contracts outline 3 - UCC OR COMMON LAW Goods UCC o Goods = movable tangible property Growing crops to be severed by seller Unborn animals Fixtures that

contracts outline 3 - UCC OR COMMON LAW Goods UCC o Goods =...

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UCC OR COMMON LAW? - Goods UCCo Goods = movable, tangible propertyGrowing crops to be severed by sellerUnborn animalsFixtures that can be removed without material harm to the land- Services Common law- Real Property Common law- Mixed Predominant purpose test or split it upWAS THERE AN OFFER?- Elements of a valid offer:o Objective intent to be boundo Definite and certain termso Communication to offeree- Preliminary negotiations v. offers- Advertisements v. offers- Invitations to deal v. offers- Real estate offer must identify LAND and PRICE- Goods offer must have QUANTITY (or req./output)- Employment offer must have DURATIONWAS THE OFFER REVOKED?- Possible means of revocation:- Published offers revoked by same means of publication
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- Irrevocable offerso Direct communication to offeree (effective on receipt) ORo Offeree finds out offeror acting inconsistently with the offer being openo Offeree receipt irrelevanto Merchant’s firm offer under the UCCNo more than 3 mosSigned by a merchantPromising to hold offer openo Option for valueo Detrimental reliance on offerOfferor must have reasonably expected relianceo Unilateral offer where offeree has begun performanceMust get a reasonable time to complete performanceMere preparation doesn’t countDID THE OFFER TERMINATE?- Lapse of time- Offeree dies or goes insane- Destruction of contract subject matter- Subject matter becomes illegalWAS THE OFFER REJECTED?- Rejection by making a counteroffer- Rejection is effective when received- Options Offeree can reject and then still accept later until option expires
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WAS THERE AN ACCEPTANCE?- Only offeree may accept – no assignment of offers- Common law Mirror image rule, otherwise counteroffer o Reasonable time if no time specifiedo Mere inquiry v. counteroffero Exception: Offeror detrimentally relies on offeree’s rejectiono Exception: Options for value can be assigned- UCC Acceptance = - Mailbox rule- Inconsistent responses from offeree- Acceptance by unauthorized method still an acceptance, if actually received by offeror while offer is still open- When silence can be acceptanceo Objective intent to accept UNLESS the acceptance is made expressly conditional onthe offeror’s taking new or different terms (counteroffer) ORo Both parties start to performo No mailbox rule for option acceptanceo Letter must be properly addressed and stampedo Invalid if offer expressly said no mailbox ruleo Sends acceptance, then rejection mailbox rule applies, offer accepted UNLESS rejection arrives first and offeree relieso Sends rejection, then acceptance whichever arrives first is effectiveo Offeree agreed to it in advance
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o Offeree silently takes offered benefitsIF THERE IS A CONTRACT, WHAT ARE THE TERMS?- UCC 2-207o Additional terms not in offer:At least one party not a merchant terms of offer governBoth merchants Additional terms become part of contract UNLESS:New terms materially alter contractOffer expressly said acceptance limited to termsOfferor objects w/in a reasonable timeOfferor has already said he wouldn’t accept those termso Different terms from those in offer:At least one party not a merchant terms of offer governBoth merchants Split of authorityo No contract but performance begins terms are the ones on which the writings agree plus UCC gapfillersSame as additional termsKnockout rule- Common law will always be terms of the offer b/c of mirror image rule- Parol evidence ruleIS THERE A THIRD PARTY INVOLVED?- Intended beneficiary- Assignment
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o Traits:Identified in the contract ORReceives performance directly from the promisor (manure in the pool) ORHas some relationship with the promisee evidencing intent to benefito When rights vest:When his assent is requested by the parties, and givenWhen he brings a suit to enforce the promiseWhen he detrimentally and justifiably relieso Only creditor, not donee, beneficiary can sue promiseeo Assignment only permitted if it does not substantially change obligor’s DUTY or RISKo Clause forbidding assignment v. clause voiding attempted assignmentsNo-assignment clauses construed as not covering assignments of rights to get paido Gratuitous assignments are revocable UNLESS:Obligor has already performedA token chose is deliveredAn assignment of a simple chose is put in writingThe assignee can show detrimental relianceo A gratuitous assignment may be AUTOMATICALLY revoked by:Death of assignor Bankruptcy of assignorNotice of revocation by the assignor to the assignee or the obligorAssignor takes performance directly from obligorThe same right assigned to someone else instead
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o Serial assignments of the same right for consideration:First in time to give consideration usually wins.BUT someone else may win IF he’s a BFP w/o notice AND:Subsequent assignee gets the first judgment against the obligorThe obligor pays the subsequent assignee directlySubsequen assignee gets delivery of a toke choseThe subsequent assignee is a party to a novation releasing the assignorThe subsequent assignee has an estoppel claim against the prior assignee- Delegationo Delegating party remains on the hook unless there’s a novationo Duties that may not be delegated:Those that involve personal judgment and skillDelegations that would substantially change the obligee’s required performance (esp. Ones involving a special trust of delegating partyThose contractually restrictedo Obligee becomes a third-party beneficiary of the contract between delegator and delegaterequirements contracts)IS THERE A DEFECT IN CONTRACT VALIDITY?- No considerationo Irrelevant for UCCo Exception: “Moral” obligation OK for consideration IF:
