CONTRACTS

Contracts

Formation Performance Remedies

Third Party Beneficiaries/Assignments/

Delegation

Contract Formation

Formation

Mutual Assent

Offer Acceptance

Consideration

Bargained for Exchange

Promissory Estoppel

Restitution/Quasi

Contract

Defenses to Formation

Mutual Assent

Offer Still Open/UCC 2-205

Merchants Firm Offer

Offer Made

Objective intent to be bound

Contains all material terms

Communicated to Identified Offeree

Acceptance

Common Law Mirror Image

UCC 2-207 Additional Terms Contained in the

Acceptance

UCC2-206 Shipment of Non-

Conforming Goods

Mutual Assent

Is The Offer Still Open? The Mailbox Rule

Rules: 1.  An ACCEPTANCE is effective upon DISPATCH 2.  A REVOCATION or REJECTION is effective upon RECEIPT

Mail Acceptance

Call to Reject Offer or Revoke

Acceptance

(call received after letter sent but

before received.)

There is a Contract:

Acceptance was dispatched before

Revocation or Rejection Received.

Always Look to See what Came First: Acceptance or Rejection/Revocation. As long as the Acceptance was dispatched before the rejection/revocation was received, the acceptance will take precedence. EXCEPTION: If the rejection was received prior to the acceptance and relied upon, it will take precedence over the otherwise effective acceptance.

What Happens If Additional Terms Are Included in the Acceptance of a Contract for the Sale of Goods?

Apply UCC 2-207 and Ask Yourself Two Questions:

1=Yes 2=No contract formed

by the communications

between the parties

1. Is the potential acceptance a definite and seasonable expression of acceptance?

2. Is the potential acceptance expressly conditioned on agreement to the additional or different terms? IF YOU ANSWER:

Then Look to 2-207(2) to see what happens to the Additional Terms. If You Answer in ANY OTHER COMBINATION, then no contract arises from the communications between the parties, and you need to look at 2-207(3) to determine the outcome.

ACCEPTNCE CONTAINS ADDITIONAL TERMS: 2-207(2)

If You Answered Yes to Question 1 and No to Question 2, then a contract is formed by the communication of the parties. 2-207(2) now lets you know what happens to the additional terms in this situation.

Are Both Parties Merchants?

Yes

Additional or different terms automatically become part of

the contract UNLESS

The offer expressly limits acceptance to the original

terms

Or: The additional or different terms materially alter the

contract

Or: The offeror objects to the additional or different terms within a

reasonable time

No

Additional terms will NOT become part of the contract unless the offeror ASSENTS

1. Is the potential acceptance a definite

and seasonable expression of

acceptance? IF YOU ANSWER

YES or NO

2. Is the potential acceptance expressly

conditioned on agreement to the

additional or different terms? IF YOU

ANSWER:

YES

No Contract arises from the

communications of the parties.

Acceptance Contains Additional Terms: UCC 2-207(3)

If the conduct of the parties is sufficient to indicate the existence of the parties then a contract will exist, and the terms of the contract will consist of any terms upon which the communications agree while conflicting terms are knocked out. Any gaps in the terms of the contract will be filled using UCC gap-filler rules.

Contract Modifications UCC 2-209

What is Required for a valid modification?

Under The Common Law?

Under the UCC?

Is Mutual Assent Required?

Yes Yes

Is Consideration Required?

Yes (Look out for Unanticipated Difficulties Exception.)

No, as long as the modification is requested in good faith.

If the Contract states that it can only be modified in writing, is oral modification allowed?

Yes, unless the contract as modified falls within the Statute of Frauds. In this case, it must be in writing or otherwise satisfy the statute.

No. (also, if the contract as modified falls within the Statute of Frauds, it must be in writing or otherwise satisfy the statute.

DEFENSES TO FORMATION

Formation Defenses

Writing

Statute of Frauds

Parol Evidence

Rule

Public Policy

Fraud/Mistake Capacity

Statue Of Frauds Ty

pe

of C

ontr

act?

Contracts subject to the statute include:

1. Contracts that, by its terms, cannot be completed within a Year,

2. Contracts for the sale of any interest in Land,

3. Contracts for the sale of Goods over $500, &

4. Suretyships (Contracts guaranteeing the debt of another.)

Is I

t In

Wri

ting

? Yes: Enforceable

No: Unenforceable, Unless an Exception Applies.

