CONTRACT FORMATION 1. Offer 2. Acceptance 3. Consideration
(keep all 3 separate)
Framework:
1. What law applies (UCC or common law)
2. Was a valid contract formed?
a. Offer
b. Acceptance
c. Consideration
d. Defenses
3. If so, was it performed?
a. Contract terms
b. Excuses of Condition
c. Discharge of Duty
d. Breach
e. Third Party Beneficiaries
f. Remedies
i.
Damages
ii.
Specific Performance
iii.
Restitution
iv.
Rescission
v.
Reformation
4. If contract was breached, determine the appropriate remedy
OFFER
1. OFFER ELEMENTS
a. outward manifestation of INTENT to enter into a contract
i.
lots of conversations in the hypo’s but sometimes no intent
b. a valid legal offer needs SPECIFIC TERMS:
i. price
ii. quantity
iii. description
2. ADVERTISEMENTS
i. generally NOT considered an offer
ii. considered AN INVITATION to offer
1.
the more specific the terms are, the more likely it is an offer
3. TERMINATION OF OFFER (LORRD)
a. DEATH
i. WILL terminate the offer
ii. Death of offeror, offeree can’t sue the estate
b. LAPSE OF TIME
i. if offer is available for reasonable amount of time (if no time stated in FP) and too
much time passes (too long) = it lapses = WILL terminate
c. REJECTION
i.
ii.
Careful in hypo, once you see rejection - “start over”
Once a person rejects – the power of acceptance is DESTROYED. Cant go back and say yes to
previous offer.
d. COUNTEROFFER
i.
e.
Changes the material term of the offer = original K IS
terminated, new offer by person proposing change
ii. Has to be a material change – a reply to an offer that merely requests
information regarding the offer constitutes in inquiry rather than a
counteroffer
iii. Only for merchant sellers: Person asking for warranty of merchantability –
not a counteroffer/termination because it is IMPLIED
1. Selling a freezer – has to be a good freezer. = implied
2. A warranty of merchantability is implied in every contract for the
sale of a good by a seller who is a merchant with respect to goods
of that kind.
REVOCATION (COUNTERMAND) (2 ways) (offeror powers)
1. DIRECT REVOCATION
a. RETRACTION of an offer by the offeror
b. Offeror calling the other party and revoking before other party
Person ‘accepting’
responds
(person making the offer MAY revoke before person accepting responds)
2. INDIRECT REVOCATION **** tested
a. Person receiving offer (offeree) LEARNS another deal was
made = offeree can no longer accept because power of
acceptance has been terminated by indirect revocation by
the Offeror
i.
ii.
Only valid if offeree hasn’t done anything to accept
HYPO: Jon calls you at 8 AM and asks if you would be interested in
buying his car for $20,000 and states the other valid terms. You tell
Jon you will think about it. At 3 PM, you hear from a mutual friend
at coffee that he just bought Jon’s car. Is that proper? YES. Because
Julissa had not responded. Valid because of Indirect Revocation.
Can you now call Jon back and tell him you want to buy his car?
3. OFFERS ARE REVOCABLE !!!! ***
f. MUTUAL RESCIND
i. Both parties to a contract may AGREE to rescind and discharge their
contractual duties as long as the duties are still executory on both sides.
(neither party has performed under the contract – making the contract
mutually rescinded)
4. (3) instances when an offer is NOT REVOCABLE
1. OPTION CONTRACT
a. promise to keep the offer OPEN FOR A PERIOD OF TIME +
b. need additional consideration paid by offeree ***
i. = valid option contract/ irrevocable
1.
2.
3.
Without (b) additional consideration– reverts to black
letter law = contract is REVOCABLE bc not a valid option
contract
HYPO: If Jon says he will keep his offer open for two
weeks, is that enough? NO
HYPO: If Jon says he will keep his offer open for two weeks
for $50, is that valid? YES
2. UCC FIRM OFFER (sale of goods)
a. Offer by Merchants
b. promise to keep the offer open
c. need TO BE IN WRITING
d. signed by a merchant ***
i. how long?
1. Time stated: lasts for the time stated
2. if no time stated: no longer than 3
MONTHS
a. after the 3 months: offer goes back
to being revocable
e.
f.
HYPO: You and Jon are talking on the phone. He says he has a good deal on
peaches. You tell him you will think about it, and he says he will keep the
offer open for two weeks. Is that a valid firm offer? NO. not valid because it
needs to be in writing. What happens? Revert to black letter - now revocable
HYPO: Jon tells you he has a good deal on oranges. He promises to keep the
offer open in writing. There is no time included. On day 92, Jon calls you
and tells you he’s changed his mind. 1) Can he do that? Yes, past 3 months
2) What is the status of the offer? Back to being revocable 3) so now Can you
call Jon on day 92 and accept? yes, because I accepted before John revoced
“whoever comes first” applies. If john would have revoced – Julissa cant buy it
anymore
3. UNILATERAL CONTRACT
a. a promise for an ACT
b. performance/act begins = offer becomes IRREVOCABLE**
i. FP will tell you when performance begins
1.
ii.
c.
Two common questions on MBE:
a. Asking about revocability of the offer? When
performance has begun
b. When you need to get paid?
HYPO: Jon promises to pay you $500 to paint his house. You show
up on Monday at 9 AM and do the first wax-on wax-off at the house.
Jon comes out and says never mind. Can Jon do this? NO. unilateral
contract. But doesn’t owe me the 500 dollars until I finish the job.
unilateral vs bilateral
i.
unilateral – promise for an ACT (performance)
a.
ii.
“I promise to pay you 50 bucks if you mow the
lawn” I have to mow the lawn
bilateral– promise for a PROMISE
a.
“ill promise to paint your house If you promise to
pay me 500 $” - contract once agreed upon/ only
words
ACCEPTANCE
1. MIRROR IMAGE RULE (common law)
a. acceptance must mirror the offer
b. if stated acceptance must be made a particular way = it must be that exact way
i.
“I need you to call me” I need you to write me” “I need you to do something” accepting person
must mirror that
c. If no specification stated, any means are reasonable
d. Objective standard
Other ways to accept:
2. SILENCE
a. if buyer is silent and seller KNOWS = valid (appropriate acceptance)
b. usually:
i. where parties have so agreed or
ii. where that has been their course of dealing before
3. PERFORMANCE
a. words OR
i.
saying I accept
b. actions
i.
pay the money for whatever grantor is selling
4. MAIL **
a. Mailbox rule
i. acceptance is effective when SENT
1. in FP – looking for the date you dropped the acceptance in the
mail to offeror
a. If you mail Jon an acceptance on April 5, the acceptance is effective
on April 5
ii. EXCEPTION:
1. Send rejection first - then send an acceptance
2. Prevails? FIRST LETTER TO ARRIVE WINS **
Acceptance in UCC Sale of Goods
5. UCC SALE OF GOODS (between merchants)
a. Acceptance is construed liberally: Buyer can accept in ANY WAY even if there are
small changes to the contract so long as they are not material
i. is there a custom in the way they do business because merchant relationship?
b. EXCEPTIONS: (3) (where change in terms will not be acceptance)
i.
if the buyer’s changed term is a MATERIAL CHANGE to the contract
= invalidate offer/no deal
1.
totally change the price, type of car or widget
ii. if seller OBJECTS to the change of term in a reasonable amount of time =
that will invalidate the offer
iii. offer LIMITS THE acceptance
1.
