Overview of Ks SEVEN GENERAL ISSUES Applicable law Formation of contracts Terms of contract Performance Remedies for unexcused nonperformance

mance Excuse of nonperformance Third-party problems Armadillos from Texas play rap, eating tacos

I. Applicable Law
1) Common law: applies to (2x) a) Real Estate b) Service Ks 2) UCC: applies to SALE of GOODS (i.e. tangible, personal property) 3) Mixed Deals: a) All or nothing rule. Apply the rule to the most important part of the transaction b) Exception: (1) If the K divides payment, then apply UCC to sale of goods part and CL to the rest.

II. Formation of Contract is there a valid K?

1) Overview of formation a) Agreement? And legally enforceable? 2) Three (3x) issues in Agreement: (1) Initial Communication Offer? (2) Offer Terminated? (3) Acceptance? 1. Was the Initial Communication an Offer? (1) General Test: Manifestation of Commitment (a) Look for words or conduct that create an obligation (would reasonable person in the position of the offeree would believe that his assent creates a K?) (b) Wrong answers: intent or intended to offer this is subjective, but test is objective. (2) Specific Problems: (a) Content: (i) Missing price term in sales K 1. Common Law: Sale of real estate: a. Offer = Price and description required 2. UCC: Sale of Goods a. No price requirement (ii) Vague or ambiguous material terms not an offer under either CL or UCC 1. Magic words suggesting vagueness: Appropriate, Fair, Reasonable (appear in initial comm. offer) (iii) Requirements/Output Ks 1. K for sale of goods can state the quantity of goods to be delivered under the K in terms of the buyers requirements or sellers output a. Magic words for Output/Req Ks: All, only, exclusively, solely 2. Increase requirements: buyer may increase req so long as the increase is in line w/prior demands, and is NOT unreasonably disproportionate limitation on increase (b) Context: (i) Ads are NOT offers (ii) Except: 1. Ad may be an offer if its in the nature of reward 2. Ad may be an offer if it specifies quantity and expressly indicates who can accept a. 1 fur coat $10 first come, first served 3. Price quotation can be an offer if sent in response to an inquiry 2. After initial Communication: Was the Offer Terminated?

(1) Cannot accept a DEAD offer (Necrophilia gross dont do it) (2) 4 Methods of Termination: (a) Lapse of Time time stated or reasonable time (Qs will include 2 dates, and too much time is more than 1 month) (b) Death of a Party Prior to Acceptance: (i) General rule: Death or incapacity of either party after the offer, but before acceptance, terminates offer (ii) Except: Irrevocable offers: (Options, Firm offer rule, Reliance, Performance on a unilateral K) (c) Revocation of an Offer: by the words/conduct of the offeror (i) How: 1. Unambiguous Statement/Conduct AND awareness by offeree (need Epstein and Sharon Stone in the shower) 2. Note: Multiple Offers NOT revocation. (ii) Irrevocable Offers 4 types: 1. Option Contracts: An offer cannot be revoked if the offeror has not only made an offer but also: a. Promised not to revoke (promised to keep offer open) AND b. This promise is supported by payment or other consideration (option) 2. UCC Firm Offer Rule: offer cannot be revoked for up to 3 months if (3 elements): a. Offer to buy/sell goods; b. Signed, written promise to keep the offer open; AND c. Party is a merchant (Merchant is GENERALLY a person in business) i. Note: No Payment/Consideration is required to keep it open ii. MBE: signed written offer is not enough, must be written offer w/promise 3. Reliance: An offer cannot be revoked if there has been: (3x) a. Reliance that is b. Reasonably foreseeable; and c. Detrimental 4. Start of Performance in Unilateral K: makes an offer irrevocable for a reasonale time to complete performance a. Must be performance and not mere preparation. If unsure, go with prep.(prep has reliance remedy available) b. Unilateral K if: Offer accepted only by [performance] (d) Rejection (4 ways): Words or conduct of the offeree (i) Counteroffer 1. Kills the offer 2. Terminates and becomes new offer, but does not result in an express K, unless the counteroffer is subsequently accepted 3. Distinguish from bargaining: generally if response from B is in question (?) form, this shows intent to bargain. 4. Exception: counteroffers do not kill option K that bind revocation for a c (ii) Conditional Acceptance: terminates the offer 1. Language: accept followed by words of insistence: if, only if, provided, so long as, but, or on condition that 2. Common Law: a. Rejects and replaces the offer with the new offer which includes the new term that must be accepted (may be accepted by actions or performance). 3. UCC: a. Rejects the offer, but does not replace with new condition, if K subsequently accepted by conduct, the condition is not part of the K (unlike CL above) (iii) Additional Terms Common Law 1. Mirror Image Rule: a response to an offer that adds new term is treated like a counteroffer rather than an acceptance, therefore killing previous offer a. Does not contain words of insistence accepted provided that (iv) Additional Terms under UCC Art 2 Battle of the Forms 1. Fact patter: there is an offer to buy or sell goods and a response with additional terms

