Contract and Sales- All Black Letter Concepts 1- Types of Contracts a- Contract: Legally Enforceable agreement express: Based

on words written or spoken Implied: Requires conduct b- Quasi-Contract: equitable remedy P confers benefit P reasonably expected to be paid D was unjustly enrich if P is not paid c Bilateral Results from an offer that is open as to the method of acceptance. NOTE: Most contracts are bilateral Unilateral Results from an offer that expressly requires performance as the only possible method of acceptance Includes rewards, prizes, and contests

2- APPLICABLE LAW a Common Law derived largely from case law Service contracts Real estate contracts Article 2 UCC Applies to the sale of goods Mixed Deals

3-FORMATION a-Offers General Rule: Manifestation by words or conduct showing intent to contract Look to the first communication in the fact pattern for offer questions Material Terms 1 -Offer need not contain all material terms 2 -Price and description required in real estate contracts 3 -UCC has NO price requirement; offer is an offer if the parties so intend Vague or Ambiguous Material Terms 1 -For a fair price

-Invalid offer under UCC and Common Law

-Requirement/Output Contracts 1 -Quantity determined by buyers requirements or sellers output is generally valid -Price quotes are generally not offers -Advertisements are not offers unless 1 -Reward 2 Specific quantity and specific person who can accept Termination of Offers: Offer dies cannot be accepted if terminated i 1 2 3 ii 1 2 Time Lapse Time stated expires or Reasonable time lapses Multiple months is probably a lapse

Offerors Words or Conduct Direct statement to offeree of unwillingness or inability to contract Conduct by offeror that offeree is aware of indicating unwillingness or inability to contract 3 Revocation of offer not effective until received by offeree 4 Offer cannot be revoked after accepted Irrevocable offers 1 a b 2 a b c d 3 a b c a b c d Option contracts: offeror promises to keep offer open and offeree gives consideration UCC Firm Offer Rule Offer to buy or sell goods Signed, written promise to keep the offer open Offeror is a merchant Offer open for up to three months Detrimental Reliance Offeree detrimentally relied on the offer Reliance was reasonably foreseeable Usually applies with general contractors and subcontractors Unilateral contract Requires performance as acceptance Offer irrevocable for a reasonable time to complete performance Must be more than mere preparation

iv-Rejection of Offer

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Counter Offer Terminates offer and becomes new offer Bargaining does not terminate original offer If the question has a question mark, it is bargaining If the question has a period, it is a counteroffer Offeree cannot accept original offer once he makes a counteroffer and it is rejected Conditional Acceptance Words of condition Acceptance is expressly conditioned on these terms Additional Terms at Common Law: Mirror Image Rule Acceptance must be the mirror image of the offer Acceptance that additional terms is a counter offer Is the term a part of the contract If parties are merchants yes unless 1 materially changes the offer or 2 offeror objects to the change If one or both are not merchants, additional term is a proposal and must be separately accepted or rejected Death Death of a party before acceptance terminates offer Exception-Option contract Part performance of offer to enter into unilateral contract Acceptance Who Can Accept? Acceptance only by person who knows about the offer and is the person to whom it was made Only way they can test is if theres a reward Agreement will control method of acceptance usually not on the bar exam Offeree Performs Acceptance depends on whether notice is required to accept Notice required if offeree has reason to believe that offeror will not learn of acceptance look for offeror and offeree in different locations Notice not required if offer dispenses with notice requirement Offeree begins performance Acceptance for bilateral contracts Where offer is open to method of acceptance Not acceptance for unilateral Offer states that acceptance only by performance Completion of performance is required