CONSIDERATION
(somehow the offer would limit the manner in which the buyer would accept)
1. BARGAIN FOR EXCHANGE
a. I’m giving up something
b. Your giving up something
i. You will NEVER have insufficient consideration because of the amount, even a peppercorn
is enough
ADDITIONAL WAYS MBE TESTS ON CONSIDERATION (each have their own hypo):
2. ILLUSORY PROMISE
a. Not valid consideration
b. the party making the offer retains control/reserving control
i.
“sell it to you when I feel like it”, “ill get back to you”, “I’ll call you when I decide”
ii. modern trend: generally, air on the side an illusory promise is
enforceable consideration, if language allows you to say “he’s basically
saying he’s going to sell you the car”
3. GIFT
a. the promise to give a gift is NOT VALID CONSIDERATION (not enforceable)
i. no consideration
ii. no bargained for exchange
b. already gave a gift IS valid consideration (enforceable)
i. after you have given the gift you cannot take it back
1.
HYPO: Grandmother calls the grandson and says she will give him $100 for his
birthday. The grandmother changes her mind. What if the grandmother does not give
her grandson a check? GMA can change her mind. If she already gave the check, can
she get it back? NO.
4. PAST OR MORAL CONSIDERATION
a. is NOT valid consideration
b. you do something on your own, then, offeror promised the money AFTER THE
FACT – NOT valid consideration/NOT enforceable
c. offeror promised the money FIRST and then you go do it because of this
promise = valid consideration /enforceable
i.
ii.
HYPO: Jon and Mrs. Jon are at the beach. Mrs. Jon gets caught in the riptide, and she’s floating
out to sea. Jon can’t swim. You jump in and save Mrs. Jon. Jon tells you he will give you $10,000
tomorrow for saving Mrs. Jon. You show up at the house, and Jon gives you $10. Is this valid? YES
because that’s past and moral consideration, I did something out of the kindest of my
heart. John didn’t ask me to do that. John doesn’t owe me anything.
2) What if Jon screams, "Whoever can go save my wife, I promise to give you $10,000!” You save
her, and then come to the house. Will Jon have to give you the $10,000? YES. I did it because
John promised me the money.
5. PROMISE TO PAY A DEBT THAT WAS BARRED BY THE STATUTE OF LIMITATIONS
a. valid consideration
b. promising to pay the debt that is barred = enforceable
i.
ii.
HYPO: john owes me 100$, but the statute of limitations has run = john doesn’t owe me anything =
NOT enforceable
HYPO: john owes me 100$, statute of limitations has run, John promises to pay me even though
statute of limitations has run = ENFORCEABLE
6. PROMISE TO PAY A DEBT THAT HAS BEEN DISCHARGED BY BANKRUPTCY
a. if you promise to pay the debt after it has been discharged = enforceable and
valid consideration
i.
HYPO: john declared bankruptcy, it wiped away all his debts, if john promises to pay me AFTER the
fact = enforceable and valid consideration
7. FORBEARANCE TO SUE
a. if John has the (right to sue you, legal ability to sue you) but John promises not
to, even though he could = valid consideration/ enforceable
b.
i. FP will say party can legally sue or has the right to sue
The person threatening to sue has to believe in god faith that his claim is valid
PROMISORRY ESTOPPEL ******* “because the interest of justice require it”
a. promise to someone that induces them to rely to their detriment
i. QUESTION ALL BY ITSELF:
1. When hypo involves detrimental reliance (I promised x, and you
go out and do y)
ii. PICK THE ANSWER TALKING ABOUT reliance/detrimental
reliance, NOTTTT consideration/bargain for exchange
ACCORD AND SATISFACTION (3 hypos)
1.
2.
3.
An accord: an agreement in which one party to an existing contract agrees to accept, in lieu of performance
that he is supposed to receive from the other party, some other, different performance. Generally, an accord
must be supported by consideration, but the consideration may be of lesser value than the originally
bargained for consideration in the prior contract, as long as it is of a different type or the claim is to be paid
to a third party
ACCORD:
a. A valid accord, taken alone, does NOT discharge the prior contract. = it merely SUSPENDS the right
to enforce it in accordance with the terms of the accord contract.
b. If accord agreement is breached = debtor may seek to have the action enjoined by raising the
accord agreement as an equitable defense.
SATISFACTION:
a. The performance of the accord agreement = called satisfaction
b. DISCHARGES the accord agreement AND original contract
1. there is a DEBT OWED and it is UNDISPUTED
i. HYPO 1: Jon owes you $100. You go out to the mail, and you get a
check from Jon from for $50. The check is marked paid in full. You
cash the check. The debt is NOT disputed. Can you get the remaining
$50?
1. John owes the remaining 50 dollars, I can still go after John for
the remaining 50 dollars
2. Ruben - one party making a partial payment saying that it is the
full payment, that is not the full payment, you still owe the other
half
ii. HYPO 2: Jon owes you $100. He doesn’t have $100; he offers to pay
$50. You say you need $90. We agree on $75. Jon sends you a check
for $75 paid in full. Is that enforceable? YES, valid
1. Settlement, compromise, negotiation, deal, dispute, back and
forth between John and I
2. I can’t go after the remaining 25 dollars from John because
now we made a deal
3. Ruben - if there is a bargain or negotiation, then that is
enforceable and valid new debt
iii. HYPO 3: You call Jon and ask when you will get the $100. Jon doesn’t
know what you are talking about. You tell him that you gave him $100
last year. Jon says you are friends and doesn’t want there to be hard
feelings, so he offers $50. He gives you $50, and you take it/cash it
in. Will that be it? yes
1. If John questions/doubt’s that there was a debt in the first place,
but he pays me anyway = ENFORCEABLE and I cant go after him
for any additional money after. The 50 dollars will be FINAL.
2. I cant ever go after John for the remaining 50 bucks.
3. Ruben - when you doubt whether there was a debt in the first
place and you make a payment of some money of that debt, the
other party can't try and get the money left. The question has to
say that you doubt or question whether there was a debt to begin
with
DEFENSES TO A CONTRCT ENFORECEABILITY (keep them separate, BE will only test ONE at a time
1. AGE/MINORITY
a. entering into a contract with a MINOR
b. the contract is VOIDABLE - at the option of the minor
i. once the kid reaches the age of majority, they can ratify the contract
THEMSELVES
ii. price/# stated when a minor = DON’T MATTER = unenforceable
iii. price/# stated AFTER minor reaches age of majority = that is the proper
contract number = enforceable
1.
2.
iv.