First Question: is there a K? a. A response to an offer that adds new terms, but does NOT make the new terms a condition of acceptance is generally treated as a seasonable expression for acceptance. 3. Second Question: is the addl term part of the K? a. Additional term is part of the K only if i. Both parties are merchants AND ii. Additional term is not material (fact question) AND iii. Addl term is not objected by original offeror 3. Acceptance of an Offer (1) Look at the offer for info about how the offer was accepted and who accepted (2) METHOD: (a) Offer may control the means of acceptance but this is unlikely on the bar (b) If silent: Acceptance involves 3 general fact patterns (i) Offeree starts to perform: 1. Verbal offer, no words in response, and start of performance 2. Rule: State of performance is acceptance, b/c starting to perform is considered an implied promise to perform creating a bilateral K. a. Exception: start of performance is not acceptance of unilateral K offers (completion of performance is required) but offer becomes irrevocable, but offeree may walk away. (ii) Distance and delay in communications: 4 rules 1. All communications OTHER THAN ACCEPTANCE are effective only when received 2. Acceptance is GENERALLY effective when mailed (i.e., the mailbox rule) 3. If rejection is mailed BEFORE an acceptance, neither is effective until received 4. Cannot use the mailbox rule to meet an option deadline (iii) Seller of good sends wrong goods 1. Rule: Creates an acceptance and then a breach a. By accepting the shipment, a K is formed, but there is also breach of K 2. Exception: Accommodation Exception: a. Creates a counteroffer and no breach b. Doesnt create a K when sends a wrong shipment w/a note explaining. (3) WHO CAN ACCEPT (a) Generally offer may be accepted by: (i) Person who knows about the offer at the time he accepts (ii) Who is the person to whom it was made (iii) Offers may NOT be assigned, but options may, unless K says otherwise (iv) Reward: Must know of the reward to accept the offer. 11 Reasons that agreement is not legally enforceable 1) Consideration: a) Usually not an issue in commercial transactions and UCC has reduced the significance of consideration in modification b) 3 steps (look for bargained-for legal detriment): (1) Identify the promise breaker, i.e., the person who is not doing what she promised (2) Ask whether that person asked for something in return for her promise, i.e., bargained for something (3) Look at the person who is trying to enforce the promise and ask what requested legal detriment that person sustained. c) Possible consideration issues: (1) Bargained for (a) Asked for by the promisor IN EXCHANGE for her promises (i.e. people doing stuff that they were asked to do or not?) (2) Legal Detriment: forbearance or any action taken by promise is detriment or benefit. (3) Promise as consideration (a) S promises to sell house to B, and B promises to buy = Consideration (b) Exceptions: Illusory Promise: promises to sell, unless I change my mind. (i) MBE tip: Illusory Promise and Adequate Considerations usually WRONG answers.

