Contracts Outline—2
Winter 1999—Frier
I. POLICING THE BARGAIN 374-482
1. Concealment and Misrepresentation 374Swinton v. Whitinsville Savings Bank (pg376)—House infested with
termites.  did not disclose and  didn’t ask. Is a seller liable for bare
nondisclosure of material facts which affect the value of the property sold?
Held: no
Misrepresentation—an active statement with an intent to deceive. Don’t need
intent in K, just negligence. Viewed very seriously by the courts.
Concealment—affirmative act that is intended or known to be likely to keep
another from learning a fact.
Non-disclosure—
Is there a duty to inspect? Some statutes require disclosure of defects known
to them vs. caveat emptor (buyer beware).
Kannavos v. Annino (pg378)— purchased a property, did not know about
the zoning ordinance,  did and had advertised it as a dwelling for 8 people.
When a seller makes a representation, does he incur a responsibility to disclose
the entire truth about the matter represented? Held: Yes . Ct. characterized it
as a half-truth. Ct. is saying no duty to inspect zoning laws.
So a misrepresentation must be: (pg383)
1) knowingly (scienter)
2) must be of fact, not opinion
3) justifiable reliance
4) materiality
My summary: (pg4)
1) misrepresentation, concealment, non-disclosure
2) duty to inspect?
3) materiality-- Rest §161 (b)
4) form of relief sought—F: seems the threshold for rescission should be
lower than damages.
5) confidential relations ex. Atty/client
2. Unconscionability and Problems of Adhesion Contracts 386Footnote 9 on pg429 defines unconscionability as “such as no man in his
senses and not under delusion would make on the one hand, and as no honest
or fair man would accept on the other”—Does this help?
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§ 2-302—Unconscionable Contract or Clause
(1) If the court as a matter of law finds the contract or any clause of the
contract to have been unconscionable at the time it was made the court
may refuse to enforce the contract, or it may enforce the remainder of the
contract without the unconscionable clause, or it may so limit the
application of any unconscionable clause as to avoid any unconscionable
result.
Unconscionability is an equitable doctrine. ONLY APPLIES TO SALE OF
GOODS.
Campbell soup case (pg5) (pg418)—I don’t really get it
Contract of Adhesion—If a party wants what the other has, you have no choice
but to adhere to that party’s terms. There is no real bargaining, and terms can
be oppressive.
1) no bargaining between equals
2) no opportunity to bargain at all
3) one party may be completely unfamiliar with the terms.
O’Callaghan v. Waller & Beckwith Realty Co. (pg388)—Negligence of ,
clause in lease that relieves the  of liability. Is a lease exculpating the
landlord from negligence enforceable? Held: Yes.  loses, the K and the
clause are good.
2 Frameworks (pg389):
1) Against settled public policy
2) Something in the social relationship of the parties militating against
upholding the agreement.
Courts have refused to enforce exculpation K’s in 3 areas:
1) common carriers
2) telegraph
3) master/servant (employment)
What is the distinction between employment and landlord/tenant?
Court fails to realize that may be a monopoly:
1) too many people; too little housing
2) all have the clause, so no choice (such as a trade organization)
Henningsen v. Bloomfield Motors, Inc. (pg402)—Small print stated there
was no warranty except for defective parts. Will a provision in the sales
contract exculpating  from liability under implied warranty be upheld? Held:
No.
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The term came from a trade organization, so no alternative.
There was:
1) monopoly-like situation
2) fine print
3) obscure language
4) lack of heading
Is this alone enough?
Williams v. Walker-Thomas Furniture, Co. (pg426)-- was purchasing lots
of things on credit. A clause in the contract said that any payment was to be
spread out pro rata on everything due, so that the  had a little due on a lot of
things. When she failed to make payments to cover the most recent purchase,
the stereo, they repossessed everything (dragnet clause). Is ’s clause on
repossession unconscionable? Held: Yes. F: they are just trying to scare her.
2 part test (pg10)
1) no meaningful choice (formation of K)
2) unreasonably unfavorable terms (K itself)
Leff (pg420) divided unconscionability into 2 things
1) procedural
2) substantive
Eisenburg—says the dichotomy has not been useful
Epstein—says we should look for procedural alone
UCC 2-302 is not objectionable on constitutional grounds because right to K is
not a fundamental right.
Jones v. Star Credit Co. (pg432)—bought a freezer for $900,  on welfare, had
pd $600, and still owed $820. Retail value, $300. Price unconscionability.
Will a court refuse to enforce a contract as unconscionable on the basis that
the price is excessive compared to actual value? Held: Yes.
 Potentially very dangerous to say that this was unconscionable
because they were on welfare. Have to distinguish between someone
who is taking advantage of another v. someone who is just putting the
credit risks into their price. If creditors know that courts won’t
uphold it, may not give credit to poor people. May drive creditors in
poor areas out of business.
 On the other hand, if sellers know that courts will still give them retail
value, they will charge exorbitant rates, and still make money off of it.
Carnival Cruise Lines, Inc. v. Shute (pg441)—passenger slipped. Forum
selection clause. Ship wants Florida; ’s want Washington. Is a forumselection clause contained in a ticket for passage on a ship enforceable? Held:
Yes.
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Forum selection clauses implicate 2-207—are they material? Here they
stipulated they knew about it, so 2-207 is not an issue.
SC is saying it doesn’t matter what court in the US, you should get the same
fair trial everywhere.
Blackmun argues, yes it is a form K, who cares? 1) cruise lines want to
limit the forum, and 2) dispels confusion about the forum.
Franchise Relations (pg451)—Shell said a franchise could be terminated at will,
ct. said this was unconscionable.
3. Illegality (pg454-482)—
In this section, we are concerned with protecting the public at large against
imposition by both parties. Ct. does not want to lend its moral weight to the
transaction. So contracts may be void on the grounds it contravenes “public
policy”--May preclude not only enforcement but also restitutionary claims. Ex.
Palimony, surrogate parent contracts, prostitution.
§178 When a Term is Unenforceable on Grounds of Public Policy—
May be unenforceable:
1) by statute
2) statute doesn’t invalidate it (??)
3) judicial creation (hard to police)
Hopper v. All Pet Animal Clinic (pg456)—covenants not to compete. “The
common law policy against contracts in restraint of trade is one of the oldest
and most firmly established”. Held: enforceable. Geographically reasonable,
covenant reasonable, she could do large animals or move, Made the duration 1
year because 3 years is too long.
 Ct. said it is a valid covenant if (pg458): F: they don’t make much sense to
me.
