DEFENSES to ENFORCEMENT
MH)
FRAUD: Nondisclosure, Misrepresentation, Concealment
*Integration clause is no bar to fraud claim
*Remedies: voidable, elect: rescind+rest(X) or damages (Diff. in Value)
*Rsnbl Rel: arg for/agnst π, bal. equity for ct. concl; ask π sophistic/innocent?*
Nondisclosure (Hill termites): (in)action that asserts a fact does not exist
(1) Omission + Duty
Indirect: (1) Actual knw ∆ (2) No actual/constructive knw π (*diligence) (3) Material
Issue: elastic: choice to enter K, affect on π circs, remedy, good faith, basic assum
Direct: π asks  automatic duty (materiality irrel.)
(2) Reasonable Reliance: causal link, rsnbly motivated to enter K on (lack) info
Misrepresentation: assertion not in accord with the facts
(1) Statement: concrete > puffery (2) False/Misleading: half-truth/incomplete
thought suffice (3) Intent to deceive (4) Material (5) Rsnbl Rel: causal to enter K
Concealment: deliberate conduct hide fact is affirmative, even if not verbal lie
(1) Active concealment > silence (2) Material (3) Rsnbl Rel: causal to enter K
UNCONSCIONABILITY (Walker Thomas furniture; Higgins tv show)
* Unfair bargaining process leading to unreasonable terms
* Sliding Scale: balance procedural & substantive; more one, less other
Procedural: unfairness in the bargaining process
(1) Adhesion: not determ, but suggestive; 3: std form, no neg, uneql brgn
(2) *Key: not mere unequal bargaining; abuse of power to impose
(3) Others: target, understand/educ, fncl vuln, need/no time to read
(4) Factors of unfair surprise or oppression
Substantive: unfairness in oppressive terms *context rule
(1) Unfairly One-sided: high costs of litig, only one party
(2) Shocking as to: (a) industry or (b) πs specific circs
Remedies: depends – severability or rescind+Rest(X)
(1) Sever: sever unconscionable, if can preserve intent (Adler)
(2) Rescind+Rest(X): void entirety; employer has “insidious pattern”
Other: lux vs. need: legis. det.; slippery slope; no bearing on unconsc.
PUBLIC POLICY *Need Statute: society as victim; must void K*
Illegal K: in pari delicto; both know illegal, ct. refuse to provide any relief
Non-illegal, Offend Public Policy: bal equity; likely Rest(X) or adjustment
Consider: nature/gravity viol, goals of law/pub policy, extent permeates K
Employer-Employee Agreements (Valley Med v. Farber non-compete)
(1) Strict scrut.: (a) against employer, (b) compare to outside policy guide
(2) Rsnblty: (a) interest: employer vs. other parties (b) unrsnbl if greater than nec:
(i) geography, (ii) duration, (iii) activity restrictions or (iv) pub. Policy
(3) Severability ‘blue pencil’: sever unreasonable, but cannot rewrite
*Tag: FRD/DUR>back-up UNCON; UNI.M>FRD; CHCIRC>othr REPUD;
UNI.M>CHCIRC; FRUST+IMPRAC; *PUB POL
Family Relations Agreements (RR v.