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(4) Adequacy consideration not relevant in K law. d) What are most likely consideration issues on Exam: (1) Past Consideration not consideration (a) Exception: expressly requested by promisor and expectation of payment by promise (2) Pre-existing K or statutory duty rule (a) CL: (i) Rule: doing what you are already legally obliged to do is NOT new consideration for a new promise to pay you more to do merely that. NEW consideration is required for K modification (ii) Exception: No new consideration needed 1. Addition to or change in performance 2. Unforeseen difficulty to serve as to excuse performance (i.e. sound not working, but promised to pay $5k if will still perform, thats enforceable) 3. Third party promise to pay (b) UCC: (i) No pre-existing legal duty rule. NEW consideration is NOT required to modify a sale of goods K. Good Faith is the test for changes to an existing sale of goods K. (3) Part payment as consideration for release (a) If debt is due and undisputed promise to pay in exchange for release of debt is NOT new consideration, and debt settlement is NOT legally enforceable (b) If debt is NOT due or is disputed, then early payment before the due date is consideration, bc early payment is a benefit. e) Consideration Substitutes: (1) A promise is legally enforceable even though there is no consideration if there is one of the following consideration substitutes: (a) A written promise to satisfy an obligation for which there is a legal defense is enforceable w/out consideration. (b) Promissory Estoppel (detrimental reliance) (i) Elements: 1. Promise 2. Reliance that is reasonable, detrimental, and foreseeable, and 3. Enforcement is necessary to avoid injustice 2) Lack of Capacity a) Who? (1) Infant under 18 (2) Mental incompetents (3) Intoxicated person, if other party has reason to know b) Consequences of incapacity (1) Right to disaffirm by person w/out capacity (2) Implied affirmation by retaining benefits after gaining capacity (ratification) (3) Quasi-K liability for necessaries exist for a person who does not have capacity but is legally obliged to pay for food, clothing, shelter. 3) Statute of Frauds (ORAL = SOF) MYLEGS marriage, term of years, land Ks, executing Ks, goods over $500, and Surety a) 4 Ks w/in SOF (means subject to rules so need WRITING or PERFORMANCE) (1) Surety: promises to ANSWER for DEBTs of another (Usually the wrong answer) (a) Not merely a promise to pay but rather a promise to pay if someone else DOES NOT. Look for a GUARANTEE) (b) Exception: MAIN PURPOSE EXCEPTION: if the main purpose of the obligation allegedly guaranteed was to BENEFIT the guarantor, then not w/in SOF. (2) Service K not capable of being performed w/in a year from time of K (more than one year) (a) Specific time period: more than one year, then SOF applies. Cannot fulfill 3 year employment K in a 1 year, regardless of termination clauses. (b) Specific time: more than a year from the date of K, then SOF applies. (ex: Do this for one day 2 yrs from now) (c) Task: SF does NOT apply b/c capability is a theoretical possibility w/unlimited resources

(d) Life: SOF does NOT apply if hired to work for the rest of life. (could die tomorrow) (3) Transfers of interest in real estate (with exception for leases of year or less) (a) Selling/option/easements are w/in SOF (b) Lease for 1yr or less is NOT! (trick question on exam) (4) Sale of goods for $500 or more b) How is the SOF satisfied: WRITING or PERFORMANCE (1) If SOF defense is asserted and established, there is no legally enforceable agreement = no K liability (2) Performance: may be satisfied by performance depending on the KIND of K. (a) Performance and transfer of Real Estate (i) Part performance satisfies the SOF in transfer of real estate. Part performance requires any 2 of 3: 1. Improvements to land 2. Payment, and 3. Possession (b) Performance and Service K (i) Full performance by either party satisfied the SOF (ii) Part performance of services Ks does NOT satisfy SOF (evidence of working 2 yrs of 3 yr K does NOT satisfy SOF) 1. But might have claim in Quasai-K (c) Part Performance and Sale of Goods K (i) Sellers Part Performance Ordinary Goods 1. Rule: Satisfies, but only to the extent of part performance 2. Delivered goods: if the lawsuit is about payment for the goods that were delivered, then delivery satisfied the SOF and cannot be defense. 3. Undelivered goods: if the lawsuit is about payment/failure to deliver undelivered goods, the SOF has not been satisfied and will be a defense. (ii) Sellers part performance Specially Manufactured Goods 1. SOF satisfied as soon as the seller makes substantial beginning, i.e. does enough work to that it is clear that she is working on a custom order. (3) Writing (a) Not every writing satisfies SOF, and SOF may be saitisfed w/out writing (performance) (b) SOF other than UCCs: (i) Content 1. K must contain ALL MATERIAL terms such as WHO and WHAT 2. If fact pattern is not explicit about signature it means that person didnt sign it. (ii) Who Signed it: 1. Defendant must sign to satisfy SOF and D cant assert it as defense. (c) Article 2 SOF: (i) Content: must indicate K for sale of goods and contain a QUANTITY term (price not required) (ii) Who signed it: 1. Generally: writing must be signed by the D to satisfy SOF req. 2. Answer the DAMN LETTER RULE: may infer evidence that a K is created by failure to respond to a writing: a. BOTH parties must be MERCHANTS, object w/in 10 days of receipt of signed writing. (4) Judicial Admission (a) If D asserted in pleading or testimony that he entered into an agreement with P, no SOF defense. (5) Estoppel (a) Ps reliance on Ds oral promise can estop the D from asserting a SOF defense. c) SOF other than SOF defense: Fact pattern: is a writing requirement as a matter of law? (1) Written proof authorization to enter into K for someone else: (a) Rule of law require that the authorization must be in writing only if the K to be signed is w/in the SOF (the authorization must be of equal dignity w/the K (2) Written proof of K modification: (a) Rule of law requires written evidence of modification when: (i) Look at the deal w/the allege change

