CONTRACTS MINI REVIEW
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FORMATION
I. WHAT LAW APPLIES
 Common Law  Real Estate, Services
 UCC  Goods, Structures to be Removed from Land, Crops, Sand, Gravel, Water, Electricity
 Mix  De Minimus, Apportionment (separate elements), Preponderance
II. TYPE
 Formation: Express, Implied (conduct), Quasi (P has Conferred Benefit on D + Reasonable Expectation of
Payment + Unjust Enrichment if Not Paid)
 Validity: Void (Nullity from beginning), Voidable (defect in formation), Unenforceable (No Defect in Formation
but Ct Won’t Enforce, S/F, S/L, etc.), Valid
 Performance: Executed (fully performed) or Executory (not fully performed)
III. REQUIREMENTS [LACC]
1. LEGALITY: Illegal subject matter = void; illegal purpose = voidable
2. AGREEMENT: reasonable person/belief (intent)
 Offer: Willingness to contract – would reasonable offeree believe assent creates a contract
 Effective: Effective when communicated (actual knowledge; when mail is READ)
 Essential terms:
o Real Estate=description + price
o Services = duration (time/task)
o Goods = quantity
 *Requirement/output K = no precatory terms (wish, desire, mandate, want)
+ in-line w/ prior history
 Unilateral K: CL (no K until fully performed) UCC (accept by perform or promise to perform)
o UCC: Can accept by performance – if ship non-conforming goods must send a
NOTICE of accommodation (counteroffer) otherwise acceptance and breach
 Ads: NOT offer UNLESS specific quantity stated + indication of who can accept
 Termination: (offer must be viable to be accepted) 4 ways to terminate
o Lapse of Time: offer only open for reasonable time unless specifically stated
o Revocation by OFFEROR: words/conduct of OFFEROR + awareness of offeree
 Effective: upon communication (receipt if mail – possession not knowledge)
 No revocation after acceptance
 Public: If public, same/comparable publication
o Irrevocable Offers:
 Option K: Promise to keep open + consideration (no set time length)
 Merchant Firm Offers: Offeror is Merchant + Writing + Signed + Words of
Firmness (don’t need consideration)
 NOT for real estate
 Time: Irrevocable for promised OR reasonable time (max 3 months)
o If have consideration then can be irrevocable forever
 NOTE: can accept after 3, just able to revoke after 3 months
 Detrimental Reliance: Det Reliance + Reasonably Foreseeable
 Unilateral K + Start Performance: Irrevocable for Reasonable Time to Finish
o Rejection by OFFEREE:
 Common Law: 1) Counteroffer (not bargaining) 2) Conditional Acceptance 3)
Additional Terms (mirror image rule) = new offer, terminates old
 Death/Incapacity of either party prior to acceptance terminates
 Exceptions: Option K OR Part Performance of Unilateral K
 Acceptance: Assent to the offer
 Who: Person who knows + person to whom offer is made (options can be assigned)
 Accept w/ Additional Terms: *****
o CL  Mirror Image Rule (no add’l terms/requirements)
o UCC  Intention controls (objectively) [for goods etc – doesn’t matter if merchants]
 1 party NOT merchant: use offered terms
 BOTH merchants: use acceptance terms UNLESS offer expressly limits, they
are *****material alteration, or objection w/in reasonable time
 Accept by Silence: Prior Dealings, Affirmative Duty to Speak (lawnmower) or Agreement
(records club)
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Effective upon Communication: Effective upon dispatch (proper mode + properly
dispatched)
o Mailbox Rule: never has to arrive so long as proper mode AND properly dispatched
o UNLESS offer says acceptance on receipt, option K or rejection arrives 1 st.
