Contracts Flashcards

Multistate
Flash Cards
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CONTRACTS 1
Formation of Contracts
What is a contract?
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1
It is:
A promise or set of promises, the breach of
which results in a remedy at law, and the
performance of which the law recognizes
somehow as a duty.
NOTE: Traditional contracts, express and
implied, require an offer, acceptance,
consideration, legal subject matter, and
capacity of the parties (COALL).
CONTRACTS 2
What standard is applied to determine

whether an agreement is definite enough to
be enforced as a contract at common law?
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Whether or not there is a reasonably certain basis

on which an appropriate remedy could be
granted. NOTE: Under the UCC, in contracts
between merchants, the rule of definiteness is
much more liberal - if terms in a contract between
merchants are vague or missing, the court can
look to the subsequent acts of the parties, their
past dealings, and general trade usage, to
determine the terms of the contract.
CONTRACTS 3
Does Article 2 of the UCC specifically cover

service contracts?
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3
No - the UCC deals with transactions in

goods only. Thus, it does not cover
services, real property, or intangibles (e.g.,
stocks).
However, the UCC is liberally interpreted,
and frequently applied by analogy to
service contracts.
CONTRACTS 4
Formation of Contract
What is an "offer"?
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Basically - it's a promise to do something in exchange for something
else. Specifically, it is a communication by the offeror; creating a
reasonable expectation in the offeree; that offeror is willing to enter
into a contract; on specified terms; such that offeree need only accept
in order to form a contract.
NOTE: The offeror must manifest an intent to be presently bound. It is
important to distinguish an offer from a negotiation or offer to
negotiate. The offer must have the language of a promise,
definiteness as to essen-tial terms, and be communicated to offeree.
FACTORS: In determining if there has been an offer, look to see it the
communication Is a promise. Consider language, circumstances,
prior prac-tices and relations of parties, method of communication,
and industry custom. Language like "*I offer," "for immediate
acceptance" or "I promise" is typical; words like "*I quote:' "I'm asking:'
"I want," and "I'd consider" are typically words inviting negotiation
(although they don't have to be).
CONTRACTS 5
What are the four essential terms of an

offer at common law?
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1. Parties;
2. Subject matter;
3. Time of performance; and
4. Price.
Mnemonic: TOPPS (Time; Parties; Price; Subject)

Note: If a term is missing, it can be reasonably implied by the court - except
quantity, which must be supplied. Note also that the contract itself can
cure ambiguities in the offer, as through part performance.
NOTE: For public offers, language of promise and quantity are required. By
the nature of the offer, the offeree can't be identified.
*UCC VIEW: The UCC is even more liberal, providing only that the parties
manifest their intent to be bound, and there is a reasonably certain basis
on which to apply a remedy. UCC SS2-204(3). The only absolutely
essential term is quantity.
N.B.. The more terms that are left open, the less likely it is the parties
intended to form a contract.
CONTRACTS 6
Is a subjective standard used to determine

whether an offer has been made?
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No, an objective standard is used. It is: Would a
reasonable person assume that the power of
acceptance had been created in him? Thus, an
offer could exist whether or not the offeree
intended that it exist.
COMPARE: Acceptances. The necessity of
actual, subjective intent to accept depends on the
kind of offer involved. An offer for a bilateral
contract is governed by the objective standard, so
no intent is required. An offer for a unilateral
contract, on the other hand, requires offeree's
intent to accept.
CONTRACTS 7
What is an "option"?
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It is an offer made irrevocable by consideration - i.e., offeree pays

offeror to keep the offer open for some period of time. It creates a
property right in offeree, which means, without a provision otherwise,
that the offeree can sell or transfer this power of acceptance to
someone else, enabling him to accept the original offer.
NOTE: Unlike an offer, the death or insanity of either party doesn't
necessarily terminate an option contract.
UCC VIEW: Under § 2-205, an offer can be irrevocable in the
absence of consideration - it's called a "firm offer" - as long as the
offeror is a merchant, the transaction concerns the sale of goods, and
the assurance not to revoke is embodied in a "signed writing." (The
maximum length of a "firm offer" is three months; it the parties state a
longer period, it's only valid to three months.) NOTE: When the option
expires, the offer isn't automatically revoked; instead, the offeror gets
back the right to revoke the offer.
CONTRACTS 8
Can offers made in jest ever be the basis of

a contract?
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Yes, as long as a reasonable person would

understand the offer to create a power of
acceptance in him. If this objective
standard is not met, the joking offer is not
valid.
CONTRACTS 9
Does an offer continue until it is expressly

revoked?
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No. Although the offeror can set any time limit he likes, in the absence
thereof, the offer expires at the end of a reasonable time.
"Reasonable time" varies according to circumstances, including trade
customs, nature and subject matter of the contract. The means of
communication is also relevant: an oral offer made in a face-to-face
meeting normally lapses when the meeting ends; a phone offer lapses
when the conversation ends. An offer can also terminate through
death or insanity of either party, intervening illegality, rejection or
counter-offer, and destruction of the subject matter,
NOTE: If an offer gives an offeree a set time, say, seven days - in
which to accept an offer, the time period begins when the offeree
receives the offer, unless the offeror specifically provides otherwise
(or the offeree should know the offer had been unusually delayed).
CONTRACTS 10
Must the offeror expressly revoke his offer