What Constitutes a Sufficient Writing? Common Law: Signed by defendant; contains all essential terms. UCC: Signed (except between merchants, it can be signed by the sender); quantity term.

Is T

here

An

Exc

epti

on?

If an exception applies, the contracts does not have to be in writing in order to be enforceable:

Exceptions:

Goods: merchant's confirming memo exception, Land: part performance (money plus improvements or money plus possession,) Year: Detrimental reliance exception, Suretyship: main purpose rule

Certain Types of Contracts Must Be In Writing in Order to Be Enforceable.

Parol Evidence Rule Once a contract is reduced to writing it will control.

Is t

her

e a

wri

ting?

Yes: The Parol Evidence will prohibit introduction of prior or contemporaneous oral agreements that differ or contradict the terms of a writing that is considered to be a “total integration.”

Is I

t a

Tota

l In

tegra

tion

?

Corbin “Surrounding Circumstances.”The court will admit evidence on the issue of integration to determine whether the writing is a total integration.

Williston ”Four corners" rule. Taking the document as a whole, does it, on its face, appear to be a total integration?

Is T

her

e an

Exc

epti

on?

1. Collateral agreements

2. Consistent additional terms (partial integrations, both common law and UCC)

3. Explain the meaning of terms (even in a total integration under the UCC)

Performance

Performance

Conditions Discharge Breach

Conditions

Conditions?

Are there any Conditions?

Express, Implied, or

Constructive

If yes, Have they been satisfied?

If yes, but not satisfied, are they excused?

Waiver, Breach, or Forfeiture

Discharge

Discharge

Impossibility

Illigality Death Destruction (Risk of Loss)

Severe Impracticability

Frustration of Purpose

Breach

Breach

Anticipatory Breach

Adequate Assurance Under the UCC

Retraction under the UCC

Present Breach

Minor (No

Remedy) Material

Relief for the Breachor

Material (Time to

Cure)

Minor (substantial

Performance)

Total

Divisible Contract Restitution

Remedies

Remedies

Damages Restitution Injunction Rescission Reformation

Damages

Damages

Liquidated Expectation

Natural Standard

Real Property

Seller = K price – market price

Buyer = Market

Price – K price

Goods

Seller = K price, market price, cover

Buyer = K Price, Market Price, Cover

Employment

Employee: Lost

Wages - Earnings

Employer: Extra Cost

Construction

Builder: Profit & Costs

Owner: (1) Cost of

Completion and (2)

Diminution in Value.

Consequential

Reliance

General Measure of Damages = Natural + Consequential + Incidental – Cost Avoided – Loss Avoided (Mitigation)

Restitution (Value of Benefit Conferred)

Restitution

Grounds

Mistake Breach Unenforceable Contract

Measure of Recovery

Breach

Aggrieved Party (Relief is Value

to the Breachor)

Breachor (measure is

value conferred – damages)

Unenforceable Contract

Injunction, Rescission, and Reformation

Injunction

Specific Performance

Definite & Certain K

Inadequate Remedy at

Law

Feasible Decree

Mutuality of Remedy Defenses

Rescission Reformation

Third Party Beneficiaries

Third Party Beneficiaries

Formation

Intended

Creditor Donee

Incidental

Performance

Modify/Rescind

Vested Not Vested

Remedies

A v. B

Creditor: YES

Donee: No $ Damages

C v. B

Promisor’s defenses Good against TPB

C v. A

Creditor YES on underlying

promise

Donee NO A = Promisee B = Promisor C = TP Beneficiary

Assignment of Rights

Assignment of Rights

Formation

Effective Prohibition

Increase of Obligor’s Duty/Risk

Existing or Expected

Future Rights

Performance

Effect of Assignment

Revocation And

Priorities

Remedies

A v. B C v. B

Direct Cause Of

Action YES

B has same Defenses against C

as against A

C v. A

Implied Warranties

YES A = Obligee/Assignor B = Obligor C = Assignee

Delegation of Duties Delegation

Formation

Delegable Duties

Consideration

Performance

What is effect of the

delegation?

Remedies

B v. A

Delegation YES

Novation NO

B v. C

Direct Cause Of Action

YES

Delegatee’s defenses are the same as against A

since B stands

in A’s shoes.

A v. C

General breach Issue. A = Obligor/Delegator

B = Obligee C = Delegatee