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Old promise unenforceable b/c of a technical defense ANDNew promise is made in writing OR is partially performed OR the past act was made at promisor’s request- Illusory promise- Pre-existing legal duty w/ no new consideration- IllegalityIf this is a new promise to pay an old debt, enforcement limited to amount of NEW promise.o Promise not to sue is consideration IF:Claim is valid OR Person believed in good faith she had a valid claimo Seal minority of states. Seal is BS.o Condition entirely within promisor’s controlo Right to cancel with no noticeo Gratuitous suretyships before debtor gets the $o Promisor can choose several options and one is of no detrimento Irrelevant for UCC so long as change was made in good faitho Exceptions to pre-existing duty rule:“New” promise is a ratification of an otherwise voidable contractThe pre-existing duty is owed to a third personThere is an honest dispute over whether the pre-existing duty is really owedo If the purpose behind the contract was illegal (boat rental to run drugs), contract isvoidable by the
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innocent party IF:He was unaware of the purpose at first ORDid not facilitate the purpose and it did not involve serious moral turpitudeWAS PERFORMANCE DISCHARGED?- Condition precedent never occurred No duty- Accord and satisfaction Old duties discharged o One party prevented condition from happening condition is excusedo Waiver of condition- Material breach other party’s duties dischargedo Minor breach may allow other party to delay, but not completely abandon, performanceo IF PARTY A HAS SUBSTANTIALLY PERFORMED THEN PARTY A CANNOT ALSO HAVE MATERIALLY BREACHED (exception: perfect tender rule)o Breach as to one unit of a divisible contract still entitles the party to payment for other, performed unitsDivisible contract: Performance is divided up in the TERMS of the contractSame number of parts for each partyThe performance of each part is the agreed equivalent of the corresponding part- Anticipatory repudiation other party’s duties dischargedo Breach of one unit of an installment contract is a material breach as to the whole contract only if it substantially impairs the value of the entire contract.o Must be a definite repudiation, not mere expression of doubt
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o Voluntary disablement – “actions speak louder than words” – defined as anticipatory repudiation by conduct not expressed in words (discharges - Reasonable (insecurity must be reasonable) written request for an adequate assurance of performance; performance suspended until response given; if not given constitutes repudiation and breach, so other party’s duties discharged - Impossibility- Frustration of purposeo Discharges both parties if NO ONE could have performed on the contract due to intervening impossibility, not just the obligor.Exception: Impossibility discharges a contract requiring an individual’s unique personal service o Parties can be reimbursed for part performance in quasi-contracto Contract to build a house house destroyed after part performance no impossibilityo Elements:A supervening eventNOT reasonably foreseeable at the time of contractingCompletely or almost completely destroys the purpose of the contractAND the purpose was understood by BOTH parties.o When there is an executory contract and neither side ever performs, eventually their duties lapse.if the individual to perform is incapacitated or dead. Exception does not apply to non-unique
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services (mechanic contracts to service your car)- Discharge by lapseWAS THERE A PRE-EXCHANGE BREACH?- Material breach discharges other party’s performance, but minor breach only allows suit for damages.- To put someone into material breach, non-breaching party must show he was willing and able to perform.- Special breaching rules under the UCC for sales of goods:o Considerations for major v. minor breach:Amount of benefit received by non-breaching partyAdequacy of compensation for damagesExtent of part performance by the breaching partyHardship to the breaching partyNegligent or willful behaviorLikelihood that breaching party will complete performanceo Perfect tender ruleIf not perfect, can reject all or any commercial unitsMUST NOTIFY S OF REJECTION!Must take care of the goods until S gets themo Must reject before acceptance occursAcceptance cannot occur before reasonable opportunity to inspecto Revocation of acceptanceB can only revoke acceptance IF:He accepted them on reasonable belief defect would be cured OR
