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CONTRACT LAW BARBRI OUTLINE

7 MAJOR CONTRACTS QUESTIONS


Is there a deal? Was a deal or agreement made?
If there is a deal, how do courts enforce deals?
Assuming there is a deal, is there any reason for the court not to enforce that deal?
What is the deal exactly? What was agreed to?(ea. side has their own version of the deal)
Once we know what deal is, did anyone not do what he agreed to do?
If someone didnt do what he agreed to do, did he have an excuse?
Does anyone other than the two guys who made the deal, have legal rights b/c of the deal?
Definitions
1. Contract legally enforceable agreement
2. Express Contract verbalbased solely on words
3. implied contract based at least in part on conduct, parties acting as though they have a deal
Unilateral contracts are usually (1) rewards or contests (such as $500 for finding my lost dog Fluffy)
or (2) offer expressly requires performance
4. Quasi contract equitable remedy (tells you that it is not contract law and rules of contract law have no
application at all)
Since it is equitable remedy, and equity is about doing what is fair
If it seems unfair to apply contract law on a question, add a paragraph discussing quasi K
5. Unilateral contract contract results from offer that requires performance to accept.
6. Bilateral contract contract results from an offer that is open as to how it can be accepted.
Offeror doesnt require specific way to be accepted.
7. executory means that it has not yet been performed
What is contract law?
Case law or Common lawwhat courts say the law is
Article 2 of UCC: some contracts are governed by this2 basic questions
o When do I do article 2?
It will never say use article 2
Must be sale of goods to use this article (never services)
Goods=something that is moveable personal property (ex. can of coke)
Fact pattern: mixed deallots of deals are like this
When pay for paint and labor of painter
How do you deal with this? 2 part test
o All or nothingapply it to whole deal or not at all
o What is more important part of deal?
Is it a sale of goods or putting paint on wall more important?
Painterso use common law for whole deal
How do you determine whether it is a unilateral or bilateral agreement?
You look to the nature of the offer
If it requires a performance for acceptance, then it is a unilateral agreement
If it is open as to how it can be accepted then it is a bilateral agreement.
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QUESTION 1: Is there a deal?


Issues to consider in formation questions:
Was there ever even a deal proposed? Did we even have an offer?
Was the offer revoked/rejected or terminated?
Was the deal for the offer accepted?
Applicable Law
Looking to the applicable law is always the first step in answering a question. What law you look to depends on
the subject matter of the contract. If the contract concerns the sale of goods the contract is subject to article 2 of
the UCC. For anything other than the sale of goods, the contract is subject to common law.
Which law governs contract depends on subject matter of contract
1. U.C.C. Article 2 Sale of Goods
2. Common Law anything other than the sale of goods (land, services, etc)
Formation of Contracts
First find the agreement then look to whether it is legally enforceable.
OFFER AND ACCEPTANCE
Offercommitmenthas it been terminatedwords to offereeindirect rejectionwho accepted and how
did they accept it
Offer need manifestation of a commitment through words or conduct.
Exam key: they will give information about what offeror intended but this is a red herring b/c not looking at
intentions but manifestations. Look for the manifestations of the willingness to contract.
Commitment can be manifested through an individuals words and actions indicating a willingness to be
bound
Always include phrase manifestation of mutual assent on questions about formation.
Offeror: person who makes offer
Offeree: person to whom offer is made
offeror revokes offer
offeree rejects offer
Things to watch for
Look for content to see if is an offer
o Terms for immediate acceptance- language suggest commitment
o Fact pattern will give you what communication says
Look for missing termssee if communication seems incomplete
There is no longer requirement that communication contain all of the material terms
there can be gaps and still be manifestation of commitment
Look for missing price problemwill see this in context of communication relating to
proposed sale
Under common law price term and description of real estate are essential or there is no
manifestation of commitment
Article 2communication can be an offer even though there is a missing price term
o Also look for an ambiguous term fair reasonable appropriate- indicate no commitment
Missing v. ambiguous rule
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Missing terms: person was willing to make commitment and leave it to court to
fill in- Person wasnt insisting on that term
Ambiguous- courts will conclude it was not a commitment and no deal