 ***Auctions: Offer (bids), Acceptance (Bang of Gavel), Reserve Presumed
o W/o Reserve (seller must sell if bang gavel) W/ Reserve (seller doesn’t have to sell)
o Close Case: CL (jury ?) UCC (auctioneer decision)
 Note: Paying in advance of inspecting does not affect rights to inspect or remedy for breach
3. CAPACITY: Incapacitated Person can Avoid = Voidable
 When incapacity ends, party can avoid (reasonable time) OR affirm (no new consideration needed)
 Who Lacks Capacity: Infant (necessities of life exception); Insane; Intoxicated/Drugs ONLY if other
party KNOWS; Others (duress, fraud, undue influence etc)
4. CONSIDERATION: Bargained for Legal Detriment
 Adequacy: Irrelevant
 Forms: Performance, Forbearance (something legally entitled to do), or Promise of Either
 Gifts: depends on surrounding circumstances if “bargained for”
 Past Consideration: NOT consideration (even if they say it is consideration when making deal)
 Pre-Existing Legal Duty:
 CL  Need consideration to modify a contract
o Exceptions: Unforeseen difficulty so severe as to excuse performance
(quicksand/bedrock in home construction); OK if owed to 3rd party promises more
 UCC  OK if good faith, no new consideration needed to modify a contract
 Mutuality: There must be mutuality of consideration (not illusory consideration)
 Requirement/output  mutual unless precatory terms
 Satisfaction Clauses  Not illusory b/c getting good faith presumption of satisfaction
 Exclusive Agency  Not illusory b/c getting best efforts to sell the goods
 Notification Requirement (Must give x days notice)  Not Illusory
o If it just says either party may cancel = illusory
 CONSIDERATION SUBSTITUTES:
 Promise to Pay Barred by Technical Defense = Written promise to pay a debt barred by a
technical defense is consideration sub (credit mgr’s trick)
 Release of Breach Claim = Written release for breach of sale of goods K is consideration sub
 Promissory Estoppel (Det Rel) = promise + reliance that is detrimental/foreseeable/and
reasonable + enforcement necessary to avoid injustice; PE better that DR b/c dam > or =
IV. DEFENSES TO FORMATION
1. Statute of Frauds
 MY LEGS = Marriage, Year, Land (sale), Executor (promise to pay from personal funds), Goods
>$500, Surety (unless benefits surety)
 K to build building not w/in SOF unless can’t be built w/in a year by its terms
 Requires: Writing + Signed by D (letterhead OK). Equal dignity rule (agency K can be oral)
 Exceptions: SWAP
 Specially Manufactured Goods: substantial beginning + unsuitable for others (Entire K
enforceable)
 Written Merchants Confirmation: (UCC) BOTH merchants + written (by P but not signed by
D) confirm of oral K for GOODS + 10 days to object
 Admission: (in ct/pldgs) Admission of oral K then enforced to extent of admission
o NO privilege of self-incrimination; NO privilege of Statute of Frauds; NO objection b/c
irrelevant/immaterial; LIE to keep in S/F
 Performance: Performance by 1 party takes it out of SoF
o CL  FULL performance by 1 side (unless real estate)
o UCC  Partial performance to extent of performance
2. Mistake, Misrepresentation or Fraud:
 Fraud:
 Fraud (didn’t know signing K) = VOID
 Fraudulent Misrepresentation = VOIDABLE IF justifiably relied
 Non-Fraudulent Misrepresentation = VOIDABLE IF justifiably relied + material (would induce
reasonable person or knew would induce this person
 Mistakes:
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Unilateral Mistake -> NOT a defense UNLESS other party knew or should have known
Bilateral Mistake -> DEFENSE if basic assumption of fact (basis of the bargain) + materially
affects agreed exchange
3. Unconscionability = NO K – Measured at time of contracting (inconspicuous risk shift, adhesion, unreasonable
covenant not to compete (not allowed in law at all))
V. **RIGHTS OF NON-PARTIES
o 3rd Party Beneficiaries: intended beneficiary (must be stated in K) can hold promisor + promisor can use
defenses + CREDITOR beneficiary an hold promisee on original debt + incidental (unintended) beneficiaries
cannot hold anyone + modification OK until vesting (knowledge + action) + promisee can enforce K against
promisor
o Assignment: All rights can be assigned UNLESS prohibited by law, unique personal service, or substantial
change
o MUST have present transfer but NOT necessarily writing/consideration
o Assignee can hold obligor unless notice
o Assignor out of picture once assign the rights
o Delegation: All duties can be assigned UNLESS prohibited by law, unique personal service, or substantial
change
o Must have present transfer but NOT necessarily writing/consideration
o Obligee MUST accept BUT delegator remains liable
TERMS
I. PAROL EVIDENCE RULE