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The defects were latent.Must revoke w/in a reasonable time AND before any substantial change in the condition of the goods. o Seller right to cureMust notify B of intent to cureIf time for performance has passed, S can still cure IF he reasonably believed B would accept the o Installment contractsB CANNOT reject a defective installment if the defect can be cured.o Shipment of non-conforming goods is a simultaneous acceptance and breach UNLESS S includes a notice that they are offered as an accomodation (counteroffer)goods. Then he has a reasonable time to cure.WAS THERE A POST-EXCHANGE BREACH?- Goods destroyed – risk of loss issue- Breach of warranty of title/infringement- Breach of implied warranty of merchantability- Breach of implied warranty of fitness for a particular purpose- Breach of express warrantieso Seller is a merchant Risk passes when the buyer takes physical possession of the goodso Seller a non-merchant Risk passes on tender of deliveryo Shipment contract Risk passes upon delivery to the carriero FOB/destination contract Risk passes when tendered to buyer
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o Defective goods Risk of loss doesn’t pass until goods are accepted despite defects OR defects are curedo Rightfully revoked acceptance Risk of loss is on S from the beginning of the transaction, to the extent of defiencies in B’s insuranceo Breach by buyer ANY loss occurring within a commercially reasonable time after S learns of the breach falls on B to the extent of any deficiency in S’s insuranceo B who provides specifications for custom goods to S holds S harmless against patent infringement claimso For merchants onlyo Fit for ordinary purposeso Disclaimers must be conspicuous and used the word “merchantability”o Can be disclaimed by language like “as is”o Express warranty = Became part of the basis of the bargaino A visual sample is an express warrantyIS THERE A DEFENSE TO ENFORCEMENT OF THE CONTRACT?- Statute of Frauds- Fraudo MYLEGS contracts must be in writing signed by the party to be chargedIn consideration of MarriageContracts that can be performed in one YearInterests in Land (leases more than a year)Executors’ promises to pay estate debts out of their own pockets
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Sale of Goods for $500 or moreSuretyshipso SWAP removes it from the Statute of FraudsSpecially-made goodsWritten merchant’s confirmationParty Admits the contract in courtPerformanceo Requirements of writingIdentity and signature of party to be charged (or his agent’s)Identification of contract subject matterTerms and conditions of dealRecital of consideration if requiredo UCC ONLY: Merchant’s confirmatory memo will sufficeParties reach oral deal, one sends confirmatory memo to the other, this is enough even though o Contract is voidable if innocent party reasonably relied on a material misrepresentation Letterhead OKnot signed by the party to be charged- Unconscionability- Mutual Mistake- Unilateral Mistake- Latent ambiguityo Puffing v. fraud
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o Shocks the consciouso Contracts of adhesiono Unconscionability tested at the time the contract was madeo Usually wrong MBE answero Elements:Mistake by BOTH partiesConcerns a basic assumption on which the contract was madeNobody assumed the risk of mistakeo If satisfied, contract is voidableo No defense, BUT no snap-ups Offeree knew or had reason to know of the mistakeo Neither party aware of ambiguity No contract unless both parties intended same meaningo Both parties aware of ambiguity No contract unless both parties intended the same meaningo Only one party aware of ambiguity Binding contract based on what the ignorant party reasonably believed was the meaning (Frigaliment)o 4 years from breach of UCC contractFixed-price contract is per se assumption of risk that prices will change- Statute of LimitationsWHAT REMEDIES UNDER THE CONTRACT?- Sales of goodso Buyer breaches Seller gets deficiency in resale plus costso Seller breaches Buyer gets difference between cover and contract price o Specific performance for unique goods UNLESS already sold to a BFP
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o Lost volume sellers get lost profitso Replevin of goods:B can replevy identified, undelivered goods from S IF:S can replevy from B when:B has made at least part payment AND EITHERS becomes insolvent w/in 10 days of receiving B’s payment ORThe goods were for household purposes.The goods were bought on credit ANDB was insolvent when he bought them AND S makes demand w/in 10 days of B’s receipt.- Sales of land- Services contracts- Liquidated damages clauses- Remember duty to mitigate damageso May get specific performance since all land is presumed unique UNLESS already sold to a BFPo Seller can also get specific performance even though $$ not uniqueo Specific performance never available BUT court may enjoin D from working elsewhereo Valid ONLY if:Damages were difficult to ascertain when the contract was formed ANDThe amount agreed upon was a reasonable forecast of actual damages OR(UCC ONLY) The amount is close to what the actual damages really were.
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o Employment contracts: Employee must use reasonable diligence to find a like position.o Construction contracts: Must cease work, not keep building and racking up costs.IF NO CONTRACT OR UNENFORCEABLE CONTRACT, IS QUASI-CONTRACTUAL RELIEF AVAILABLE?- Promissory estoppel- Unjust enrichmento Promisor must have reasonably expected promisee would detrimentally rely ANDo The reliance is of a definite and substantial charactero One party has conferred a benefit on the other o With a reasonable expectation of being compensated ando The benefits were conferred at the request of the other person ando Not rewarding damages would result in unjust enrichment.- Quasi-contractual relief may exceed the contract price!REMEDIES FROM REMEDIES LECTURE
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