MBE will tell you the age of majority
If you enter into a contract for 100$ with a 15-year-old minor, and the age of majority
is 18. Is it automatically void? No. voidable. At the option of the kid. Later on, kid
turns 18. Now he says its going to be 200$. What number is enforceable in the
contract? 200$
NECESSARY: if the contract is a necessity), the kid still has to pay – only because it is a
necessity – will be enforceable
1. Food
2. Shelter
3. Clothing
4. Medical care
2. MENTAL INCAPCITY
a. Person: Mental disease, legally insane
b. contract is VOID
c. NECESSARY: if the contract is a necessity), the kid still has to pay – only because it is a necessity – will be
enforceable
*following defenses look the same, be extra careful when memorizing - JG
3. DURESS
a. some sort of a WRONGFUL THREAT
b. because of the threat - the person entered into the contract
i.
ii.
“ill make him an offer he cant refuse”
blood, gun, dead horse in the bed, knife
4. UNDUE INFLUENCE
a. looking for some sort of UNEVEN BARGAINING POSITION
b. “unfair tactic” where one party is beneath the other party = not equitable
i.
examples:
1. not a balanced situation because of either:
a. person has more power,
b. more status, or
c. the setting where they are negotiating the contract
i.
= not in an equitable situation as far as their bargaining position
2. HYPO: Jon walks up to you with a contract to sign before you take the bar
exam = John has more power
5. UNCONSCIONABILITY
a. RESULT ITSELF will be UNFAIR/unconscionable
i.
ii.
iii.
iv.
Focus: on the result itself
If we go forward with the contract – the result itself will be unfair/unconscionable
Ask yourself “what will happen if we do go through with the contract”
TWO TYPES:
1.
procedural unconscionability
unfairness in the bargaining process that leaves a party
with no meaningful choice about whether to enter into the
contract
b. one party has substantially superior bargaining power and
can dictate the terms of the contract to the other who has
inferior bargaining power
c. unequal bargaining power
substantive unconscionability
a. price terms that unreasonably favor the other party
b. excessively high or low price term
a.
2.
6. ILLEGAL CONTRACT
a. UNENFORCEABLE and
b. can be raised as defense
7. MISTAKE (2)
a. UNILATERAL MISTAKE
i. if ONE party is mistaken about a term in the contract
ii. it is generally NOT a defense UNLESS:
1. the other party KNEW/ has reason to know about the
mistake OR
2. if there was a CLERICAL ERROR
a. = voidable
b. MUTUAL MISTAKE
i. BOTH parties mistaken about a material term
ii. WILL be a defense because there was no meeting of the minds
1.
will be told when both parties are mistaken
iii. remedy:
1. RESCISSION of the contract (put us in a place as if this never happened)
a.
b.
Examples: Buying an animal, but neither party knew the animal had a
disease, that nobody could have known about it
Buying Joe Namath rookie card, but neither party knew it was from the
bottom of the Cracker Jack box and it was worth a dollar = mutual mistake
8. MISREPRESENTATION (2)
a.
no meeting of the minds because one party is trying to take advantage of the other
b. INTENTIONAL misrepresentation
i. knew/should have known of falsity with intent to induce reliance
ii. elements:
1. intentionally saying something
2. with “scienter”
a. scienter: party knew or should have known it was false
3. with intent to induce reliance
c. NEGLIGENT misrepresentation
i. there was an OMISSION and it causes the innocent party to detrimentally
RELY
1.
HYPO: John forgot to tell me something, he left something out, didn’t act intentionally.
Usually looking for a special relationship between the parties. I’m relying on some sort of
information from john.
9. NONCOMPETE CLAUSE
a. Generally, have to be REASONABLE under the circumstances = enforceable
i.
ii.
how long can't you find another job, whats the geographic area you are not allowed to work in?
To determine if a non-compete clause is reasonable, look for facts that indicate how long you
can’t compete and the geographic area restrictions
10. STATUTE OF FRAUDS ****
a. important contracts need to be in writing
b. look for these words: ORAL, VERBAL, or TALKING OVER THE PHONE
i.
ii.
iii.
fact pattern obviously wont tell you “SOF”
NOT ALL QUESTIONS WILL BE SOF WHEN YOU SEE THOSE WORDS!!!
Make sure SOF IS APPLICABLE (MYLEGS)!!!! Or testing on what a legal writing is !!!!
The following contracts MUST BE IN WRITING:
c. MY LEGS
i. MARRIAGE
1. contracts for marriage need to be in writing
ii. CONTRACT FOR A YEAR
1. contracts that can NOT be performed WITHIN A YEAR
a. (including services, any contract)
2. if a contract for services has already been fully performed = NO
writing is required since the work has been performed
iii. LAND
1. sale for the interest in land including leases must be in writing
2. EXCEPTION - PART PERFORMANCE:
a. (writing not needed if 2 of 3 occur)
i. if you PAY SOMETHING OF VALUE
b. AND either:
i. you TAKE POSSESSION of land, OR
ii. make IMPROVEMENTS of land
iv. EXECUTOR CONTRACTS
1. if your hired to be an executor of an estate
2. has to be in writing
v. GUARANTOR/SURETY
1. Promising to guarantee/pay the debt of another
2. EXCEPTION:
a. Look to main purpose/motive
b. If it is self serving = contract does NOT need to be in
writing = therefore enforceable
i.
if the purpose of the guarantee is to benefit yourself, then it does not
need to be in writing
ii. HYPO: Example: Jon cosigns on a car because he wants the
car for himself too – John’s motive is for himself, contract
does not have to be in writing then
iii. it takes it out of SOF = no writing required
c. surety does not need to receive consideration separate
from the consideration of the person whose debt they are
backing
vi. SALE OF GOODS 500$ OR MORE
1. Sale of goods for 500$ or more = has to be in writing
2. 499 dollars – does not have to be in writing
a. If Contract is modified from 400 – 600 = modification in
writing is needed !!
3. EXCEPTION – PART PERFORMANCE
a. PART PERFORMANCE of either party or both
1. Sending SOME PART OF PAYMENT of the
goods
2. SEND PART of the goods / partial delivery
(and buyer accepts)
a.
Rejects – can claim SOF
ii. it takes it out of SOF = no writing required
4. EXCEPTION - MERCHANT CONFIRMATION
(memorandum/memorialization)
a. One merchant, sends the other, a written confirmation of
the order:
i. confirmation SIGNED by sender
ii. includes the QUANTITY
iii. no written OBJECTION from the other merchant
within 10 days of receipt
1. = this is considered the writing for the
agreement
5. Under UCC 2-305 a contract may be enforceable. In the absence of
a PRICE TERM so long as the parties otherwise intended to enter
into a contract
LEGAL WRITING:
1.
2.
3.
4.
the PARTIES
SUBJECT MATTER
basic MATERIAL TERMS of the contract
signed by the party to be charged
a. can be initials, symbol, ANY kind of marking will qualify as
a signature
b.
HYPO: Jon signs his signature “JG.” Can a signature be a symbol or marking
that everyone knows? Yes
c.