(1) ID source of pub.policy: (a) id interest, (b) actual/comp. statute as guide
(2) Analyze wrt statute: (a) no pmts beyond hosp. care, (b) services, not baby: (i)
staggered pmt, (ii) final pmt, (iii) refund triggered by condns
(3) Adequate Decisional Moment: time to relinquish connection
(4) Other: (i) surrog husband consent, (ii) adult surrog prev. preg., (iii) adopt parents
evaluated, (iv) adopt wife barren, (v) all have advice of counsel
JUSTIFICATIONS for NONPERFORMANCE
MISTAKE (M: Lenawee income house sewage; U: Wil-Fred low-ball SC bid)
*not mistake: judgment, future prediction, law
(1) Mutual (2) Fact (exists, not jdgmt) (3) Basic Assumption: essence motivation
not collateral (value, qlty), “barren cow” (4) Materially Affects Bargain (bal of
exch/deprivation) (5) AOR: K or construct (*art/paint = jdgmt risk w/ mistaken prty)
Remedies: (a) rescind+Rest(X) at ct. discretion or (b) two innocts *AOR: (i) “ as is”
clause, (ii) best position to know, (iii) context rule
(1) Unilateral (2) Fact (exists, not jdgmt) (3) Basic Assumption (4) Materially
Affects Barg (5) Occurred Even w/ Rsnbl Care: (i) good faith and (ii) notice: immed
act to rmdy or other shd have notcd (6) Bal Eq=Rescind (chk*AOR; back status quo)
Remedies: rescind if (i) enforce = grave conseq. (ii) non-rescind= no status quo
CHANGED CIRCUMSTANCES (3 Types)
*basic assumption: not foreseen by parties – okay to be foreseeable by others
Unforeseen: war, act of god, strike, change in law; foreseen: market shift (*dep size)
1. Impossibility: literally impossible (classic = death; not look to fault)
(1) After K (2) Event (3) Basic assumption is non-occ. (4) Literally impossible
2. Impracticability (Karl Wendt farm eqp; mkt shift insuff.) supervening event
(1) After K (2) Event (3) Basic assumption non-occurrence (4) Imprac (undue…)
(4) No fault: nthr π nor flowing from (5) *AOR: foreseen/explic/implic/indus/equity
3. Frustration of Purpose: not incapable, but main purpose disappeared
(1) After K (2) Event (3) Frustrates Purpose: (i) prncpl/shared purpose (ii) substntl:
not w/i foreseen risks (iii) basic assumption is non-occ (4) No fault: nthr π nor
flowing from; extra precaution avoid? (5) *AOR: foreseen/explic/implic/indus/equity
Remedies: Rescind: relieve perf. due or if part perform Rest(X)
MODIFICATIONS
*Remedies: voidable, elect: rescind+Rest(X) or (2) damg (Diff. in Value)
Economic Duress (Galtaco overcharging for bearings factory)
(1) Improper Threat: not nec. illegal, threat breach, reputatn, embarrass (2) No Rsnbl
Alt: amt, reputatn, undue burden/risk, not cure threat conseq (3) Some Protest (*low)
Oral Modification (Mama Rizzo breach oral mods of basil orders)
SOF: UCC 2-201: sale of goods, > $500, writing, signed by ∆, quantity
Exceptions: (1) Classic Estoppel: ∆ provides assurance no need/would
provide/already made writing; π relies on promise to reduce oral to writing
(2) 2-201(3): Statutory Exception: (i) special manuf. (ii) admission – not enforceable
beyond qty admit (iii) part perf: pmt made/acc, goods rcvd/acc
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Breach: Expr/Impl; AnticipRepud; Matrl/Total/Partl: what IS it, how π treat it; π:
Mat+Total/Partial; ∆: Partial+Cure, π AnticipRepud; Damages? (see Damages)
CONSEQUENCES of NONPERFORMANCE
EXPRESS CONDITIONS
1. Breach of Condition (Oppenheimer office bldg lease)
(1) Condn Precedent?: (a) magic lang: “if and only if/unless and until” or
(b) rsnblty test: would parties condn perf on completn; *spec = condn?
(2) Express or Implied?: (a) express: literal compliance (b) implied: subst.
performance/compliance suff; *ambiguous = implied
(3) Express Std. of Adherence: (a) obj: industry (b) subj: art, good faith
* subst. perf. insuff. to excuse non-occurrence of express condn.
(4) Excuse?: (a) Forfeiture: unfair depriv to recip of perf, unfair benefit to party
subject to condn, not matrl part of K (b) Waiver: express or implied (pattern)
Practical Result: excuse = condn has been ‘performed’; return perf is due
2. Option Renewal (JNA v. Cross Bay failed lease renewal)
(1) Given within time: yes – valid; no – invalid
(2) Exception: Forfeiture balancing π loss vs. ∆ minimal harm:
(i) subst improvmts (ii) good faith mistake (iii) no harm ∆ (iv) subst. harm π
DETERMINING BREACH
Step 1: Material or Immaterial
Material: (1) Express Condn: magic lang or rsnblty test; gray area: spec = condn
(house vs. pipes); (2) loss of bargain/basic assumption; (3) some: willfulness
Immaterial: subst perf/compliance - *insuff. to fulfill express condn
Limit: (i) excuse (ii) condn not arisen: preced, subseq (unless hinder = condn arise)
Step 2: Material: Incurable or Curable:
*Key: extent of –ve impact on reasonable expectations; context rule
Incurable: material-immediate, irreparable harm that nothing can be done
Curable: material but partial-breacher can cure deficiency = subst. perf.