1) in writing
2) part of a contract of employment
3) based on reasonable consideration
4) reasonable in duration and geographical limiation
5) not against public policy
 Ct. considers the fact that she will be the only competition, she has the $ to
move, and most importantly, she got the skills at this job she would not
have had. They invested in her
Central Adjustment Bureau v. Ingram (pg461 and 86) (18)—Former
employees of CAB left to form their own collection agency in violation of the
non-competition contracts. Can the court modify a covenant not to compete
which is otherwise unreasonably broad? Held: Yes.
 Cts have 3 choices:
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1) all or nothing
2) blue pencil
3) reasonableness rule—the court rewrites it to make it reasonable.
The court used the 3rd one. Dissent favors the all or nothing approach.
Dissent says that employers will be forced to write the clauses very carefully
for fear that they will be thrown out completely. Otherwise, may be abuse
the reasonableness standard and be very restrictive because courts will
police it anyway.
It is considered contrary to public policy to pay a lobbyist for getting a bill
passed. And in most of the world, contingency fees are banned. Why? Maybe
it is bad to have a personal stake in the law or the lawsuit. Spills over into the
commercial context in Sirken (pg468) (pg23).
McConnell v. Commonwealth Pictures Co. (pg469)-- agreed to pay $10,000
if  procured a K between  and a motion picture producer.  bribed a third
party to obtain the K. Is a contract, legal on its face, unenforceable because of
an illegality in performance? Held: Yes.
 But why should  benefit from ’s wrong by getting to keep the
commission?
 Riggs (pg470)—“No one shall be permitted to benefit from his own fraud...”
 Dissent argues that the wrong should be punished separately. The contract
was valid in every way, and it was not even contemplated that  would
commit a wrong. Their rule is that “if the contract was lawfully made, and
did not contemplate wrongdoing, it is enforceable. If on the other hand, it
was procured by the commission of a crime, or was in fact for the
performance of illegal services, it is unenforceable”.
In Pari Delicto (pg476)—in circumstances of equal fault, the position of the
defendants is more compelling.
Malum in se—K itself is evil
Malum prohibitum—statute holds something is illegal, but purpose of the law
is not served by applying them further than the statute.
X.L.O. Concrete Co v. Rivergate Co. (pg478)—May a plaintiff have recourse to
the courts for nonpayment of a contract that was awarded in violation of
antitrust law? Held: Yes.
 Here,  is whistle-blowing, but it is a little too convenient. But shouldn’t
there be an incentive to blow the whistle?
 Court says the test is whether it is “integrally related”. Here, they say no.
Not a very precise test.
Licensing (pg475)
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Clean Hands (pg481)
II. REMEDIES 483-564, Sullivan (read Emmanuel’s—pg242 on—it might
help with this)
1. Measuring Expectation—pg483
Expectation—the net gain that it would have been enjoyed had the contract
been performed.
Breach may cause 4 things:
1) depriving that party of the expected return of performance = loss in
value
2) loss other than the loss in value, such as physical harm or expenses
incurred to attempt to salvage the agreement = other loss
If the injured party chooses to terminate the K, then 3 and 4 may occur.
3) may have a beneficial effect saving further expense = cost avoided
4) further beneficial effect avoiding some loss = loss avoided
Formula (pg484):
a) Damages = loss in value + other loss - cost avoided – loss avoided
b) Damages = cost of reliance + profit – loss avoided + other loss
So reliance + profit AND loss in value – cost avoided are practically
the same thing.
Sullivan v. O’Connor (pg486 and 7)—Night club singer wanted a nicer nose.
 brings suit in tort (malpractice) and contract (breach). Ct. awards reliance
damages.
 After Hawkins v. McGee (the hairy hand case), expectation damages should
have been applied.
 Judge felt expectancy was too high, and restitution was too low.
Vitex Manufacturing Co. v. Carbitex Co. (pg486)—Is overhead properly
chargeable as a cost saved in computing an award for contract breach? Held:
No.
 Here,  wanted some of the overhead costs (fixed costs) to be included in the
cost avoided.
 Reliance doesn’t include fixed costs or it would be higher
 Profit doesn’t include fixed costs or it would be lower
 Reliance is easier to calculate than cost avoided.
SECTION 2 OF THE UCC ONLY APPLIES TO THE SALE OF GOODS!! So
while §2-708 is persuasive authority, it is not binding here.
§2-711, §2-712 (cover), §2-713 (damages)
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Laredo Hides Co. v. H & H Meat Products Co. (pg490)—May a buyer recover
the extra cost of buying goods elsewhere when the original K seller cancels
(cover)? Held: yes.
 Check got delayed in the mail, so H&H breached. Why? Market price was
soaring. Ct. thought they were opportunistic and said breach was
unjustified.
 What is reasonable cover?
 Ct. is giving much discretion to the buyer—they implicitly shift the burden
to the seller to prove the conduct is unreasonable.
 The UCC is not using the market price as a check; they are just asking if the
cover is reasonable.
R.E. Davis Chemical Co. v. Diasonics (pg494)—Davis had a contract with 2
physicians, asked Diasonics for a machine, the physicians breached, so Davis
breached. Diasonics sold the machine for the same price to someone else. Can
they recover for lost volume under 2-708? Held: Yes. Are a lost volume seller’s
damages limited to the market price/contract price differential provided under
§2-706? Held: No.
 Diasonics argued they lost a profit because they would have sold the other
machine anyway, so 2 instead of 1.
 The opposite is that Boeing can only make 100 planes, so if someone
breaches and they still sold it, they couldn’t make any more planes so not
lost volume.
 Burden of proof on seller to get to the favorable water of 2-718(2). Under 2718(1) would have gotten what the trial court gave (the difference between
the retail price and the contract price).
They forgot about 2-708(2). This was designed for component part sellers.
Doesn’t make sense when applied to a basic lost volume seller. Huh?
Losing Contracts (pg501)—Where the breaching party commits a total breach,
the injured party may elect to sue for restitution of the benefits conferred if this
amount would exceed the amount of the benefit of the bargain rule.
United States v. Algernon Blair (pg502)—Breach by Blair, termination by
Coastal. Ct. said the termination was justified. DCt. found for the , but no
damages (hard line). May a plaintiff recover in restitution even if he would
have recovered nothing in a suit on the contract? Held: Yes.
 Ct. grants the “amount for which such services could have been purchased
from one in the ’s position at the time and place the services were
rendered”. Very related to what the  expended under the K.