Can have a SOF contract on a napkin
PAROLE EVIDENCE RULE - CONTRACT CONTENT AND MEANING
Careful on these hypos: answer choice will say “inadmissible because it would violate the parole evidence rule” or inadmissible because you cant bring in new
evidence to violate the parole evidence rule”, correct answer will actually be “admissible because one of the exceptions apply or admissible because its partially
integrated and its coming in anyway” SLOW DOWN IN THEF ACTS
1. MBE:
a. Issue spotting PER:
i. the question will say that you are going to court to ask the court to admit
more evidence and enforce it into the contract
ii. both have an agreement; someone is trying to add more terms/elements
into an already existing contract
b. applying PER:
i. PER applies to things both parties negotiated/discussed/admitted to
PRIOR to OR at the time the contract was entered into
1. Negotiated/discussed AFTER the contract was created = is
admissible and PER does NOT apply
2. Parole evidence Definition:
a. ADDING MORE TERMS to a contract
b. Must be information discussed PRIOR TO or AT THE TIME the parties entered
into the contract
3. HOW TO KNOW WHEN IT IS ADMISSIBLE?
a. step 1: ask yourself: is the contract a COMPLETE or FINAL integration OR: a
PARTIAL integration?
i. COMPLETE/FINAL INTEGRATION
1. if it’s a complete or finally integrated contract = parole evidence
will NOT be admissible (parole evidence will NOT come in)
2. how do I know what a complete or final integration looks like?
Generally, those contracts contain:
a. merger clause:
i. clause stating: “this will be the final agreement
between the parties”
1.
Other examples: “nothing else can come in” ;; “court
determines this is a complete integration”
ii. If so, Parole evidence is NOT admissible
1.
It will not be a final integration UNLESS the facts tell you it
is somehow through that language, do not infer!!
3. EXCEPTION to final integration
a. If party is only trying to bring the new evidence to clear up
an ambiguous term
i. if they are talking about ambiguity in the facts, pick the answer
choice which talks about ambiguity, don’t infer ambiguity!!!
b.
If there is no evidence in the hypo of a merger clause or that other language, hypo just says “you and I have
a contract and now I want to bring in more stuff” then… you have a partial integration::
i. PARTIAL INTEGRATION (presumption unless they give you above facts)
1. Parole evidence IS ADMISSIBLE
a.
(you can bring in more stuff to the contract - because we didn’t want to stop it
coming in the first place)
2. Evidence that CAN COME IN: (admissible)
a. anything that explains or supplements the original terms
of the contract
b. consistent additional terms
i. any accessories - things that explain when, where,
how were going to do the contract!!!! Makes it
easier to understand what were doing, explain
what were getting with the contract
3. Evidence that can NOT come in: (not admissible)
a. anything that CONTRADICTS or MATERIALLY ALTERS a
term of the contract
i. changing the price on a car
4.
HYPO: Jon goes to the car dealer to negotiate the purchase of a car. It is a partially
integrated contract. There is no merger clause or final agreement. When Jon goes to
pick up the car, he asks the dealer where his leather floor mats and satellite radio are.
The dealer tells him those are not in the contract. Jon tells him they talked about it,
and the dealer was supposed to add in the floor mats and radio. 1) Can Jon add those
terms? Yes because the satellite radio nor the floor mats materially alter nor
contradict a term of the contract – it just explain what he gets with the car
2) What if Jon plans to buy a Lexus, and the dealer tries to make him take a Kia? No.
not coming in because it Materially alters it.
ADDITIONAL EVIDENCE IS ADMISSIBLE (CAN BRING IN PER)
1. FRAUD
a. Any evidence about fraud – admissible
2. MISTAKE
a. Any evidence about mistake – admissible
b. Does not bar introduction of evidence to show the mistake that forms the basis
of reformation
3. DURESS
a. Any evidence about duress – admissible
4. CONDITION PRECEDENT
a. any evidence to show the existence of a condition precedent – admissible
i.
(a condition in the contract)
5. SALE OF GOODS HYPO:
a. any information/evidence to show course of dealing
b. customs and the trade of parties
c. how parties have done prior business with each other
i.
ii.
iii.
iv.
v.
vi.
trade usage
trade custom
a custom in the industry
“the way I always the deliver the tomatoes”
how they buy and sell
how they work together
1. can be brought in even if the parties intended the agreement be complete and exclusive
PERFORMANCE, BREACH, DISCHARGE
RISK OF LOSS (2)
Risk of loss with buyers and sellers and when the risk of loss passes from one party to another. If john is selling widgets, issue will
be if he is delivering them right to me, or is he going to use a carrier – the plane, the boat, fed ex, UPS, horse, buggie etc.
1. NON CARRIER cases: (seller is directly delivering them right to buyer, figuring out who is responsible for damage on the goods)
a. seller IS A MERCHANT:
i. risk of loss: on the seller UNTIL the buyer takes possession
b. seller a NON MERCHANT: (ie craigslist, amazon etc)
i. risk of loss: on the seller UNTIL the goods are tendered to the buyer
(tender: seller make the goods available to the buyer)
2. CARRIER CASES (2)
a. SHIPMENT CONTRACT / “FOB seller”
i. default rule
ii. risk of loss: on the seller UNTIL he gives/delivers them to the carrier
(fedex, ups) then it shifts to the buyer
1.
“risk of loss shifts to buyer when goods are delivered to carrier”
b. DESTINATION CONTRACT / FOB “anything else”
i. risk of loss: on the seller UNTIL it gets to the actual location
1.
c.
“risk of loss shifts to buyer when goods are delivered to the actual location”
How to know which one FP is talking about?
i. FOB seller = shipment contract
ii.
FOB “anything else” = destination contract
REQUIREMENTS CONTRACT “I promise to deliver ALL (all the quantity that I have) of the widgets that I
have” – but something happens and seller cant produce them all
1. Buzzword: good faith
2. if seller acts in good faith to obtain all that he could = that is fine/seller off the hook
3. generally requirements contract not assignable, however, the UCC allows the assignment if the
assignee acts in GOOD FAITH not to alter the terms of the contract
MODIFICATION
1. Modifying/changing a material term to the contract
a. COMMON LAW: (services, land etc)
i. New/additional CONSIDERATION IS NEEDED = valid modification
1. Where a modification would operate to the benefit of only ONE
of the parties – generally unenforceable UNLESS some
consideration is being given to the other party
2. Under the pre existing legal duty rule – promise to perfom or the
performance of an existing legal duty – will NOT be sufficient
consideration
b. UCC
i. just need good faith = valid modification
ii. No consideration needed to modify
1.
FP will tell you if good faith
2. Modification CAN be ORAL/WRITTEN
a. Generally, modification can be oral or written
b. UCC
i. If there is a clauses prohibiting oral modification - considered valid
1.