to offeree in order for the revocation to be
valid?
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No. Any act which is inconsistent with the

offer is sufficient to revoke, as long (and as
soon) as offeree knows about it (e.g.,
selling a house to another buyer).
CONTRACTS 11
May an offeror revoke his offer under a

unilateral contract once offeree has begun
to perform, under the modern view?
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11
No. Under the modern view, an offer to enter into
a unilateral contract becomes irrevocable once
offeree begins to perform. Second Restatement,
Section 45.
OLDER VIEW: The offeror could revoke until
performance was completed. Older courts based
this on the fact that offeree could revoke anytime,
even after he began to perform, so in the name of
mutuality, offeror could revoke anytime also.
CONTRACTS 12
Traditionally, does an offer for a bilateral

contract request performance in return
rather than another promise?
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No. A traditional bilateral contract consists of exchanging
mutual promises; the situation given involves a unilateral
contract - a promise requesting performance, not a return
promise.
Note that almost all contracts - barring offers of rewards or
offers in which the offeror expressly demands only
performance in return - can be construed as bilateral
contracts.
NOTE: The Restatement (2d) of Contracts doesn't
recognize the unilateral/bilateral distinction per se, but
instead categorizes offers which request a promissory
acceptance (i.e., bilateral), and those that don't (i.e.,
unilateral).
CONTRACTS 13
Must a statement sufficiently identify the

offeree to constitute an offer?
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Yes, because it must create in offeree an
immediate power of acceptance. Although the
offeree is normally one person, it can be a class
of persons and even the general public, as long
as the terms are sufficiently definite and the
offeree clearly identified. Note, however, that the
broader the "class" of ostensible offerees, the
more likely a court is to find that an "offer" (e.g.,
an advertisement) is actually only an invitation for
offers.
CONTRACTS 14
Does a missing quantity term invalidate a

contract?
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Yes, because without a quantity term there is no
reasonably certain basis on which to give an
appropriate remedy, This is true at common law
AND under the UCC.
N.B.: A quantity term need not be an express
quantity in the contract itself, as long as it can be
definitely ascertained. Thus, requirements
contracts ("We will buy all the flanges we need
next year from you") or output contracts ("We will
buy all the sunshine salad you produce next
year") are valid.
CONTRACTS 15
What are the six ways in which an offer

may be terminated (except through
acceptance)?
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1. Revocation;
2. Death or insanity (of either party);
3. Intervening illegality;
4. Rejection/counter-offer;
5. Lapse of reasonable time (depends on
circumstances);
6. Destruction of subject matter.
MNEMONIC: RED TIRED (Revocation;
Destruction; Time; illegality; Rejection; Death)
CONTRACTS 16
There are three means of acceptance

under the UCC. What are they?
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According to UCC § 2-606, buyer can:
1. After a reasonable opportunity to
inspect, manifest to seller that goods
conform OR are acceptable in spite of
non-conformance;
2. Fail to reject within a reasonable time,
3. Act inconsistently with seller's
ownership.
CONTRACTS 17
If posted properly, by acceptable means,

when is an acceptance effective?
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The moment it is posted. This is the "mailbox" rule, and it holds even
if the acceptance never actually reaches the offeror, a valid
acceptance occurs once a properly addressed mailing is posted.
NOTE: The offeror can insulate himself from the mailbox rule by
providing acceptance won't be valid until it's received. The same rule
applies to telegrams. Unless the offeror specifically provides
otherwise, the offeree can use telegrams instead of the mail, and still
have the "mailbox" rule apply. NOTE: This does not apply to option
contracts, for which acceptance is valid only when received.
UCC VIEW: An offer can be accepted by any reasonable means; if
unreasonable means are chosen, the acceptance is still valid when
dispatched as long as offeror receives it no later than he would have
via reasonable means. UCC § 1-201(38).
CONTRACTS 18
Is a subjective standard used to determine

whether there has been a valid
acceptance?
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18
It depends on the nature of the offer. If it's an
offer for a bilateral contract (i.e., it requests a
promise in return), the offeree's intent is not
required - his acceptance is judged objectively. If
it's an offer for a unilateral contract, on the other
hand (requesting performance in return), intent to
accept is required, meaning it's judged
subjectively. When in doubt, it is a bilateral
contract.
CONTRACTS 19
How is a unilateral contract accepted?
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Through performance.
Compare this to a bilateral contract which requires a return promise, not
performance. Note that in a unilateral contract, only the offeree is bound to
perform!
NOTE; With a unilateral contract, offeree need not notify offeror of
acceptance - he need only begin to perform.
NOTE: Acceptance of a unilateral contract offer is judged subjectively that is,
the offeree must intend to accept. (Acceptance of a bilateral contract is judged
objectively.)
N.B.: There are very few situations where an offer clearly seeks performance
instead of a return promise. One clear case is the offer of a reward; another
is where offeror specifically limits the acceptance to performance. Most other
offers could be construed as desiring a promise in return.
UCC VIEW: Under UCC § 2-206(l)(a), an offeree can accept a bilateral or
unilateral contract by any reasonable means, unless the offer expressly and
unambiguously states otherwise.
CONTRACTS 20
Under common law, in accepting an offer,