 Ultimate unprofitability is off the table after this decision.
 Figure out how much they get in real terms if a court does this in QM
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Quantum meruit—no one who benefits from labor and materials of another
should be unjustly enriched thereby; must pay reasonable value of services
rendered.
2. Limitations on Damages
a) Avoidibility (pg505)
Virtue v. Bird (pg505)—There is no ”duty” to mitigate. The injured party is
simply precluded from recovering for a loss he could have reasonably avoided.
But under no liability to the other party for not mitigating.
Rockingham County v. Luten Bridge Co. (pg506)—County notified Luten it
had decided it no longer wanted the bridge, but Luten kept building it. Must
the nonbreaching party attempt to mitigate the damages caused by the breach?
Held: Yes. Luten got reliance and profit (I think), but not the cost of continuing
work. (What does he get?)
 Why would Luten keep building? Had to choose whether the termination
was legal, because if not, then they would be in breach.
 Victim of breach can’t run up the damages. §2-704(2)
It is one thing to say that an injured party can’t recover for cost that could have
been avoided by stopping performance. It is another thing to tell the injured
party they have to take affirmative steps to arrange a substitute transaction.
Parker v. Twentieth Century-Fox Film Co. (pg508)—Shirley MacLaine case.
Does a wrongfully discharged employee have a duty to accept any available
employment to mitigate damages under a contract of employment? Held: No.
 Is it SO clear as a matter of law that this was an unacceptable substitute?
Because this is a summary judgment motion.
 Ct. called the criteria “different and inferior”.
 Might it be that she genuinely doesn’t want to work with the breacher of the
contract (note, pg513)?
Contracts for the Sale of Goods (pg514)—it is generally assumed with goods
that an alternate sale can be worked out. See page514 to explain a lot of UCC
provisions. A criticism of the UCC is that it seems to give the injured party a
“windfall” by allowing that party to recover more than its actual loss as
opposed to the goal of §1-106 (putting the party in as good as a position as if
the other party had fully performed).
Tongish v. Thomas (pg516)-- contracted to deliver sunflower seeds for a fixed
price. Market price of seeds doubled, and  breached. Is the proper remedy for
breach of K to deliver goods the difference between the contract price and the
market price? Held: Yes. The court used §2-713 (because it is a buyer) (§2708 is a seller).
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More in my notes on this case (pg39). Figure out the math.
Jacobs & Youngs v. Kent (pg520)-- requests a certain type of pipe,
contractor uses the wrong type,  refuses to pay the rest of the bill. Where
complete performance in accord with contract specifications is a condition
precedent to payment, and where substantial performance has been rendered,
will a minor failure to perform be excused? Held: Yes.
 Trivial and not willful
 Focus on the damages here (I missed this day, so maybe check someone
else’s notes)
Groves v. John Wunder Co. (pg526)—Should Groves get cost of performance
or increase in value? He got cost of performance. Is cost to complete rather
than the diminution in value the proper measure of damages? Held: Yes.
 Why does willful breach matter?
Peevyhouse v. Garland Coal & Mining (pg532)—Ct. held when the defect
cannot be repaired without an expenditure disproportionate to the objective to
be attained, the diminished value rule should be followed.
Economic waste—pg530 and 534
b) Foreseeability (pg534)
Hadley v. Baxendale (pg534)—Consequential damages. A mill part broke,
and  was negligent in taking too long to fix the part. Does the proper measure
of damages for “special situations” include actual damages where actual
damages are greater than the natural consequences of the breach? Held: No.
 Damages foreseen at the time of the breach irrelevant, must be at the time
of the K.
 Pg536 says “contemplation of both parties”—wrong, usually only interested
in the party who breached.
  didn’t know about the mill being shut down, even though the facts say it
did. See notes after the case. I am a bit confused here with my notes...
 So the two rules of Hadley are:
1) The court will impute foreseeability to the defendant as to those
damages which any reasonable man should have foreseen whether or
not he actually saw them
2) The court will also award damages as to remote or unusual
circumstances, but only if the  had actual notice of the possibility of
these circumstances
Versions of Hadley:
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1) tacit agreement—2 parties specifically bargain over breach, active
contemplation, they foresee and plan when making the K for potential
breach. Widely discredited (used in Arkansas )
2) foreseeability-Under the UCC, gives consequential damages only to buyers. Usually that
makes sense, but not always. Sometimes sellers should get them §2-716.
What’s at stake here with the different formulations of the rule?
Spang Industries v. Aetna Cas. & Surety Co. (pg539)—When a contract
provides for the future determination of a time for performance, will knowledge
of the consequences of failure to perform be imputed as of the time when the
date for performance was set? Held: Yes. The damages were reasonably
foreseeable
 Nov 69 is important here for the Hadley rule
c) Certainty (pg546)—
Damages for breach must be shown by clear and satisfactory evidence to
have been actually sustained and no left to speculation or conjucture.
Fera v. Village Plaza (pg547)—Village Plaza rented to Fera to start a book and
bottle shop. May lost profits be awarded to a new business which is prevented
from starting due to breach of contract? Held: Yes.
 How can you measure profits of a new business?
 Rule on certainty provides no incentive for a lessor to adhere to a K (why?)
3. Liquidated Damages and Penalties (pg553)
Wasserman’s v. Township of Middletown (pg554)-Dave Gustafson & Co. v. State (pg562)
III.
PERFORMANCE AND BREACH 664-794
1. Conditions (pg665)—
A condition is an event, not certain to occur, which must occur, unless its
nonoccurrence is excused, before performance under a contract becomes
due.
Hornbook—pg564—In exercising the freedom of contract, a party can make a
condition anything they want, even very insignificant things (subject only to
unconscionability, etc.)
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Pg566—Rest 2d says that conditions are NOT: 1) events that must occur before
a contract comes into existence, 2) events that are certain to occur, and 3)
events that extinguish a duty after its performance has become due.
Pg569—If the condition does not occur: 1) the obligor is entitled to suspend
performance on the ground that the performance is not due as long as the
condition has not occurred, 2) if a time comes when it is too late for the
condition to occur, the obligor is entitled to treat its duty as discharged and the
contract as terminated.
Pg571—If the occurrence of a condition is required by the agreement of the
parties, rather than as a matter of law, a rule of strict compliance traditionally
applies. Since an express condition depends for its validity on the manifested
intention of the parties, it has the same sanctity as the promise itself. Courts
are reluctant to overturn the will of the parties—strict compliance.