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Offeree promises to perform Most offers can be accepted by a promise to perform If offer states performance required, promise to perform is not enough for acceptance Mailbox Rule: Offeror and Offeree are at different locations and there are conflicting communications Offer invites acceptance by mail 2 Acceptance effective when mailed NOTE: Revocation of offer only effective when received by offeree For multiple communications, rule is whichever gets there first controls

vii Seller Sends Wrong Goods under UCC 1 General rule: If seller sends wrong goods, it acts as sellers acceptance and a breach 2 Accommodation Exception: Acts as a counter offer and no breach if a Seller sent goods as an accommodation and b Explains why he sent the wrong goods viii Offeree is Silent 1 General Rule: Silence is not acceptance 2 Exceptions: Offeree, by words or conduct, agrees that silence is acceptance d i 1 a b 2 a b c 3 a b c d iii Consideration Introductory Materials Consideration Defined: Bargained-for legal detriment Bargained-for means asked for by the promisor in exchange for promisors promise Legal detriment means any detriment Methods Look at each promise separately Identify promisor and ask what he bargained for Identify the promisee and determine the detriment Forms of Consideration Performance Forbearance Promise to Perform Promise to Forbear Illusory Promise

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Almost always a wrong answer Promise in which the promisor has not committed herself in any manner Adequacy of consideration is irrelevant Past Consideration General Rule Past consideration cannot be consideration, cant bargain for something that already happened Very Limited Exception Promisor expressly requests something and Promisor knows that promisee expects payment Preexisting Contractual or Statutory Duties Common Law General Rule Doing what you were already required to do is not consideration for a promise to do it Exceptions to Common Law General Rule Addition to or Change in Performance Exception Third Party Promise to Pay for Preexisting Obligations or Duties are Enforceable UCC Rule Good faith test for changes in existing sale of goods contract

vii Promise to Forgive Balance of Debt 1 If debt is due and undisputed, part payment is not consideration for forgiving the debt 2 If debt is not due, early payment is a new detriment viii Written Promise to Pay Debt Barred by Technical Defense Statute of Limitations: Consideration Substitute 1 Written Promise to satisfy obligation that is unenforceable because statute of limitations has run is enforceable without consideration 2 Elements a Existing debt b Cant enforce it because of statute of limitations c In writing d Promise is to pay a new amount to satisfy the debt usually less than the original debt ix 1 2 3 Promissory Estoppel: Consideration Substitute Use only if no other possible consideration Dont choose this if its in the A slot Elements

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Promise Reliance is reasonable, detrimental, and foreseeable Enforcement necessary to avoid injustice Distinguish Consideration Parties ask each other to do something = consideration Acts of reliance = promissory estoppel

e Lack of Capacity Infants, Mentally incompetent, Intoxicated unless other person knows Consequences 1 Party without capacity can avoid or disaffirm the contract 2 Party without capacity affirms by retaining benefit after gaining capacity Liability for Necessaries f i ii 1 a 2 3 a b c d 4 a b c 5 6 iii 1 a i ii b i 1. 2. ii 1. Statute of Frauds Look for oral agreement in the fact patters Contracts within the Statute Promise in Consideration of Marriage Not promise to marry Promise to pay obligation of decedent from executor funds Guarantees Answering for Debts of Others I will pay you does not come within the statute of frauds I will pay you if A doesnt comes within the statute of frauds Usually a wrong answer on the MBE Exception: Main purpose for the promise is to benefit the guarantor Service Contract Performed More than One Year after Contract Date Specific Time Period Specific Time of Performance Contracts For Life Excluded Transfers of Interest in Real Estate More than a Year UCC Sale of Goods for $500 or More Satisfying Statute of Frauds Performance Service Contracts Full performance satisfies the statute of frauds Part Performance does not satisfy statute UCC Sale of Goods Ordinary Goods Delivered Goods: part performance satisfies the state Undelivered goods: part performance does not satisfy Specially Manufactured Goods Custom made goods and

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Substantial beginning Real Estate Transfer Contract Full cash payment does not satisfy the statute of frauds Part performance and two of the following satisfies: Payment Possession Improvements

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Writings that Satisfy the statute of frauds Common Law All material terms: who and what? Signed by the party to be charged UCC Quantity: Signed by the party to be charged Exception to Signature Requirement Merchants and Party claiming no contract receives a writing with the quantity term Fails to respond within 10 days Judicial Admission Acknowledgement of an agreement In pleadings, testimony, discovery Other Issues Authorization to Enter into Contract for Someone Else: Equal Dignity Doctrine Authorization to execute a contract for someone else Must be signed and in writing if the original contract must have been also Contract Modification Written Modification Required Look at the deal with the modification as a whole If deal with the change is within statute, then modification must be in writing Modification Clause in Contracts Disregard the writing Ignore the modification clause Apply the Written Modification Rule UCC Rule: Modification clause is effective unless waived Illegality Illegal Subject Matter: agreement is void