1. Advertisements Advertisements are not offersthey are invitations to the shopper to make an offer. A
store sign that says Shirts $10 is not an advertisement. The sign invites the shopper to take the shirt to the
counter, offer $10, an offer that is accepted by the cashier ringing up the sale. Gives the store the right to
refuse to sell to a customer.
exceptions focus on whether ad is specific about how many ads are available and about who can
accept the ad
2. Missing Price Term Whether a contract that is missing a price term is an offer depends on whether the
UCC or common law governs the interchange
Common law not offer, must include the material term
UCC can be offer if the parties intended it to be so
3. Ambiguous Material Terms In this case the term is there, but it is ambiguous, or vague. Neither the
UCC nor CL considers this an offer. The material terms cannot be vague and still be considered an offer.
Ambiguity
Contracts must be sufficiently clear to be legally enforceable. Raffles v. Wifflehaus is the prime
example of ambiguous terms. The contract is for cotton to be shipped on the boat Peerless. The problem was
that there were 2 sailings of the ship Peerless. Each of the parties had different sailings in mind, and the court
could not establish an agreement for the parties. It was fatal ambiguity.
1. ambiguous term in contract
2. each party must have different meaning in mind
3. neither party knows or has reason to know of meaning attached by the other
If B knew that there were 2 sailings, it takes the case out of the Raffles realm. The situation is then legally
enforceable under the terms as understood by the other party.
4. Requirements Contracts Here the measure of the quantity of goods to be purchased by the buyer is
determined by the buyers needs. For example, you make a deal with a local supplier saying that Ill buy all
of my wine from youexclusivity agreement. In this case the quantity is not vague or ambiguous and the
offer is therefore valid.
If you increase your requirements under this type of agreement, it cannot be unreasonably
disproportionate. If you buy 10 bottles for the first 10 months, you cant increase your demand to
100 bottles for the last two. That is considered to be unreasonably disproportionate you have to
match what he asked for previously to what he asked for today.
o Is there a ceiling? YES, unreasonably disproportionate
o Increase must be proportionate to other demands
Contextwhat is the setting?
o Watch for the bargaining historyhistory of negotiations- that adds to argument that it is a
manifestation of commitment
o Watch for advertisements- generally ads are not offers but invitations to make an offer.
Once the offer is found, check to see if it has been terminated
Termination once an offer is terminated, its gone forever.
METHODS OF TERMINATION
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1. Lapse of Time the offer is open only so long as is specified by its terms, if not time is not included the
offer is open for a reasonable period of time
Look at when offer was made
How long a gap was there before offer was responded to?
2. Death of either party offer is terminated if not completed before either party dies
Offer dies with person a gap was there before offer was responded to
3. Revocation of offer
1) Offeror puts offer on table and changes his mind and takes it back
2) How does contract terminate? if the offeror later changes her mind and decides not to enter into deal,
whether the offer can be revoked depends on the offeree. The offer must be revoked before the offeree
accepts it. The offeree must also be aware of the revocation. Sharon Stone in the shower example.
Looking for words or conduct of offeror that was communicated to the offeree
Revocation is two player game
Essential offeree be aware of it
3) When does a revocation become effective? Its all about the timing
i.
must complete revocation before acceptance occurs
ii.
if revocation is sent through the mail, its not effective until its received
4) When it is impossible to revoke? Some offers cannot be revoked, and offeror is held to the offer
i.
Option contract If I offer to sell my caddy to you for $400 and you pay me $25 to hold the
deal open, I cannot revoke that offer. If there is consideration paid for a promise to keep an
option open it cannot be revoked.
ii.
Offer reasonably and foreseeably relied upon offer cannot be taken back. If X uses Ys bid
to bid on a contract and wins that contract, X has relied on Ys bid and can be held to the offer.
Bid=offer
Drennan Star Pavingit is irrevocable b/c reliance
Jaimes Bairdreliance does not make offer irrevocable
iii.
Part performance of an offer to enter into unilateral contract unilateral contracts require
performance for acceptance of a contract. Once a unilaterally contracted party begins starts
performance, the offeror can no longer revoke the offer. However if all the party has done is buy
paint in preparation to perform, there has been no partial performance and the offeror can revoke
the offer. Use quasi-contract law to recover for money spent on reliance of the contract.
Start of performance pursuant to offer to enter into unilateral contract
Fact pattern: this offer can only be accepted by performance=unilateral
Will never get direct rejection as a question
iv.
Firm offer rule special UCC rule only applicable if its for the sale of goods. If a merchant
puts promise to keep offer open in a signed writing, then the promise cannot be revoked. This is
only applicable in the sale of goods. There is no consideration required because we assume that
a business woman knows what she puts into writing and its implications.
Sale of goods and writing signed by a merchant that not only promises to buy or sell,
this writing must expressly promise that offer will not be revokedMUST HAVE
ALL OF THESE EXACTLY
3 month ceiling to itonly impt. when writing says it will keep it open for 6 months
o even if writing says it is irrevocable for 1 year, still only open for 3 months
4. Rejection if the offeree turns offer down, the offer is terminated.
There are three forms of indirect rejections:
1) Counteroffer offer is killed. Offer for $400 with the reply Ill only give you $200. This is a
rejection and takes the offer completely off of the table. There is a fuzzy fact line between a counter
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offer and bargaining. A bargain would consist of the following reply to the $400 offer Will you take
$200? By asking you are clearly bargaining and the offer is still there. It shows that you understand
the difference between counteroffers and bargaining.
2) Conditional acceptance I accept, if ... is a rejection.
No mutual assent
This is changing the deal so you are killing the deal
Exceptionimplied contracts
Fact pattern where words dont connect up
3) I accept, and... whether an offer is accepted with the addition of additional terms depends on whether
you are dealing with the UCC or CL
Additional terms rulecommon law rule only
I accept and is a rejection
Something new is added
I accept if/providedno express contract common law or UCC
Different from I accept andnot insisting on this term but throwing it out as proposal
o In common law, still no express contract
o Acceptance cant add anything to offermirror image rule
i.
CL Mirror image rule requires that the acceptance look just like the offer
ii.
UCC 2-207 The Battle of the Forms allows additional terms so long as they are merely added
and not insisted upon. To insist makes it a conditional acceptance, which is actually a rejection.
Most often UCC code tested
Sale of goods where communications dont match up
iii.
Hypo if offer falls under UCC 2-207 and the acceptance attaches additional terms. There is
an offer and an acceptance, but which one governs the deal? The offer says X and the
acceptance says X+Y. Which one is binding? That determination depends on whether both
people are business people, whether new terms materially alter the deal, whether the new terms
were objected. If the new terms were objected to and they did create a material difference, there
is still an acceptance and the terms that govern the deal are those in the original offer.
Did other guy agree to deal? 3rd part to question 1
Look at fact pattern and it will go in terms of two possible issues of acceptance
Look at who is accepting
How they are accepting
Acceptance once the offer has been made and theres no problem with rejection, you must then look to the
acceptance.
4 Fact patterns regarding acceptance to watch for
Mailbox rulewhere parties are contracting from distance
o Adams v. Lindsell
What has happened is the offer is made, and then in response to offer, person to whom offer was made,
starts performance
o Start of performance is acceptance is viewed as implied promise to perform so it is enough to
make deal
o Gives us manifestation of mutual assent
Where offer requires performance to acceptthis does not create a bilateral contract
Notice of acceptance2 rules to apply
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o Acceptance by promise has to be communicated to offeror


o Acceptance by performancewhether facts are such that the person would reasonably know you
have performed
Must give notice when other party wouldnt know that you have started performing
Sale of goods questionwhere facts are that buyer offers to buy goods and seller sends the wrong stuff
2 consequences
o That creates a dealsending wrong stuff is acceptance
o Can now sue for breach
o Accommodation exceptionsends wrong stuff with explanation
Doesnt create contract, simply a counteroffer

1. Who accepted the offer


1) Must be person to whom offer is made. The offer is person specific.
2) Offers are not assignable
3) Need manifestation of personal assentonly assented to sell to specific person
4) In rewards and contests, the offeree must know of the offer at the time he accepts. He must know of the
award when he catches the dog
2. How acceptance occursofferor can control how acceptance happens
1) Return promise most offers can be accepted by merely a promise
2) Start of performance only if you start performance, have you accepted the offer? You have to look at
the nature of the offer. If the offer is a unilateral one accepted only by performance, partial performance
does not constitute an acceptance. If the offeror revokes the offer after partial performance, you are
under no obligation to finish the performance. In the case of unilateral contracts, full performance is
required for acceptance. However, once you begin performance the offer becomes irrevocable. If the
offer doesnt say anything about the method of acceptance, a bilateral contract, then starting
performance is an acceptance and creates the contract. If the offer is made, the work is started, but is not
completed, look to the nature of the offer to determine whether offer had been accepted.
i.
Uni start, irrevocable, can walk away, not actual acceptance, can only be accepted by
performance
ii.
Bi start is acceptance, duty to complete, can be accepted in any way
Presumption is it is bilateral
Unless expressly required performance, it is bilateral
Unilateral/bilateral not used today
3. Mailbox rule only applies to acceptance. Where reasonable to respond to offer by mail, fax, or FedEx and
response is so done, the acceptance dates from the time the acceptance is sent, the time placed in mailbox.
This concept is usually tested with a revocation of the offer.
Example I offer to sell you my Caddy for $400 via mail. On Tuesday I change my mind and mail you
another letter revoking the offer. The letter of revocation doesnt arrive until Friday. (The revocation is
only good once it is received, unlike the acceptance that is good once it enters the mailbox.) If you mail a
letter of acceptance on Wednesday, when acceptance is good when posted, what happens when you receive
the revocation? The offer was not terminated so long as the right person accepted it. You dont have a
contract, but it is legally enforceable.
QUESTION 2how do courts enforce deals?
Specific performancecourt will order person to do what person agreed to do
This is equitable remedymust say this
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Only applied where money damages are inadequate