Express conditions—created by the parties themselves
Constructive conditions—created by courts
a) Effects of Conditions
Luttinger v. Rosen (pg665)— contracts to buy a house subject to getting a
mortgage.  offered to help out by supplying the last bit needed. Does one
party’s offer to compensate for the failure of a condition precedent prevent the
operation of the condition? Held: No.
 Seller is bound by the condition; only buyer can get out, so condition is in
favor of the buyer.
 Buyer has to use “due diligence”.
 Financing condition is very specific, so it is clear when the condition fails
Court in note 3, pg667 said that “time is not of the essence” (the condition
failed, but only on a technicality—buyer acted opportunistically, so had to do
specific performance).
Internatio-Rotterdam v. River Brand Rice Mills (pg668)—Rice contract. 
was to provide shipping instructions no later than 2 weeks prior to delivery.
Got them for half of the shipment to one port, but not the other. So on Dec
18th, the  cancelled the balance of the shipment. When a sales contract
specifies a delivery time and requires the buyer to provide delivery instructions,
is the buyer obligated to provide timely delivery instructions as a condition
precedent to receiving the goods? Held: Yes.
  was opportunistic because rice prices went up, and it is a matter of
interpretation to set the 17th.
 However, the court says that “time is of the essence” here. Why?
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The K was severable as the 2 ports, so the continued shipment to one does
not constitute an election to continue with the whole K.
Can we say that Riverbrand was acting in bad faith? Seems opportunistic
termination is not bad faith per se. No duty to act selflessly.
UCC §1-203—Obligation of Good Faith
Every contract or duty within this Act imposes an obligation of good faith in its
performance or enforcement.
b) Problems of Interpretation
Drafting problem (pg673)—HELP!
Peacock Construction Co. (pg674)—General contractor was never paid, so
general said that payment to sub was conditioned on the general being paid by
the owner. May the courts determine the intention of the parties from the
written contract, as a matter of law, when the nature of the transaction lends
itself to judicial interpretation? Held: Yes.
 If it isn’t a condition, what is it?
 2 interpretations: 1) condition precedent 2) reasonable time frame.
 Ct. says it is a reasonable time frame for payment.
 Ct. reasons a sub would never enter a K where they won’t get paid. Ct.
operates on a general preference for paying the sub, or against reading
conditions into it.
 Try drafting the language for a reasonable time, and then for a condition.
Mattei v. Hopper (pg677, 121)—Satisfaction clauses.  wants to buy ’s land,
but the K is expressly subject to  finding satisfactory leases (“leases
satisfactory to the buyer”).  found the leases and paid, but the  won’t give
the deed. Is a promise that is conditional on the promisor’s satisfaction with a
related matter enforceable? Held: Yes.
 Ct. gives 2 possible standards:
1) objective standard—“reasonable person”
2) subjective standard—“good faith”, honesty in fact
(Can only get at good faith by proving bad faith)
Rest2d. has abandoned the terminology condition precedent and condition
subsequent. Now condition precedents are just called conditions.
Gibson v. Cranage (pg679)-- agreed to make a portrait of ’s daughter. 
said  would only have to pay if the picture was “perfectly satisfactory”. 
refused the portrait without giving a reason. Can contractual liability be
conditioned on subjective personal satisfaction? Held: Yes. (probably because
solicited) Most extreme example.
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Would the outcome be the same if  had refused to look at the painting all
together? Probably has to look at it.
Doubleday & Co, Inc. v. Curtis (pg681)—2 books from Tony Curtis. Does a
party have a duty to assist an author in the preparation of a manuscript where
the contract requires the author to provide a manuscript that is satisfactory to
the publisher? Held: No.
Note 2--The case of the cheaper chips (pg678)—The court said you have to use
an objective standard to determine if it is in good faith, but they may not have
lost under Maetti because there the court used a subjective standard.
Laurel Race Course v. Regal Construction Co. (pg685)—K specified that the
engineer had the final say, and that his interpretation governed. K also said
that the engineer had to give final approval before the balance was due. May a
court order a party to make full payment despite the engineer’s refusal to issue
a certificate of completion, where there is no showing of bad faith or collusion?
Held: No. The DCt. said they had substantially performed and order the  to
pay. But the appellate court overturned the decision because they did not
want to substitute its judgment on what was a good track—a more subjective
standard here. (He spent a lot of time on paragraph 2 v. 24—not sure about the
significance).
Hicks v. Bush (pg690)—May parol evidence be introduced to supplement a
written agreement? Held: Yes.
 Comment says—the parol evidence rule says that an oral agreement cannot
be used as evidence to change a subsequent written agreement. However, if
an oral agreement is for a condition precedent to the effectiveness of the K,
then such evidence may be introduced.
 Can be admitted unless deeply in conflict.
 But what if parol evidence (§2-202) does apply? Probably the same result as
in Hicks (why?)
c) Mitigating Doctrines
Prevention--A party who prevents the occurrence of a condition cannot assert
the non-occurrence of the condition as a defense to performance (LL124) (ex.
NRA case on pg693 and pg59)
Waiver—A party may promise to perform despite the nonoccurrence of a
condition. Such a waiver is actually an excuse of the non-occurrence. If the
waiver takes place before the time for occurrence, it may be retracted so that
the condition becomes binding again (LL124)
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What’s involved is not the relinquishment of a right and the termination of the
reciprocal duty, but rather the excuse of the nonoccurrence of a condition of a
duty. The waiver can be reinstated unless there is reliance--UCC §2-209(5).
Election means that when the time for the occurrence of the condition has
expired, the party whose duty is condition has a choice between taking
advantage of the nonoccurrence of the condition and treating the duty as
discharged or disregarding the nonoccurrence of the condition and treating the
duty as discharged. If they disregard, they are bound to do so. (pg694)
Even a specific, “this clause cannot be waived” may not be enough to keep it
from being waived implicitly—note#1,pg695
Course of Dealing—Where an architect’s certificate is a condition to each of
several payments with first receiving the certificate, the owner may be deemed
to have waived the certificate requirement, even as to the final payment
(LL124)—see McKenna.
McKenna v. Vernon (pg697)—Payments were received even though the work
was considered defective, so the  could not withhold payment of the last
installment.
Courts try to interpret contracts to avoid forfeiture—pg697—but they cannot
where the intention of the parties is clear.
2. Constructive Conditions of Exchange
Hornbook (pg604)—Under Mansfield’s scheme, the court itself determines
whether one party’s promise is dependent upon the other party’s return
promise. If it is, the court supplies a term making the first partly’s promise
condition on performance of the return promise. If an agreement provides that
a builder is first to build and the owner is then to pay, the court will supply a
term making the builder’s performance a condition of the owner’s duty to pay.
