contrary Lanaguge in K CONTROLS
  • reliance = irrelevant if K gives promisor/promisee right to rescind/modify at any time

• PROMISOR = Liable to TPB (despite lack of privity) AND promisee
  
• PROMISEE = Liabile only to creditor TPBs (and no others)

• RULE: Contracutal duties may be delegated WITHOUT consent of person to whom performance is owed (obligee)
• EXCEPTIONS:
  
  • Contractual language controls
  • Obligor's duties are NOT delegable when obligor has SPECIAL SKILLS or REPUTATION
    • e.g. Derek Jeter can't delegate duties to play baseball
      

• Assignment of Rights transfers ONLY the rights, not the duties.
• Requirements:
  • Language of PRESENT Transfer (e.g. "I assign" NOT "I promise to assign")
  • NO CONSIDERATION REQUIRED

• RESTRICTIONS on Assignment
  • Contract Language Controls
  • Cannot substantially change duties of obligor (e.g. requirements K may be assigned but ONLY if assignor/assignee's requirements are similar)