Subject Matter: Is UCC implicated?

UCC 1-103 (Purpose); 2-102 (Scope); 2-105 (Goods); 2-106

(Sale); 2-104 (Merchants);)
Hybrid? (Predominant/Gravamen Tests);
Is SOF implicated? (say, “analysis below”) R. 110/ UCC 2-201
Formation: Do we have a contract?
What evidence establishes: (1)
manif. of mutual assent and (2)
bargain for exchange of a legally
sufficient consideration.
Rest. 1, 3 (agreement), 17
(bargain), 18, 19 (conduct), 20
(misunderstanding), 21, 22, 23,
24, 26, 29, 30, 32, 33, 35, 36, 50.
Acceptance: Master of Offer,
Mailbox Rule
Option contracts – R. 45
Counteroffers
Consideration: Rest. 71-79; 82-
90; Pre-existing Duty Exceptions:
UCC Formation: 1-103, 2-207, 2-
205 (firm offer), 2-209
(modification); 2-210
(delegation/assignment).
SOF: R. 110; UCC 2-201;
UCC Exceptions: 1) admission;
2) specially manufactured goods;
3) part performance
Defenses: Is the K unenforceable by
way of a defense?
1. Incapacity (R 12): 1) Infants (14);
2) Mental Illness (15) Guardianship
(13); Intoxication (16)
2. Mutual Mistake - R. 151; 152
3. Unilateral Mistake: R. 153
4. Misrepresentation/Fraud:
Opinion R. 169; Silence; Active
Concealment/ Nondisclosure;
Material Misrepresentation;
Fraudulent Misrepresentation
5. Duress: Physical/Economic –
improper threat
6. Undue Influence: Odorizzi
7. Illegality/Public Policy: balance
test: weigh the policy of the statute;
restraint of trade (ancillary - ok/non
ancillary); impairment of family
relations/other protected interest
8. Unconscionability:
Procedural/Substantive Analysis
Breach: Is there an unperformed
promise within the scope of
agreement for which there is no
lawful excuse?
Express Terms (Warranties): UCC
2-313 Affirmation/Promise,
Description, Sample
Parol Evidence: R 213; UCC 2-202;
Fully/Partially Integrated.
Ambiguity: Resolved by: contract
definitions; or by UCC 2-202 Course
of performance; Dealings; Usage of
Trade
Implied terms: 1) Good faith and
fair dealing/best efforts – R. 205/UCC
1-203; 2) Good Title; 3) Implied
warranty of Fitness for a particular
purpose UCC 2-315; 4) Implied
Warranty of Merchantability 2-316
Excused/Discharged by:
1) Condition; 2) Amendment,
Modification, Waiver/Estoppel; 3)
Impossibility/ Impracticability/
Frustration of Purpose; 4)
Anticipatory Repudiation; 5) Material
Breach- R. 241
Remedies: Is there an available
legal or equitable remedy?
Goal: compensation/not compulsion –
no punitive; specific performance not
available when injury is compensable
Purposes: R. 344 a), b), c)
Expectancy: R. 347
Reliance R. 349
Limitations: Avoidability R. 350;
Foreseeability R. 351; Certainty R.
352
Interest as Damages (Statutory)
Liquidated Damages/Penalties R. 356
Restitution: R. 371
UCC:
Seller’s Damages: UCC 2-703-710
Buyer’s Damages: UCC 2-711-716
Liquidation or Limitation of Damages:
UCC 2-718 enforceable unless punitive
Contractual Modification or Limitation
of Remedy: UCC 2-719

Promissory Estoppel: (after formation- before defenses): R. 90: Promise is binding if: 1) the promise was made; 2) reasonably expected to induce a party to
contract; 3) which did induce; 4) injustice can be avoided only by the enforcement of the promise; 5) remedies limited to reliance interest.

Third Parties: 1 K; Intended/Incidental Beneficiary; Creditor/Donee K.; Intended Ben. Has the right to enforce K subject to all infirmities.
Assignments I.and Delegations:
Start withUsually 2 Ks – Matter:
the Subject second one creates a 3d party beneficiary K; Assignment of K by means of gift – gift is revocable unless given; Right is assignable
unless: (1) materially changes the duty of the obligor; (2) materially increases the burden or risk on the obligor; (3) materially impairs on obligor’s chance of getting the return
1
performance; (4) materially reduces its value to obligor; (5) is forbidden by statute or public policy; (6) validly precluded by K; Duty is delegable unless: 1) against public policy; 2)
against the terms of the promise; 3) promise requires performance by a particular person only to the extent the oblige has a substantial interest. Also, delegation of non-delegable
duties may constitute repudiation (R. 239) and be treated as reasonable grounds for assurances under UCC 2-210 (5)
 I. Subject Matter
The contracts analysis depends on the subject matter of the transaction, which helps to determine:

(1) whether UCC is implicated and

(2) whether Statute of Frauds is implicated. The subject matter of the transaction is determined by the promises between the parties.

Here, ….. analysis

Therefore, the subject matter of the contract is ….

Is UCC implicated? !!! Don’t say “UCC is governing body”!!!!

Per UCC 1-103 “… Unless displaced by the particular provisions of the Uniform Commercial Code, the principles of law and equity, including the
law merchant, and the law relative to capacity to contract, principle and agent, estoppel, fraud, misrepresentation, duress, coercion, mistake,
bankruptcy, and other validating or invalidating cause supplement its [UCC] provisions.” In other words, the Common Law applies unless
displaced by the particular provisions of UCC.

Moreover, under UCC 2-102 “Unless the context otherwise requires, this Article (UCC) applies to transactions in goods; it does not apply to any
transactions which although in the form of unconditional contract to sell or present sell is intended to operate only as a security transaction nor
does this article impair or repeal any statutes regulating sales to consumers, farmers, or other specified class of buyers…”

UCC 2-105 “Goods means all things (including specially manufactured goods) which are movable at the time of identification to the contract for
sale other than the money in which the price is to be paid, investment securities (Article 8) and things in action.”

UCC 2-106 “A “sale” consists in the passing of title from the seller to the buyer for a price.”

UCC 2-104 “Merchant means a person who deals in goods of the kind or otherwise, by his occupation, holds himself out as having knowledge or
skill peculiar to the practices or goods involved in the transaction…”

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Hybrid Transactions: Goods or Service?

1) Predominant purpose test: whether the transaction’s predominant factor, its thrust, its purpose reasonably stated is the rendition of
services or for sale of goods, with labor incidentally involved? (look at the contract language – does it reference goods in the contract;
look at the invoice – how is the transaction billed (does it name the goods); look at the mobility of the subject matter)
2) Graveman Test: whether the graveman of the court action involves goods or services (what is the material or significant part of the
grievance or complaint – complaining of service or of product defects?)

IS SOF Implicated? !!! Don’t discuss it here…. Just mention that since the contract is for the amount of 500 or more, then SOF is implicated.
Please, see the analysis below.