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(ii) Determine if (allege change) deal is w/in SOF (3) K provisions requiring written modification: (a) CL: such clauses are ignored in the K and are not effective (b) UCC: such clauses are effective, unless waived. Illegality a) Illegal subject matter no enforcement b) Legal subject matter, but illegal purpose enforcement, if P did not have a reason to know of Ds illegal purpose Public Policy a) Look for exculpatory agreement that exmpts intentional or reckless conduct from liability b) Covenant not to compete w/out a reasonable need or reasonable time and place limits Misrepresentation of fact: (Misrepresentation + Reliance) a) False statement made by one person to another pre K that is relied on. Wrong doing not required (look for honestly/innocently) Nondisclosure: no duty to disclose, unless: a) fiduciary duty relationship or concealment Duress or Undue Influence a) Physical duress b) Economic duress (2 elements) (1) Bad guy (imporper threat which is usually threat to breach existing K, AND (2) Vulnerable guy no reasonable alternative Unconscionability a) Empowers court to refuse to enfoce K on 2 bases: (examiners looking for these phrases) (1) Procedural Unconscionability process by which it was created was questionable (2) Substantive Unconscionability oppressive terms Ambiguity in words of the agreement: a) No K if: (1) Parties use material term that is open to at least two reasonable interpretation (2) Each party attaches different meaning (3) Netiher party knows or has reason to know the term is OPEN to at least 2 reasonble intereptation b) Rarely the case except in the two ships Peerless case c) If one party knows of the ambiguity, then K is construed as understood by the party in the dark. Mistake of Fact Existing at the time of K a) Mutual mistake: Barren cow example: Does not negate K b) Unilateral mistake of material fact: No K if the other party had reason to know of the mistake, i.e. palpable mistake

III. Terms of K
1) Overview: a) Look for Words used by people to make K, then look for Past Deals, and then think about Warranty, Delivery and Risk of Loss if it is a sale of goods. 2) Parties Words and the Parol Evidence: a) Strategy (1) Evidence rule b/c issue is whether it comes in (2) FOR THE PURPOSE for which it is introduced b) Vocab: (1) Integration: court determined final agreement (2) Partial integration: written and final, but not complete (a) Usually wrong answer (3) Complete Integration: written and final and complete. (a) Usually wrong answer (4) Merger clause: (a) K clause such as this is the complete and final agreement (b) Its persuasive, but not conclusive (5) Parol Evidence (a) Words of party(ies) (b) Before integration, i.e. before agreement was put in written Form

(c) Oral or written 5 Parol Evidence fact patterns (1) Changing/contradicting terms: Cannot use PE to change/contradict terms (a) Post K statements are always come in (2) Mistake in integration: i.e. clerical mistake: (a) PE allows evidence for limited purpose of determining whether there was a mistake in putting the agreement in writing (3) Getting out of written deal: evidence of defense (a) Allowed to prove fraud, misrepresentation, duress (4) Resolve ambiguity (a) PE does not prevent ct from admitting to resolve ambiguities (5) Adding to the written deal: additional terms are out unless: (a) That written agreement was only a partial integration or (b) That the additional terms would ordinarily be in a separate agreement 3) Conduct and Course of Performance: a) Conduct can be a source of K terms (3 forms): (1) Course of performance - same people, same K. (2) Course of dealing same people, different but similar K (3) Custom and usage different but similar people, different but similar K. 4) UCC for terms in SALES OF GOODS K (default terms) a) Delivery obligation of Seller of Goods if Delivery by Common Carrier: (1) Shipment Ks: Seller completes its delivery obligation when it: (a) Gets the goods to a common carrier, (b) Makes reasonable arrangements for delivery, and (c) Notifies the buyer (2) Destination Ks: seller does not complete its delivery obligation until the goods arrive at destination where buyer is (3) Determining Shipment v Destination? (a) FOB (city where seller is) = Shipment (b) FOB (any other city) = Destination b) Risk of Loss (1) Arises: (a) After the K has been formed, but before the buyer receives the goods (b) The goods are damaged or destroyed (c) AND neither the buyer NOR seller is to blame (2) Consequences in risk of loss problem, risk on: (a) buyer- pay full K price for lost or damaged goods (b) seller no obligation on the buyer and possible liability for non delivery (3) Risk of loss rules (4x steps) non involve title do them in order: (a) Agreement controls (b) Breach breaching party is liable for any UNINSURED loss even though breach is unrelated to problem (c) Delivery by common carrier risk of loss shifts from S to B at the time the S completes its delivery obligations (d) Catch-all no agreement, no breach, no delivery by a carrier) (i) If SELLER is a MERCHANT (buyer doesnt matter), risk of loss shifts from merchant seller to buyer on the BUYERs receipt (physical possession) of goods; (ii) NON-MERCHANT risk of loss shifts from S when he tenders the goods (tells where goods are and how to get them) c) Warranties of Quality (1) Express: words that promise, describe or state fact, or for use sample or model (2) Implied Warranty of Merchantability (a) When any person buys from a merchant, a term is automatically added to K by operation of law that the goods are fit for the ordinary purpose for which such goods are used: (i) Triggering fact: seller is a merchant WHICH HERE MEANS IT DEAL IN GOODS OF THAT KIND (ii) Warranty: goods are fit for ordinary purpose (3) Implied Warranty of Fitness for Particular Purpose c)