2 conclusions follow: 1) the owner is under no duty to pay until the builder
performs. 2) after the time for performance has passed, the owner may treat
the duty to pay as discharged by the delay and therefore may terminate the
contract.
Legal Lines (pg124)—A party may fail to render an agreed performance, but the
contract may not specify that such a failure depends on what the parties
intended. While the implied covenant of good faith and fair dealing is a means
of insuring that the parties’ expectations are met, the doctrine of constructive
conditions is used to supply conditions in the interest of fairness and justice.
14
Kingston v. Preston (pg700)-- agreed to apprentice for a certain amount of
time and give security in return for the ’s business. Must a party fully
perform before the other may be forced to perform? Held: Yes.
 3 types of covenants:
1) Mutual and independent—either party can recover damages, and an
alleged breach is not an excuse for nonperformance
2) Conditional and dependent—until one party performs the prior
condition, the other party does not have to.
3) Simultaneous mutual conditions—one tenders and the other refuses,
the first has a action.
§2-507 and §2-511—What does tender mean here? (I have no idea!)
Stewart v. Newbury (pg702)—If no agreement on payment periods, work has
to be done by the contractor before payment is due. Is a contractor entitled to
part payment if the contract makes no provision for it? Held: No. Progress
payments are not to be inferred.
3. Mitigating Doctrines pg707
a) Substantial Performance pg707
Substantial Performance—For the purposes of payment completed, but still
have damages. Usually the breach must be minor and nonwillful. Damages
are usually measured by the diminution in value of A’s performance rather
than the cost to complete or cure the defects.
Jacobs & Young v. Kent (pg707 and 520)—Pipe specified in the contract was
not used. Damages were awarded for the diminution in value.
 Court examines:
1) significance of the departure
2) willfulness of the departure—pg708, note 2
 “of the essence” is key. Time was of the essence in Internatio, so there was
no substantial performance.
Plante v. Jacobs (pg710)—House was built, but there was a misplaced wall
and various other omissions. Has  substantially performed on the K? Held:
Yes. Ct. says there is substantial performance. Pg711, “Whether the
performance meets the essential purpose of the contract”.
 The misplaced wall did not diminish the value of the home, so it is not
material breach.
 Ct. gave diminished value for the wall and cost of repair for the various
omissions
(minor items = cost of repair; major items = loss in value)
15
Moulton Cavity & Mold v. Lyn-Flex Industries (pg714)—Molds were not
satisfactory. Does the doctrine of substantial performance apply to a contract
for the sale of goods under the UCC? Held: No.
§2-601—Buyer’s Rights on Improper Delivery. Buyer can accept the whole,
reject the whole, or take any part and reject the rest.
The controversial part is the “if” clause.
Here the “whole” was rejected.
Perfect Tender Rule—the goods must correspond to the description in every
respect. In Art 25 of the Convention on the International Sale of Goods rejects
the perfect tender rule (Supp138).
Code’s softening of the Perfect Tender Rule (pg719)
1) §2-508—a seller has the power to cure a defective tender “if the time
for performance has not yet expired”
2) §2-608—allows a buyer who has already accepted goods to revoke
that acceptance (and return the goods) only if the “non-conformity
substantially impairs the value of the installment”
3) §2-612—allows a buyer under a contract for delivery of goods in
installments to reject an installment only if a non-conformity as to the
goods “substantially impairs the value of that installment” and to
claim breach of the whole K only for a breach that “substantially
impairs the value of the whole K”
Bad faith is exceedingly important—pg719, note 4.
b) Divisibility
Gill v. Johnstown Lumber Co. (pg720)—Flood washed logs past where they
were supposed to stop. Is the contract severable so that  may recover for
those logs actually delivered? Held: Yes.
 There is a rate, so they made it easy to determine how much was owed.
Entire—have to finish everything before you pay vs. Severable
Test of “apportionable or apportioned consideration”—pg721
Pennsylvania Exchange Bank v. United States (pg722)— performed steps
1-3, but 4 was never needed.  sued the government for the cost of steps 1-3.
However, the government got no utility for steps 1-3, so the K is not divisible.
Was divisibility correctly applied in Internatio-Rotterdam? Pg723
c) Restitution
16
Britton v. Turner (pg725)-- didn’t work all 12 months, only 9 ½ months. He
was supposed to get $120 at the end.  sued in quantum meruit to recover
the value of the services he did render. May an employee who voluntarily
leaves his job before the en of the K recover the net benefit received by his
employer but not exceeding the K amount? Held: Yes. Jury gave him $95
 Is he getting by on unjust enrichment where he wouldn’t have on K? Yes,
probably
 Ct. says he can’t get more than the K price. Is this right? May not get the
value of his services if K is unfavorable, so may conflict with unjust
enrichment.
K theory (gets nothing) v. Unjustified Enrichment (quantum meruit)
Kirkland v. Archbold (pg732)-- wants repairs. The payments are staged,
and 1 payment of $800 has been made.  was stopped from continuing. May
a party who has not willfully abandoned performance or broken his contract
recover the benefit conferred on the other party less damages caused by
inadequate performance? Held: Yes. Trial court said the K was severable
because the payment plan made it look like it.
 Who breached the K?  breached (wall not correct), and  terminated.
That’s how this court interpreted it.
 In what situations would you be better off in quasi-K than K? When it is a
losing K. (huh?)
4. Breach in the Course of Performance
Walker & Co. v. Harrison (pg735)-- rented to own a sign from . Sign was
hit with tomatoes.  refused to make any further payments until  came and
cleaned up the sign.  sued for breach and won. Must a party’s breach be
material before it can justify the other party’s repudiation of the K? Held: Yes.
 wins.
 The material v. immaterial stuff is a fuzzy standard because a court can
often go either way.
 What should the  have done instead? Pg67
K & G Construction Co. v. Harris (pg741)—Is an owner’s promise to pay
dependent on the contractor’s performing in a workmanlike manner? Held:
Yes. The promises were dependent here. (I don’t understand this case)
Iron Trade Products Co. v. Wilkoff Co. (pg747)—Is seller’s performance
excused if the buyer makes the goods more expensive by making additional
purchases from the seller’s supplier? Held: No.  did not show that  knew
the supply was limited or that it would harm the .
17
What is the PECK rule? (page 745)—The conduct of one party to a K which
prevents the other from performing his part is an excuse for nonperformance.