may an offeree request additional terms?
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No. This was the "mirror image" rule - the
acceptance had to be a "mirror image" of
the offer to constitute a valid acceptance;
otherwise, it was considered a rejection and
counter-offer.
UCC VIEW: For transactions in goods, the
UCC is more liberal in treating new terms,
where the con-tract is between merchants.
UCC § 2-207.
CONTRACTS 21
Is a revocation effective when dispatched

under the "mailbox" rule?
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No. The "mailbox" rule concerns only
acceptances, not revocations. Revocations
(and rejections) are only effective upon
receipt.
NOTE: "Receipt" does not mean the
communication must be read; if delivered
reasonably to addressee's control, it's valid
when it arrives.
CONTRACTS 22
What are the two basic elements of valid

consideration for a bilateral contract?
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1. Legal value (detriment to promisee or benefit to promisor); and

2. Bargained-for exchange.
NOTE: The bargain element is the key to consideration. Bargained-

for-exchange means the detriment must induce the promise, and the
promise must induce the detriment (the detriment being either a
promise, or an act, in the case of a unilateral contract) - thus, each
party's promise is the consideration for the other party's promise. If
one party's detriment occurs in reliance on the other's promise, but
there is no bargained-for exchange, the promise is enforceable due to
"promissory estoppel" (in spite of the lack of consideration.)
NOTE: Although there need only be, in theory, detriment or benefit, in
practice most courts require both.
CONTRACTS 23
What is an "unconscionable contract"?
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According to the UCC definition (which most states
follow), a contract is “unconscionable” if the clauses
involved are so one-sided as to be “unconscionable,”
(UCC § 2-302), meaning that the terms are oppressive
and grossly unfair. Unconscionable contracts are very
rare, because courts normally won’t look into the
adequacy of consideration. However, they occasionally
appear in the consumer credit context – when this
happens, the court is free to void the entire contract, apply
all but the offending clause, or limit application of the
clause to eliminate the unconscionable effect.
CONTRACTS 24
What is an "aleatory contract"?
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It is one where the duty to perform is
conditional upon an occurrence which is
uncertain. Accident insurance is one
example. Aleatory contracts are
enforceable – the conditional obligation to
pay is adequate consideration for the
insured’s promise to pay premiums.
CONTRACTS 25
What's the difference between fraud and

duress?
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25
Fraud involves misrepresentation; duress
requires coercion (i.e., the deprivation of free will).
EXAMPLE: Sparkle Plenty, a jeweler,
misrepresents a worthless paste diamond to Zsa
Zsa as the real thing. Zsa Zsa buys it, relying on
this representation, for $5,000. Fraud.
Say, instead, that Sparkle Plenty holds a gun at
Zsa Zsa's head and forces her to buy the paste
diamond. Duress.
NOTE: The same remedy applies to both fraud
and duress - the contract is voidable.
CONTRACTS 26
If one of the parties to a contract lacks the

"capacity" to contract, is the contract void?
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No. Contracts of incapacitated people (including
minors, insane persons, and those drunk or in
shock), are voidable at their option (but not that of
the other party to the contract, to whom the
agreement is binding). The exception to this is a
person adjudged insane, whose contracts ARE
void.
Note: One lacks the capacity to contract if he
does not fully understand his rights, as well as the
nature, purpose, and effect of the contract he is
undertaking.
CONTRACTS 27
Can minors refuse to uphold any contract

they enter into?
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No. Although contracts of minors are
generally voidable by them due to lack of
capacity to contract, public policy requires
that some contracts by minors are
enforceable, such as contracts concerning
military enlistment, insurance contracts, and
contracts for necessaries.
CONTRACTS 28
Since mutual mistake is a ground for

rescinding a contract, is unilateral mistake a
ground for rescission also?
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No. If the other party reasonably did not know of
the mistake, the mistaken party must perform
(although some states only demand performance
to the extent of the non-mistaken party's actual
costs of detrimen-tal reliance). The mistake can
be one of identity (the other party's), mistake by
the intermediary chosen to deliver an offer,
mistake as to subject matter or calculation of
costs under the contract, among others.
NOTE: If the other party knew or should have
known of the mistake, it will excuse the mistaken
party's performance.
CONTRACTS 29
What's the difference between a contract

implied in fact and one implied in law?
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A contract implied-in-fact is one where the conduct of the parties and