(a) Triggering fcats: (i) Buyer has particular purpose (ii) Buyer is relying on seller to select suitable goods (iii) Seller has reason to know of purpose and reliance (b) Warranty: goods fit for particular purpose d) Limitation on Warranty liability (1) SOL 4 years, starts running on tender of delivery is made (2) Privity (3) Buyers examination of the goods no implied warranty to defects which would be obvious on examination (4) Disclaimer (a) Express warranties generally cannot be disclaimed (b) Implied warranties of merchantability and fitness can be disclaimed by: (i) CONSPICOUS language of disclaimer, mentioning merchantability, OR (ii) as is or with all faults (5) Limitation of remedies: limits or sets recovery for breach of warranty BUT does not eliminate warranties (a) Possible to limit remedies even for express warranties (b) General test is unconscionability (c) Prima facie unconscionable if breach of warranty on consumer goods causes personal injury IV.

Performance of Article 2 Ks (6 concepts)

1) SALE OF GOODS PERFORANCE CONCEPTS (UCC) a) Perfect Tender (1) Applies only to sale of goods (2) Goods and the delivery must conform to the K terms (3) Less than perfect tender by S generally gives the B the option of rejection of the delivered goods, so long as B acts in good faith b) Rejection of Goods (1) Note difference between rejection of offer and K (rejecting goods, K still exists) (2) If not perfect tender, B has option (a) Retain and sue for damages; or (b) Reject all or any commercial unit and sue for damages (3) Rejection is limited by Cure, Installment K, and Acceptance (4) B must take reasonable care of the rejected goods c) Cure (1) Second chance at perfect tender (a) Opportunity to Cure arises when: (i) Sellers reasonable grounds to believe it would be acceptable 1. Look for information about prior deals between that B and S (if was ok before w/non-conforming goods, S has a chance to cure) 2. Time for performance has not yet expired d) Installment Ks (1) Requires or Authorizes (a) Delivery of the goods in a separate lots (b) To be separately accepted (2) If B has right to reject an installment only where there is a SUBSTANTIAL IMPAIRMENT in that installment that cant be cured. (3) Note: difference between installment sales for multiple deliveries and buying on credit and paying monthly installments e) Acceptance of Goods (1) Once accepted, B cant reject (2) Payment w/o opportunity to inspect NOT acceptance (3) Failing to reject: rejection must be timely and failre to reject after the buyer had reasonable time to reject is acceptance (4) Retention as acceptance: effect of buyers keeping goods is implied acceptance

(a) Look for the Bs keeping the goods w/out objection: look for when buyer received the goods and when first complained to seller f) Revocation of acceptance of the Goods = same as rejection (1) Requirements (3x): (a) Nonconformity substantially impairs the value of goods (really bad/wrong), and (b) Excusable ignorance of grounds for revocation or reasonable reliance on sellers assurance of satisfaction, and (c) Revocation w/in a reasonable time after discovery of nonconformity g) Comparison of rejection of the goods and revocation of the goods Rejection 1 2 3 Timing Standard Other Requirement Early, before acceptance Generally, perfect tender 1. reasonably notify seller 2. hold the goods for seller 3. follow reasonable seller instructions 1. Goods back to seller 2. no buyer payment obligation Revocation Later, after acceptance Substantial impairment