Step 3: Damages *if total: π has option to treat as partial; offer chance cure
Material and Total: w/hold perf, terminate, claim full damages (past/future)
Material and Partial: suspend perf, await cure, claim past damages
*cure not arrive: partial = total, claim full damages (past/future)
Immaterial (subst. perf.): past damages (cost completion); cannot w/hold perf
*Remember: breacher can still claim Rest(X); return of benefit conferred on π
ANTICIPATORY REPUDIATION
Actual Anticipatory Repud (Schupf cont. ltrs to buy land; not repud.)
Step 1 Repud?: (1) After K (2) clear manifestation of intent: (a) not to perform or
(b) only perform on condn beyond agreed K; Limit: ambig/equivocal/mere conduct
Step 2 Retract?: Anytime before perf is due; Limit: aggrieved party (a) reliance:
mat. changes posn due to repud. (b) notice: indicates believe final
Results: (1) clear, not retracted, π term. or treat final = ∆ breach; (2) ambiguous, π
terminate: (a) ∆ not retract, fails to perf = ∆ breach or (b) ∆ arg retract/not repud = π
breach; (3) ambiguous, π not terminate: (a) ∆ fails to perf = ct. claim π failed mitig
Insecurity Anticipatory Repudiation (Hornell failed iced tea in canada)
Step 1 Insecurity: (1) After K (2) comm’lly rsnbl insecurity: words or actions,
course of dealing/perf., nature of sales K, industry; Internal: non-pmt, failure to fix
defects, shortage of supplies, cont. late deliveries; External: only major act of god or
financial collapse; Rumors: not flimsy; (3) Impair π expectation of due perf: (a)
material decline or (b) threatened with subst. loss
Step 2 Adeq. Assur.: context: comm’lly rsnbl request, time to fulfill
Step 3 Results: Assurances provided w/i time? Yes: No Antic Repud; No: (Step 4)
*Exception: further changed circs/insecurity require addn’l assurances
Step 4 π or ∆ further Liable?: π: unrsnbl insecurity or demands, or adds new
demands after ∆ provides assurances, or demands unrel to K; ∆ gray area: provides
modest but not exact assurances b/c belief π demands unrsnbl
WARRANTIES (Bayliner)
Express Warranties: 3 Bases: wrt specific good (1) representation (picture = gray
area); (2) description – must match exactly; (3) display sample/model; (F) must be
the basis for entering bargain
Limit: puffery/talk – ask: verifiable/factual?; gray area: “I’m no expert…”
Disclaimer: must be consistent w/ express wty or inoperative
Implied Wty Merchantability: (1) a merchant (2) regularly sells goods of kind (3) 2
Tests *require evid. of industry stds.*: (a) pass w/o objection in the trade (b) fit for
the ordinary purposes for which such goods are used; Fail 1 = liable
Suff.: actual use relative to objective average suggests fitness (Bayliner)
Insuff: signif. segment of buying public wd object – need wide discrep. in perf.