(you can do whatever you want)
3. MUTUAL MODIFICATION
a. both parties agree to change/modify the original terms in K
b. unforeseen circumstances have occurred which make the contract complicated
c. ALLOWED as long as it is fair and reasonable under the circumstances
CONDITIONS
Be very careful, VERY SUBTLE in a very long hypo
Make sure condition being breached is for the original offer – minor breaches for conditions within the contract, just
make that specific condition not met, but not the entire contract for breach?? Q 195 in barbri position
1. Very Subtle in FP, be careful, look for:
a. “I don’t have to do this, unless you agree to do something else”
b. “John agrees not to sell the house, unless Bob does something else”
c. “im not going to do something unless you do it”
d. something has to happen (condition) which either makes you perform or says
that “if you don't perform” the other party doesn't have to perform, if Bob
doesn’t do it, John wont sell you the house.
e. Condition in a contract. Does that need to happen so that it requires me to
perform, OR it allows me to get out of the contract? Yes
2. KINDS of CONDITIONS
a. CONDITION PRECEDENT
i. Condition/event has to happen PRIOR to the performance of the
contract
b. CONDITION CONCURRENT
i. Condition/event happens AT THE TIME of the contract
1. UCC article perfect tender rule – a seller’s tender of delivery of
goods and a buyer’s tender of payment are concurrent conditions
of exchange. If one isn’t met. The other party does not have to
perform.
c. CONDITION SUBSEQUENT
i. Condition/event happens AFTER the contract
a.
b.
c.
HYPO: You and Jon have agreed for Jon to sell you his house. The closing is on
June 1. Contract: You must secure a mortgage 30 days prior to closing or else
Jon doesn’t have to sell. What type of condition? (Condition precedent)
(before)
HYPO: Jon is obligated to give you 10 sets of keys on the day of closing. What
type of condition? (concurrent) (at the time of contract)
HYPO: Jon must take the jungle gym out of the yard 30 days after closing.
What type of condition? (subsequent)(after)
3. DISCHARGE OF PERFORMANCE
a. if the condition is not met the other party does NOT have to complete the
contract or perform = aka discharged
b. EXCEPTIONS: (person still has to perform anyway)
1. waiver of condition/performance ***
a. allowing the party who needed to perform a condition not
do the condition
i.
ii.
iii.
iv.
HYPO: Jon puts a condition in the contract and then calls you and
says forget about it. What does this mean? Condition is waived,
john still has to perform for me aka sell me the house even if I get
the mortgage after 30 days in above hypo
usually happens when one party realizes its too hard for you to
complete, calls you and says don’t worry about it
don’t use “waive”
look for: don’t worry about it, its fine etc
2. bad faith
a. if one party acts in bad faith, they must still perform
3. avoiding forfeiture
a. if a party would suffer a great loss or forfeiture of
something = the condition will be excused, person has to
perform anyway
4. TIMING IN CONTRACTS
a. Generally, time is NOT of the essence UNLESS stated
b. If stated:
i. it becomes a condition to the K, then requiring performance
c. if time is not of the essence:
i. then it is NOT a material breach
5. GOOD FAITH
a. Generally, it is implied into every contract that parties must act in good faith
and imposes an obligation to make reasonable efforts to do what you have to do
(ie. Get that mortgage in above hypo)
NON CONFORMING GOODS
(goods were not conforming)
1. Fact pattern:
a. Goods that were not conforming
b. Asked for apples, receive peaches
c. Asked for pencils, receive markers
d. Look and focus on the type of hypo!!!!
2. RULE:
a. if the seller delivers non conforming goods, the BUYER(buyer’s rights) MAY:
i. REJECT
1. in a reasonable amount of time
ii. ACCEPT
1. buyer will pay the amount of the goods in the original contract if
the price is the same
2. buyer accepts non conforming goods w a different price, buyer
can RECOVER: WARRANTY DAMAGES:
a. difference between the value of the goods delivered and
the value they would have had if they had been as
warranted in the contract + incidental and consequential
damages
iii. REJECT part of it
iv. ACCEPT part of it
3. SELLER’S RIGHT TO CURE: (2 versions, watch out)
a. if the seller has reasonable grounds to believe that buyer would accept the
nonconforming goods then the seller can fix that delivery IF:
1. the seller gives reasonable NOTICE to cure
2. make a conforming delivery in a reasonable amount of time
a. Examples: deal is for #2 pencils. Seller: Didn’t you say that you could
b.
use number one pencils if you aren’t testing? John reasonably
believed I’d accept and now John can fix the delivery to send me the
#2 pencils (conforming delivery) if he sends it in a reasonable time
Didn’t you tell me that if I ever had a good deal on peaches to send
them?
b. if seller delivers nonconforming goods PRIOR to the delivery date, the seller can
fix the situation IF:
i. giving reasonable notice to the buyer and
ii. the seller delivers the goods on time
iii. buyer must give seller the chance to cure the issue
1.
HYPO: Jon is supposed to deliver you number two pencils on June 1. On May 29, you
open a box and there are number 1 pencils. Can the seller fix it? YES because June 1’s
wasn’t the original date anyway. I must give John the chance to fix it if he can get them
to me by June 1.
INSTALLMENT CONTRACTS
1. delivering goods to the buyer in several different shipments
a. deliver peaches every month for 10 months, month 3 sends apples
2. if ONE of many installment is NON CONFORMING:
a. defective shipment CANT be rejected if the defect can be cured
b. the seller has NOT totally breached the contract if seller CAN fix it = buyer must
give seller the right to fix it
c. but IF, it affects/substantially impairs that installment, and the seller can NOT fix
it = buyer can reject that installment
d. EXCEPTION:
i. If that ONE installment would materially impair the value of the whole
contract – buyer can hold seller to a total breach / cancel the contractf
1. If it blows out the entire contract
2. If john’s one shipment that messed up was the huge shipment on #2 pencils the day
before the exam – materially impairs the value – I can hold him to a total breach of
contract
3. SELLER ACCOMODATION
a. if seller is sending the buyer something as an accommodation = the buyer has
the choice of whether to ACCEPT or REJECT
i.
“im only sending you this as an accomodation”
1.
Hypo has to use the word accommodation
DISCHARGE (impracticability vs. impossibility)
1. IMPRACTICABILITY
a. Situation where theirs unforeseen circumstances which now makes the
performance of the contract so difficult, so expensive, AFTER the contract was
entered into that now performing has become way too hard and expensive
i. Seller can say its impractical – seller is discharged from performace
b. SO UNFORESEEABLE: Change has to be SO LARGE, so expensive, seller probably
wouldn’t have entered the contract in the first place
c. Foreseeable: a slight increase in price does NOT mean that the contract is
impracticable, fluctuation in prices is seen as foreseeable
i.
HYPO Jon is going to deliver widgets to you. He is driving from New York to California and is
going to make $1,000. 1) Gas prices go up 50 cents a gallon. Now Jon is only going to make $900.