II. Formation:
Do we have a contract?

Per R. §1: “A contract is a promise or a set of promises for the breach of which the law gives a remedy, or the performance of which the law in
some way recognizes as a duty.” (See also UCC 2-204) “A contract for sale of goods may be made in any manner sufficient to show agreement,

including conduct by both parties which recognizes the existence of such a contract.”)

Per R. 2: (1) A promise is a manifestation of intention to act or refrain from acting in a specified way, so made as to justify a promisee in
understanding that a commitment has been made.

Per R. 3, Agreement [contract] is a manifestation of mutual assent on the part of two or more persons. A bargain is an agreement to exchange
promise or to exchange a promise for a performance or to exchange performances.

Per R 17: The formation of a contract requires a bargain in which there is a manifestation of mutual assent to the exchange and a
consideration.

Therefore, to answer whether there is a contract, we should answer: (1)whether there is a manifestation of mutual assent, and (2)
whether there is a legally sufficient consideration.

3
 A. Is there a Manifestation of Mutual Assent
Manifestation of mutual assent is often evidenced by an offer and acceptance in both oral and written form or a signed writing
(written Contract) or conduct (Stepp v. Freeman), all of which is supported by a bargained-for-consideration, as analyzed under the
objective theory of outward manifestations. (See R. 18, 19, 21) Secret and undisclosed intent is irrelevant. (See Lucy v. Zehmer)

Analysis: Here, it appears that the manifestation of mutual assent is expressed through words … writing in the form of offer and
acceptance…
Therefore, we will analyze the communications to determine whether there was a valid offer and a valid acceptance to effectuate a
contract.

I. Offer:
Was the letter/phone call/… a valid offer?

Per R §24: An offer is the manifestation of willingness to enter into a bargain, so made as to justify another person in understanding that his assent
to that bargain is invited and will conclude it. An offer so made to the offeree is justified when the offer is clear, definite, and explicit, and leaves no
room for negotiation. (See Leftkowitz).

Also per R §26: A manifestation of willingness to enter into a bargain is not an offer if the person to whom it is addressed knows or has reason to
know that the person making it does not intend to conclude a bargain until he has made a further manifestation of assent.

To justify the offeree that his assent is invited and will conclude it, the offer should be certain, clear, definite to all its material terms, leaving
nothing open for negotiation. Such certainty is required for the court to identify the parties in breach and to craft the remedy. Material terms include
parties of the contract, the subject of transaction, price, quantity, place of delivery… Where other terms are left out, the court may look at the
totality of circumstances to determine the intent of parties.

Analysis: ….

Therefore, this was a valid offer.

The offer creates a power of acceptance in the offeree as discussed below.

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 II. Power of Acceptance
Did … exercise his power of acceptance?

Offeror is the master of his offer.

Per R. 29 and 30: The offeror, by his offer: 1) creates a power of acceptance only in the person or group of persons specified in the offer, and
2) limits the power of acceptance to the manner specified in the offer.
To have the power of acceptance, the offeree needs to have the knowledge of the offer. (See Glover v. Jewish War Veterans)
Per R. 36, The power of acceptance is terminated by: counteroffer or rejection by the offeree, lapse of time, direct or indirect revocation by the
offeror, death or incapacity of either offeror or offeree.
 Revocation – may be:
o direct: Per R. 42, An offeree’s power of acceptance is terminated when the offeree receives from the offeror a manifestation of
an intention not to enter into the proposed bargain.
o Indirect: Per R. 43, “when the offeror takes definite action inconsistent with an intention to enter into the proposed contract and
the offeree acquires reliable information to that effect.” In other words, the offerree knows that their assent is either no loner
invited nor will conclude the offer.

However, revocation is precluded in case of an Option Contract:

COMMON LAW: Per R. 25, “The option contract is a promise which meets the requirements for the formation of a contract and limits the
promisor’s power to revoke an offer.

Per R. 87, the option contract is formed by:

1) payment of consideration (as indicated in the offer signed by the offeror), or

2) commencement of performance (in case of unilateral contracts),

5
 3) promissory estoppel (in case of an offer which the offeror should reasonably expect to induce action or forbearance of a
substantial character on the part of the offeree before acceptance and which does induce such action or forbearance is binding as
an option contract to the extent necessary to avoid injustice )

4) in case the offer is irrevocable by statute.

Under UCC 2-205, an option contract (irrevocable contract) is formed through firm offers. “An offer by a merchant to buy or sell goods in a
signed writing, which by its terms gives assurance that it will be held open is not revocable for lack of consideration during the time stated or if no
time is stated for a reasonable time, but in no event may such period of irrevocability exceed three months.”

Lapse of time: a reasonable time for the acceptance of offers. If face to fact conversations, or telephone or teletype communications – the power
of acceptance does not extend beyond the time of the conversation unless special words or circumstances indicate a contrary intention of parties.
(Akers v. Sedberry).

I. Counteroffer

Per R. 39, a counter-offer is an offer made by an offeree to his offeror relating to the same matter as the original offer and proposing a
substituted bargain differing from that proposed by the original offer.

A counter-offer terminates the power of acceptance of the offeree (unless otherwise manifested by the offeror) and operates as a new offer
creating a power of acceptance in the then-offeror/now-offeree.

Note!: In case of UCC, the additional terms may not qualify as a counteroffer… but a valid acceptance. UCC 2-207 is discussed below in
acceptance.

Here, analysis… There is a counter-offer… therefore, it serves as a valid offer.

I. Power of Acceptance
Did … exercise his power of acceptance?
See Supra…

6
 II. Acceptance
Was the correspondence on… a valid acceptance?
See Supra…

_________

II. Acceptance
Was the correspondence on… a valid acceptance?

Per R. 50: “Acceptance of the offer is a manifestation of assent to the terms thereof made by the offeree in the manner invited or required.
Acceptance by performance requires that at least part of what the offer requests be performed or tendered… Acceptance by promise requires that
the offeree complete every act essential to the making of the promise.”

Under the Common law “mirror image rule,” an offer must be accepted exactly without modifications. The acceptance should be unequivocal
and unconditional.

Per R. 58, “An acceptance must comply with the requirements of the offer as to the promise to be made or the performance to be rendered.”

An attempt to accept the offer on different terms instead creates a counter-offer – which constitutes a rejection of the original offer.

Bilateral v. Unilateral Contracts:

Bilateral contract is a contract formed by an offer that invites acceptance by either promise or performance. (In case the acceptance is by
promise – then notice of acceptance is necessary.) Where offer invites acceptance by promise, the contract is consummated upon exchange of
promises. Commencement of performance may operate as acceptance by promise.
Unilateral contract is a contract formed by an offer that invites acceptance by performance only. (In case the acceptance is by performance –
then notice of acceptance is not necessary, unless the offeror has no way to know that you have commenced the performance.) Where offer

7
invites acceptance by performance only, the contract is consummated upon complete performance. Commencement of performance may operate
to create an option contract during the performance.
Per R. 32 When in doubt, an offer is interpreted as inviting the offeree to accept either by promising to perform what the offer requests or by
rendering the performance as the offeree chooses.