Disclaimer: must mention “merchantability”, clear, unambiguous, oral/written
Implied Wty of Fitness for Partic. Purp.: (1) buyer reasonably relies on seller skill
– gray area: “I’m no expert…”; (2) indicates ‘special purpose’ – but if ‘special
purpose’ is industry standard then no claim (3) seller has reason to know of reliance
– req. communication of need
Note: goods need not be defective; not limited to merchants
Disclaimer: *easier to waive, less specific than merch., only writing
Other Disclaimer: “as is”, best if conspicuous/obvious
Implied Wty of Habitability (Caceci latent defect 4 years later)
General: that home has no major defects; not higher, same reasonable expectation;
Merger clause will not bar an implied warranty of habitability; Builder knowledge is
irrelevant – implied regardless
Reason: unequal brgng, imposs. to inspect new-build home, least cost avoider
Disclaimer: viewed suspiciously; must be narrowly tailored; not effective wrt to
latent defects; oral waiver without specificity may not count
Liability: never owners; yes against builder-developer (even after-mkt can sue)
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RIGHTS AND DUTIES OF THIRD PARTIES
3P CONTRACT BENEFICIARIES: At the time of K
(Vogan 3P homeowner beneficiary of SC completion reports)
Parties: intended beneficiary: receives benefit; promisor: agrees to provide benefit;
promisee: confers their right to receive perf. on beneficiary
4 Factors for Valid Standing or ‘Right to Performance’:
(1) Intent: (a) intent of promisee to confer ben; (b) rsnbl knw of promisor agree to
assume obligation; express or implied (lang/terms of K, bkgrnd, practicality)
(2) Rel Prom-Ben: (a) creditor beneficiary or (b) donee beneficiary
(3) Causal Link: promisor breached/caused damage enabling 3PB right to sue
(4) Foreseeability: within contemplation that suit is liability for breach
Practical Result:
3PB can sue: as (a) creditor: promisor and promisee; (b) donee: only promisor
3PB subject to any limits inherent in K: promisor can raise valid defenses
Limit: 3PB not assume personal liab. for promisee; only for liab. on the K
ASSIGNMENT/DELEGATION of RIGHTS/DUTIES to 3P: After K
Assignment
(Herzog attnys liable for paying proceeds to assignee-doctor)
Parties: assignor: voluntarily assign their K right; assignee: recipient of K right;
obligor: party with duty to perform to assignee
Factors for Parties:
Assignor: (1) voluntarily manifest intent to assign (2) right in existence
(3) transfers immediately (4) complete relinquishment
Obligor: (1) receives notice of assgmt: (a) rsnbl awareness (delivery, attn), (b) not
nec party to assignment transxn, (c) if insecure, can ask assurances; (2) holds
performance for assignee: (a) right of assignor extinguished, (b) failure to perform
liable to assignee, (c) assignor cant unilateral modify/retract assgmt
Limit: (1) matrly impair obligor rights: matrl change in duty, inc burden/risk, impair
prospects return perf, subst. reduce value of perf; (2) prohib by K; (3) prohibited by
statute; (4) against public policy *invalid assgmt = anticip repud if assignr no retract
Delegation (assgmt of K usually entails assgmt of rights and delegation of duties)
(Sally Beauty invalid deleg. of distributor duties to direct competitor)
Parties: delegator: assigns a K duty; obligee: party who is to receive perf;
delegate: party with duty to perform
Practical Result
Delegate: perf discharges delegator’s K duties - obligee refusal of proper delegation
= refusal of delegator’s performance = breach
Incomplete Sub: delegator remains obligated; obligee can still sue delegator for
defective perf; delegator cannot unilaterally release himself from liab
Delegate Liab: not liable to obligee unless intend obligee as 3PB: (a) promise to
delegator (b) promise directly to obligee – then both delegator/gate liable to obligee
Insecurity: obligee entitled to adequate assurances – *analyze: anticip repud
Limit: prohibit by K/statute/public policy or impair obligee rsnbl expectations:
Substantial Interest in Original Obligor Performing: (1) K dependent on personal
attributes or skills; (2) K requires “best efforts” in excl distributorship (Sally Beauty)