surrounding circumstances indicate they intended to enter a mutually binding
agreement;
A contract implied-in law, or "quasi-contract:' isn't a contract per se, but a
legal means of avoiding unjust enrichment where one party bestows a benefit
on another under a reasonable expectation of being compensated. Under
implied-in-law contracts, a promise to pay is implied even though no such
promise was made or even intended.
N.B.: The lack of an enforceable contract is a prerequisite to quasi-
-contractual recovery.
EXAMPLE: Mr. Bill visits Dr. Spot for a physical. Price isn't mentioned.
However, there is an implied-in-fact contract, since the circumstances
sug-gest that Mr. Bill anticipated he'd have to pay, and the doctor expected
payment. Say instead that Mr. Bill is run over by a steamroller, and Dr. Spot,
walking by, stops to render emergency assistance. This would be an
implied-in-law contract, since a promise to pay couldn't be implied from these
facts (since Mr. Bill was unconscious), and Dr. Spot rendered assistance
anticipating payment.
CONTRACTS 1
Consideration
Does the UCC make offers binding without

consideration?
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No - except under certain conditions. Under UCC
§ 2-205, an offer can be irrevocable in the
absence of consideration - a "firm offer" - as long
as the offeror is a merchant, the transaction
concerns the sale of goods, and the assurance
not to revoke is embodied in a "signed writing."
(The maximum length of a "firm offer" is three
months; if the offer states a longer period, it
cannot be revoked for a reasonable time not to
exceed three months.) NOTE: A merchant is one
experienced in dealing with the type of goods
involved in the transaction.
CONTRACTS 2
Consideration
Under the UCC, can a non-merchant make

an offer irrevocable in the absence of
consideration?
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No. The UCC, § 2-205, allows irrevocable offers
without consideration, or "firm offers," only where
the offeror is a merchant and the offer of
irrevocability is made in a "signed writing" (and,
naturally, the offer must involve the sale of
goods). Also, the time period of the "firm offer" is
limited to three months. Therefore, under the
UCC a non-merchant cannot make an irrevocable
offer.
COMMON LAW RULE: Consideration is required
to create an "option," which is the common law
equivalent of an irrevocable offer.
CONTRACTS 3
Consideration
What is the consideration in a unilateral

contract?
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The promisee's continued performance

constitutes consideration in a unilateral
contract.
Note that, in a unilateral contract, there is
no obligation on offeree to perform; but if he
does, offeror is obligated to perform.
CONTRACTS 4
Consideration
As a general rule, does a promise to

perform a "preexisting duty" - something
one is already obliged to do - constitute
valid consideration at common law?
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Generally not. Consideration requires bargained-for exchange and

either detriment to the promisee or benefit to the promisor. Where the
promise is to perform an act one is already obligated to perform, there
is not detriment and as such no consideration.
NOTE: There are exceptions to this rule, including promises to pay
unenforceable debts (those discharged through bankruptcy or barred
by the Statute of Limitations), which are enforceable. UCC VIEW: The
UCC does not recognize the preexisting duty rule, For transactions in
goods, the UCC allows binding modifications without consideration, as
long as they are made in good faith. UCC § 2-209(1),
RELATED ISSUE: Keep in mind that settlements to avoid litigation
are valid even though they theoretically violate the preexisting duty
rule. The rationale is the public policy of discouraging litigation.
CONTRACTS 5
Consideration
Does a moral obligation constitute

consideration?
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No, as a general rule - however, under Restatement (2d) of Contracts section

86(1), such a promise, recognizing a benefit already received by the promisee
from the promisor, is binding to the extent necessary to avoid injustice (e.g.,
promisee permanently injured himself while saving promisor's life).
As an example of the general rule, say Clark saves Livingstone's life by
finding him lost in the jungle and leading him back into civilization.
Livingstone says, " Boy, do I owe you one. I'll leave you my house in my will."
There's no consideration, because this is merely a moral obligation. There's
no detriment created by Livingstone's promise, because Clark didn't act in
response to Livingstone's promise - he saved Livingstone's life before the
promise was made. Furthermore, it wouldn't be unjust to refuse to uphold the
promise, since Clark suffered no harm.
NOTE: If a prior debt is unenforceable due to operation of law (e.g.,
discharged through bankruptcy or barred by the Statute of Limitations), and
the promisor subsequently promises to pay the debt anyway, the moral
obligation will be enforceable (although most jurisdictions require that the
subsequent promise be in writing).
CONTRACTS 6
Consideration
Are oral contract modifications, without

consideration, valid under the UCC?
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Yes, under UCC § 2-209. However,
protections against fraud in these
instances are also found in the Section
including, among others,
1. Clauses requiring that modifications be
written are valid, and
2. If the modified contract falls within the
Statute of Frauds, a writing is required.
CONTRACTS 1
Conditions
What is a "condition"?
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A "condition" is the occurrence or

non-occurrence of an event (not merely the
passage of time) that triggers, limits, or
extinguishes an absolute duty to perform in
one party to a contract. It modifies a
promise.
CONTRACTS 2
Conditions
How can you tell the difference between a

condition and a promise?
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It's tough, but it's important, due to the nature of relief granted for
each. Breach of promise involves positive relief, while failure of a
condition merely excuses the other party's performance. The
Restatement of Contracts 260 provides this guideline for
distinguishing conditions and promises. If the contractual provision
purports to be the words of the party of whom performance is
required, the provision is a promise; if it's supposed to be the words of
the other party, it's a condition.
CRITERIA: Courts look at:
1. Language used (how parties characterize it);
2. Situations of parties,
3. Subject matter of the contract.
PREFERENCE: In ambiguous situations, courts prefer promises over
conditions.
CONTRACTS 3
Conditions
There are three types of conditions