Acceptance by silence: Per R. 69, (there should be “silence” plus something; e.g. past course of dealings, or unreasonable delay of response,
reason to know the intent of the offeror… )

Analysis: … Here, the …. answered… in the manner specified

Under UCC 2-207, (which displaces the CL last-shot rule)

The additional or different terms offered in acceptance do not constitute a counteroffer where: 1) the offer is made orally or through informal
correspondence, followed by a written confirmation as an acceptance, or 2) both the offer and acceptance are expressed through printed
boilerplate forms.

Those additional or different terms are considered as mere proposals, unless the transaction is between merchants. In case the transaction is
between merchants, those additional terms constitute part of a contract unless: (1) the offer expressly limits acceptance to the terms of the
offer; (2) they [additional or different terms] materially alter the offer; or (3) notification of objection to them has already been given or is given
within a reasonable time after notice of them is received.

Where the offer is not made through an oral confirmation followed by a written confirmation of acceptance or where the contract is not formed
through printed boilerplate forms, the conduct by both parties which recognizes the existence of a contract is sufficient to establish a contract

8
for sale although the writings of the parties do not otherwise establish a contract. In such case, however, the terms of a particular contract
consist of those terms on which the writings of the parties agree…”

Note: In case of sending non-conforming goods after the contract has been made, the sender is not in breach if the sender sends also a notice
with the goods and informs that the goods are offered as a substitute for those offered.

1) In case of such notice, the sender is not in breach. The receiver’s acceptance then becomes binding if he accepts the non-conforming
goods.
2) But in the absence of such notice, the offeree can accept or reject the goods and can sue for breach.

Mailbox Rule: Per R. 66-68 Acceptance is effective upon dispatch. Mailbox rule does not apply to rejection, offer or revocation. Note: If for
some reason, the acceptance was sent by a slower mail, and the rejection is sent after the acceptance but through a faster mail carrier, and
therefore the rejection is received earlier, still the contract has been made because the acceptance was sent earlier.

__________________________________

III. BARGAINED-FOR-CONSIDERATION

Per R. 71, “To constitute consideration, a performance or a return promise must be bargained for.”
Thus consideration requires 2 elements: 1) Legally sufficient consideration, and 2) a bargain

1) A valuable [legally sufficient] consideration consists either of some right, interest, profit or benefit accruing to the one party, or
some forbearance, detriment, loss or responsibility given, suffered or undertaken by the other. (Hamer v. Sidway)The court will
not challenge the adequacy of consideration unless it shocks the conscience of the court. (Schell v. Nell)
 Adam Smith: “Give me that which I want, and you shall have this which you want, is the meaning of every such offer…”

Past or moral duty, illusory promises, or love and affection are not sufficient consideration.
Here, analysis…

9
 2) Bargain means reciprocal inducement of promises. There is no bargain without knowledge of the offer. (see Glover v. Jewish
Veterans)
Here, analysis…

Answer: If the contract has been formed…

CONTRACT MODIFICATION:
Under Common Law, the modification of the contract requires a “new” consideration.

Pre-existing duty is not a valid consideration. However, there are exceptions to the pre-existing duty, as enumerated in R. 82-90:

1) New or Different Consideration Promised: Even a slight change in the consideration by the promisee (If the promisee/creditor (the
person to whom the promise is made), in addition to what she already owes in return for the promise by the promisor/debtor - even
slightly changes his/her offer)
2) Ratification of a voidable obligation (e.g. infant making a payment after becoming mature; or defrauded person’s promise to go
through with the tainted K after learning of the fraud)
3) Pre-existing duty owed to a third party (e.g. A contracts to sing for B for $5,000, but cancels. Then C promises A $1,000 if A sings for B. A
sings – but can claim his $1,000 from C – because A did not initially have a pre-existing duty with C)
4) Honest dispute as to duty: Modification/compromise by each party in an honest dispute as to duty
5) Unforeseen circumstances: fair and equitable modification of K in view of circumstances not anticipated at the time of contracting.
6) Modification of K for the sale of goods: as long as done in good faith
7) Existing debts – 1) paying the debt earlier than the maturity date, or slightly changing the consideration; 2) paying in stock, in cash,
paying a smaller debt that is subject to an honest dispute. Note: no discharge of duty when paying a smaller amount than due.
8) Forbearance to sue: when the claim is valid or the claimant reasonably (in good faith) believes it is valid.

As mentioned above in (6), Under UCC, for the modification of the contract no new consideration is required as long as the modification is done
in good faith.

10
 Is there a new consideration?

Is there a new manifestation of assent?

Is there a new valid offer?

Did the offeree exercise his power of acceptance?

Is there a new valid acceptance?

Is there a legally sufficient modification of the contract?

____________________

In the remote chance that the contract was not formed – we will apply the doctrine of promissory estoppel: R. 90

1) In case there was a clear and definite promise

2) Reasonable expectation that the offer will induce action
3) Justified reliance
4) Actual inducement
5) Injustice is unavoidable otherwise.
6) Remedies are limited (majority – reliance interest only).

******************************************************************************************************************

DEFENSES: Is the contract unenforceable by way of a defense?

1. Incapacity is represented by: 1) Infants; 2) Mental Illness or Defect; 3) Intoxication – all of these are voidable by the incapacitated; 4)
Guardianship – K. is void (majority).

11
Per R. 12, “No one can be bound by contract who has not legal capacity to incur at least voidable contractual duties. Capacity to contract may be
partial and dependent on the nature of the transaction or other circumstances.

a) Infants: Per R. 14, “Unless a statute otherwise provides, a natural person has the capacity to incur only voidable contractual duties
until the beginning of the day before the person’s 18th birthday.”
 For return of consideration: Majority view – infants do not have to return the consideration; Minority view – have to return the FMV of
the consideration already received (Valencia v. White).
 If age is misrepresented –the defense is valid (majority view) or invalid (minority view)

b) Mental Incapacity: Per R. 15, “a person incurs only voidable contractual duties by entering into a transaction if by reason of mental
illness or defect (1) he is unable to understand in a reasonable manner the nature and consequences of the transaction, or 2) he is
unable to act in a reasonable manner in relation to the transaction and the other party has reason to know of his condition.”
 NOTE: If a person becomes mentally incapacitated after the manifestation of assent – the K. is not voidable.

 Guardianship: Per R. 13, “a person has no capacity to incur contractual duties [even voidable ones] if his property is under
guardianship by reason of adjudication of mental illness or defect.”
o This rule can be overruled if proven that the party has become mentally competent but has not officially reinstated his
competence by the court.
o Some jurisdictions – guardianship is treated as a presumption… so it is not necessarily void.

c) Intoxication: Per R. 16, “A person incurs only voidable contractual duties… if the other party has reason to know that by reason of
intoxication (1) he [the drunk] is unable to understand in a reasonable manner the nature and consequences of the transaction; or
(2) he is unable to act in a reasonable manner in relation to the transaction.”
o On becoming sober, the person should promptly disaffirm the contract and return the consideration. However, if the
consideration is dissipated or lost, there is nothing to return.