 Rule: Written integration = NO extrinsic evidence
 Exceptions:
 CL: clarify ambiguity, fraud/duress, or subsequent agreement (no such thing as unamendable K)
 UCC: usage of trade, course of dealings, course of performance
II. PERFORMANCE (goods/UCC)
 Seller: PERFECT tender + single delivery
 Non-Carrier -> Seller’s Place of business
 Carrier ->
 Destination (deliver to buyer’s place of business) = FOB (buyer $/risk); FAS (seller $/risk)
 Shipment (deliver to shipper) = C&F (K price = cost and freight); CIF (K price = CI + freight)
 Buyer: Pay (concurrent w/ delivery ) + must give time to get cash if demanded
III. RISK OF LOSS – ALWAYS ON EXAM *******
 NO Breach:
 Non-Carrier:
 Seller Merchant -> Risk passes on possession
 Seller Non-Merchant -> Risk passes on tender
 Carrier:
 C&F or CIF -> risk on Buyer
 FOB or FAS -> Risk on Seller
 It doesn’t specify delivery to particular location risk of loss passes to buyer on giving to carrier
 Breach:
 Risk on SELLER UNLESS
 Acceptance despite breach
 Cured the breach 1) Within proper time OR 2) addt’l time if reasonable belief would accept
non-conforming goods (prior history OR new model old price)
 Trial Period: “Sale or Return” (Risk on buyer during trial) OR “Sale on Approval” (Risk on seller during trial)
 Building Contracts: New building (risk on builder) Old Building (risk on owner)
CONDITIONS
I. TYPES
 Timing: Precedent (occur before duty arises), concurrent (2 precedent); subsequent (not occur during K period)
 Burden of Proof: On P for precedent or concurrent; On D for subsequent
 Formation: Express, Implied, Constructive
II. SATISFACTION OR EXCUSE
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Satisfaction:
 CL: Substantial Performance
 UCC: Perfect Tender
Excuse:
 Prevention -> if you prevent condition from occurring you waive the condition
 Anticipatory Breach -> excuses condition - can sue NOW (executory bilateral K + unequivocal)
 Breach -> breach by one party excuses condition of the other party to perform
 Excuse by Substantial Performance -> If performance is precondition to other party perform
(constructively). Substantial perform excuses condition of perfectness under CL (UCC – perfect tender)
 Divisibility/Installment -> Performance divided into 2 or more parts + # of parts same for both +
performance of each part is equivalent of the other = entitled to $ of units performed even if not all
 Installment -> Have to show substantial impairment of part or all to reject part or all
 Waiver -> AFTER condition is broken statement that won’t require condition
 Estoppel -> BEFORE condition is to occur statement wont’ require condition
******WARRANTIES – ALWAYS ON EXAM
I. TYPES
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Constructive Warranty of Title: Will give good title (imposed on merchants AND non-merchants by law)
Constructive Warranty of Infringement: No copyright, trademark etc infringement (merchants ONLY)
Implied Warranty of Merchantability: Goods will be fit for ORDINARY PURPOSE (merchants ONLY)
Implied Warranty of Fitness for Particular Purpose: Buyer has PARTICULAR purpose + Seller has reason to
know + buyer relying on seller (merchants AND non-merchants)
 Express Warranties: Affirmation of fact through language (distinguish “puffing”) (innocent misrep still breach)
II. DISCLAIMERS
 ALL warranties can be disclaimed
 Merchantability -> Must be express and use word conspicuously
 Implied Warranties (Merch or Fitness) -> can use “AS IS” clause
 Federal Consumer Protection Law: no disclaimer of implied if full written warranty issued; no ty-ins unless
totally w/o costs for parts and labor; lemon problem (consumer chooses remed)
III. BENEFICIARIES
 Warranties extend to FAMILY, HOUSEHOLD, OR GUESTS in the HOME
DISCHARGE (EXCUSE OF PERFORMANCE)
I. 12 WAYS TO NOT BE IN BEACH
1. Performance  perfectly
2. Tender  if tender goods can’t be sued (tender = ready, willing, and able to perform)
3. Condition Subsequent Occurs  cut off duty to perform
4. Impossibility  Objectively performance can’t be done (no one could perform) not subjective (this D can’t do)
 CL  illness = discharge in SERVICE contracts
 UCC  destruction of ID’ed goods, transportation failure (when K about what carrier to use MUST
tender/accept reasonable substitute), or failure of presupposed condition (e.g., oil – allocate)
5. Commercial Frustration  event occurring AFTER K formation, but before K performance + unforeseen +
affecting either party’s ability to perform OR the value of performance (hurricane)
6. Rescission  executory x 2 + cancel (performance still remaining on both sides and cancel)
7. Cancellation  executory x 1 + cancel (one party has performed and cancel)