Real estate deals fall under this category
Sale of goods only when dealing with unique goods (art, antique or custom made)
Never do it in services or employment contracts
Negative specific performancewhere someone has agreed to work with you and breached the contract
o Cant force them to work for you
o Can get negative specific performance by preventing them from working for competitors

Money damagesmost exam questions


Punitive damagesnever for breach of contract
Liquidated damagesthis is phrase that describes contract provision that tries to fix or set the way of
fixing damages
o General rule is that liquidated damages are recognizedvalid way of fixing damages
o Exceptionparties cannot by agreement set out an amount of damages that would be penalty
o Issue will always be is this liquidated damages clause some kind of disguise for penalty
Expectation damagesgeneral standard for damages
o Trying to make the world same as it would have been had contract been performed
o Judicial effort
o 3 steps
ask yourself, what would now have if the contract had been performed?
What does actually have?
What does it take to get her from 2 to 1 (from what actually have to what supposed to
have)?
o Hawkins v. Mcgeedoctor promised perfect hand
What is value of perfect hand? What is value of gross hand received?
o 3 limitations on expectation damages
rule with respect to avoidable damagesthey are not recoverable
2 different fact patterns that raise avoidable damages
o fact pattern 1: an agreement followed by a breach, followed by continuing
performance by non breaching party
must mitigate damages
watch for following two things
was there clear breach? or was it ambiguous?
Is this a situation in which it can be fairly argued that
continuing to perform decreases the damages rather than
increases them?
o fact pattern 2: employment contract
argument that couldve gotten comparable job
judgment call whether comparable or not
Shirley MacClaine case
Not taking comparable job to reduce damages
Rule of consequential damages
Rule is that they are recoverable only if foreseeable (in contemplation) by both
parties at time of contract
Hadley v. Baxendale: mill in small village where mill breaks
o Contract to transport milling machinery
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o Transporting company took far too long and they agree they breached the
deal
o Mill had to be closed b/c of them taking so long
o Not reasonably foreseeable by both parties here
Consequential damages are where is saying b/c you breached contract with me,
something else bad happenedspecial damages which dont arise in every
situation
Economic waste
Peevinghouse and Groves v. John Wunder
o contracts involving work done on land
o unrestored land has same market value as restored land
o assume that deal was that land will be completely restored and appraisers
say that if it was completely restored it will be worth $100,000--if not
restored, only worth $80,000
o contract is breached and land is not restored
o will argue that it will cost $75,000 to restore my land now

QUESTION 3any reason not to enforce the deal?


WHO MADE DEAL?
did have capacity? Does he have legal right to disaffirm
Capacity
Agreement is not enforceable if party lacks capacity
o Person under age of majority
o Intoxication
o Mental incompetence
Must mention disaffirm in this type of question
o Ability to get out of agreements that he has made
o With infancy, only requirement is age
2 exam exceptions to capacity rule
implied affirmationenter into agreement when 17 years old
o that person continues to retain benefits of agreement
o by continuing to retain benefits of contract after gaining capacity, just like
you made a new deal
necessaries
o most common test question
o food, clothing, shelter, health care
o situation where 17 year old rents apartment
o even though lacks capacity, if necessary, legally obligated to pay
o not contract obligation thoughquasi K obligation
o not agreed to pay agreed upon amount but fair and appropriate amount
2.2

Capacity
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Each of the agreeing parties must have capacity. The following group of persons are not held capable of being
held to contracts:
1.
2.
3.

Infants (under 18)


one fact rule
Mental incompetents
one fact rule
Intoxicated
two fact rule
1. intoxication
2. significance of persons need to know of it
There is a specific rule for necessaries. We want everyone to be able to get what they need to survive, so
we do require those persons lacking competence to pay for necessaries. The agreement to provide an
infant, mental incompetent, drunk with a necessary is not a contract (they do not have the capacity to
contract) but a quasi-contract. The only thing that can be recovered from this group of individuals is the
value of the performance to that person and not necessarily the contract price. Which person? The
contractor or the incompetent?

HOW WAS DEAL MADE? look for following


Duressnot just physical duress but economic duress too
o Looking for 2 things in economic duress
Improper threat by did person who is trying to enforce deal do something improper
is he left with any reasonable alternative?
Improper threat standard
o Watch for 2 fact patterns
Fact pattern #1: involving changing the dealmodification in contracts
Look at litigation settlement where settled for less than she had previously
acknowledged that she would
Undue influence
o Unfair threat not impropermilder standard for
o Look at tougher standardmust be under domination of
o Must talk about duress and undue influence
o Looking for prob with how deal was done
o Look at and see if he was under the domination of
o Looking at a weaker
o Culpability is harder on in duress
Misrepresentation
o When only reason deal was made was b/c of misrepresentation
o Looking that I understand contract law concept of misrep and tort law concept
Tortlooking for negligence or intent
Contractdont need to show intentional or careless
Must show misrep, that it was material and that it was relied on
Mistake
o Guys who made deal didnt understand surrounding facts
o Not language of deal but surrounding facts
o Sherwood v. Walker
Rose the cow who both owner and buyer thought was barren
Where there is mutual mistake, about a basic material fact then deal is not enforceable
To trigger this rule, need mistake that is basic and material
If mistake about what something is (the nature of what it is) then this qualifies
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If mistake about what it is worth, that is never material!!