Exceptions to Incapacity: Per R. 12, “Persons having no or limited capacity to contract are often liable for necessaries furnished to them or their
wifes or children. Necessary is determined by the facts of the case.”

12
 2. Mistake and Misunderstanding:

a) Misunderstanding: Per R. 20, “there is no manifestation of mutual assent to an exchange if the parties attach materially different
meanings to their manifestations AND (a) neither party knows or has a reason to know the meaning attached by the other; or (b) each
party knows or has a reason to know the meaning attached by the other.”
 However, manifestations are operative in accordance with the meaning attached to them by one of the parties if: (a) that party does
not know of any different meaning attached by the other, and the other knows the meaning attached by the first party, OR (b) that party
has no reason to know of any different meaning attached by the other, and the other has reason to know the different meaning
attached by the first party.
 Exists when there is a mutual misunderstanding = objective ambiguity. Contract is void because there was no meeting of the minds – and
no manifestation of assent.

b) Mistake: may be bilateral or unilateral (K is voidable by the party adversely affected unless there was an assumption of risk)

Per R. 151, A mistake is a belief that is not in accord with the facts.

 Bilateral Mistake: Per R. 152, Factors are: 1) shared belief not in accord with the facts, 2) at the time of contracting, 3) as to the basic
assumption on which the contract was made, 4) which results in material effect on the agreed exchange; 5) voidable by the adversely
affected party, 6) unless he bears the risk under R. 154 (agreement; conscious ignorance; court order)

 Unilateral Mistake: Per R. 153, Factors are: 1) belief of one party not in accord with the facts, 2) at the time of contracting, 3) as to the
basic assumption on which the contract was made, 4) which results in material effect on the agreed exchange; 5) voidable by the
adversely affected party, 6) unless he bears the risk under R. 154 (agreement; conscious ignorance; court order) AND a) the enforcement
would be unconscionable OR b) the other party had reason to know of mistake or caused the mistake.

 At common law, only the bilateral mistake was voidable; but not the unilateral.

3. Duress: R. 174 -176, Duress elements are: 1) Improper threat (what is threatened is a crime or a tort or a criminal prosecution or a bad
faith threat of civil process; bad faith threat of breach of good faith and fair dealing; bad faith threat of breach of duty) and 2) no
reasonable alternative (no immediately available market substitutes; no adequate nor reasonable legal remedy; Economic Duress:
Immediate possession of a needful good is threatened (e.g. requirement or output contracts)).

13
4. Undue Influence: renders K. voidable by the servient party. R. 177: Also, per Odorizzi: Undue influence requires proof of: undue
susceptibility to pressure (due to age, illness or some other incapacity; circumstances or confidential relationship) and excessive
pressure/overpersuasion evidenced by: 1) discussion of transacton at an unusual or inappropriate time; 2) consummation of transaction
at an unusual place; 3) insistent demands that business be finished at once; 4) extreme emphasis on untoward consequences of delay; 5)
use of multiple persuaders by the dominant side against a single servient party; 6) absence of a third-party advisors for the servient
party; 7) statement that there is no time to consult financial advisor or attorney.
 Usually present in case of confidential relationship between the parties, where the dominant party gains the trust and confidence of the
other and purporst to act or advise with the other’s best interest.

5. Illegality/Public Policy: R. 178-179. The contract may be void if 1) it is against a statute; or 2) where there is no statute on point, the
contract term is circumstantially against the public policy.
 Balancing test: 1) Favoring the enforcement of K term: 1) partie’s justified expectations; 2) forfeiture; 3) special public interests (such as
freedom of K). 2) Against the enforcement: 1) strength of the policy; 2) non-enforcement will further the policy; 3) seriousness of
misconduct and the extent of deliberateness; 4) directness of the policy to the term.
 Also, restraints on trade, such as:
o Covenants not to compete – if ancillary to the business operation – Ok, i.e. limited in time, scope and geography; but if non-
ancillary – not Ok.). Test: how specialized/specific the skills are thought; must be something that only the plaintiff can teach
internally; not enough to be unique; Also, cannot be greater than necessary to protect the plaintiff’s legitimate interest – thus,
should be limited in geography, duration, scope of activities. Valley Medical
o Licenses -

6. Unconscionability: Subjective category, measured by a 2-part test: Procedural (age, intelligence, education, expertise of parties, gross
disparity of bargaining power; conspicuous and comprehensible language; look for adhesion contracts) and Substantive (terms of the
contract shock the consience of the court: commercial reasonableness, purpose and effect, allocation of risk).
 A bargain is said to be unconsciounable … if it is “such as no man in his sense and not under delusion would make on the one hand, and
as no honest and fair man would accept on the other.”
 Gross inequality of bargaining power, together with terms unreasonably favorable to the stronger party, may confirm elements of
deception/compulsion or may show that the weaker party had no meaningful choice.

14
  Although in case of unconscionability we can 1) refuse the entire K; 2) throw out the unconscionable term; or 3) change the term (the if
the term is clearly severable)– it is more reasonable to refuse the entire K.

**********************************************************************************************************************

BREACH/PERFORMANCE:
Is there an unperformed promise within the scope of the agreement for which there is no lawful excuse?

Where is the unperformed promise? - found in oral or written words or conduct

1. Express terms of the K: Is it in the express terms?

Express warranties: Per 2-313, “Any affirmation of fact or promise … that relates to the goods and becomes part of the basis of the bargain…
any description which is made the basis of the bargain… any sample or model made the part of the basis of the bargain.”

2. Parol Evidence: R. 212-213/UCC 2-202: If no – is the Parol Evidence Rule triggered? Parol evidence rule is a substantive rule which
applies only to the prior and contemporaneous agreements. It is triggered where there is a writing and a person is trying to insert a
term which is inconsistent with the express terms. Per R. 213, “1) A binding integrated agreement discharges prior agreements to the
extent that it is inconsistent with them. 2) A binding completely integrated agreement discharges prior agreements to the extent that
they are within its scope. 3) An integrated agreement that is not binding or that is voidable and avoided does not discharge a prior
agreement. But an integrated agreement, even though not binding, may be effective to render inoperative a term which would have
been part of the agreement if it had not been integrated.”