Will hindrance short of prevention have the same effect?
In many cases, a contracting party is responsible for taking affirmative steps to
cooperate with the other party, even though it is not expressly bound to do so.
New England Structures v. Loranger (pg751)—When notification of a ground
for termination is sent to a party deemed to be in breach, is the notifier limited
to that ground in defending his action in terminating? Held: No. (reread this
case—I am confused)
§2-605—Waiver of Buyer’s Objections by Failure to Particularize—buyer
can’t reject goods if the seller could have repaired it or if the seller requested
notice of any defects that the buyer found and the buyer didn’t supply the
notice on the defect that he claims waiver.
5. Prospective Nonperformance
a) Anticipatory Repudiation
If either party repudiates the K in advance of the time set for performance, with
words manifesting his apparent intent not to perform as promised, the other
party may treat such anticipatory repudiation as a present, material breach of
the K and bring an immediate action for the entire value of the promised
performance. [rest 1st §318] LL133
So it occurs when a promisor wrongfully signifies, in advance of the time for
that party’s performance, that it will not be forthcoming—pg755
Repudiation has been defined as an “overt communication of intention not to
perform” (§2-610, comment 2)—pg755
Frequent Questions:
1) Is the aggrieved party discharged from their duty?
2) Can the aggrieved party go immediately to suit, even before the
scheduled date of the K was to begin?
3) Can the aggrieved party ignore?
4) Can the repudiator repent and withdraw the repudiation?
Example case—Philpotts v. Evans (pg755)—K between the parties to purchase
wheat and K was cancelled by the buyer before delivery. ISSUE: Should the
amount of damages be determined by the price of wheat at the time of the
breach or at the time of the agreement?
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Hochster v. De La Tour (pg756)—--Courier , --Rich guy. May the promisee
bring an immediate action for damages when the promisor repudiates the K
before the date set for performance? Held: Yes.  may either wait for the date
set for performance or sue immediately.
 Is the aggrieved party discharged from his agreement to be ready to work?
Yes
 Is the aggrieved party obliged to wait until the K begins or can he bring suit
immediately?
--can bring suit immediately, not efficient to have him sit around. He
should be able to rely on ’s repudiation.
So the doctrine of anticipatory repudiation allows the aggrieved party to back
away from the K at a time when no damages have been incurred yet. Don’t
want them to just sit around and accumulate damages without trying to
mitigate
Note 1, pg759—If the injured party ignores the repudiation all together, will the
rights of the parties later be determined as if the repudiation had never
happened? Yes. (Question 3 above—can the aggrieved party ignore it?)
Note 2, pg760—“An offer to contract and an anticipatory repudiation have
virtually nothing in common except they both can be withdrawn” (Offer =
revoke and repudiation = retract). See §2-611. (Question 4 above—can the
repudiator repent? Yes, in some circumstances)
So states require that you sue before the K was to start, and some require that
you sue after the K would have started.
Phelps v. Herro (pg761)—Ct. said the suit could not be brought until the
money came due. They said that anticipatory breach has no application to
pure money contracts.
NY Life Ins. v. Viglas (pg763)—Viglas was a disabled guy who sued his
insurance co. when they stopped paying his claims. The co. had decided he
wasn’t disabled anymore. Is the good faith dispute over disability in an
insurance policy and refusal by  to make further payments a repudiation?
Held: No.
 Ct. again said that cannot sue to receive the payments until they came due.
This makes more sense because he might die and not deserve the money.
§2-713 is in LL, but not in Tara’s notes.
Kanavos v. Hancock Bank & Trust (pg764)—To recover for the breach of K,
must the owner of a right of first refusal prove that, he had been notified of the
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impending sale, he would have been ready, willing, and able to exercise his
right? Held: Yes.
 F: what about the fact that the value of the stock exceeds the purchase
price, so it would have been a good investment, and he probably would have
been able to get the money.
 On remand, the  has the burden to prove he had the financial ability to
pay for the stock.
 So the rule is that one side’s breach does not mean the other side wins if
they could not have performed either.
McCloskey & Co. v. Minweld Steel Co. (pg769)—War broke out and sub
(Minweld) was having trouble finding the steel to meet the K with the general
(McC). To show an anticipatory breach, must the party breaching express an
absolute and unequivocal refusal to perform? Held: Yes. McClosky loses; ct.
said he precipitated the final break.
 Is there any obligation on McC to help Minweld? Ct. says there is not, but
that it was reasonable for Minweld to ask.
 Asking for assurances is the opposite of anticipatory breach
 Should McC have a duty to help?
 Should Minweld have a duty to say they are having K problems?
§2-609—Right to an Adequate Assurance of Performance
Note 3, pg773—“I will try to perform, though I see no prospect of succeeding”.
That is just not going to be good enough.
Bill’s Coal v. Board of Public Utilities—Is it repudiation to insist on a
ridiculous interpretation of the K? Ct. of App. says no in this case. Reasoning
may be confined to the facts of this case. If one party’s interpretation is
ludicrous the other party is free to rely on its own interpretation, accept the
other party’s interpretation, or seek a declaratory judgment.
See the diagram on pg70
§2-713—Buyer’s Damages for Non-delivery or Repudiation
Cosden Oil & Chemical Co. v. Karl O. Helm Aktien...(pg775)— claims
damages should be measured by the market price at the time  learned of the
repudiation.  wants damages at the time of performance. Should the buyer
get damages when he learned of the repudiation, time of repudiation and
commercially reasonable time, or time of performance. Trial ct. gave the middle
one. Held: Ct. affirmed the commercially reasonable time part.
 Court says they are using §2-713, but commercially reasonable time is not
in there. So they are also using §2-610 to get the commercially reasonable
time. This is consistent with giving time to retract the repudiation (§2-611)
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
Argument for merging 610 and 713 is cover or mitigation
Note on pg782—consider this
§2-611—Retraction of Anticipatory Repudiation—
unless the aggrieved party 1) cancelled
2) materially changed position
3) otherwise indicated considers the repudiation
final
United States v. Seacoast Gas Co. (pg783)—When a party repudiates a sales
K, may he withdraw that repudiation until the injured party indicates that the
repudiation is accepted as final, or detrimentally relies on the repudiation?
Held: Yes.
 More in my notes on pg71
 Locus poenitentiae—a period of time during which you can “repent”—take it
back.
What does note 1, pg786 and pg72 mean?
b) Assurance of Due Performance pg788
§2-609—Right to Adequate Assurance of Performance—if there are
reasonable grounds for insecurity. And if there is a failure to provide
assurance within 30 days after a justified request, that is a repudiation of the
K. Also in Rest. §251, but not solidly in law yet, so sale of goods really
matters.