classified in accordance with their time of
performance. What are they?
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Conditions precedent, concurrent, and
subsequent.
COMPARE: The other way to classify
conditions is in relation to how the condition
came about: These are express and
implied/constructive conditions.
CONTRACTS 4
Conditions
What is a "condition precedent"?
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A condition precedent is an act or event which must occur
in order to trigger a party's absolute duty of performance.
As a result, until the condition occurs, there's no
enforceable duty owed. Thus, if, say, Huck is to paint
Becky's fence for $50, Huck's performance - painting the
fence - is a condition precedent to Becky's duty to
perform - paying the $50.
NOTE: In the Huck-Becky example, the condition
precedent is implied/constructive, since it's not mentioned
in the agreement. Note that it would be considered a
condition precedent, not a concurrent condition, because
of this rule: When one party's performance takes a period
of time, and the other party's performance only takes a
moment, the longer performance will be considered a
condition precedent of the shorter performance.
CONTRACTS 5
Conditions
What is a "concurrent condition"?
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A “concurrent condition” provides that the parties exchange
performance simultaneously, each party’s duty to perform is
dependent on the other’s. It is implied under the following
circumstances:
1. Simultaneous performance is possible, and no time is set for either
performance;
2. Time is set for one performance, but not the other, and they’re
capable of simultaneous performance.
EXAMPLE: Sam agrees to sell his “Slugs of the World” calendar to
Dave for $5. Sam’s tendering the calendar is a condition to
Dave’s duty to pay; and Dave’s tendering the $5 is a condition to
Sam’s duty to hand over the calendar. The same rule would
apply if, say, Sam agreed to sell the calendar on December 15,
and no date was set for Dave’s performance; since they can be
performed simultaneously, their performances will be considered
concurrent conditions (to occur on December 15).
CONTRACTS 6
Conditions
What is a "condition subsequent"?
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It is an event which, pursuant to the agreement of
the parties, discharges a duty to perform that had
become absolute. It is typically indicated by
language like, “The contract will be void if…”
SIGNIFICANCE: Although conditions precedent
and subsequent are substantively similar,
procedurally they differ in that the party to whom
performance is owed must prove the occurrence
of conditions precedent; the party of whom
performance is required must prove the
occurrence of conditions subsequent.
CONTRACTS 7
Conditions
What is a "constructive" (or "implied")

condition?
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It is one not spelled out by the parties, but is
applied by the court to help in determining the
order in which contractual performances are or
will be due.
SIGNIFICANCE: The only important distinction in
types of conditions is determining if the condition
is express - if it is, courts require strict compliance
with its terms; if it's implied/constructive,
substantial compliance will do.
CONTRACTS 8
Conditions
Is substantial performance sufficient to

satisfy an express condition?
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NO; an express condition calls for strict compliance.
Substantial, or less-than-complete, compliance with an
express condition both:
1. Excuses the party's performance which was
conditioned on the event, and
2. May pave the way for damages due to breach.
COMPARE: Constructive/implied conditions only require
substantial performance, since the aim of
con-structive/implied conditions is to promote fairness.
CONTRACTS 9
Conditions
To what six criteria should you turn to

determine whether "substantial
performance" has been rendered?
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The Restatement of Contracts sec. 275 looks to these six, to be taken

together (paying particular attention to the factors most critical to each case):
1. To what extent has the injured party received benefits?
2. Can the injured party be adequately compensated in damages?
3. Is the breaching party "close" to full performance?
4. Will the breaching party face great hardship if termination is permitted?
5. How willful is the breach?
6. How great is the certainty of completion?
MNEMONIC: REACH CurFeW (Received benefits-, Adequately
compensated; Hardship; Certainty of completion; Full performance; Willful).
N.B.: Regardless of these criteria, if the breach is considered willful (knowing
or In bad faith), most courts would decide there is no substantial performance!
However, it the willfulness concerns a trivial condition, courts will ignore it.
CONTRACTS 10
Conditions
What is "anticipatory repudiation"?
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A party's unequivocal repudiation of his duty to perform,
before performance is due.
SIGNIFICANCE: The promise’s can sue for breach
immediately, without having to wait for the time
performance is due. However, the promisee must also
immediately try to mitigate his damages. EXCEPTION:
One party has performed - the other hasn't. Where one
party has performed and the other repudiates, the due
date of the second party's performance must arrive before
the aggrieved party can sue.
UCC VIEW: UCC § 2-610 has a similar rule on
anticipatory repudiation, as well as an option to negotiate
for retraction of the repudiation.
CONTRACTS 11
Conditions
What are the elements of promissory

estoppel?
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11
Basically, promissory estoppel is a substitute for consideration, to

avoid injustice. It is triggered by a gratuitous promise that is likely to,
and does, induce promisee's detrimental reliance.
Technically, under Restatement of Contracts section 90, promissory
estoppel exists when: There is a promise; Which the promisor should
reasonably expect; To induce action or forbearance; The promisee
has in fact justifiably relied on the promise to his detriment to induce
action, and injustice can be avoided only by enforcement of the
promise.
NOTE: Promissory estoppel replaces consideration where promisee's
detriment was not bargained for (as long as the above elements are
present); this is what distinguishes it from consideration. Thus, a
prerequisite for promissory estoppel is the lack of consideration - if an
enforceable contract exists, promissory estoppel doesn't apply.
CONTRACTS 12
Conditions
What's the difference between promissory

estoppel and consideration?
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12
The bargain element.