Never ground for not enforcing deal

Mistakes of Fact
Sherwood v. Walker is a prime example of a mutual mistake of fact. The case involved the sale of a cow
believed to be barren, but wound up being fertile and with calf. The court determined that there was no
contract, because the contract was for a barren cow that did not exist. When the parties make a mistake about a
material fact, there is no contract.
Its not enough just to have a mutual mistake. There must be a mutual mistake of material fact. Value is
not considered a material fact.
Example Im selling you a painting that we both believe to be an authentic Warhol. If it turns out that it is not,
that is a material fact that would invalidate the contract. If I am selling you a Warhol that we believe is worth
$10K but winds up only being worth $1K, that is a question of value and is not considered a material fact.
Mutual Mistake the contract can be rescinded
Unilateral Mistake is not a basis or defense for contract formation
Exception if it is an obvious mistake where the other side knows or has reason to know of the others
mistake, they cannot take advantage of them.
Things to Look for
Offer, manifestation of commitment
Revocation know how offers are revoked
***Unconscionability
always decided by judge but fact driven
Need to know where it comes from
o UCC 2-302: Williams v. Walker Thomassince that case it is common law too
o Now ucc and common/case law
What the 2 issues are that we need to discuss
o How the deal was made?
procedural unconscionability
whether terms were hidden or clearly expressed
get into bargaining laws
flaws in bargaining processdisparity of bargaining power or surprise in terms
substantive unconscionability
oppressive terms
problems with the terms themselves
Unconscionability
This concept was introduced with the UCC, but now it is generally included in all contracts, including
those covered by common law.
Major Points
1. Court can refuse all or part of agreement because the terms are oppressive or presented in a way that they
unfairly surprised the other party
2. Whether terms are oppressive is tested as of the time the contract was entered into. This is important in
long-term contracts. What was reasonable 20 years ago may not be reasonable today (option to buy)
3. Issues of unconscionability always go to the judge. They are questions of law.
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CONSIDERATION
In order for a contract to be valid, there must be consideration or consideration substitute.
Legal Detriment the promisee must show that he suffered some bargained for legal detriment. Detriment
entails doing something, promising something, promising to forbear or refraining from doing something there is
a legal right to do.
If you come by my house I will give you my Caddy. If I am trying to get you to come over to my house as
my objective, and nothing else worked (such as listen to music, come over for dinner, drinks), then my giving
you my Caddy is a bargained for detriment. If I just want to give the car away, and you just happened to be
walking by at the time I wanted to do so, thats a benevolent gift that is not enforceable.
If you stop listening to Barry Manilow Ill pay you $100. That is a bargained for detriment because you have
a legal right to listen to Barry Manilow, and if you give up that right then there is legal detriment. Hamer v.
Sidway
4 step approach to consideration
1. what is promise in question?
o Promise that is in dispute is one to focus on
2. Identify promisor and promisee
o Promisor who made the promise
o Promisee
3. What was the promisor asking for in exchange for the promise? What bargaining for in exchange?
o Concept of consideration is a concept of exchange
o Will be asking for 1 of 4 things in exchange
Performanceto wash car for example
Promise to perform
ForbearanceWilly my boy

o Person who made promise must be asking for something in return


o Willie my boyif bargaining for return promise and person does not perform then no
consideration
4. Is there some new benefit or detriment?
o Thing she was bargaining for, was it benefit to promisor and detriment to promisee?
o Need benefit to promisor and detriment to promisee
o 3 situations where issue of detriment needs to be discussed in answering question
past consideration
cant bargain for anything already done
must have bargain for new benefit and detriment
There is no such thing as past consideration. Past consideration is no
consideration at all. (Generally) If you are grateful for someone saving your life
and you promise to pay them $100, this is not a legally enforceable promise.
There is no consideration for the promise. You cannot bargain for something that
you have already done. An agreement is not the same thing as a contract. Things
must happen before an agreement
Pre-existing legal duty
Doing something you are already legally obligated to do is not consideration for
promise to pay you more money to do it
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There is no legal detriment in doing something that you are already obligated to
do. There is no PELDR in the UCC.
Example When sports stars renegotiate their contracts, there is usually a
different term of years in the new contract. If there were 3 years left in the
original contract, the renegotiated contract would be for 4 years. Otherwise, the
contract would be subject to the pre-existing legal duty rule.
Amount of consideration is not discussedpeppercorns will suffice
Part payment on debt
Question is usually obtuse as to what the problem is
Promise in question will often be the creditor promising to release the rest of the
claim
Part payment of a debt that is due and undisputed, is not consideration for a
release
Since you have legal obligation already for the whole amount, it is no new
detriment to me to pay smaller amount

CONSIDERATION SUBSTITUTES3 of them


Promissory Estoppel (#1)
6 step approach
1. what is the promise in question
2. label promisor and promisee
3. what did promisee do after promise was made? what was reliance?
4. was this thing, action or inaction, that promisee did, was it induced or caused by, did it happen b/c of
promise?
Tells you whether you are doing consideration or promissory estoppel
No one has asked promisee to do what she is doingshe is doing b/c of the promise
Ex. I hold the mortgage on your house. I promise I will not foreclose your mortgage for 5 years.
(promise in question)
a. I try to foreclose anyway. But after you have painted house. There is no consideration
for my promise, but under promissory estoppel it may be.
b. Is it legally enforceable?
i. I wasnt asking for anything, simply making promise not to foreclose
c. In Willy, if uncle just promised money for being a good person and Willy chose to refrain
from smokingthat wasnt asked for
After promise, promisee does something that was caused by the promise but not asked for (like
refraining from smoke
5. Should guy who made promise anticipated this action? was it reasonably foreseeable?
Should mortgage holder have anticipated that mortgagee would paint house?
6. Would it be unjust not to enforce this promise?
Promissory estoppel
1) Four elements of PE
1. promise
2. reasonably relied on to the actors detriment
3. only way to avoid injustice
MORAL OBLIGATION (#2)

may make a promise legally enforceable


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situation in which worker injures himself saving his employers life and employer promises to
pay employee
no consideration for modifications

Modification of Contract does a modification of a contract have to be in writing? You have to look to the
contract as modified. If after you made the contract, it still falls within the SOF the modification must be in
writing. If the contract no longer falls within the SOF, the modification does not have to be in writing.
Example Enter into lease for 2 years, it has to be in writing. If the amount paid in rent changes, the
modification must be reflected in the writing. If you change the length of the lease to just 1 year, then
the modification does not have to be reflected in the lease. Why would you not put it in writing, when
you really trust the person?
UCC 89enforceable modification contracts made in good faith even if no consideration
Statute of Frauds (#3)
certain agreements have important subject matter or susceptible to fraudulent claims
within the statute of frauds
o need to use this phrase
o above phrase only means statute of frauds applies
1. Which contracts fall within the SOF?
The SOF is concerned with contracts that are so important or so susceptible to fraud that we need special
proof of their existence.
1) Personal services contracts not capable of being performed in 1 year
a. Contract to cut down all trees on your land. It is capable of being done in one year regardless of
size with enough men and saws.
b. If I hire you to work for me for the rest of your life, this too could only last for one year. You
could die within the year.
c. If I hire you to work for me for 2 years SOF applies. Granted, you could still die tomorrow,
but then you would not have completed performance.
d. If I hire you to perform at my wedding on July 1, 2002, the contract cannot be performed within
one year and is subject to SOF.
1. full performance by either party satisfies the SOF, it provides needed proof that this was what the
agreement was
2. part performance does not satisfy SOF, but you can be quick to add quasi-contract claims
2) Transfers of interest in real estate If the interest in real estate is for one year or less, the contract
does not fall within the SOF. For example a 12-month lease would not fall under the SOF, but a lease
for 13-months would.
Regardless of dollar amount
Key is that it has to be real estate interest that has a term of duration of more than a year
B orally agrees to buy Blackacre from S. Part performance can satisfy the SOF in real estate
dealings if two or more of the following occur:
a. partial payment by the buyer
b. possession by the buyer
c. improvements made by the buyer
3) Sale of goods of $500 or more (UCC 2-201)
Article 2 applies regardless of if you are a merchant and dollar amount does not apply
Specially manufactured goods for goods that are custom made the start of performance satisfies the
SOF
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Ordinary goods partial performance of a contract for the sale of goods satisfies the SOF, but
only to the extent of partial performance. Example you contract to sell me 1000 widgets
for $1000. You deliver 400 widgets. You can recover for the 400 widgets because you
partially performed. But the deal was for 1000 widgets, what about the other 600? I cannot
recover those, but I must pay for the 400 delivered. (what if there was reliance on the entire
1000 being delivered? If you dont have them all its not worth having any, is there anything
that can be done in that instance?)