Consequences

V. Remedies for an Unexcused Performance

1) NONNOMENTARY REMEDIES (IN REM) a) Specific performance/injunction (SP is usually the wrong answer) (1) K for sale of real estate: SP is OK (2) K for sale of UNIQUE goods: SP is OK (a) Art, antiques, custom made (3) K for services NO SP, but possible injective relief b) Sellers RECLAMATION from an insolvent buyer of goods (right of unpaid S to get his goods back) (1) Requirement (3x) (a) Buyer must have been insolvent at the time that it received the goods, and (b) S demands return of goods w/in 10 days of receipt (c) B still has goods at the time of demand 2) MONEY DAMAGES FOR BREACH OF K a) Essay Approach: your discussion of damages must have the following 3 sentences: (1) Purpose of K damages is to compensate P, not to punish D. (2) The various CA money damages rules are all based on protection of expectation (3) The goal is to put the plaintiff in the same dollar position as if there was no breach. b) Vocab: (1) EXPECTATION (2) Incidental (3) CONSEQUENTIAL (4) Avoidable (5) Certainty (6) Reliance (7) Liquidated c) Measure of damages: (1) Protection of expectation (a) Dollar value of performance w/out breach COMPRE TO value of performance with breach = damages d) Sale of Goods (UCC) (1) General K damages: put innocent party back to where they were had the K been performed (who breached and who has the goods 4 rules) (a) Seller breaches, buyer keeps goods (i) [FMV if perfect] [FMV as delivered or cost of repair] (b) Seller breaches, seller has goods (WHICHEVER IS GREATER) (i) [Market price at the time of discovery of the breach] [K price]; or (ii) [Reasonable replacement price] [K price]

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(c) Buyer breaches, buyer keeps goods (i) K price (d) Buyer breaches, seller has goods (i) [K price] [resale price] (ii) Lost profits to a lost volume seller 1. May recover damages but limited to the provable lost profit 2. Look for words REGULAR INVENTORY Additions and Limitations (1) Plus INCIDENTAL damages (a) Cost incurred in dealing w/ the breach such as costs of storing rejected goods or finding a replacement in a service K (b) ALWAYS recoverable (c) Wong answer will include FORESEEABLE INCIDENTAL DAMAGES (2) Plus foreseeable CONSEQUENTIAL (special) damages (a) IF damages arose from special circumstances and recovery of consequential damages limited to only when D had reason to KNOW of special circumstances (b) Consequential damages may be merely general damages if it is the kind of loss that any one would sustain (i) C breach K and M has to search for a replacement for nonperformance. (3) MINUS AVOIDABLE damages (a) No recovery for damages that could have been avoided w/out undue burden on P (i) Burdens of pleading and proof on D (b) May not turn down similar opportunities if first K is breached (c) May not continue to perform to run up damages (4) MINUS damages that cannot be established with reasonable certainty (a) Look for: Service K involving P engaging in new business/activity (i) Consider reliance recovery (expended money in furtherance of K) Liquidated Damages (1) K provisions re damages (often fixing amount of damages) (a) Concern is wether provision is too high a penalty (2) Test: (a) Damages were difficult to forecast at the time K was made; and (b) Provision is a reasonable forecast (3) Valid: formula or range (4) Invalid: single amount of damages almost always a penalty

VI. EXCUSE OF NONPERFORMANCE OF K

Fact pattern: non performance of K, and something happens AFTER K 1) Excuse of performance b/c of the other guys nonperformance 2) Excuse of Performance b/c the other guys saying it is NOT GOING TO PERFORM (Anticipatory Repudiation) a) Unambiguous statement or conduct indicating (1) Repudiating party WILL NOT perform, and (2) Made prior to the time that performance was due b) Time of Recovery (1) AR generally gives rise to an immediate claim for damages for breach, unless the claimant has already finished her performance, then required to wait for the K date for payment c) Retraction of AR (1) May be retracted so long as there has NOT been material change in position of party (a) Retraction = duty to perform + delay until adequate reassurance 3) Excuse b/c of INSECURITY about whether the other guys is going to perform a) Almost always for sale of goods (UCC) b) Words or conduct make it uncertain the performance will occur c) Test: (1) Reasonable grounds for insecurity (2) Written demand for adequate assurance, and (3) Commercially reasonable to stop performance