 Did the parties intend to make the agreement a full and final expression of their agreement? – Per R. 214 (preliminary determination),
“Agreements and negotiations prior to or contemporaneous with the adoption of a writing are admissible in evidence to establish 1) that
the writing is or is not an integrated agreement; b) that the integrated agreement, if any is completely or partially integrated, c) the

15
 meaning of the writing, whether or not integrated; d) illegality, fraud, duress, mistake, lack of consideration or other invalidating cause;
e) grounds for grnting or denying rescission, reformation, specific performance, or other remedy.”
o Fully integrated: (evidenced by: merger clause; completeness of the terms; oral testimonies that the parties intended so; timing
of the extrinsic evidence) If fully integrated – then we only look into the four corners of the contract. No other terms come in.
o Partially integrated: then only the consistent terms come in. (partially integrated are agreements that are partly oral/partly
written)

3. Ambiguity: Is the term ambiguous? If so – then:

 Whose meaning prevails? R. 201 – Objective Determination (different meaning attached by each but neither knew of the other’s
attached meaning – neither party is bound by the meaning attached by the other) or Subjective Determination (parties attached
different meanings to a promise, but 1 party knew or had a reason to know the different meaning attached by the other – then that 1
meaning controls)
 Rules in Aid of Interpretation: R. 202, 203; UCC 1-303 (definition of 3 freebies), UCC 2-202: (intent of parties; prevailing meaning
controls; technical artful terms in accordance with the field; 3 freebies – course of performance, course of dealing, usage of trade) Per
UCC 2-202, “…[Integrated] Terms… may not be contradicted by evidence of any prior agreements or of contemporaneous oral
agreement but may be explained or supplemented by (a) course of performance, course of dealing, or usage of trade, and (b) evidence
of consistent additional terms, unless the court find the writing was intended to be completely integrated.”

4. Is the promise in the implied/omitted terms?

1) Implied warranty of good faith and fair dealing: Per UCC 1-201, Good faith … means honesty in fact and the observance of
reasonable commercial standards of fair dealing) – It is never disclaimed.
2) Implied warranty of good title.
3) UCC Implied Warranty of Merchantability: Per UCC 2-314, Factors are: 1) seller is a merchant of goods of that kind (serving food
for value or drink to consume on premises elsewhere is sale); 2) to be merchantable, the goods must: a) pass without objection
in trade; b) be of fair average quality within description; c) fit for ordinary purposes for which goods are used; d) run… of even
kind, quality, and quantity within each unit and among all units involved; e) adequately contained, packaged, and labeled as the
agreement may require; f) conform to the promise or affirmations of fact made on the container or label if any; and 3) other
implied warranties may arise from course of dealing or usage of trade.

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 4) UCC Implied Warranty of Fitness for a Particular Purpose: Per UCC 2-315 unless excluded or modified under 2-316, “At the time
of contracting, the seller has reason to know 1) any particular purpose for which goods are required, and 2) buyer is relying on
seller’s skill or judgment to select suitable goods.”

So “Is there an unperformed promise? Answer: If yes, then:

Disclaimer/Excuse: Is there a lawful excuse to the unperformed promise?

If so, then are those terms disclaimed or excused by:

1) Condition: Per R. 224, “a condition is an event, not certain to occur, which must occur, unless its non-occurrence is excused, before the
performance under a contract becomes due.” The condition needs to be clear and unequivocal; otherwise, it will be construed as a
promise.
a. Preferred interpretation: Per R. 227 (3), “In case of doubt, an interpretation under which an event is a condition of an obligor’s
duty (which reduces the obligee’s risk of forfeiture) is preferred over an interpretation under which the non-occurrence of the
event is a ground for discharge of that duty after it has become a duty to perform. Per R. 225 (3), The non-occurrence of a
condition is not a breach by a party unless he is under a duty that the condition occur.
b. Avoidance of Forfeiture: R. 229 – Courts whenever possible will try to excuse a condition to avoid a disproportionate forfeiture
unless its occurrence was a material part of the agreed exchange.
c. Good faith on the promisee: Where the duty of one party is subject to the occurrence of a condition, the additional duty of
good faith and fair dealing may require some cooperation on his part, either by refraining from conduct that will prevent or
hinder performance. Conduct of the party preventing performance must be wrongful.
d. Good faith on the promisor: Where the party’s performance is subject to a condition – the party has to make reasonable good
faith efforts to effectuate the condition. Otherwise, the party may be in breach.
2) Amendment/Modification/Waiver/Estoppel/
a. Waiver: voluntary relinquishment of a known right.

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 b. Estoppel: Acts which induce reliance on the part of the breacher and therefore P. is estopped to assert the right. If the non-
breaching party (P.) wishes to retract the waiver and abide by the strict language of K, it must give notice of intention to
breaching party before holding the breaching party in breach.
3) Disclaimer – UCC 2-316
o Express warranties: inoperative if language or conduct is inconsistent with the language or conduct of its creation. Subject to
Parol Evidence Rule, express warranties prior to the execution of the integrated writing are excludable… (so if the K states: this is
the entire agreement…. – then no previous warranties, including express warranties, apply…)
o Implied warranties: only to implied warranties of merchantability and fitness for a particular purpose and only in case the
disclaimer particularly mentions “merchantability” and “fitness” and is conspicuous OR is expressed through words such as “as
is,” “with all faults” or other plain language; or prior to enter in into K, the buyer has examined or refused to examine – but there
must be a demand by the seller; also, implied warranties can be excluded by the course of dealings or course of performance or
usage of trade. Also implied warranties disclaimed by the language: “there are no warranties which extend beyond the
description on the face thereof”)

4) Impossibility/Impracticability/Frustration of Purpose
a. Impossibility/Impracticability: where, after the contract is made, a party’s performance becomes impossible/impracticable,
without his fault, by the occurrence of an event/contingency the non-occurrence of which was a mutually shared basic
assumption on which the contract was made, both parties’ duties are discharged, unless the language or the circumstances
indicate the contrary (i.e. unless a party has assumed the risk). In impossibility – the contract is impossible to perform. In
impracticability – it is possible to perform, but economically impracticable (e.g. K will ensue huge losses)
b. Frustration of purpose: Per R. 265, where, after a contract is made, a party’s principal purpose is substantially frustrated,
without his fault, by the occurrence of an event the non-occurrence of which was the mutually shared basic assumption on
which the contract was made, both parties’ duties are discharged, unless the language or the circumstances indicate the
contrary.
i. Risk assumption: where the event is foreseeable, but the party failed to negotiate it, the party may be deemed to have
assumed the risk. But unforeseeable risks discharge parties’ duties (e.g. war, fire, earthquake).
5) Anticipatory Repudiation: Per R. 250, “To anticipatorily repudiate, there must be a clear communication of intention not to perform.”
a. Retraction: a party may retract prior to the performance date of the contract, unless the other party (aggrieved) has materially
changed his position in reliance on the repudiation (by finding an alternative K or bringing a suit).
b. Applies only to the bilateral K’s: no anticipatory breach of unilateral contract.

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 c. Traditionally, failure to pay one installment – is not a failure to perform a K, but modernly – it is enough.