2. How do you satisfy the SOF?


Full performance is a way of satisfying that there was an agreement and you followed through with its
terms

Look at what question tells you about what writing says


Not enough that there is a writingthere are requirements for writing
In order for writing to satisfy statute of frauds, all material terms must be in writing (not for sale of
goods b/c that is UCC)
o From the writing alone you can tell

Who the contracting parties are

What did each agree to do

If sale of goods, all the writing must say is quantity


Doesnt have to name parties
o Look at who signed the writing unless it is sale of goods question which would be UCC
In order to satisfy statute of frauds it mustve been signed by if common law
UCC special rule for sale of goods of $500 or more there is situation under 2-201 in which all that is
needed is signing by
This would happen when both are merchants and received notice of the contract and never
answered the letter
If dont answer the letter, assumed that you are on board with deal
o Situations where performance can satisfy statute of frauds
Ignore for exam
What type of writing does it need to be?
What type of writing depends on the type of contract in consideration.
1. Common Law
1. material terms
2. signed by person against whom you are trying to enforce agreement
All material terms must be included in the writing. Your offer on November 9, 1999 is accepted is not an
adequate writing. There is no indication of who they are and what they are intending to do. It is important to
look at who signed the writing, because only those who signed their name to the document can be held to what
it says. Example A contract for K&S and Marsha Clark for a 3-year term at $400,000 a year exists. This
contract was signed by K&S, but not by Marsha Clark. Marsha can sue K&S (who did sign the contract) on the
contract even though she did not sign her name to it. K&S, on the other hand, cannot sue Marsha on the contract
because she did not sign her name to the terms. She may have agreed to the terms, but its not binding and she
has an SOF claim.
2. UCC
1. Quantity term
2. Signed
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Unlike the common law requirement for all material terms, under the UCC a valid writing only needs
quantity term to complete, the UCC will fill in the rest.
There is a special rule that applies if both parties are merchants. If one of the parties sends a letter to the
other claiming that the other has entered into a contract, the notified party has 10 days to respond or else the
contract becomes legally binding.
PAROL EVIDENCE RULE
Impact of a written agreementsuperiority of written agreement
Impact a writing has on earlier agreements
o Even if earlier agreements are in writing
Parol evidence: evidence of some agreement made prior to this writing
o Does not have to be oral
Integrated agreement: it is written, intended by parties to be their last word
o Written and final word
Complete integration: it is a writing that is final and complete
Partial integration: it is written, final as to what it covers but it may not be the whole deal
Merger clause: shorthand way of describing a contract provision that says this is the complete deal
o To determine if complete or partial
Parol Evidence Rule
There is a contract, but what are the terms? Rule of contract law about what the terms of the contract are. Four
issues to know: what the rule is, what facts trigger the rule, possible issues, how the rules are different from
statute of frauds. Often the two are confused and tested together.
1. Parol evidence rule when there is a WRITTEN contract that is intended by the parties to be their final
agreement, then you CANNOT use earlier agreements to change the terms of that written contract.
2. What triggers the rule?
a. There MUST be a WRITTEN CONTRACT (if there is nothing in writing you never get to the parol
evidence rule). Effect the written contract has, the importance of the terms included.
b. It MUST be the contract that the parties intended to be the final agreement. (Integrated agreement
writing intended to be the final agreement)
c. There MUST have been some earlier agreement, oral or written. Effect of agreement has on earlier
agreements, the effect is that you cannot use the previous agreements to change the terms.
3. Possible issues
a. Does the parol evidence rule apply (Was it an integrated agreement? This is a question of law for the
judge.)
b. Was there a merger clause? a contract provision stating that this is our final agreement.
c. Is there an applicable exception to the parol evidence rule?
1) You can always introduce evidence to establish a defense to the existence of the contract. (i.e. argue
fraud, duress)
2) You can introduce the earlier agreement to show a mistake in reducing the agreement to this final
writing. (i.e. evidence through partial writings, oral conversations)
3) The earlier agreement doesnt change the terms of the written agreement, but it adds terms to the
written agreement. Was the writing intended by the parties to be their complete and final agreement?
(was it partial integration?) ARE NOT TRYING TO CHANGE THE WRITING. It is at the judges
discretion as to whether the contract is integrated or partially integrated. Did the parties mean for the
writing to be their final and complete agreement?
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4. How different from the Statute of Fraud?


The SOF is brought up when you are deciding whether you have a legally enforceable agreement. Triggered by
the phrase there was an ORAL agreement. For Parol Evidence, you are past that stage and you are considering
the terms of the contract. There must be a WRITTEN contract.
3 basic points
1) where you have an integrated agreement, parol evidence can never contradict it
2) What if parol evidence doesnt contradict the integrated agreement but simply adds terms to it?
o When will the court consider parol evidence here?
o Ques. for court--Need to find out if this is a complete integration?
3) even if it is a complete integration, parol evidence can be used to explain ambiguous terms
parol evidence rule: cant contradict, can supplement and can explain
CONTRACT INTERPRETATION
what does the deal mean?
course of performance
all about what these people have previously done under this very duty
persuasive form of extrinsic evidence as to what the deal means
same people, same deal
course of dealings
not as persuasive
what these very people have done under earlier similar deals
same people, similar deal
custom and usage
what different people have done under different but similar deals
relevant and some evidence but not as persuasive as first two
GAP FILLERS
what if deal is more than what party has said?
Fact pattern governed by common law
Implied duty of good faith
Wood v. Lucy Lady Duff Gordon
UCC it is sale of goods question you are encountering
UCC is great to fill gap
o Implied obligation of good faithgood faith is made part of performance of any sale of goods
contract
Sale of goodsalways do article 2
Firm offer rule
o Implied warranty of merchantability
Situation in which a person who regularly sells goods of that kind, sells something and it
turns out to be defective
Ex. anytime jewelry store sells jewelry, even though no discussion of quality, you have to
assume it is ok
Seller must be in business of selling goods of that kind, then law imposes obligation on
that seller
Adds a term to the contractthe goods must be okaymust be fit for ordinary purposes
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QUESTION 5DID SOMEONE NOT DO WHAT HE AGREED TO DO?