4) Excuse b/c of IMPROPER PERFORMANCE a) Article 2: Requres Perfect Tender Rule unless Installment K b) CL: Material Breach (1) General Rules: (a) Damages can be recovered for ANY breach (b) Only MATERIAL breach by ONE excuses other guy from performing (c) Materiality is a fact question (not likely on bar) (d) Substantial performance CANNOT lead to a material breach and vice versa. (2) Material breach b/c of the QUALITY of performance (a) Excuse occurs if MATERIALLY breached (b) May get damages for breach regardless whether it is material (3) Material breach b/c of QUANTITY (amount) of performance (a) Delivery of less than half IS material breach (i) UNLESS: divisible K exception, there can be a K law recovery for substantial performance of a divisible part, even though there has been a material breach of entire K 1. Look for payment in lump sum vs per performance basis 5) Excuse b/c of NONOCCURRENCE OF AN EXPRESS CONDITION a) Express condition (1) Mutually agreed upon promise modifier IN K, which LIMITS obligations (a) Look for: if, only if, provided that, so long as, subject to, in the event that, unless, when, until, and on condition that, in the K (2) Distinguish from conditional acceptance: where there is NO K. (Express condition is already in K) b) Standard for determining whether express condition has occurred/satisfied: (1) Strict compliance = SATISFACTION of Condition (a) No strict compliance, then excused for performance (i) Exception: Personal Satisfaction 1. Condition: X will pay Y, if X is satisfied with work (not illusory promise) 2. Test: whether reasonable person would be satisfied (not subjective) (b) Distinguish: Quality of Performance if quality not an express CONDITION, then not excused of using lesser quality material. c) How express condition be eliminated so that its nonoccurrence does not affect performance obligations: (1) Waiver: person who benefits from or is protected by the express condition is giving up the benefit and protection of the express condition (2) Prevention: person protected by express condition hindering or preventing occurrence of express condition d) Difference between (same law no new performance obligations): (1) Condition precedent conditions that excuse performance until and unless they occur (2) Condition subsequent occur subsequent to the start of performance and excuse performance when they occur (a) Ex: Spike Lee selling tickets, so long as Knicks are not in first place. 6) Excuse by reason of a LATER K a) Rescission (cancellation) (1) Is valid if there is performance still remaining from EACH K party b) Accord and Satisfaction (substitute performance) (1) Meaning of ACCORD: agreement to accept DIFFERENT PERFORMANCE in satisfaction of existing obligation (a) Distinguish consideration. If doing something less then select consideration as answer. If doing something different then select accord. (2) Effect of accord AND SATISFACTION: (a) If the new agreement (the accord) is performed (satisfaction), then performance of the original obligation is excused. (b) If NO performance, the other party can recover on either the original obligation OR the accord (3) Look for words: IFTHEN c) Modification (substitute agreement) (1) Accept a different agreement in satisfaction of existing obligation (2) Agreement that D will do something instead of doing something else (a) Cant recover on original agreement if modified. No IF...THEN language

d) Novation (substituted person) (1) Novation: agreement between BOTH parties to an existing K to substitute a party. Same performance, different party (2) Liability (a) Excuse the party who is substituted for or replaced from performance (3) Delegation vs Novation (a) Delegation doesnt require the agreement of BOTH parties and DOES NOT excuse. 7) Excuse of performance by reason of LATER, UNANCIPIATED EVENT a) Look for: 1) who is trying to get out; 2) what her performance is 3) whether post-K occurrence affected her ability to perform, not just the cost of her performance b) Damage or destruction of subject matter of K (1) CL: (a) Impossible to perform = excused (K for painting house, house burned down, impossible to perform; compare: hired to build house, house burned, down, not excused b/c can still build new one) (2) UCC: (a) Decide who bears the risk of loss first. (i) ROL on Buyer then buyer pays (ii) ROL on Seller buyer does not have to pay, but 1. B may get damages for nonperformance if the Goods are NOT one of a kind (cant replace Cadillac, so buyer cant recover for nonperformance.) But if goods are GRITS, then buyer can recover Expectation, since substitution is easily performed by seller. c) Death AFTER K (1) General effect of death on K obligation does not make a persons K obligation disappear (a) Exception: death of party to K who is special person excuses performance d) Subsequent law or regulation (1) Later law makes performance of K illegal excuse by impossibility (2) COMPARE: Frustration of Purpose (a) Later law makes mutually understood purpose of K illegal: (i) Both parties must understand the purpose and the time of the K.

VII.