Personal Services: need specific language allowing review if change personnel
“No Assignment” Clause
Not Explicit: only “no assignment”
Prohibits delegation; assignments are effective; assignor held in breach; obligee
entitled to damages from breach
Impermissible delegation = repudiation of K = retract or anticip repud

“No Assignment” Clause: *must be extremely explicit

Not Explicit: only “no assignment”
Prohibits delegation; assignments are effective; assignor held in breach; obligor
entitled to damages from breach but must fulfill for assignee
Explicit: “…any transfer of rights shall be void”
Forbids assignment without consent: K cannot absolutely forbid assgmt; req “good
faith” refusal that might be judged by objective rsnblty: others in situatn wud consent
- Judge objectively: “which consent shall not be unreasonably withheld”
- No objective jdgmt: “where consent shall be given for reason or no reason at all”
- Absence of clause assumes allowing of assignment
Assignee: subj. to any condns/defenses obligor has against assignor – on the K

3

DAMAGES
 E(X): posn π would have been in had K been fully performed
o Economic loss provable; not provable or unique goods - see Alternatives
o 3 Factors
 Causation: flows from the breach
 Foreseeability: w/i contemplation of parties at time K
 Certainty: rsnbly certain fact and amount; not math precision (ESPN)
o New Venture/Entertainment: issue is certainty; likely Rel(X), out-of-pocket
 Increasing Damages: *applies to both partial and total breach
o + DIRECT: π loss in value
 Real Estate: K – FMV; at time K (slr: K>FMV; byr K<FMV); (Roesch)
 Services:
 Employer: K-equiv replace srvcs (see Mitig); *seasonability/certainty
 Employee: K-suitable alt employ; back+front pay; *spec: vaca/bonus/raise
 Construc: K-Total Dir Costs; Profit + Expenses upto Breach (Luten Bridge)
 General: K expectation – received (Cost in Completion Am.Std v. Schectman)
 Exception: Diminution in Value (Jacob & Youngs)
o 3 Factors: incidental, unintentional, economic waste – strict*
o + INCIDENTAL: reliance exps rsnbly incurred to deal w/ breach/avoid loss
 out-of-pocket: on the K, ship, store, admin. costs obtain sub, cancel fees
o + CONSEQUENTIAL: conseq of breach; depend on K; collateral K (Florafax)
 Decreasing Damages: *applies to only total breach
o – COST AVOIDED: costs saved by not cont. K; dir/variable on the K Lim: OH
o – MITIGATION (Loss Avoided): π rsnbl axn to avoid/not aggravate losses
 Obj Std: reasonable effort, equivalent substitute, economic price
 *π inaction may not harm, unless ∆ satisfies burden
 Equiv Replace Svcs: least cost, equally qualified (Lukaszewski)
o less/eql $+same svc=no dmg; higher cost+better svc = yes dmg, if rsnbl
o never have to accept less/inferior skill
 Suitable Alt Emplmt: different is suff.; inferior is insuff.
o Equiv given bkgrd/experience; only b/c of unique char/skills (famous)
o Alt K only acceptable because of breach
o Alt income stream: rsnbly increase hours; age: older maybe not rsnbl
 Limit:
 Self-injurious: undue brdn/cost, personal risk, loss rep, inferior svc/goods
 Some: ∆ eql opp to mitigate and does not accept (Wartzman)
 Exception: non-mitigating
 Accept better/more expensive sub, if only rsnbly avail (Lukaszewski)
 Decline commlly unrsnbl alt (i.e., goods, job offer, venue that impair π)
 Lost Volume (goods/svcs): 3 Factors: capacity, profitability, probability
 ∆ burden to prove failure to mitigate
 Counter rsnblty claims of π: efforts, alternatives, price
 π inc. losses: irrational (Luten Bridge), bad faith, unfair, fault (dishonest)
o Nonrecoverable: Exception agreed in K terms, provided by statute/court order
 Attny Fees: not litigation; but see Westhaven (relet), Wartzman (replacement)
 Emotional: not comm’l K; no foresee (contempl) or causatn (econ), (Erlich)
 Legal Duty: insurer-insured, special rel, fiduciary, public interest
 Tortious: Ask: negligent, fraud, deceit, coercion, intent+know anguish
 Personal K: express object of K is emotional, sentimental, psychic benefit
 Punitive Damages: standard no; ask: willful+tortious
 Alternatives
o Still 3 Factors: causation, foreseeability, certainty
o Rel(X): restore π status quo; refund out-of-pocket; component of E(X)