Yes obviously
QUESTION 6DOES THE PARTY HAVE AN EXCUSE FOR NOT DOING WHAT THEY AGREED
TO DO?
Excuses for not doing what you agreed to do
1) situation in which there is an unmet condition of performance
Performance was conditional and one condition was unmet
Ex. B contracts to build building for Othere are progress payments
o Payment of progress payments is conditioned on an architects certificate
o If an architect doesnt approve a month of work, dont have to make the payment b/c you are
excused
o Ok not to perform b/c condition not met
Ex. will buy house if appraised at 100,000 but it was only appraised at 90,000no need to buy
Must look for express condition in fact patterns
o Look for words if provided that so long as
o Anything short of the phrase on condition that you are going to add statement to answer, if
there is any doubt about whether the contract language creates an express condition, that the
preferred interpretation is no condition
If you determine that there is language of condition, the general test for conditions is conditions must be
strictly complied with
o If the house is appraised at only $90,000
o Jacobs & Young v. Kent
Owner wanted Reading pipe but builder used a different kind of pipe
Court said this was not language of express condition
Homeowner did not say I will only pay you if you use reading pipe
Different result if language was an express condition
o Courts try to conclude that there isnt a condition
If there is any way to conclude that there is not an express condition, that is way court will go
2) Breach by the other party as an excuse for non performance
I dont have to perform b/c other guy didnt do what he was supposed to do
Remember to look to see what law to apply
Article 2 differs most from common law here
o Article 2 has perfect tender standard
Anytime the seller of goods is less than perfect, not exactly what buyer wants, buyer is
excused from performing b/c seller did not do perfect tender
General standard for sale of goods is perfect tender
That standard is subject to 2 big exceptions
o 1. cure: in certain limited situations, b/c perfect tender standard is so high and demanding, give
seller second chance
watch for situation in which the seller sends the wrong stuff early!!
Must give delivery deadline in this fact situation
If seller can still get right stuff there by deadline, then no problem
o 2. installment sale contract: where parties in their agreement have agreed that there will be
deliveries in several separate installments
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if agreement provides for these installments, a problem with one installment, so long as
not substantial problem, will not excuse payment
it can be adjusted in future installments

if common law contract, not a sale of goods and one guy is arguing that one guy breached so dont have to
perform, must do a material breach rule (major screw up rule)
when will one parties non performance excuse the other?
o Ex. H hires P to paint his housedeal is that house must be painted in two coats with Sherwin
Williams paint
This is common law contract
Turns out that painter you hire is big fan of Price
So he paints your house purple
Dont have to pay b/c material breach
What if painter buys different brand of paint instead by accident?
It is a breach but still have to pay b/c not a major screw up or material breach
2 exceptions to material breach rule
o language of condition exceptionif contract said I will pay you 1000 for painting my house
white on the condition that you use Sherwin Williams paint
this requires strict compliance b/c condition
o divisible contract exception
ex. H has huge house 20 roomsH hires P painter to paint whole house for 4000P
only paints 3 of the 20 rooms
is this material breach? YES
is H excused from paying? YES
if unfair, go to quasi K (equity)
ex. H hires P to paint 20 different apartments for 200 each
this is divisible
if painter paints 3 of the apartments, law would say this is divisible so you did
perform with respect to the 3 apartments
3)anticipatory repudiation
o I tell you before you finish that Im not going to pay you
o Excuse for stopping work
o Excuse of non performancegives right to stop performance and sue immediately if told youre not
going to be paid
4)

later agreement2 forms


novation:
o both of the guys who made first deal agree that another person can perform
o other person is a no show
o initial guys performance is excused by later agreement of ally mcbeal doing it
accord and satisfaction:
o change in what is going to get done
o agreement to clean house instead of paying money (that is the accordagreement to do
something different than first agreed to do)
o by actually cleaning house, that is satisfaction
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o and in order to have this excuse, must have both accord AND satisfaction so that if I
dont actually clean house, can still sue me on original promise to pay money
IMPOSSIBILITY, FRUSTRATION OF PURPOSE, IMPRACTICABILITY
Another excuse for non performance
easy facts to watch for are time sequence
deal was made and later, after the deal something happened
what happened was unexpected (unless it is totally unexpected there is no excuse)
harder facts to watch for
whether either party had assumed the risk in some way
did it make the performance impossible?
o Easy case: Taylor v. Caldwell: concert hall burning down
o This is post contract occurrence, unforeseeable, and so it was impossible
o This is destruction of subject matter of the contract
o Variations are often on exams
Homeowner contracts to build housewhen house is 90% complete it burns down
Neither party assumed risk
Relationship between unforeseen occurrence and performance
Not impossible to rebuild house
Is guy excused from performing? NO
May be excused from being late but still must build house
Not impossible nor impractical
Rule of thumbif all that happens is that there is a later unforeseen occurrence, that makes performance more
expensive, the tough luck rule, it is not impossibility or impracticability
Some situations in which even if it is not impossible that the burden may be so great that it will be excused
usually judgment call
Impracticability
Frustration of purpose is similar and different from impossibility
Krell v. Henry: guy who rented a flat to watch the coronation parade
o Parade gets canceled and he wants out of the deal b/c his whole reason for renting the flat was to
see the parade so his purpose has been frustrated
o He can still use flat though
o Where both guys know of the purpose of the deal at the time the deal is made and there is
something that happens after the deal, it doesnt affect ability to perform, it affects reason of
performance
o Non performance will be excused
Impossibility is in UCC
No UCC provision for frustration of purpose
o May apply to sale of goods

Sometimes people who were not parties to contract have rights under the contract
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3rd party beneficiaries


Contract between two people and both intend for a third party to benefit from the contract
Life Insurance contractinsured bought the contract, insuror is company and someone else will benefit
Where contract was made with intent to benefit you, you can sue to enforce it
Not purely insurance law
Intended third party beneficiary
3rd party beneficiary: didnt make contract but intended to be benefited
promisor: guy whose promise goes to 3rd party beneficiary
Guy whos promise goes to the 3rd party bene
Insurance company
promisee: guy who takes out insurance policy
creditor beneficiary or donee beneficiary
rule of thumbif in doubt, call it donee
only time creditor beneficiary is when third party was previous a creditor of promisee
o ex. I owe Heidi 1000I say Ill name her in life insurance policy insteadshe is creditor
beneficiary
o donee beneficiary is if I felt sorry for Heidi and said I would name her in policy
3rd party bene can always sue the promisor!!
Rights of third party do not depend on provision of consideration or notthey are simply the intended
beneficiary
Promisor liable to 3rd party beneficiary
If 3rd party bene was a creditor bene, he can also sue promisee on original debt
DELEGATION
You start with contract between 2 peoplelater one of them gets someone else to do the work
what are consequences of a delegation?
o what if third person doesnt do work, can still sue person who initially shouldve done the work
b/c not mutually agreed upon substitutiononly delegation
o delegations do not excusedelegating party remains liable
limitations on delegationsome duties are not delgable
if contract says you cant delegate
or, subject matter of contractsome duties require special skills
o cant delegate special skillsSalvador Dali cannot delegate to me to paint picture he was
supposed to
most duties are delegable
ex. H hires P to paint his house
contract says nothing about delgation
P gets X to do work instead
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If X doesnt do work, H can still sue P