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Legal subject matter but illegal purpose: agreement is enforceable by the person who did not know of the illegal purpose Misrepresentation False Assertion of fact or Concealment of facts Effect Fraudulent or material misrepresentation of terms is voidable Misrepresentation of nature of contract is void Duress Improper threat to breach unless new deal made and Other party has no reasonable alternative source of supply Unconscionability Unfair surprise and oppressive terms At the time agreement made Determined by the court Ambiguity Material term open to at least two reasonable interpretations Each party attaches a different meaning to the term Neither party knows or has reason to know that the term is open to two interpretations Mistake of Fact Mutual Mistake of Fact Both parties mistaken Mistaken as to what it is = no contract Mistaken as to what it is worth = contract Basic assumption of fact Materially affects the agreed exchange Unilateral Mistake of Fact General Rule: Party cannot avoid a contract for mistake made by only one party Exceptions Mistaken party can avoid contract for obvious mistakes known to the other party Mistakes discovered before significant reliance by the other party TERMS

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Vocabulary for Parol Evidence Rule Integration: final agreement Partial Integration: written and final, but incomplete Complete Integration: written, final, and complete Merger Clause: complete, final agreement of parties Triggering Facts for Parol Evidence Rule Written contract that court finds is the final agreement and Oral statement made at the time the contract was signed or Earlier oral or written statements by the parties to the contract Fact Patterns for Parol Evidence Rule Changing the Written Deal Partial or complete integration General Rule: cant change the written deal based on earlier agreements that are inconsistent with the terms of the contract Exception: clerical errors Establishing a Defense to the Enforcement of the Written Deal Partial or complete Earlier words of parties to determine defenses like misrepresentation, fraud, duress Explanatory Terms Despite the parol evidence rule, Parol can be considered to resolve ambiguities in the written contract Adding to the Written Deal Partial Integration: agreements with consistent additional terms admissible Complete Integration: agreements with terms that would naturally and normally be in a separate agreement are admissible Conduct & Course of Performance In order of Importance Course of Performance: Same Parties, Same Contract Course of Dealing: Same Parties, different but similar contract Custom & Usage: different but similar people, different but similar contract UCC Gap Fillers Delivery Obligations No agreement Place of delivery is sellers place Exception: Both parties know that the goods are some place else in

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which case, this place would be place of delivery Agreement about Place of Delivery by Common Carrier: Sellers Obligation Shipment Contracts Seller gets the goods to the carrier Makes reasonable arrangements for delivery Notifies the buyer Destination Contracts Obligation is complete when goods arrive at the buyers location Determining Shipment or Destination FOB Sellers Location = Shipment FOB Buyers Location = Destination Risk of Loss Any Breach: Breaching party has the risk of loss Delivery by Common Carrier other than Seller: ROL shifts once seller completes delivery obligations see above No Agreement, No Breach, No Delivery by Common Carrier Merchant Seller: risk of loss shifts to buyer when buyer receives the goods Non-merchant Seller: When seller tenders the goods makes them available Warranties of Quality Express Words of promise, description, or facts Puffing excluded Samples and Models are express warranties warranting that the goods will be like the sample or model Correlates with parol evidence rule Implied Merchantability Any merchant that deals with goods of that kind Goods fit for ordinary purpose Implied Fitness Buyer has particular purpose Relies on seller to select suitable goods Seller has reason to know of purpose and reliance Warrants that goods will fit the particular purpose Disclaimers No warranties Eliminates Implied Warranties As is or with all faults for both implied warranties or Limitations on Warranty Can limit implied and express warranties Test is unconscionability at the time of the contract Limitation is prima facie unconscionable if breach of warranty of