6) Material breach:
a. Common Law: Substantial performance: there is no material breach where the other party has substantially performed his
obligation. (e.g. construction Ks) The part unperformed must not destroy the value or the purpose of the K. Where a K is made
for an agreed exchange for 2 performances, one of which is to be rendered first, substantial performance rather than exact,
strict or literal performance by the first party is adequate to entitle the party to recover on it. (Jacob and Youngs v. Kent)
b. Equitable doctrine: does not apply where the breach is willful. (clean hands)
c. UCC Perfect Tender Rule: Per UCC 2-601: UCC requires a perfect tender of goods, and in case of delivery of non-conforming
goods, the buyer may (a) reject the whole; or (b) accept the whole; (c) accept part and reject the rest. However, in case the
buyer accepts the non-conforming goods, the buyer has the right to require, within a reasonable time, the seller to cure the
defects, and the buyer is entitled to reject the goods in case the seller fails to cure the defects within a reasonable time.
Exception to the Perfect Tender Rule are installment contracts.
d. Time of essence: where parties have not expressly declared intention, determination as to whether time is of the essence – such
determination depends on the intention of the parties, the circumstances surrounding the transaction, and the subject matter of
the contract. If time is NOT of the essence, delay may not be considered as a material breach.

If no excuses apply, then move to remedies!

REMEDIES UNDER COMMON LAW:

In determining whether the remedy in damages would be adequate, the following circumstances are significant:

1) Difficulty of proving dmaages with reasonable certainty,

2) Difficulty of procuring a suitable substitute performance by means of money awarded as damages, and
3) Likelihood that an award of damages could not be collected. (often overlooked)

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COMMON LAW MEASUREMENT OF DAMAGES: Difference between the value of what was promised and what was in fact received. (Hawkins v.
McGee)

In contract law, we do not penalize the breach, we only compensate. Therefore, there are no punitive damages unless the contract breach is
accompanies with a certain tort or the contract breach has elements of tort (commonly, fraud).

In case of a valid contract, the aggrieved party may seek one of 3 remedies:

1) Expectation interest [subject to limitations]

2) Reliance interest [subject to limitations]
3) Restitution interest

Limitations:

1) Avoidability: loss that the injured party could have avoided without undue risk, burden or humiliation R. 350;
2) Unforeseeability – loss that the party in breach did not have reason to foresee as a probable result of the breach when the contract
was made. R. 351;
3) Uncertainty: loss beyond the amount the evidence permits to be established with reasonable certainty R. 352;

Emotional disturbance: excluded unless the breach also caused bodily harm or the contract or the breach is of such a kind that serious
emotional disturbance was a particularly likely result. R. 353

Interest as damages: if the breach consists of failure to pay a definite sum in money or to render a performance with fixed or ascertainable
monetary value, interest is recoverable from the time for performance on the amount due less all deductions to which the party in breach is
entitled. In any other case, such interest may be allowed as justice requires on the amount that would have been just compensation had it
been paid when performance was due. (R. 354)

Punitive Damages: not recoverable for a breach of contract unless the conduct constituting breach is also a tort for which punitive
damages are recoverable. R. 355

Liquidated damages and penalties: recoverable only at an amount that is reasonable in the light of the anticipated or actual loss caused by
the breach and the difficulties of proof of loss.

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Expectation Interest: R. 347 Puts the parties in as good a position as he would have been had the contract been fully performed (R. 344 (a)).

Measure of expectation interest: (Loss in value of performance + Incidentals + Consequentials – Losses avoided)

1) The loss in value to the promisee of the other party’s non-performance

a. Buyer’s perspective: product or fair market value of the product at the time of learning of breach
b. Seller’s perspective: contract price (consequential damages are included in the contract price)
2) Plus incidental and consequential losses
3) Minus any cost or other loss that the promisee has avoided by not having to perform.

For example, if a man agrees to sell a teenager a $5000 rock for $5 bird then decides not to, he would owe the teenager $4995 ($5000 - $5) in
expectation damages.

***

Reliance Interest: R. 349 As an alternative to the measure of expectancy damages stated in R. 347, when a claimant cannot prove w/ sufficient
certainty the full benefit of the bargain. Reliance interest - puts the parties in as good a position as he would have been in had the contract not
been made. (R. 344 (b))

Measure of reliance damages:

1) Expenditures made in preparation for performance

2) Plus - Expenditures made in performance
3) Less - any loss that the party in breach can prove with reasonable certainty that the injured party would have suffered had the contract
been performed (R. 349). “A claimant should not recover more in reliance than what would have accrued if the contract had been
performed” (DPJ v. FDIC)
4) Less – the value of any benefit received by claimant for salvage or otherwise.

For example, if a man agrees with a boy to trade a hat for an apple and the boy spends $5 to buy the apple, but the man later decides not to trade,
the man would owe the boy $5 in reliance damages.

***

Restitution Interest: - Restores to the promisee any benefit that he has conferred on the other party. R. 344 (c)

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For example, if a doctor performs an emergency procedure on an unconscious dying victim, the victim is liable for the medical fees for restitution
damages.

Measure of Restitution damages R. 371:

Either

a) The reasonable value to the other party of what he received in terms of what it would have cost him to obtain it from a person in the
claimant’s position;

or

b) The extent to which the other party’s property has been increased in value or his other interests advanced.

UCC REMEDIES:
For an Aggrieved Seller: The seller may recover the price of:

a) Accepted goods;
b) Of conforming goods lost or damaged… after the risk of loss has passed to the buyer (once the goods leave the seller’s
Principal Place of Business)
c) Goods if unable to sell (UCC 2-709).

Note: UCC does not oblige you to resell, but in case of no resale, you can’t recover incidental damages.

With resale: (commercially reasonable and in good faith) The seller may recover the difference between the resale price and
the contract price plus incidentals minus expenses saved in consequence of breach. (UCC 2-706 (1)).

Without resale: The seller may recover the difference between the market price at the time and place of tender and the
unpaid contract price plus incidentals minus expenses saved in consequence of breach. (UCC 2-708 (1)).

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Note: Incidental damages to an aggrieved seller include any commercially reasonable charges, expenses, or commissions incurred in
stopping delivery, in transportation, care and custody of goods after the buyer’s breach, in connection with return or resale of the
goods or otherwise resulting from the breach.

Since this may not put the seller in as good a position as he would have been the seller can recover under “lost volume” theory, if
he can prove he has: 1) demand for two or more sales and 2) capacity to satisfy the sale. (UCC 2-708 (2)): The measure of damages
is: profit (including reasonable overhead) which the seller would have made from full performance by the buyer + incidental
damages, + costs reasonably incurred + credit for payments or proceeds of resale. So it is: 1) the list price less cost to the dealer, or
2) the list price less manufacturing cots to the manufacturer.

Aggrieved Buyer:

Absence of goods:

The buyer may recover so much of the price as has been paid (UCC 2-711 (1))

With “cover”: The difference between the cost of cover and the contract price, plus any incidentals, plus any consequential,
less expenses saved in consequence of the seller’s breach. (UCC 2-712 (2))

or

Without “cover”: The difference between the market price at the time when the buyer learned of the breach and the
contract price, plus any consequential, less expenses saved in consequence of the seller’s breach. (UCC 2-713 (1))

Or

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 Specific performance – purest of all expectancy – where the promised goods are unique or in other proper circumstances.
(UCC 2-716 (1)) In case we find an economically interchangeable substitute for subject under contract. Physical uniqueness is
not a magic door. (See: Van Wagner Advertising v. S&M Enterprises)

Non-conforming goods

The buyer may recover:

a) The difference at the time and place of acceptance between the value of the goods accepted and the value they would have had if
they had been as warranted, unless special circumstances how proximate damages of a different amount.

b) In a proper case (in case could not have been avoided through cover), any incidental and consequential damages.