Is that impracticable? NO. not making the same amount of money, but any fluctuation in price is
seen as foreseeable 2) What if there is a war and now gas prices go up $5 a gallon. Now, Jon
would be losing money. Is that impracticable? YES
2. IMPOSSIBILITY
a. something is IMPOSSIBLE if NOBODY can perform, objectively no-one can
perform
i. no widgets, no more widgets
ii. house, burned down house
b. examples of impossibility:
i. UCC: if the goods are destroyed, the contract is impossible
ii. illegal
1. if performance has now made the contract illegal it makes it
impossible – seller can raise impossibility
c. EXCEPTION:
i. temporary impossibly (temporary issue)
1. can NOT raise impossibility if the impossibility is only for a short
period of time
a. ex. severe storm, flood will go away in 3 days
ii. Parties prepared for the event (foreseeable)
1. parties prepared for the event, contemplated event
2. impossibility will NOT apply because FORESEEABLE that it
would happen since parties prepared = defense can NOT be
raised
3. FRUSTRATION OF PURPOSE
a. The core reason for K is no longer present
b. if the core reason of why the contract was entered into has now become
frustrated, no longer exists, then the parties can be discharged of performance
i. Example: You entered into a contract to work with Jon to prepare for the bar exam.
Now, you decided not to take the exam – reason contracted with John – prep for bar –
purpose is gone – “frustration of purpose” and discharged from performance
4. ANTICIPATORY REPUDIATION
a. HYPO 1: UNEQUIVOCALLY REFUSES
i. before the contract is supposed to be performed
ii. one party unequivocally (absolute) refuses to perform
1. the statement has to be absolute unequivocal refusal
iii. you can hold the other party in breach and sue immediately
1. do not have to sue immediately
2. can wait and see if other party changes their mind
3. can look for another to do the work
4. if party repudiating (redusing) shows up to do the work after the
repudiation, non breaching party MAY accept the work but does
not have to
a. HYPO: Jon says he doesn’t know if he will be able to close
because he hasn’t found a mortgage. I know closing is in 4
days, but well happen. Has Jon repudiated? NO. he just
said hes not sure. Not “unequivocal”, YOU CAN ONLY
DEMAND ASSURANCES
b. HYPO 2: DEMAND ASSURANCES
i. Performing Party says something/does something that gives a reason to
other party to worry/doubt performance = can demand assurances
1. “promise me you will show up”
2. promise that the other party will complete the contract
ii. Performing Party: responds in a reasonable amount of time
1. Other party must wait to show up/give performing party a shot to
complete it
2. Cant find another party to complete the contract
iii. Performing party doesn’t respond within a reasonable time
1. Other party CAN seek someone else, do whatever they want
iv. UCC sale of good case:
1. demand must be IN WRITING
2. and reasonable amount of time for response: 30 days
c. RETRACTION (refusing party) OF REPUDIATION
i. repudiating party may retract the repudiation/ CAN take it back
ii. unless:
1. the other party has sued already
2. the other party has accepted the repudiation (refusal)
3. the other party has already relied on the repudiation (refusal)
and began looking for someone else
a.
HYPO: Jon calls you and tells you he is no longer buying your house on May
28. 1) Can you sue? Yes 2) If you sue, can Jon take it back? No 3) If you
accepted the repudiation or tried to find another buyer, can Jon take it back?
No 4) What if you haven’t sued and Jon calls you two hours later to say he’ll
be there. That’s fine, can accept him back if you haven’t sued, accepted, or
relied.
REMEDIES (legal remedies/ equitable remedies)
LEGAL REMEDIES (harder questions, take what you can) // MONEY rule after breach, generally the non breaching
party is getting the damges
1. EXPECTATION DAMAGES
a. Default remedy/formula
b. put plaintiff in a position if contract had been performed
c. only entitled to ED if: foreseeable with a reasonable certainty
d. FORMULA – expectation damages:
i. (contract price) - (money received/saved) + costs = expectation damages
ii.
What you agreed to pay – what you already would have received + what its going to cost you =
expectation
1. HYPO: If you were going to make $10, but you already got $1, what are your damages?
9 What if there were $3 in costs? 12
2. RELIANCE DAMAGES
a. put plaintiff in a position he was in before/prior to entering the contract
b. expenses made RELYING on the fact that a contract was going to be made
c. can get reliance damages when you cannot get expectation damages because
they are too speculative or uncertain
d. unreimbursed costs
i. will be told that you cannot get expectation so you can then get reliance
ii.
Example: Jon was going to teach out in California, and now he has unreimbursed costs because
he relied on you telling him to come out to California on June 1 to teach a class. He gets reliance
damages, might not get expectation because its so uncertain and speculative, john doesn’t even
know if there is damages
3. RESTITUTION DAMAGES
a. Getting back any value of the benefits that you already gave the other party
b. this occurs: when the contract is partially performed
c. measured: by the market value of the services
i.
this is what you will be able to recovery
d. the non breaching party has the option to choose between restitution or
expectation damages
i.
ii.
HYPO: I was hired by John to paint at his house. I breach. Partial performance. John, the non
breaching party has the option to choose expectation OR restitution
if the hypo says that something has been partially performed, you may choose either expectation
damages or restitution damages
4. CONSEQUENTIAL DAMAGES
a. as a result/consequence of the breach, FORESEEABLE losses/costs have
incurred
i.
costs which the non breaching party has to make because of the breach
ii. Example: You don’t buy Jon’s house, now he has to pay to put it back on the market
5. INCIDENTAL DAMAGES
a. out of pocket expenses that have been incurred by non breaching party
6. LIQUIDATED DAMAGES
a. These damages are determined by the parties at the time the contract is
entered into because they would be too hard to figure out later
i.
“If one of us breaches, this is what you/me will get”
b. CAN be enforced if:
i. REASONABLE
ii. and does NOT ACT AS A PENALTY
1. the reasonableness analysis involves examining the amount of
liquidated damages in the contract compared to the prospective
or actual compensatory damages from a breach
c. generally/roughly:
i. 10% or less = of the value of the contract is fine
ii. 10% and above = it looks like a penalty and won't be enforced because its
unreasonable and its acting as a penalty
7. QUANTUM MERUIT
a. get to recover the REASONABLE VALUE of your services
b. breaching party FORMULA: (even the breaching party can recover)
i.
(reasonable value of services) – (damages incurred/damages they have caused)
1.
generally the non-breaching party is getting the damages in 1-6, however in quantum
merit, FP is generally testing you because BREACHING PARTY can recover as well under
quantum merit.
8. Money Damages for Breach of Employment Contract
A company's unjustified termination of an employee's employment constitutes breach
of contract entitling the employee to recover monetary damages
b. A wrongfully discharged employee is expected to mitigate damages by making
reasonable efforts to seek comparable employment.
i. In a case of a wrongfully discharged employee, the employee is expected to
accept an offer of comparable employment.
ii. If the employee fails or refuses to do so, the employee’s recovery is reduced by
the amount of the loss tgat the employee could have avoided by accepting the
job offer.
c. However, if no comparable employment is reasonably available and the employee does
not take another job, the employee is entitled to recover the promised salary for the
remainder of the contract duration
d. Employers cannot obtain specific performance requiring an employee who has breached
a personal services contract to work for the employer. Generally, courts refuse to grant
specific performance of an employment contract against a breaching employer.
a.