consumer goods that results in personal injury 5 a i ii 1 2 iii 1 2 3 a b c iv 1 2 3 4 v 1 2 3 vi 1 2 3 iii 1 2 a b iv 1 PERFORMANCE UCC Sale of Goods General Rule: Seller must make perfect tender Remedy: Seller gets opportunity to remedy if: Time of performance has not yet expired sends wrong goods before deadline or Time of performance has expired and seller has reasonable grounds for believing that the improper tender would be acceptable Rejection of Goods Rejection must occur before acceptance otherwise, must revoke acceptance General Rule: no perfect tender = ability to reject Exception: Installment contracts Contract requires or authorizes Delivery in separate lots Separately accepted Acceptance Express Acceptance Payment General Rule: Payment without opportunity for inspection is not acceptance Exception: buyer retains good without objection after a opportunity for inspection multiple weeks Effect: Buyer cannot reject if he accepts Revocation of Acceptance Nonconformity substantially impairs the value of the goods Excusable ignorance and Revocation comes within a reasonable time after discovery of nonconformity Payment Cash unless otherwise agreed Buyer can pay by check Seller can reject the check but must give buyer reasonable time to get cash Standard for Satisfying Express Condition GR: Strict compliance with the condition Exception: Condition based on approval by one of the contracting parties Satisfied if reasonable person would approve Exception: art or other matters that are inherently discretionary Excusing Express Condition Estoppel

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Identify the person who benefits from or is protected by condition See if that person gave up the benefit or protection with a statement before the condition was to occur and requires a change of position Waiver Identify the person who benefits from or is protected by condition See if that person gave up the benefit or protection with a statement after the condition was to occur and does not require a change of position

Constructive Condition, identification a Keyed to the order of performance, eXCUSE OF NONPERFORMANCE, Excuse by Reason of Breach b i 1 2 3 4 5 ii 1 2 3 c i 1 2 ii 1 2 3 iii 1 Anticipatory Repudiation or Inability to Perform Anticipatory Repudiation Unambiguous statement Repudiating party will not perform Mad before time that performance due Excuses non-repudiating partys duty to perform and give immediate claim for damages unless non-repudiating party already performed Can be retracted if timely. If timely, performance can be delayed until adequate assurance is provided Inability to Perform Agreement for services in exchange for something other than money Before performance, the thing is gone Performance excused for party that was going to get the thing Excuse by Later Contract Rescission Cancellation Mutual rescission before performance ends excuses performance Mutual rescission after performance ends does not excuse performance Accord and Satisfaction substituted performance Accord: agreement to an existing obligation to accept different performance to satisfy the existing obligation Satisfaction: performing the newly agreed performance to fulfill the obligation Accord Alone: Suspends enforcement of the original obligation to provide time to perform the accord Modification has to be mutual agreement

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or accept a different agreement to satisfy an existing obligation Novation -everyone agrees Mutual agreement Substitute a new party Performs the same performance Excuses the party that was substituted Excuse by Later Unforeseen Event Test Event after contract formation but before complete performance Unforeseen Makes performance impossible, commercially impracticable or frustrates the purpose of the performance Unforeseen event never excuses buyers performance if the buyer has the risk of loss Death Death of a party to contract after formation does not excuse performance unless decedent was a special person Subsequent law or regulation Later law makes performance of contract illegal = excuse by impossibility Later law makes mutually understood purpose of contract illegal BREACH REMEDIES Punitive and Liquidated Damages No punitive damages always a wrong answer Liquidated Damages Amount of possible damages for later breach is difficult to determine Provision is a reasonable forecast of possible damages E.g., single sum liquidation provision is suspect General Damages Approach Whos the P? What would P receive if contract was performed? What did P actually get? General Rule Expectation interests of the P Put the P in a position she would have been had the contract been performed