Incidentals: expenses directly incidental to the breach and reasonably incurred in inspection, receipt, transportation, and care and
custody of goods rightfully rejected; any commercially reasonable charges, expenses or commissions in connection with effecting cover
and any other reasonable expenses incident to the delay or other breach.

Consequentials: indirect losses; any loss which the seller at the time of contracting had reason to know would have followed the breach,
and which could not have been prevented by cover or otherwise; and injury to person or property proximately resulting from any breach
of warranty.

**********************************************************************************************************************

THIRD PARTY BENEFICIARY – Applies only to Unilateral K’s

Third Party Beneficiary: A third-party beneficiary contract is a contract where the promisor promises something to the promisee for
the benefit of a third person.

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 I. WHEN IS IT PROPER TO HAVE A 3RD PARTY BENEFICIARY – TO EFFECTUATE THE INTENT OF PARTIES
Per R. 302
(1) Unless otherwise agreed between promisor and promisee, a beneficiary of a promise is an intended beneficiary if recognition of
a right to performance in the beneficiary is appropriate to effectuate the intention of the parties and either
(a) the performance of the promise will satisfy an obligation of the promisee to pay money to the beneficiary; or
(b) the circumstances indicate that the promisee intends to give the beneficiary the benefit of the promised performance.
(2) An incidental beneficiary is a beneficiary who is not an intended beneficiary.

Per R. 308
It is not essential to the creation of a right in an intended beneficiary that he be identified when a contract containing the promise is
made. (In my words: the contract may be for an unborn child or group of people – as long as the beneficiary is mentioned (even
though not personally identified))

In my own words: Intended beneficiary is one who is identifiable at the time of contract performance and who benefits from the promisor’s
promise to the promisee to either (1) pay money (known as “creditor beneficiary”); or (2) give some benefit (e.g., a business benefit (business
beneficiary); or a gift (donee beneficiary)).

II. A PROMISE IN A CONTRACT CREATES A DUTY IN THE PROMISOR SUBJECT TO INFIRMITY OF K

Per R. 309
(1) A promise creates no duty to a beneficiary unless a contract is formed between the promisor and the promisee; and if a contract
is voidable or unenforceable at the time of its formation the right of any beneficiary is subject to the infirmity.

(2) If a contract ceases to be binding in whole or in part because of impossibility, illegality, non‐occurrence of a condition, or present
or prospective failure of performance, the right of any beneficiary is to that extent discharged or modified.

(3) Except as stated in Subsections (1) and (2) and in § 311 or as provided by the contract, the right of any beneficiary against the
promisor is not subject to the promisor’s claims or defenses against the promisee or to the promisee’s claims or defenses
against the beneficiary.

(4) A beneficiary’s right against the promisor is subject to any claim or defense arising from his own conduct or agreement.

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 III. BENEFICIARY ALWAYS SUES THE PROMISOR, BUT CAN OBTAIN JUDGMENT AGAINST EITHER PROMISEE OR THE
PROMISOR OR BOTH WHEN HE HAS AN ENFORCEABLE CLAIM AGAINST THE PROMISEE.

Per R. § 310

Where an intended beneficiary has an enforceable claim against the promisee, he can obtain a judgment or judgments against either
the promisee or the promisor or both based on their respective duties to him.

IV. IN CASE OF PROMISOR’S BREACH, THE BENEFICIARY OR THE PROMISEE CAN SUE THE PROMISOR

V. BENEFICIARY’S CONTRACT MAY BE MODIFIED

R. 311
(1) Discharge or modification of a duty to an intended beneficiary by conduct of the promisee or by a subsequent agreement
between promisor and promisee is ineffective if a term of the promise creating the duty so provides.

(2) In the absence of such a term, the promisor and promisee retain power to discharge or modify the duty by subsequent
agreement.

(3) Such a power terminates when the beneficiary, before he receives notification of the discharge or modification, materially
changes his position in justifiable reliance on the promise or brings suit on it or manifests assent to it at the request of the
promisor or promisee.

(4) If the promisee receives consideration for an attempted discharge or modification of the promisor’s duty which is ineffective
against the beneficiary, the beneficiary can assert a right to the consideration so received. The promisor’s duty is discharged to the
extent of the amount received by the beneficiary.

VI. THIRD PARTY BENEFICIARY’S RIGHT VESTS - R. 311 (3)

1) By the assent of beneficiary at the request of either party (in the form requested or invited), OR

2) By beneficiary’s material change in his position, OR

3) By the beneficiary’s justifiable reliance on the promise

Anytime other than that, the rights of 3d party beneficiaries may be discharged or modified

26
Once the third party's rights have vested, the original parties cannot modify or rescind a contract in such a manner that would derogate the third
party beneficiary's rights, without the third party's consent.

**********************************************************************************************************************

ASSIGNMENTS AND DELEGATIONS – SUBSTITUTION OF PARTIES

Assignment: Assignment of a right is the transfer of one’s right to receive benefits under the contract to a stranger to the original transaction.

Delegation: Delegation of one’s duty is the transfer of one’s duty to perform some aspect of the contract to a stranger to the original
transaction.

USUALLY – CREATES 2 CONTRACTS, ONE OF WHICH IS AN INTENDED THIRD-PARTY BENEFICIARY CONTRACT (The third party being the obligee)

ASSIGNMENT OF RIGHT:

Per R. 317 (1), An assignment of a right is the manifestation of the assignor’s intention to transfer it by virtue of which the assignor’s right to
performance by the obligor is extinguished in whole or in part and the assignee acquires a right to such performance.

Per R. 317 (2) ASSIGNMENT OF RIGHTS ENFORCEABLE UNLESS:

a) Material impairment to the obligor’s duty (does not apply to the payment of debts), or

b) material increase of the risk imposed (does not apply to the payment of debts), or

c) contrary to public policy (wage-assignments, or assignments of government contracts – limited or forbidden by statutes), or

d) Assignment is validly precluded by contract. (mostly, the non-assignment clause does not render the assignment invalid, but only
gives the obligor a claim against the assignor rather than a defense against the assignee)

Per R. 318 (1, 2, 3) DELEGATION OF DUTIES IS ENFORCEABLE UNLESS:

(1) Against the public policy OR the terms of the promise;

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 (2) Unless otherwise agreed, a promise requires a performance by a particular person only to the extent that the obligee has a substantial
interest in having that person perform or control the acts promised;

Also, unlike the assignment, unless the obligee agrees otherwise, the delegation of performance or a contract to assume the duty made with
the delegator by the delegatee does not discharge any duty or liability of the delegator.