UCC sale of goods REMEDIES/ UCC money damages
UCC SELLER’s DAMAGES (if Buyer breaches, Seller can recover)
1. if the GOODS HAVE BEEN DELIVERED AND ACCEPTED
a. Seller gets: the contract price
b. If SOME or NONE of the GOODS have been DELIVERED and have NOT been
RESOLD
i. If NONE have been resold by seller:
1. Seller gets: (contract price) – (market price) = seller’s recovery
ii. IF SOME have been resold by seller:
1. Seller gets: (contract price) – (resale price) = seller’s recovery
c. INCIDENTAL DAMAGES
i. seller can ALWAYS get incidental damages (in addition to 1+2 above) for
any additional costs related to reselling the goods
2. LOST PROFITS (lost volume seller)
a. when the seller is the lost volume seller
i. lost volume seller: seller can sell AS MANY widgets as possible
1.
Seller can sell as many widgets as possible, has a million widgets. Seller can sell millions
of cars, because biggest car producer
2. HYPO on MBE: when you see FP states “lost volume seller”, or see
“as many of X as possible” in the facts = the answer will have to
mention lost profits, shut up and pick that answer
b.
FORMULA (if MBE doesn’t give you above answer, and makes u use formula)
i. (profit the seller would have made) + (seller’s costs) – (what the
payment was for the resale) = lost profits
ii. Contract price – cost to the dealer = lost profits
UCC BUYER DAMAGES (if seller breaches, buyer can recover)
1. HAS BUYER BOUGHT REPLACEMENT GOODS
a. buyer PURCHASED replacement goods
i. (contract price) – (what buyer paid for the new goods) = buyer’s
recovery
b. buyer has NOT purchased replacement goods
i. (contract price) – (market price AT THE TIME buyer learn of the breach)
= buyer’s recovery
1.
“seller calls and informs buyer he wont be delivering the widgets”
c. INCIDENTAL DAMAGES
i. Buyer can ALWAYS get incidental damages or consequential damages
ii. (Incidental/consequential damages) – (expenses buyer saved) = buyer’s
recovery
iii. Incidental: any additional costs related to reselling the goods
iv. Consequential: as a consequence of the seller’s breach, FORESEEABLE
losses/costs have incurred on the buyer
2. BUYER WHO RIGHTFULLY REJECTS OR JUSTIFIABLY REVOKES GOODS
a. has a security interest in the goods
b. can recover any damages for:
i. their price and any expenses incurred in their: inspection, receipt,
transportation, care and custody and
ii. may hold such goods and
iii. resell them in like manner as an aggrieved seller
EQUITABLE REMEDIES
-
Hypo: sometimes FP on MBE just testing you on:
o Q: “when can a person get an equitable remedy?”
o A: when the remedy at law is inadequate/when money won’t help you
1. SPECIFIC PERFORMANCE
a. the court will MAKE a party perform in a certain way
b. when.. the item in the contract is unique/ for “UNIQUE TERMS”
i. ex: 1) land is ALWAYS unique!!!! 2) if its a rare item it is always unique
c.
1. “rare car, rare card etc”
Court CAN grant specific performance of a contractual obligation where an award of monetary damages is
inadequate
i.
Where damages would not be a just or reasonable substitute for performance of the promise, or
ii. Where the calculation of adequate damages would be impracticable
2. INJUNCTION
a. The court will STOP party from doing something
b. Will grant… to “prevent IRREPERABLE HARM”***
i. Irreparable harm examples:
1. employment contracts
a.
someone wants to go to competitor
2. trade secret contracts
a. Example: You work at McDonald’s, and you are going to move to
Burger King and talk about the secret sauce
3. Proprietary information
3. RESCISSION
a. when there is no meeting of the minds (not on the same page aka not fair)
b. everybody goes back as if the contract NEVER OCCURRED in the first place
i. occurs when:
1. mistake
2. misrepresentation
3. duress
4. lack of capacity
4. REFORMATION
a. When parties orally agree on a deal
b. May then reduce the agreement to writing
c. When the writing incorrectly reflects the original agreement they made,
d. Either party may seek reformation from the court
i. Re writing so that the document correctly reflects the oral agreement
they made originally
e. Reformation ONLY proper when the writing incorrectly summarizes the parties
shared understanding,
i. NOT when they fundamentally disagree on terms of the deal to begin
with
ii. Reformation is NOT a remedy for an underlying disagreement about the
deal itself that results in a document reflecting only the understanding of
one party.
iii. Here, courts will find that no contract exists at all due to the mutual
mistake preventing assent
THIRD PARTY RIGHTS
THIRD PARTY BENEFICIARIES
 Issue spotting:

Really study the facts of these hypos for these questions to make sure you are issue spotting when its about a
third party beneficiary, hard to spot these
 Hypo will be about:
 two people entered into valid agreement/contract and
 a third party will BENEFIT from the 1+2 agreement
(2 type) THIRD-PARTY BENEFICIARIES
1. INCIDENTIAL BENEFICIARY
a. RULE:
i. 3rd party who incidentally benefits from the original two parties’ contract
but
ii. The original 2 parties did NOT intend to help/NEVER wanted 3rd party, &
even so:
iii. 3rd party benefited
b. 3rd party RIGHTS?
i. NO RIGHTS/ NEVER HAS RIGHTS against the 2 original parties
ii. Can NEVER SUE the 2 original parties
rd
c. 3 party RELIES?
i. does NOT matter – still has NO RIGHTS
1.
HYPO: You and Jon are working together. Jon is helping you with the bar exam. Bob is
next door. He puts a glass up against the wall, and he’s eavesdropping and taking
notes. You and Jon move to your office. Bob is upset because he can no longer hear. Can
Bob sue saying he’s a third-party beneficiary? No. John and I never wanted him to
benefit, even though he is an incidental party, has no rights to sue John and I.
2. INTENDED BENEFICIARY
a. RULE:
i. The original 2 parties WANTED TO HELP/INTEND TO BENEFIT a 3rd party
ii. Intended 3rd party beneficiaries in hypo DO NOT NEED TO BE NAMED
1. in the hypo the third party beneficiary WILL BE NAMED ORRRR REFERRED TO WITHOUT
A NAME
a. “I want to help a friend OR
2.
b. I want to help anyone who is a Spurs fan” = both are intended beneficiaries
contracting parties talked about 3rd party, wanted to help 3rd party so he could benefit
a. HYPO: You and Jon are working together. Jon is helping you with the bar
exam. Bob is next door. I tell John Bob has always needed help with the bar,
he might need a tutor. John agrees to record the sessions on the phone,
and tells me I can send the link to Bob. What is bob? Hes an intended
beneficiary because John and I are wanting to help him/intending to help
him
b. 3rd party RIGHTS?
i. MAY have rights
ii. If 3rd party’s rights have NOT vested = cant sue original parties
c. RIGHTS VEST WHEN? (2 ways) (when the 3rd party CAN sue original 2 parties)
1. EITHER/OR BOTH of original 2 parties INFORMS the third party of
rights AND 3rd party accepts it (ORRR)
2. 3rd party LEARNS about it independently AND begins to RELY
ii. Once rights have vested, 3rd party:
1. CAN Sue either original 2 parties
2. Becomes like one of the original 2 contracting parties.. aka “3rd
party has same rights & defenses as original parties”
a.