X does the workwhat result?
Issue of the question is is the duty delegable? YES

ASSIGNMENTS
Ex. Batman makes contract with Gotham to provide security services
o Later, Batman comes to Robin, and tells Robin he can collect the money from the contract
To make that a third party beneficiary
How do you tell when he wants you to talk about TP bene or assignment
3rd party, all 3 people are involved in contract from beginningintent to benefit from the beginning
if Robin was brought in from the beginning and told Gotham to pay Robin, then 3rd party bene
assignor would be Batmanmakes contract and later assigns his rights to someone else
assignee is Robindidnt make contract but can enforce it
obligorGotham
effect of assignmentassignee can sue obligorif Batman does work, Robin can come in and sue Gotham for
payment
common law limitation on making of assignments
cannot make an assignment that substantially changes the duties of the obligor
ex. assume Batman makes contract with Gotham to provide security services and assigns right of
payment to Robin
o no prob b/c havent changed duties of Gotham (the obligor)
o just as easy to pay Robin
o assignment of a right to payment is never a problemnever substantially changes duties
ex. Batman makes contract with Gotham to provide security services, Metropolis wants Batman to
defend their city so Gotham gives Batman to them
o Batman=obligor
o Gotham=assignor
o Metropolis=assignee
Here we have changed Batmans dutieshe was supposed to protect Gotham, not Metropolis
Assignments get combined with delegation on exams. In real life, assignments and delegations get
combined, especially in the sale of a business. Often referred to in total as assignment.
PRIOR OUTLINE NOTES
Sale of Goods can effect the terms of the contract
2-207 Battle of the forms. Mismatching offer and acceptance. Each business has its own form and they
arent all identical. Which sheet of paper controls?
1. Doesnt have to be the mirror image, it can be a seasonable expression of acceptance
2. Everything in the offer is in the contract
3. In the acceptance form different forms that contradict the original terms are kicked out. They are objected
to.
4. In the acceptance form (only if both parties are merchants), the new terms are accepted UNLESS they are
objected to or if it is a material change. The additional terms do make it into the contract.
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5. In an acceptance form and both parties ARE NOT both merchants, the new terms are proposals, it is added
only if it is separately agreed to by the other party. If the new terms are insisted upon, its a conditional
acceptance and there is no acceptance.
6. Article 2 is a source of terms.
Warranties 21. Express warranty words of the party that describe the goods, state facts, or make promises with respect to
the goods being sold. (distinguish from puffing (sales call) general, opinion i.e. unbelievable price, high
quality structure, as opposed to a representation of fact - warranty specific, all steel structure)
2. Implied warranty of merchantability
a. when you buy something from someone in the business world, part of the deal is that it is merchantable
for ordinary purposes. Go to jewelry store for gold chain, put it on and head falls off, you can sue for
breach. Add a term to the contract, nothing bad will happen to you because you wear it.
b. If you buy something from someone that is in the business and nothing is said about the quality, you can
sue for breach of contract if it is defective.
3. Implied warranty for fitness for a particular purpose
a. A buyer that has a particular purpose and is relying on the seller to provide that good and the seller
knows of the buyers need and reliance on the sellers expertise. Test will have to tell you why the buyer
is buying the good and that the seller is AWARE. Go to the shoe store because you need mountain
climbing boots, but shoe sales man sells you Converse tennis shoes. Adds term, I know what you want,
I know what you need, here it is.
I.

Performance Obligation
A. Makes certain that the terms have been complied with. It turns on the terms of the contract.
B. Conditions
1. Modifies the obligation to perform (i.e. I will buy your house if it appraised at $100,000). That
is beyond the parties control
2. An express condition must be strictly complied with. (i.e. if $95,000 you are not legally
obligated to buy)
3. I will pay if I am satisfied (requires the approval of one of the contracting parties
a. It is not illusory, it is legally enforceable
b. If the subject matter of the contract is such that it involves personal taste and individual
judgment, then it is read literally. (if the person is not satisfied, they dont have to pay). For
example, if I contract a person to paint my portrait, satisfaction is based on my subjective
satisfaction.
c. If it a more ordinary contract (i.e. paint house), then even though the contract language says
I it is read as if a reasonable person would be satisfied. Objective standard.
C. Seller of Goods Performance Obligations - UCC
1. There must be a perfect tender. The seller is obligated to deliver exactly what the terms call for.
(Contract for 100 widgets, 99 is a breach. This only applies in article 2)
2. Rejection of the goods if the seller does not make a perfect tender, the buyer has the option to
reject the goods.
a. there is a difference between a rejection of an offer (no contract cant sue) and a rejection
of the goods (still contract can sue)
3. Revocation of acceptance of the goods tested with rejection
a. The buyer is acting immediately and the buyer can reject the goods if they are anything less
than perfect.
b. If there was a substantial problem with the goods that was difficult to discover early on, they
can still revoke the contract
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II.

Excuse of Nonperformance
A. Nonperformance is sometimes excused, 5 grounds for excuse
B. If there was a conditional obligation and the condition wasnt met (Buy house if appraised at $120K,
but turns out $118 excused)
C. The other parties breach (UCC perfect tender the items are not perfect). A material breach excuses
the other party from performing. Painting house for $1K, get paint on the windows, can get away
without paying $1K? Probably, but will have to pay something. If I paint if purple rather than
white, then payment would be excused because that is a material breach.
D. Anticipatory repudiation early revocation. The other party is excused.
E. Later agreement that excuses nonperformance
1. Novation two people make a contract and later both agree that a new party can perform the
contract. If that third party breaches, you cant sue because it excuses the other party (Cant sue
the originally contracted party? yes, the original party is excused, agreement to substitution is
critical)
2. Accord and Satisfaction the excuse requires both the accord and the satisfaction. It changes the
deal with the same two parties. (i.e. Owe $1000. Paint house instead)
a. Accord = new agreement, does not affect the original agreement. Breach results in suing on
either condition money or paint house.
b. Satisfaction = actual act
c. Does agreement as modified fall within the SOF?
d. When do we need consideration for changes in contract? Not UCC because there is no
PELDR, but it is required in common law cases.
F. Later unforeseen occurrence
1. Impossibility - Where there is a later unforeseen occurrence that is no ones fault, the nonperformance is excused. Taylor v. Caldwell concert hall lease, after agreement made the hall
burned down. Taylor sued for breach of contract, cant use concert hall.
2. Frustration of Purpose performance isnt impossible, but it takes away the purpose of the
contract. The agreement is unenforceable. Krell v. Henry guy wants to see the coronation
parade. Flu epidemic and parade called off. Its not impossible, but the purpose for agreement is
frustrated by later occurence.