 Per R. 322, TERM PROHIBITING “ASSIGNMENT OF CONTRACT” BARS ONLY THE DELEGATION. SO THE OBLIGOR CANNOT SUE THE
ASSIGNOR FOR DAMAGES FOR THE BREACH OF THE NON-ASSIGNMENT CLAUSE (with respect to the assignment of “rights”).

 Per R. 322, TERM PROHIBITING “ASSIGNMENT OF RIGHT” BARS THE RIGHT, BUT DOES NOT PRECLUDE THE POWER TO ASSIGN THE
RIGHT. HOWEVER, HERE, SUCH NON-ASSIGNMENT CLAUSE GIVES THE OBLIGOR THE RIGHT TO SUE THE ASSIGNOR FOR BREACH OF
THE NON-ASSIGNMENT CLAUSE, IN CASE OBLIGOR CAN PROVE ANY DAMAGES FROM THE BREACH OF SUCH CLAUSE.

 THOSE TWO NON-ASSIGNMENT CLAUSES ONLY LIMIT THE RIGHT TO ASSIGN, but NOT THE POWER and therefore the CONTRACT IN
BOTH CASES IS STILL ENFORCEABLE. THE OBLIGOR HAS TO PERFORM.

 ONLY THE WORDS SUCH AS “ASSIGNMENT OF RIGHTS WILL RENDER THE CONTRACT VOID OR INVALID” bar the “POWER” TO
ASSIGN. IN SUCH CASE, THE CONTRACT WILL BE RENDERED VOID AND INVALID AND THE OBLIGOR DOES NOT HAVE TO PERFORM.

Thus, under R. 322,

(1) Unless the circumstances indicate the contrary, a contract term prohibiting assignment of “the contract” bars only the delegation to an
assignee of the performance by the assignor of a duty or condition;

(2) A contract term prohibiting assignment of a right under the contract, unless a different intention is manifested,

a. Does not forbid assignment of a right to damages for breach of the whole contract or a right arising out of the assignor’s due
performance of his entire obligation;

b. Gives the obligor a right to damages for breach of the terms forbidding assignment but does not render the assignment
ineffective;

c. Is for the benefit of the obligor, and does not prevent the assignee from acquiring rights against the assignor or the obligor from
discharging his duty as if there were no such prohibition.

______________________________________________

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 ASSIGNMENT OF THE GIFT - REVOCABLE, BECAUSE THE GIFT IS INVALID UNLESS GIVEN. (so if smb. designates me as his life insurance
policy beneficiary (which is a gift), that person may later assigned the policy to smb. else, because the “gift” will be irrevocable only upon
the person’s death when I actually get the gift (money under insurance policy)).

 However, per R. 332, “A gratuitous assignment is irrevocable if: (a) in a writing either signed or under seal that is delivered by the
assignor, or (b) the assignment is accompanied by delivery of a symbolic writing. Otherwise, the gratuitous assignment is revocable by
the assignor’s death or incapacity, by a subsequent assignment by the assignor, or by notification from the assignor received by the
assignee or by the obligor. Ceases to be irrevocable if: 1) before termination, assignee obtains payment or satisfaction of the obligation,
or 2) judgment against the obligor; or 3) a new contract of the obligor by novation; also 4) to avoid injustice in case of promissory
estoppel (detrimental reliance)

 ASSIGNMENTS FOR VALUE – ARE NOT REVOCABLE.

 Per R. 331, “An assignment may be conditional, revocable, or voidable by the assignor, or unenforceable by virtue of a Statute of
Frauds.”

 DELEGATION OF CONTRACT DOES NOT DISCHARGE THE DUTY OF THE DELEGATOR, UNLESS THE OBLIGEE CONSENTS TO THE
DELEGATION. IN SUCH CASE, THE DELEGATOR’S DUTY IS DISCHARGED AND THE CONTRACT IS A NOVATION!

 FUTURE RIGHTS MAY BE ASSIGNED!

********

DEFENSES AGAINST AN ASSIGNEE:

Per R. 336,

 The right of the assignee is subject to the infirmity of the initial K (if it will be voidable by the obligor or unenforceable against him)

 The right of the assignee is subject to any defense or claim of the obligor which accrues BEFORE the obligor receives notification of
the assignment, but not THEREAFTER, except as stated below.

 Where the right of the assignor is subject to discharge or modification in whole or in part by impracticability, public policy, non-
occurrence of a condition, or present or prospective failure of performance by an oblige, - the assignee’s right is subject to discharge
even AFTER the obligor receives notification of the assignment.

29
  An assignee’s right against the obligor is subject to any defense or claim arising from his conduct or to which he was subject as a a
party or a prior assignee because he had notice.

SO, until the obligor receives notification of an assignment, he is entitled to treat the oblige assignor as the owner of the right, and
therefore, the derivative assignee’s right is subject to the defenses and claims arising from dealings between the assignor and obligor in relation
to the contract before notification. (A holds B’s unsealed written promise, which is unenforceable because given without consideration. A
assigns this to C who pays value on the faith of the writing, with reasonable beliefe that A had given B consideration and that the promise is
legally binding. C has no right to B.)

DISCHARGE OF AN OBLIGOR AFTER ASSIGNMENT - R. 338 significance

In case obligor’s duty is properly discharged, there can be no claim against the obligor.

1) Gratuitous Discharge by true obligee/assignor– effective!

If B owes A $100. A assigns the right to C. C gives B a gratuitous release under seal and subsequently assigns the right to D for value.
D. acquires no right against B.

2) Discharge by an apparent obligee/assignor: when obligor renders performance or otherwise gives value or changes his position in
good faith and without knowledge or reason to know that the appearance (of assignee) is false, the discharge is still effective!

E.g. B owes A $100. A assigns the right to C. C assigns it to D, and D assigns it to E. Before receiving the notification of the assignment
to E, B pays D. B is discharged.

3) NOTE! Assignor’s power to discharge terminates when the obligor “receives notification.”

4) NOTE! Certain writings are treated symbolic (chattel paper, documents, or instruments, such as a writing in the bank checkbook). So
if the obligor pays the person but fails to notate so in the checkbook, and then that person sells the not-notated book to a third
party, the bank will have to pay both the original assignor or the third party, because the discharge of the note or payment was not
duly notated and the other person took possession of the writing (the note or check-book) as a bona-fide purchaser (w/o
knowledge).

Damage Rules for Sales of Good

i. If seller breaches, and buyer keeps the good: buyer recovers [fair market value if perfect] – [fair market value as delivered].

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 ii. If seller breaches, and seller keeps the goods: buyer recovers [market price at time of discovery of breach] – [contract price] OR
[replacement price] – [contract price]
iii. If buyer breaches, and buyer keeps the goods: seller recovers the contract price.
iv. If buyer breaches, and seller has the goods: seller recovers [contract price] – [market price at time and place of delivery] OR [contract
price] – [resale price] AND, in some situations, provable lost profits (where sell is from regular inventory)

31