HYPO: You and Jon agree to help Bob by recording the tutoring sessions and
giving him the link. You leave Jon’s office, and you’re in your car. You call Bob
to tell him the good news. Jon calls you on other line and tells you he doesn’t
want you to give information to Bob. You click back over to Bob. Have Bob’s
rights vested? NO!!! What if you called and told Bob before Jon called you?
Then vested!!!
ASSIGNMENT AND DELEGATION
 Issue spotting:



Really study the facts of these hypos and DO NOT CONFUSE THEM with 3rd party beneficiaries because A&D
problems also involve 3 parties.
3rd party B: 1&2 generally are doing all the work ….and 3rd party benefits
Assignment and delegation: passing off obligation to someone else
 Hypo will be about:
 two parties have an agreement to do something and
 (usually) ONE of the parties gives away/transfers/giving their job/there duties in the
contract/their benefit from the contract TO ANOTHER PERSON
 GENERAL RULE::
 **********BOTH are VALID ***********
 ASSIGNMENTS AND DELEGATIONS ARE VALID!!!
 NO NOTICE required - NO AGREEMENT IN ADVANCE – have to let the
person complete the job
 can assign/delegate to whomever and whenever you want
1. ASSIGNMENT & DELEGATION
a. one party from 2 original parties in a contract is passing off an obligation to
someone else”
b. there has to be a PRESENT INTENT TO TRANSFER job NOW
i. CANT be a future intent to transfer to another in 6 months or at a later
date
c. NO NOTICE required
d. NO AGREEMENT IN ADVANCE required
e. Writing not required to have an effective assignment
f. Consideration NOT required for an assignment – gratuitous assignemtn is
effective
i. HYPO: if Bob doesn’t show up and do what he’s supposed to do, or if he
does a bad job, can you sue him? Yes. Can you also sue Jon, the original
person you made the deal with? YES
2. Assignee DOES NOT SHOW UP / DOES A BAD JOB / non workmanlike manner
a. Innocent party MAY:
i. SUE: original party OR assignee, if assignee breaches UNLESS there is a:
b. NOVATION: original party and innocent party sign a novation
i. Novation: a RELEASE of the original party from the K
1. Original party who assigned will no longer be liable to innocent
party for asignee’s breach
ASSIGNMENT
1. ANTI ASSIGNMENT CLAUSE
a. Clause prohibiting assignment, but original party STILL assignes: assignment is
i. STILL VALID…. BUT
b. the original party is LIABLE FOR MONEY DAMAGES to the innocent party
i. innocent party can prevail
2. “VOID” anti assignment clause
a. if clause prohibiting assignment says the word VOID, then..
b. original party is NOT ALLOWED to assign
c. original party assigns anyway: INVALID ASSIGNMENT
DELEGATION
1. ANTI DELEGATION CLAUSE
a. “anti delegation of duty” “no delegation”
b. Clause that says “no delegation of duty is allowed”
c. Clause is ENFORCEABLE and original party cant delegate
i. original party delegates anyway… NOT ALLOWED, invalid
d. no exception
2. “VOID” anti delegation clause
a. if clause prohibiting assignment says the word VOID, then..
b. original party is NOT ALLOWED to assign
c. original party assigns anyway: INVALID delegation
d. enforceable
EXCEPTIONS: (2)
1. if original party assigning 3rd person would MATERIALLY ALTER RISK that innocent party
would not receive the performance then.. CANT assign 3rd party
a. makes innocent party SCARED because there is a CHANCE that they might NOT
receive the performance from the 3rd party
i. look for: (doesn’t know what hes doing, financially in trouble, doesn’t do
that type of work, lack of experience, business trouble, insolvent)
ii.
iii.
HYPO: John and Julissa have a contract. John will sell Julissa widgets. John is giving contract to ABC
inc to sell the widgets. Julissa sees ABC inc is going bankrupt in the newspaper. Julissa will feel
scared that ABC inc will not perform. THEREFORE, CONTRACT CANT BE ASSIGNED BY JOHN
because it puts Julissa at material risk
HYPO: John and Julissa have a contract. John will sell Julissa pencils. John is giving contract to pens
inc. Pens inc only manufactures pens!! This materially risks Julissa from not getting pencils because
Julissa is worried. John CANT ASSIGN
2. UNIQUE OR SPECIAL SERVICE
a. If innocent party hired the original party because they had a UNIQUE/SPECIAL
or PERSONAL SERVICE then original party can NOT delegate or assign
i. they will tell you if it is unique or special
1.
2.
3.
HYPO: Julissa has a car. car washing is not special, therefore delegable..
HYPO: Julissa now has a super fancy one of a kind italian car, BUT john is the only person
in town that has Italian wax. John wants to assign to random car washer. Julissa does
not want John to delegate to normal car washer because John is special/unique –
therefore NOT assignable
HYPO: john delivers cookies/cakes to Julissa’s firm every month. John is one of the only
bakers in Houston that uses water from new York. John wants to assign to Carlos??. NO
cant. Julissa does not want John to assign because it wont taste the same. Obviously not
delegable
b. WATCH OUT:
i. EVEN IF 3rd party has the EXACT same special/unique skills that original
party can NOT ASSIGN
ii. Because innocent party wanted original party, not 3rd party
Assuming original party CAN assign, can 3RD PARTY CHANGE THE TERMS OF K on original party
1. 3rd party changing terms of K
a. can NOT change terms of K because 3rd party gets the:
b. SAME RIGHTS and TERMS as the original party had with innocent party
i. Ex. 3rd party cant add new price
Wrinkle hypo: John is transferring a RIGHT TO MONEY (he is entitled to 100$). John calls Julissa
and says to pay Bob the $100 dollars. John is transferring the right of cash. John MUST GIVE
JULISSA NOTICE, to make sure Julissa knows she is transferring it to Bob. If John never gives
Julissa notice. Bob wants to sue Julissa? NOT POSSIBLE, because Julissa never had any notice in
the first place … Og 1 – john Og 2 – Julissa 3rd party Bob
1. RULE: if the original party is transferring a right for money, he must:
a. give the other original party NOTICE of assignment
i. if no notice by original party given:
1. 3rd party (bob), cant sue the original party (Julissa) because no
notice was giving by original party (John)
b. If money is a GIFT: gratuitous assignments are generally revocable
i. Exceptions:
1. Obligor (OG 2) irmhas already performed
2. Assignor is stopped from revoking by virtue of the fact that he
should reasonably foresee that the assignee will change his
position IN RELIANCE on the assignment
3. and such detrimental reliance occurs
ESCROW????