In promissory estoppel, there has been no request from promisor that
promisee perform; in consideration, on the other hand, pro-misee's
detriment is bargained for.
EXAMPLE: Jethro tells Miss Hathaway "I promise to give you my car,
next month." She signs a garage lease agreement to begin next
month. Jethro backs out of the promise and doesn't hand over the car.
Since Jethro didn't request performance, no con-sideration exists.
However, since his promise was likely to, and did, induce detrimental
reliance, promissory estoppel will make the contract enforceable (if
nothing else, to the amount Miss Hathaway has to pay on the lease).
Say, instead, Jethro says: "I'll give you my car in return for $1,000.”
She agrees. There's consideration - each promise is the induce-ment
for the other party's action, and it was bargained for.
CONTRACTS 13
Conditions
Does the UCC implied requirement of

"good faith" apply only to merchants?
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13
No. The "good faith" requirement of UCC §

1-203 is imposed on any purchaser or seller
of goods, not just merchants.
CONTRACTS 14
Conditions
What's the difference between "anticipatory

repudiation" and a "prospective inability to
perform"?
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14
In anticipatory repudiation, a party refuses

to perform regardless of the ability to do so.
In prospective inability, on the other hand,
regardless of his intent to perform, a party
is no longer able to do so, due to his own
actions.
CONTRACTS 15
Conditions
There are three general ways to treat a

prospective inability to perform. What are
they?
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15
MAJORITY VIEW: Absolute breach, on which the aggrieved party is
excused from performing and can sue for damages immediately, as
long as inability to perform exists and the aggrieved party suffers
damages due to detrimental reliance.
RESTATEMENT OF CONTRACTS VIEW: Since party's own acts
resulted in his inability to perform, he may regain the ability before
performance is due and hold the other party to the contract (as
long as the other party has not detrimentally relied on the prospective
inability).
UCC VIEW: Other party can demand assurances of performance,
under UCC § 2-609; if he does not receive them, he has immediate
grounds to sue. Other
party has grounds to demand assurances when a reasonable
merchant has facts
that lead him to believe performance may not be forthcoming.
CONTRACTS 1
Statute of Frauds
What seven, general types of contracts

must be in writing to conform with the
Statute of Frauds?
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1
Although the Statute of Frauds varies from state to state, a writing is generally
required for contracts:
1. For the sale of an interest in land (which includes leases of one year or
longer);
2. Incapable of performance in less than one year;
3. Regardless of value, for the sale of goods with a price of at least $500
(UCC § 2-201)(except specially manufactured goods, or where there is partial
performance);
4. For the sale of securities (UCC § 8-319);
5. Regardless of cost, for the sale of personal property other than goods with
a value of more than $5,000, e.g., royalty rights (UCC § 1-206);
6. To answer for another's debt or default (a collateral promise only, not a
primary one);
7. In consideration of marriage.
MNEMONIC: MY LEGS (Marriage; Performance less than a Year; Land;
Executor’s promise to pay the debts of the estate; Goods, sale of $500
or more; Suretyship)
N.B.: Third parties cannot rely on the Statute of Frauds as a defense.
CONTRACTS 2
Statute of Frauds
Under what circumstances will the

requirement of a writing be excused under
the Statute of Frauds?
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2
A writing will not be required where there is:
1. Full performance by both sides;
2. Seller conveys property to buyer;
3. Buyer pays all or part of the purchase price AND performs some act
explainable only by the contract's existence (e.g., constructing
buildings on land);
4. Promissory estoppel;
5. Waiver (e.g., by not affirmatively pleading the Statute of Frauds as
a defense).
NOTE: If an agreement is unenforceable through non-compliance with
the Statute of Frauds, parties are entitled to quantum meruit for the
reasonable value of part performance or services rendered, and
restitution of other benefits conferred.
CONTRACTS 3
Statute of Frauds
Is a written agreement the only way the

Statute of Frauds may be satisfied under
the UCC?
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3
No - except under certain conditions. Under
UCC § 2-205, an offer can be irrevocable in the
absence of consideration - a "firm offer" - as
long as the offeror is a merchant, the
transaction concerns the sale of goods, and
the assurance not to revoke was embodied in
a "signed writing." (The maximum length of a
"firm offer" is three months; if the parties state a
longer period, it's only valid to three months.)
NOTE: A merchant is one experienced in dealing
with the type of goods involved in the transaction.
CONTRACTS 4
Statute of Frauds
Is a written agreement the only way the