THIRD PARTY PROBLEMS

1) Overview: 3rd-party beneficiaries, assignment of K rights, and delegation of K duties 2) A person trying to enforce a K she did not make: Third Party Beneficiary a) Identifying 3rd party beneficiary problems (1) 2 parties, 1 K, common intent to benefit a 3rd party. b) Vocab: (1) 3rd-party beneficiary not a party toK, able to enforce K others made for her benefit (Sharon Stone) (2) Promisor look for person who is making the promise that benefits the 3 rd party (Allstate) (3) Promisee look for person who obtains the promise that benefits the 3 rd party (Epstein) (4) Intended/Incidental only intended beneficiaries have K law rights. Name beneficiary = intended (5) Creditor/donee: - usually donees, but look if was creditor of the promise before K c) Dealing with efforts to Cancel or Modify (knowledge + reliance) (1) 3rd party knows and has relied on or assented as requested = vesting of 3rd party rights, and K CANNOT be modified w/out her consent UNLESS the k provides otherwise. d) Who can sue WHOM: (1) Beneficiaries can recover from Promisor (2) Promisee can recover from Promisor, BUT NOT BOTH beneficiary and promisor (3) Generally: beneficiary cannot recover from Promisee (a) UNLESS Creditor beneficiary can recover from PROMISEE BUT ONLY on a pre-existing debt. e) Defenses (1) If 3rd-party beneficiary sues the promisor, the promisor can assert any defense that he would have had if sued by the promise 3) A person trying to enforce a K she did not make: Assignment of Rights a) Assignment (1) Transfer of rights under a K

(a) K between TWO parties (b) One party LATER transfers rights under K to 3 rd party (2) CANNOT transfer an OFFER, but may transfer the K! (3) Requires 2 steps, rather than naming the 3rd party in the instrument itself b) Vocab: (1) Assignor: party to the K who later transfers rights to another (2) Assignee: NOT a party to K, able to enforce the K b/c of assignment (3) Obligor: other party in K c) Limitations: (default prohibition) (1) Prohibition: language of prohibition takes away the right to assign, but not the power to assign, which means that the assignor is liable for breach of K, but an assignee who does not know of the prohibition can still enforce assignment. (a) Ex language: rights hereunder are not assignable (2) Invalidation: language of invalidation takes away both the right and the power to assign so that there is a breach by the assignor and no rights in the assignee (a) all assignment of rights under this K are void (3) No explicit language re assignment (a) CL bars an assignment that substantially changes duties of the obligor (i) Assignment of RIGHTS of PAYMENT (NEVER a substantial change) (ii) Assignment of right to K performance OTHER than right of payment (usually is substantial change). (4) Requirement for assignment (a) While consideration is not required, and only gratuitous assignments may be revoked (5) Who can sue whom? (Rights) (a) Assignee can recover from obligor (b) Assignor for consideration cannot recover from obligor (c) Obligor has SAME defenses against assignee as it would have against assignor (d) PAYMENT by OBLIGOR to assignor is effective until obligor knows of assignment. Modification agreements are effective between obligor and assignor if the obligor did not know of the assignment. (e) Implied warranties of assignor IN AN ASSIGNMENT FOR VALUE, assignor warrants: (i) Rights assigned actually EXISTS (ii) Right assigned but is not SUBJECT TO any then existing DEFENSES by obligor (obligor is an infant when signed) (iii) Assignor will do NOTHING to impair the value of assignment (iv) DOES NOT warrant what obligor will DO AFTER assignment (f) Multiple Assignments (i) Gratuitous assignments: LAST assignee WINS (ii) Assignment for consideration: 1. FIRST assignee for consideration wins a. Exception: i. Subsequent assignee for value takes only if BOTH ii. 1) does not know of earlier assignment AND iii. 2) first obtained PAYMENT, Judgment, Novation, or Indicia of ownership simply notifying obligor is not enough! 4) Disputes arising from a persons performing a K she did not make: Delegation of Duties a) Delegation (1) Party to K transferring work under the K to 3 rd party b) Relationship of assignment and delegation (1) K creates BOTH rights and duties (a) On bar, assume either assignment or delegation but NOT BOTH (b) If party delegates and promises to pay the 3 rd party, the 3rd party cant collect from obligee, only from delegating party c) Which duties are delegable (1) Generally, K duties are delegable, and are permitted unless: (a) K prohibits delegation or prohibits assignment or

(b) personal services K that calls for VERY SPECIAL skills d) Non-performance by Delegatee (1) Delegating party ALWAYS remains liable (2) Delegatee liable only if she receives consideration from delegating party (a) If NO consideration: then delegatee is NOT liable, nor can assignor recover from assignee (b) When consideration: obligor can recover from delegatee b/c he becomes 3 rd party beneficiary.