III.

Breach Remedies
A. Liquidated damages the parties have agreed what the damages are to be. They are valid if
1. The contract is uncertain as to what the possible damages might be
2. They are a reasonable measure of what these uncertain damages might be.
These are tested as to the time that the agreement is made, when no one knows what the damages
are. If you are told what damages actually made it is irrelevant, that info was not available at the
time of the agreement. Was this a reasonable way to deal with it?
B. There are NO PUNITIVE DAMAGES IN CONTRACT LAW or UCC. Contract law is not
interested in punishing breaching parties. Torts allow punitive.
C. Consequential damages recoverable only if reasonably foreseeable by both of the parties at the
time of the contract. Hadley v. Backsendale(?) English mill in small village. No one knew how to
fix the Crank Shaft. Inexcusable delay. Because you breached, something else bad happened to me.
These are indirect damages and only recoverable if reasonably foreseeable by both of the parties at
the time of the contract. (Lose money because delay in painting caused owner to miss the season to
sell the house, costing $5000. For recovery, this must have been foreseeable by both parties.)
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D. Reformation need to conform the written contract to what it is that the party actually agreed to. We
agree its the 19 south acres, but the written agreement comes out 19 southeast acres. Conform to
meet the parties agreement.
E. Specific performance court order directing the parties to do what they contracted to do. Equitable
remedy that is only used when the legal remedies are not sufficient. All equitable remedies are only
available when money damages are not enough.
1. land sales land is unique, transfer of ownership
2. sales of unique goods (antiques, works of art, made to order)
3. personal services contracts NO SPECIFIC PERFORMANCE
4. Negative specific performance or injunctive relief stops you from doing something. Pat Riley
under contract to coach the Knicks, but he doesnt want to. They cant sue him to force him to
coach, but they can get an injunction disallowing him from coaching another team.
F. Money damages
1. The goal is to put the non-breaching party in the same position that she would have been in had
the contract been performed. Expectation damages.
a. Identify the non-breaching party
b. What would the person receive if the contract had been properly performed
c. What would it take to award damages that would have been due?
2. Examples
a. breach contract for $1000 for painting house. New painter charges $1500. If breaching party
pays $500, thats where the person would be had the contract been performed
b. Ive bought the paint in preparation and you breach. How measure the damages? Give costs
and provable lost profits. What about unilateral contract acceptance by performance?
c. Sale of goods sell Caddy thats in mint condition, but its not in mint condition. You want
to keep the car, but you want some of the money back because its not in mint condition.
Delivered in $1500 condition, had it been in mint condition it would be worth $5000. Trying
to put the innocent in the same condition as if the contract had been performed would have
had car worth $5000, but you have car worth $1500. Consequential damages recoverable
only if reasonably foreseeable by both parties
IV.

Third Party Problems


A. Third party beneficiaries two people contract with each other with the intent of benefiting a third
party. The third party has legal rights and can enforce it (i.e. buy life insurance policy, you agree to
pay payments, they agree to pay son at your death. Son can enforce the contract.)
1. Third person bene person not a party to the contract but can still enforce it because the other
parties made the contract with the intent of benefiting them.
a. creditor bene
b. donee bene most 3rd party benes. It is a donee bene UNLESS the 3rd party was already a
creditor of the promisee
c. canceling or modifying
i.
contract language controls
ii.
the contract cant be canceled or modified until the 3rd party knows and assents
d. the 3rd party can sue the promisor and the promisee can sue the promisor
e. the 3rd party can sue the promisee if the 3rd party is a creditor bene.
f. Promisor = the person who is promising to do something for the 3rd party (insurance
company)
g. Promisee = other party to the contract
2. Assignments an agreement between two people and one of the parties to the original contract
transfers away (assigns) his rights to a 3rd party
a. The assignee can sue the obligor. The assignee steps in the shoes of the assignor.
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b. Happens in steps two parties make a contract, THEN one of the parties assigns his rights to
a third party
c. Simply substitutes one party for another party
3. Delegations two people make an agreement and then later one of them gets somebody else to
do the work
a. When possible
1) contract provisions always control
2) if no provisions, you can generally delegate duties unless you are talking about a situation
that involves special skills or a person involving a special reputation
b. Consequences
1) the delegating party remains liable
2) delegatee he is only legally obligated if he received consideration
c. Compare delegation and novation
1) When you delegate, if you ask the other party and they agree, it becomes a novation
2) Under delegation, you remain liable.
3) Under novation, you can sue the delegatee.
d. Connection between 3rd party bene and delegation
1) if the delegatee receives consideration from the delegating party, it is a delegation for
consideration AND a third party bene.
What happens if the SOF is not satisfied?
The SOF is a defense to contract formation. When you have a situation that falls within the SOF, and
the SOF is not complied with its a defense that needs to be presented and proved to prevent enforcement. If you
cant sue on the contract, always look for a quasi-contract remedy.
Equal Dignity Rule this concerns when it is necessary to have written authority for a third party to act on
behalf of someone else in a contract. Authorization must have the same degree as the contract the person is
entering the other into. An agent needs written authority to enter into a contract for another when the contract
is required by the SOF to be in writing. This issue turns on whether the SOF requires the contract to be in
writing and usually occurs in real estate dealings. In order to enter into a lease for another person, do I need
written authority to do so? If the contract is over 1 year I do need written authority.
Illegality
If there is a question of illegality, the issue turns on knowing the difference between a contract with
illegal subject matter and an illegal purpose.
1. If X contracts with Y to kill Z for $5000, neither X nor Y can enforce the agreement. The contract deals
with illegal subject matter and is therefore void.
2. If Y contracts with a cab driver to take him to the spot to kill Z, the cab driver can recover from Y because
their contract dealt with illegal purpose, and the cab driver is more than likely unaware of Ys purpose in
going to the spot.

Rejection - Counter offer, conditional acceptance, adds terms under common law
Terms of Contract
The terms of a contract are found in what is written and what is said. You can also find them in the
terms of previous dealings, if there has been a course of dealings between the two parties. The custom of the
industry is relevant and can dictate the terms and what they mean.
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Prior dealings how these people did their deals together, person specific
Custom and usage info about how deals with other people in the industry were done

26