Statute of Frauds may be satisfied under
the UCC?
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4
NOTE: If the goods are specially manufactured, the
Statute of Frauds doesn't apply as long as 1.
Circumstances reasonably indicate the goods are for a
specific buyer, and 2. Seller has substantially begun
manufacture or made commitments for procurement of the
goods. "Specially manufactured goods" are those not
suitable for sale to others in the ordinary course of seller's
business. § 2-201(3)(a). Furthermore, a letter of
confirmation can satisfy the Statute of Frauds under §
2-201(2), between merchants only.
COMMON LAW RULE: Requires a writing or partial
performance only.
CONTRACTS 5
Statute of Frauds
What is required to constitute a sufficient

"writing" under the Statute of Frauds
(outside the UCC)?
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5
The writing must specify, with reasonable certainty:

1. The contract's subject matter;
2. Parties' identities;
3. Promises, by whom and to whom made, and essential terms and
conditions;
4. Signature of the party to be charged (the one who denies the
contract's existence). Initials on the document will suffice.
5. In many states, a recital of consideration is also required.
MNEMONIC: SCIPS (Subject; Consideration; Identities; Promises;
Signatures)
NOTE: Under the UCC Statute of Frauds the only essential term is
quantity; others can be inserted if let out, or corrected if misstated.
CONTRACTS 1
Parol Evidence and Interpretation
What is the common law "parol evidence

rule"?
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1
It is a rule of substantive contract law, providing that a
writing that is "completely integrated" cannot be
contradicted or supplemented with prior written or oral
agreements, or contemporaneous oral agreements. A
"completely integrated" agreement is one which the
parties intended to be a final and complete statement of
the agreement. The parol evidence rule does not bar
evidence of defects in contract formation, like lack of
consideration, fraud, and duress. Nor does it pertain to
subsequent agreements.
POLICY: To avoid perjured testimony, and give a clear
basis on which to base a judgment.
N.B. Prior written agreements are all covered, as well as
oral ones!
CONTRACTS 2
Parol Evidence and Interpretation
How does the UCC handle the Parol

Evidence Rule?
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2
Under UCC § 2-202, in relation to sales contracts
only, no evidence is admissible to show prior
written or oral agreements, or contemporaneous
oral agreements contradicting the
contract - however, a contract can be explained
or supplemented by evidence of trade usage, or
course of dealings or performance. Furthermore,
unless the contract is found to be a complete and
exclusive statement of terms, evidence of
consistent additional terms may be admitted.
CONTRACTS 1
Discharge of Contractual Duties
Is an executory agreement discharging an

existing contractual duty known as a
"satisfaction"?
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1
No, such an agreement is known as an

"accord." Performance of an accord is
called "satisfaction."
CONTRACTS 2
What are the four basic requirements of a

"novation"?
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2
There must be:
1. A valid agreement in existence between the
original contracting parties;
2. An agreement between the promisee (to
whom the performance is owed under the
contract) and a new promisor, where the new
promisor undertakes the old promisor's duties and
the promisee accepts the substitution;
3. An express extinction of the old promisor's
duties;
4. A new, valid agreement.
CONTRACTS 3
Will subjective impossibility discharge a

contractual duty to perform?
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3
No. In order to discharge a contractual duty

to perform, the impossibility must be
objective.
CONTRACTS 4
What's the difference between an "accord

and satisfaction" and a "novation"?
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4
An "accord and satisfaction" involves a

substitute agreement between the original
two parties to a contract; a "novation"
involves substituting a new party for one of
the parties to a contract.
CONTRACTS 5
What is the difference between a

"delegation" and a "novation"?
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5
In a novation, one of the contracting parties
is expressly released from performing
duties under the contract; in a delegation,
the delegator's duties are not immediately
cancelled (so the delegator could still be
liable under the contract).
CONTRACTS 1
Impossibility of Performance and
Frustration of Purpose
What is the doctrine of "impossibility"?
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1
The doctrine of "impossibility" holds that where circumstances unanticipated

by the parties make contract performance vitally different from what the
parties contemplated, their duties under the contract are discharged unless
the adversely affected party assumed the risk (either expressly or impliedly)
that the contingency might occur. Note that absolute impossibility is not
required.
NOTE: Where there is partial impossibility, the rest of the contract remains
intact.
RESTATEMENT AND MINORITY VIEW: Impracticability, a less strict
re-quirement, is sufficient to discharge contractual duties. Impracticability
requires:
1. Extreme and unreasonable difficulty and/or expense would
accom-pany performance, and
2. Parties must not have anticipated the difficulty.
UCC VIEW: The UCC is more liberal than the common law on the subject of
impossibility, allowing discharge of duties under circumstances where the
common law would not allow them (e.g., unforeseeable strikes, material
shortages). UCC § 2-615.
CONTRACTS 2
Impossibility of Performance and
Frustration of Purpose
What are the four elements necessary to