Turntables v. Gestetner (pg788)—Well beyond the ordinary grounds for
uneasiness.
Pg775—Answered the request with, “we will if entitled, we won’t if not entitled”.
F: extraordinary answer.
Pittsburgh-Des Moines Steel Co. v. Brookhaven Manor Water Co. (pg789)—
Before a party may terminate a K for failure to obtain adequate assurance of
performance, must there be a reasonable ground for insecurity? Held: Yes.
Pitt went berserk; they’re demands were unreasonable.
 Majority rested their decision on the fact that there was no change in the
financial position. But is this preferable?
 The concurrence said you should look at whether an underlying condition
fails, not a change in financial position. There was no change of financial
position in Turntables.
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Pg745—A breach by one party of a separate K does not give you the right to
breach a completely different one. But in §2-609 it can affect all of the K’s
between you.
IV.
BASIC ASSUMPTIONS 795-862, Alcoa
1. Mutual Mistake
Alcoa—see notes pg74 through 77—not a sale of goods. Trial court has them
win on mutual mistake, frustration of purpose, impracticability. A sweeping
victory. One of the most criticized parts is the judge substituting his own
system.
Stees v. Leonard (pg796)—Kept trying to build a building on quicksand. Parol
agreement during and after about draining are kept out. If a contractor
contracts to build a building which collapses through no fault of his won, must
the contractor complete the building? Held: Yes.
 Just seeking restitution, not cost of performance (what does that mean?)
Sherwood v. Walker (pg799)—Rose the 2nd of Aberlone—the cow that wasn’t
sterile. Ct. said you can get out of the K because a sterile cow is a different cow
than a fertile one.
Rest §152—When Mistake of Both Parties Makes a Contract Voidable.
Mutual mistakeon a basic assumptionvoidability. Unless a party bears the
mistake under §154 (see pg801, note 1)
The Dover Pool & Racquet Club v. Brooking (pg802)—While negotiating, the
town passed a zoning ordinance where the  couldn’t use the property for a
club. Where the parties to a real estate transaction were both mistaken
regarding the applicable zoning laws, may the buyer obtain a recission? Held:
Yes. Had either party known of the restriction, the K would have been
construed against that party.
 But there was no mistake when signed.
 There is a clause about “existing zoning laws”. Ct. sees it as an allocation of
risk, but only as to existing zoning laws.
 Mutual mistake has much more to do with allocation of risk than unilateral
mistake does.
2. Impracticability of Performance
Don’t think about the nature of the change, but the relationship of the change
to the parties expectations
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Taylor v. Caldwell (pg806)—Hall burned down.  seeks reliance (advertising),
not expectation because can’t prove what is lost and would have to pay the fee
for using the hall. Will  be excused from performance by the accidental
destruction of the hall which made his performance of the contract impossible?
Held: Yes. Both parties are excused because there was an implied condition
that the perishing of the thing would excuse performance.
 Not likely they contemplated this at all
 F: seems at least restitution is possible (returning a deposit)
 Suppose Caldwell sued for the 4 100 lb. payments? Nope—constructive
condition of exchange (pg80)—(what in the heck does this mean?)
Transatlantic Financing Co. v. United States (pg812)—Suez canal closed.
Was that unforeseen? No, there was a risk it would close. When a
performance is rendered more difficult or expensive by unforeseen events, may
the injured party proceed with performance, recover the contract price, and
then, in addition, recover for its extra costs? Held: No.
 Ct. said
1) Yes—there was a contingency
2) No—the risk was not allocated
3) No—the performance was not made commerically impracticable
  got the K price, so not a case for quantum meruit. See tara’s notes for
more pg81a
Objective (the thing cannot be done) v. Subjective Impossibility (I cannot do
it)—see LLpg143
Canadian Industrial Alcohol v. Dunbar Molasses (pg821)—May a seller be
discharged from performance merely because its usual supplier reduced its
production below what the seller had anticipated? Held: No.
Eastern Air Lines v. Gulf Oil Co. (pg823 and 125, 613)—May a party to a
contract avoid performance due to commercial impracticability when its costs
are largely due to intracompany transfers? Held: No.
 Foreseeability is the key!! Ct. said that it was commonly known that oil is
risky.
§2-615—Excuse by Failure of Presupposed Conditions—applies to sellers
only by statute, but not by comment.
Mineral Park Land Co. v. Howard (pg829)—Critical that gravel costs were
found to be prohibitive.
Eastern Air Lines v. McDonnell Douglas Co. (pg830)—Eastern sued when
McD was late delivering new jets. Delay was due to their production of military
planes.
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Force Majure Clauses—a contractual provision that allocates risk. (help!!)
pg833
3. Frustration of Purpose
Krell v. Henry (pg834)—Coronation case. Will frustration of purpose excuse
performance of a K? Held: Yes.  doesn’t have to pay for the flat.
 So performance not impracticable, they still could have sat in the flats.
But now there is no point. The K did not mention the coronation, but
everyone knew that is what it was for.
 What is the distinction between this and the cab thing?
Swift Canadian Co. v. Banet (pg836)—Seller no longer bears the risk, buyer’s
policy covers it. In a K where the risk of loss transfers from the seller to the
buyer at the seller’s plant, will a change of import regulations in the buyer’s
country which adversely affects the buyer’s ability to resell the goods operate as
a frustration of purpose of the K? Held: No. I don’t understand this case!!
 Outside of §2-615 because it is the buyer
 Ct. said as long as they have any option, it is not frustrated. How realistic
is that?
 Ct. says that F.O.B. clause assigns the risk—that is a lot to get out of it.
Pg844—gear box case—didn’t transmit the reverse side, costly mistake
Chase Precast Co. John J. Paonessa Co. (pg839)—Citizens protested the
highway barriers. If a government entity eliminates certain requirements of a
construction K, is the private contractor excused from paying its subcontractor
who was to supply those requirements? Held: Yes.
 They had already paid for all the medians that Chase had made, so no
reliance argument.
 Ct. had choice of frustration or impracticability
Northern Indiana Public Service Co. v. Carbon County Coal Co. (pg845)—
May the buyer in a fixed price K be excused from performance when the market
price drops so as to render the K unprofitable for the buyer? Held: No.
 NIPSCO was betting that the price would go up faster than the escalator
clause, but they bet wrong and found themselves in an unfavorable K.
