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7-step outline

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Governing Law Formation Defenses to Formation Terms Third Parties Performance Remedies

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Governing Law

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Common Law UCC Article 2

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Formation

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Offer Acceptance Consideration

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Offer

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Promise, undertaking, or commitment to enter into a contract Certainty and definiteness in the essential terms Communication to offeree

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Acceptance

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Manifestation of assent to the terms of the offer.

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Consideration

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Bargained-for exchange of legal detriments Promissory Estoppel - detrmental reliance

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Defenses to Formation

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Statute of Frauds Mistake or ambiguity Illegality Incapacity Unconscionable Fraud or duress

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Statute of Frauds applicability

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Marriage Year, more than service contracts. Land interests Executor Goods over $500 Surety

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Statute of Frauds requirements

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One or more writings signed by the person to be held liable reflecting the material terms of the contract. Noncompliance - results in unenforceability at the option of party to be charged Remedies - reasonable value of the services or part performance rendered or restitution of any other benefit.

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Statute of Frauds exceptions

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No writing required with: Specially manufactured goods Goods received and accepted or paid for

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Terms

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Interpretation Modification Parol Evidence

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Parol Evidence

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A final integration will not consider contemporaneous or prior extrinsic evidence to vary the terms of the agreement.

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Extrinsic Evidence Allowed

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Extrinsic evidence allowed for: Validity Interpretation Reformation Evidence that normally would be left out: not conflicting and commonly excluded items from written instrument.

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Article 2 Parol Evidence

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Consistent additional terms may be added unless: 1) There is a merger clause 2) Courts find from the circumstances that the writing was intended as a complete and exclusive statement of the terms of the agreement. Contract's terms may be explained or supplemented by: Course of dealing Usage of trade Course of performance

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Interpretation

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Battle of the Forms Gap Fillers Delivery Terms

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Battle of the Forms

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CL - Additional terms in an acceptance is a rejection and a counteroffer Article 2, 2-207 governs

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2-207

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If both parties are not merchants, additional terms are not part of the contract without the offeror's approval. If both parties are merchants: 1) If the offer limited acceptance to its terms, the contract is formed without additional terms. 2) If the additional terms materially altered the contract, the contract is formed without additional terms. 3) If the offeror objected to the new terms within a reasonable time, the contract is formed without the additional terms. 4) If not 1, not 2, and not 3, the contract is formed including the new terms.

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Gap Fillers

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Article 2 fills gaps, but the quantity term is required. Price - reasonable price at the time of delivery Place - at seller's place of business; if none, at her home. Time for shipment or delivery - a reasonable time Time for payment - time and place at which the buyer is to receive the goods

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Delivery Terms

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Shipment contract - risk of loss passes when goods are delivered to the carrier. Destination contract - risk of loss passes when goods are tendered to the buyer at the destination CIF - price includes cost, insurance, and freight in a shipment contract. FOB - Seller bears risk and expense of getting goods to this location.

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Modification

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Common Law Requires new consideration. Oral modification OK, even when contract requires written modification. UCC Reasonable modification OK. Written modification clauses enforceable. But, oral modifications may serve as a waiver when relied upon.

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Common Law Performance

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Requires substantial performance

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Article 2 Performance

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Requires perfect tender

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Seller's Article 2 Performance

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Seller must tender at a reasonable hour at his place of business, unless otherwise agreed. Seller must notify buyer of shipment in shipment contracts.

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Buyer's Article 2 Performance

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Delivery and payment are due with tender of delivery in noncarrier cases. OTW, payment is due when goods are received by the buyer. Buyer has a right to inspect before paying unless contract provides for COD.

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Performance

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Conditions Discharge of Duty Breach

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Condition defined

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1) Event or state that must occur or fail before a party has a performance duty OR 2) the same which releases a duty to perform. Discharges a liability, but is not a breach.

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Condition types

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Precedent: must occur before an absolute duty of immediate performance arises in the other party. Concurrent: conditions that can occur together, and parties are bound to perform at the same time. Subsequent: cuts off an already existing absolute duty of performance

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Excuse of condition

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Hindrance Breach Anticipatory repudiation Retraction of repudiation Inability or Unwillingness to Perform Substantial Performance Divisibility of Contract Installment Contracts Waiver or Estoppel

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Discharge of Duty

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Performance or tender of performance Occurrence of condition subsequent Illegality Impossibility, Impracticability, or Frustruation Recission Modification of Contract

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Breach

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when an absolute duty of performance has not been met and has not been discharged

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Minor Breach

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Obligee receives the substantial benefit of her bargain. Does not relieve duty of performance, but does offset.

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Material Breach

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Nonbreaching party may treat contract as at an end and has an immediate right to remedies for breach

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Perfect Tender Rule

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If goods or delivery fail to conform to the contract in any way, the buyer may reject all, accept all, or accept any commercial units and reject the rest. Acceptance cuts off right to reject: 1) indication of conforming goods to seller, 2) failure to reject in a reasonable time, 3) any act inconsistent with seller's ownership.

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Revoking Acceptance

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Goods with a defect that substantially impairs their value and either: 1) she accepted them on the reasonable belief that the defect would be cured; or 2) she accepted them because of difficulty discovering defects or because of seller's assurance that they conform. Additionally: must be within a reasonable time, and before any substantial change in the goods occurs

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Remedies

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Specific performance Reclamation from insolvent buyer Recovery from insolvent seller Expectation Consequential Incidental Avoidable Reliance Liquidated

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Specific Performance/injunction

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Look for an inadequate remedy at law or unclean hands. Specific performance not applicable to services, but injunctive relief is more appropriate. Court may have difficulty in administration of SP Laches defense may apply

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Specific Performance Essay script

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California courts are reluctant to grant specific perofmarnce for two reasons: 1) history - there is an adequate performance at law 2) Problems of judicial administration.

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Reclamation from insolvent buyer

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Buyer must have been insolvent at time of receipt Seller must demand return of goods with 10 days of receipt. (10 day rule becomes reasonable time if buyer expressed solvency.) Buyer still has goods

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Buyer's Recovery from Insolvent Seller

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Seller must become insolvent within 10 days.

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Money Damages Essay Script

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1) The various California damages rules are based on protection of the expectation interest. 2) This means we put the plaintiff in the same money position as if there was no breach.

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Money Damages

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Generally - expectation is dollar value without breach - dollar value with breach Sales of Goods - relevant facts 1) who breached 2) who has the goods 3) was there a replacement deal?

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Article 2 Seller breach damages

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buyer keeps: FMV if perfect - FMV as delivered OR cost of repair seller has goods: market price at discovery of breach - K price OR reasonable replacement price - K price

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Article 2 Buyer breach damages

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Buyer keeps the goods: for the K price Seller has the goods: K price - resale, unless seller cannot resell: seller can recover sale price and, in some situations, provable lost profits

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Volume seller lost profits

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Even if a sale can be made to a new buyer, but for the breach by the original buyer, a volume seller might have made an extra profit of goods it keeps in volume.

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Incidental damages

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Costs incurred with dealing with the breach - always recoverable.

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Consequential damages

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Either general damages or loss special to the plaintiff. Recoverable when foreseeable

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Avoidable damages

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No recovery for damages that could have been avoided without undue burden on P. Burden is on D to show.

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Liquidated damages

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Fixed in contract. Valid when difficult to forecast when K was made and where provision is a reasonable forecast.

Contracts Essay Outline

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