 Timing: after K, before breach; Rsnbl: case-by-case wrt this K, nature/amt
 Mitigation: as before rsnbl subs, Limit: no self-injurious
 *Less: any loss that would have been suffered if K completed - ∆ burden
 Catch 22: Rel(X) b/c unable to prove economic profit, how prove loss
o Rest(X): return value of benefit conferred both π/∆ *cannot be complete perf
 Nonbreaching: rsnbl value svc; not capped on K – undim by loss on K
 Breaching: return benefit/expense in excess of loss caused – capped by K
 Dist: intentional not preclude rcvry; intentional+defective will preclude rcvry
o Specific Performance: bal dmge insuff vs hardship (∆/3P) + ct suprvsn burdn
 special/peculiar value; damages inadequate; no undue hardship ∆/3P/court
 Result: after spec. perf, return performance is due
 Personal Svcs K: No = invol svtude; No neg injunction = spec perf (Reier)
 Limit: diff. ct supervsn, hardship to ∆ or 3P reliance on ∆ (more profit insuff)
o Agreed Remedies: stipulated = specified; liquidated = stipulated that rsnbl
 3 Factors:
 Not penalty: actually est to avoid difficulty/confusion in future
 Anticipation: rsnbl est. at time of K; diff to est, cts defer more to parties
o New vent: loss uncertain, lenient; Est vent: more certain, firmly
 Actuality: accurate est at time of breach; less accurate ct may deem unrsnbl
o New vent: loss uncertaint, less impt; Est vent: more certain, highly rel
o Ct discretion: Agreed > Actual maybe unrsnbl, not award or maybe both
4
UCC Remedies
BUYER REMEDIES:
SELLER REMEDIES
Seller Breach:
 Failure to conform: defective, breach of implied/express wty of quality Buyer Breach:
 Failed perfect tender: late, not deliver, too few/many  Wrongfully rejects goods: bad faith, no notice, no payment, repudiation
o Fail deliver or Buyer rejects: recover price, cover dmg, market dmg, spec perf  If no acceptance:
o Accept w/ nonconformity o Resale dmg, Market dmg, Lost Profit, K price
o plus Incidental + Consequential o plus Incidental + Consequential
 Repudiates K
Remedies for No Acceptance
Buyer Response: Resale Damages: K – resale price
 Rejection: rsnbl time/notice; Lim: seller rsnbl time cure, good faith, not trivial  3 Factors: identify goods as same, provide notice to buyer of intent to sell, good
 Acceptance: (1) inspect+not care about non-conformity; (2) fail to notify: silence faith and commlly rsnbl manner of sale
= acceptance; (3) act in manner of ownership
 Revoking Acceptance: (i) substantially impaired goods (ii) seller induced Market Damages: K – Mkt Price
acceptance (iii) notice w/i rsnbl time (iv) before subst change to goods  Limit: choose one of either Resale or Market damages

Remedies for Failed Perfect Tender
Cover Damages: (K – Replacement) + (incid+conseq)
 Good faith, not unrsnbl delay, not nec. identical – commlly rsnbl sub, self cover ok  Profits for Process of Production: Action for profits; K less Cost of Production
 Lim: suprior/signif diff goods; fail cover and rsnblty=no conseq; one of mkt/cover
Market Damages: (K – Mkt Price at time of Breach) + (incid+conseq)
 Mkt Price dep on place of tender: place of shipment or destination
 Good faith, not unrsnbl delay, not nec. identical – commlly rsnbl sub, self cover ok
 Wrt Anticip Repud: “time of breach” – learn of repudiation + commlly rsnbl time
Limit: one of mkt/cover
Lost Profits: when market damages inadeq to put seller in position as if K complete
 Lost Volume Seller: capacity, profitability, probability
Contract Price: 3 types in 2 situations
 Buyer has effectively accepted and should pay
o Goods accepted
o Goods damaged ; risk of loss passed to buyer
 Goods not rsnbly subject to resale
o Force goods onto buyer bc unable to sell with rsnbl effort

Damages for Accepted Goods: (Value Wrntd less Accepted) + (incid+ conseq) Incidental: out-of-pocket expenses incurred to deal with breach; ship, storage
 Must give seller notice in rsnbl time Consequential: as a consequence of breach  not much for seller

Specific Performance
 Money damage inadequate, unique goods, substitute K not available

Incidental: out-of-pocket expenses incurred to deal with consequences of breach

Consequential: as a consequence of breach