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Incidental Damages Costs incurred in dealing with the breach Foreseeable Consequential Damages Special damages where loss is specific to this particular P Must be reasonably contemplated by both parties at the time of the contract Avoidable Damages No recovery for loss that couldve been avoided Burden of proof is on the D to show that P could have avoided the loss Applies in employment contracts most frequently Comparable job in same geographic area Need not take the job but cant recover full damages D has to plead and prove avoidable damages Sale of Goods Seller breach, buyer keeps goods: Fair market value if perfect tender fair market value as delivered Seller breach, seller has the goods: Replacement price contract price Buyer breaches, buyer has the goods: Seller gets contract price Buyer breaches, seller has the goods: Contract price market price and provable lost profits Lost Profits Regular inventory Breach followed by resale at the same price Provable lost profit is recoverable Equitable Remedies Quasi Contract Specific Performance Always specific performance for real estate Specific performance for goods if Unique goods Antiques, art, custom-made goods Fact pattern will tell you Contracts for Services No specific performance Injunction to stop party from competing: negative specific performance Reformation

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For mistake, fraudulent misrepresentation Adequate Assurance of Future Performance One party learns something after the contract Reasonable grounds for insecurity about the other partys performance Written demand for adequate assurance Reclamation Right of unpaid seller to get goods back from buyer if Buyer is insolvent at the time he receives the goods Seller demands return Within 10 days of receipt or Reasonable time if buyer expressly said he was insolvent before delivery Buyer still has the goods at the time of demand Good Faith Purchasers Owner leaves goods with seller who sells goods of that kind Seller wrongfully sells the goods to third party Owner cant sue good faith purchaser THIRD-PARTIES Third Party Beneficiaries Terminology Third party beneficiary contract: two parties contracting with the intent of benefiting a third party Third party beneficiary: not a party to the contract but able to enforce Promisor: person who makes the promise that benefits the third party Promisee: person who obtains the promisee that benefits the third party Intended beneficiary: named beneficiary with contract rights Creditor beneficiary: Promisee owes the beneficiary money Donor beneficiary: all others Cancellation or Modification Cant cancel or modify after beneficiary knows about the contract If the rights have vested, contract cant be modified or cancelled without consent of beneficiary or the contract provides otherwise Party that may sue Beneficiary can sue promisor Promisee can sue promisor Donee beneficiary cannot sue promisee but creditor beneficiary can

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sue on the pre-existing debt iv 1 b i 1 2 3 4 ii 1 2 iii 1 2 3 iv 1 v 1 2 3 vi 1 2 3 c i 1 Defenses If beneficiary sues promisor, promisor can assert defenses it has against promisee Assignments Terminology Assignment: transfer of rights under contract in two steps: 1 contract between only two parties; 2 one of the parties later transfers rights under that contract to a third party Assignor: transfers rights Assignee: not a party but able to enforce Obligor: the other party to the contract Limitations by Contract Prohibition: Clause takes away right to assign but not the power to assign. Assignee can still enforce if he did not know about the prohibition Invalidation: Clause makes any assignment void Limitations under Common Law Assignment invalid if it substantially changes the duties of the obligor Assignment of the right to payment is generally ok Assignment of other performance rights generally not ok Requirements to Assign Language of present assignment, no consideration is required Rights of Assignee Assignee can sue the obligor Obligor has the same defenses against the assignee as it would have against the assignor Obligor can continue to pay assignor until obligor learns of the assignment Multiple Assignments Gratuitous Assignments Assignments for Consideration: First assignee for consideration wins Warranty: Assignor makes warranty that the rights assigned are assignable and enforceable Delegation of Duties Defined Party to a contract transfers work under that contract to a third party

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Assignment and Delegation Assignment: Party gets rights to payment or performance Delegation: Party gets work to do Delegable duties General Rule: contractual duties are delegable Exception Contract prohibits delegation Contract prohibits assignments Contract calls for very special skills Contract calls for very special reputation Consequences of Delegation Delegating party always remains liable Delegatee liable only if she receives consideration from delegating party Delegation and assignment combined can create a third party beneficiary relationship Third Party Beneficiary Did the Right Vest Detrimental reliance Thirdd party accepts in a manner expressly stated by the agreement thirdd party files lawsuit Creditor or Donee Beneficiary Facts are silent, donee beneficiary beneficiary can only sue promisor; Creditor beneficiary can sue promisee