8. Novation  substitution of new party + consent by ALL 3 = discharge of original party’s duties after novation
9. Accord/Satisfaction (Compromise)  Parties do something different that will satisfy existing terms
 Accord = Executory promise (the compromise)
 Satisfaction = Performance of the accord
 If no satisfaction, the non-breaching party can sue on EITHER the accord or the original promise
10. Account Stated  Unliquidated claim (no fixed $ agreed to before) + amt “offered” in payment + amt accepted
11. Lapse/Laches  If neither party acts w/in reasonable time after K term, then K lapses and neither is in breach
(occurs BEFORE running of statute of limitations)
12. Judgment/Merger  If you get jdgmt for breach and give damages can’t sue again for original K amt
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BREACH AND REMEDIES
I. BREACH
 Common Law: Substantial Performance (mat’l breach -> excuse other party; minor breach -> no excuse)
 UCC: Perfect Tender bracketed by good faith
II. REMEDIES
 Land (rent or sale): Specific Performance (both sides can get) UNLESS transferred to BFP
 Damages Types: Goal: Put the non-breaching party in position would have been in w/o the breach
 Expectation: Those that flow directly and immediately as a natural consequence of the D's actions
 Generally Damages = K price +/- (EITHER FMV (can’t cover) OR Sale/purchase price
(cover/resell) + Incidentals – Expenses Saved
 Consequential: Those that do not always flow from the D's conduct – D only liable for foreseeable
damages
 Foreseeable: When the parties made the K did the D know of the special circumstances that
would cause them to a reasonable person to foresee the result
 Nominal: Hurt but not legally injured (get $1)
 Stipulated/Liquidated: Agreed on amt or method to calculate in advance
 K can NOT provide for PENALTY
 TEST: at time of K amt is 1) difficult to determine + 2) provision is reasonable forecast
 Punitive: NOT allowed in private K law (b/c goal to put in place would be in w/o breach)
III. BAD SELLER FOR GOODS
 No Goods Tendered: Buyer can
1. Cover (reasonable + seasonable) damages = K price – purchase price
2. Sue for K damages = K price - FMV (at time of discovery of breach)
3. Specific Performance (only when inadequate remedy at law – unique goods or can’t cover)
 Tender Non-Conforming Goods: buyer has 2 options
1. Reject
 Single Delivery K (assumed)  Non perfect goods unless curable (in original time or reas belief)
 Installment K  Substantial Impairment
2. Accept
 Knowingly: Can still get damages = Value non-conforming goods – Value of conforming goods
 Unknowing: Can reject acceptance (std: substantial impairment – not perfect tender b/c accepted)
IV. BAD BUYER FOR GOODS
 Insolvent Buyer: Not a breach. Options - 1) not deliver unless get cash 2) stop delivery in transit (only lots –
whole truck) 3) reclaim the goods (if go bankrupt 10 days of delivery – exclusive remedy if you use this)
 Wrongful Rejection: Options 1) sell to another (D=K price – substitute sale price) 2) K Damages if can’t resell
(D=FMV – K price (w/o reselling) 3) lost profits (only if volume seller) – NOT specific performance
V. BAD BUYER OR SELLER
 Anticipatory Repudiation/Breach: Neither party has performed + unequivocal  Can suspend your performance
and either sue now or sue later
 Right to Demand Assurances: When other side short of anticipatory breach  must demand assurances in
writing and if no response w/in 30 days becomes anticipatory repudiation
 Damages: Incidental/Consequential – Savings
 Incidental: Things connected to transaction (Buyers OR sellers)
 Consequentials: foreseeable to reasonable person (BUYERS ONLY)
 Mitigation: Duty to mitigate on BOTH sides
 **GET EXTRA CREDIT IF SAY NEED TO REDUCE TO PRESENT VALUE
THIRD PARTY RIGHTS
General Rule: Buyer gets title of seller – except buyer may ACHIEVE better title in some situations

Accession: Added value to PERSONAL property (b/c can’t have fixtures on chattels)
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Cash: Even a thief can convey good title to cash

Holder in Due Course: Takes free of personal defenses (including a claim of ownership)
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Intermingling (CL Confusion): Mandates a divvy (equal proportion). Following the divvy confusion gives finality
(cows)
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**Entrustment: Owner (not bailee) + Merchant + Buyer in Ordinary Course = Gets title (watch)
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Voidable Title: Intentional sale b/c of fraud, but later sold to BFP
Estoppel: Detrimental Reliance
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