 Wanted out, so used the IN Public Service Commission
 Carbon Coal wanted specific performance, so neither party wanted
damages.
 Why are the miners in a different position than the homeowners in Lacleade
(where the court said specific performance can be ordered if in the public
interest)?
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Read more about this case LL148
What is all the stuff about Posner on pg86
4. Half Measures
Young v. City of Chicopee (pg853)—Bridge destroyed by fire.  was required
to have materials on site which also burned. When an object upon which work
is being performed is destroyed without fault of the parties, may the party
performing the work recover the value of his work as well as materials
purchased in contemplation of performing the work? Held: No. Judgment
affirmed as to materials and work on the bridge but reversed as to materials
damaged by fire but not yet incorporated into the bridge.  assumed the risk of
loss of work and materials in the bridge, but  retained title and possession of
the materials.
 General rule (acc. to LL) is that the contractor assumes the risk of building
K’s unless otherwise specified.
Alcoa (pg857)
Olgebay Norton Co. v. Armco (pg859)—There was a price mechanism that was
to consider 1) “leading shippers” and if not, then 2) “mutually agree”. The first
way worked well until there was a downturn. May a party enforce a long-term
service K when the price is not specified and the parties must periodically
resort to the court to determine a reasonable price? Held: Yes.
 Ct. enjoins them to negotiate in good faith, but Armco just wants out.
 SCt. says they intended to be bound. Is this a good question to ask?
 How does this compare to Alcoa?
V.
THIRD-PARTY BENEFICIARIES 863-885
Lawrence v. Fox (pg865)—Holly loaned $300 to Fox (), with instructions that
 was to repay by giving the money to Lawrence (), Holly’s creditor.  sued to
recover the sum from  and won.  appeals. May a third party beneficiary
enforce the K of which is the beneficiary but not a party? Held: Yes.
Judgment affirmed.
Analogy on pg 867 is very important.
1st Restatement (pg870)—the test is whether the promisee intended to confer
a gift on a 3rd party (donee ben) or to discharge some obligation owed to a 3rd
party (creditor ben).
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Donee beneficiary—If the promisee’s primary intent in contracting was to
confer a gift upon the 3rd party.
Creditor beneficiary—If the promisee’s primary intent was to discharge a
duty he owed to the 3rd party. The modern view is that the test is
whether the promisee intended to satisfy an obligation which he believed
was owed, even if there isn’t actually a debt.
The 2nd Rest. eliminates the language and treats them both as intended
beneficiaries. However, most states have retained the language.
§302—Intended and Incidental Beneficiaries
§311—Variation of a Duty to a Beneficiary—sections 2 and 3 are the most
important
Donee beneficiary case-Seaver v. Ransom (pg872)—Death bed promise to wife to grant the house in
husband’s will to the niece. May a third party to whom a gift was intended
enforce the contracting party’s obligation to make the gift? Held: Yes
 Why does narrowness of the relationship matter?
Creditor beneficiary case-Septembertide Publishing v. Stein & Day (pg879)—May a party be a third
party beneficiary where only one of the original parties to the K clearly intended
to benefit the third party? Held: Yes
 Can we regard Septembertide as a 3rd party beneficiary of the S&D/New
Library contract? Yes. If not a TPB, the will just be in the same boat as all
the other creditors
 Did S&D really have Septembertide in mind? (K was made one day earlier,
author mentioned)
Lucas v. Hamm (pg885)—Can intended heirs recover as third-party
beneficiaries of the K between the testator and the attorney who was to prepare
the will? Held: Yes.
 Lawyer is not held to an absolute standard, so he can make mistakes. Held
to a negligence standard.
Schatz v. Rosenberg (pg888)—Does an attorney have a duty to disclose
information to persons other than his clients or third-party beneficiaries?
Held: No.
 Fraud by not revealing insolvency (huh, this is what my notes say)
Lee v. Paragon (pg884)-VI.
ASSIGNMENT AND DELEGATION 913-941
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§317—Assignment of a Right—Assignment is a transfer of a right to receive
performance. Usually it is in return for consideration, but there are some gift
assignments.
§318—Delegation of Promise of Duty—Delegates a duty to perform rather
than a right to receive performance. Not the opposite really, more limited.
Assignment definition in the Rest doesn’t reflect the UCC
2 parts/transactions
1) arrangement that gives rise to an entitlement in an assignor (rt to
payment by paragon)
2) document that transfers that entitlement to an assignee.
Don’t need consent, reference or anything of the obligor. Brings up to what
extent must the obligor be informed.
Gift assignments--Restatement says that a gratuitous gift assignment is not
invalid, but that it is revocable unless some formality is complied with, such a
signed writing. (pg916)
Form of Assignments (pg918)—No particular language for an assignment
needed. Most common law courts presume against assignment. See the
problems on pg919
Shiro v. Drew (pg919)—Paid 9 days before bankruptcy. Often these can be
recalled. So if it is a valid assignment, fine. But if not, then may have to
return the money. Where a loan is accompanied by a promise to repay out of
specified proceeds, is there an effective assignment of those proceeds? Held:
No.
Herzog v. Irace (pg921)—May a party who makes a valid assignment later
revoke the assignment? Held: No. A valid assignment cannot be
countermanded by an assignor.
UCC—Assignment—Article 9
§9-102—Policy and Subject Matter of Article
§9-106—Definitions: “Account”
So ONLY APPLIES TO SALE OF ACCOUNTS.
Herzog is not in Article 9
3 UCC Requirements:
1) Obtaining a sales document
--must describe the content of the account
2) Notification of obligor
--comparable to what Herzog did
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3) Filing—public
--places other potential creditors on alert
--perfect the security interest
DC v. Thomas (pg925, 932)—Silverline borrows money from Thomas and sells
to Thomas its claim from DC for payment for janitorial services. Thomas put
Silvermine in its filing, so it is not a valid assignment and Thomas has to get in
line with everyone else. Costly mistake.
 You don’t have to file, only if you want preference from other creditors.
§9-318—Defenses Against Assignee; Modification of Contract After
Notification of Assignment; Term Prohibiting Assignment Ineffective;
Identification and Proof of Assignment—Section 1
Section 3—authorized to pay until notice. Faxing a copy of the sales
document will usually suffice
Hit this hard—see notes pg100-101
Septembertide Publishing v. Stein & Day (pg937, 879)—May a secured
creditor obtain a security interest in proceeds that were assigned to someone
else before the security agreement was entered? Held: No.
See my notes—pg103-105. He went on for days about this case.
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