establish that one's contractual duties have
been discharged through "frustration"?
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2
1. Frustration must be caused by a supervening act or
event;
2. Which was unforeseeable when the parties entered
into the contract;
3. The act or event destroys or almost destroys the
purpose of the contract; and
4. Both parties realized this purpose when the contract
was formed.
MNEMONIC: RUDE (Realized purpose; Unforeseeable;
Destroys Purpose; Event supervenes).
NOTE: Courts dislike discharging contracts due to
frustration of purpose, and will attempt to assign the risk to
one party or the other if it can find that the risk was
foreseeable.
CONTRACTS 1
Assignment of Rights and
Delegation of Duties
What are the elements of a valid

assignment?
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1
1. Assignor's clear intent to transfer his rights to a third party
(deter-mined objectively, not subjectively; look for words like "assign,"
"convey," " sell," "transfer" - intent must be addressed to assignee or
his representative);
2. Identification of the contract's subject matter;
3. Notice of an acceptance by assignee;
Acceptance may be through words or conduct; however, beneficial
assignments are normally presumed to be accepted,
SIGNIFICANCE: Extinguishes the contractual rights in the assignor
and puts the assignee "in the assignor's shoes" for purposes of those
rights.
NOTE: An assignment, because it does not involve a promise, does
not require consideration; nor does it require a writing, unless it
involves transfer of an interest in land, involves the sale of goods
costing more than $500 or chooses in action worth more than $5,000,
it is a wage assignment, it is designed as a security interest, or a
writing is required by statute.
CONTRACTS 2
Are most contract rights assignable?
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2
Yes. The common law rule, embodied in UCC § 2-210(2),
allows assignment unless the assignment would:
1. Materially change the other party's duty;
2. Materially increase the risk the contract imposes;
or
3. Materially impair the other party's chance of
receiving return performance.
MNEMONIC: DRIP (Duty; Risk; Impair; Performance)
N.B.: Exceptions to assignability include personal
services, rights under future contracts, requirements and
output contracts, and assignments contrary to public
policy, e.g., government pensions and alimony payments.
CONTRACTS 3
Does an effective assignment normally

require a writing?
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3
No. An oral assignment is generally
effective; however, assignments must be in
writing if they involve transferring an
interest in land, assigning wages, are
designed as security interests, involve the
sale of goods costing more than $500 or
chooses in action worth more than $5,000,
or a writing is required by statute.
CONTRACTS 4
In general, can assignments be revoked?
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4
Yes, although - surprise, surprise - there are exceptions, including:
1. The assignee gave valuable consideration for the assignment;
2. The assignee has relied on the assignment to his detriment, and
such reliance should have been foreseeable to the assignor;
3. The assignee has received payment or performance from the
obligor;
4. A symbol of the assignment (e.g., stock certificates, bank book)
has been transferred.
In some states, a written assignment is irrevocable.
NOTE: If the assignor does revoke an irrevocable assignment, the
assignee can sue for breach of the implied warranty that assignor
would not interfere with the assignee's rights.
NOTE: Revocable assignments can be revoked three ways: 1/
Assignor's death; 2/ Subsequent assignment of same right (as long as
the second assignee doesn't know about the first one); 3/ Notice of
revocation to assignee or obligor.
CONTRACTS 5
What's the difference between an

"assignment" and a "delegation"?
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5
An assignment is the transfer of benefits
under a contract; a delegation involves the
transfer of duties. SIGNIFICANCE: An
assignor does not retain any rights under
the contract when he assigns them away;
but when a delegator delegates duties
under the contract, he remains secondarily
liable for them.
CONTRACTS 6
What are the requirements of a valid

delegation of duties under a contract?
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6
The one to whom the duties are delegated - the
"delegatee" - must indicate, verbally or via
conduct, his present intent to assume specific
duties owed to the obligee by the delegator.
NOTE: The delegation need not be in writing.
NOTE: If non-delegable duties are delegated,
there's no breach of contract - but the original
promisee's telling the obligee he won't perform
personally will usually constitute anticipatory
repudiation.
CONTRACTS 7
Is there a presumption that an assignment

of rights includes a delegation of duties,
under the UCC?
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7
Yes, under UCC § 2-210(4). However, this

isn't true if there are circumstances
indicating this wasn't intended - e.g., the
assignment of the right to payment is
offered as the security for a loan.
CONTRACTS 8
What's the difference between a delegation

and a novation?
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8
In a novation, one of the contracting parties

is expressly released from his duties under
the contract; in a delegation, the delegator
is still liable under the contract.
CONTRACTS 9
Once a delegator delegates his duties

under a contract, does he remain primarily
liable to the oblige’s?
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9
No, he's secondarily liable. The one who must
perform - the delegatee - becomes primarily liable. The
delegator is only released from liability under the contract
by delegatee's performance (or tender of performance),
delegatee's payment, OR a novation (where delegatee
expressly replaces delegator under the contract).
Note that the obligee can sue the delegator without suing
the delegatee - but if the delegator is required to pay, it
can recover the damages it pays obligee from delegatee,
or, where the circumstances so merit, it can demand
specific performance from the delegatee.
NOTE: The delegator can recover damages it pays to
obligee, or, where the circumstances so merit, it can
demand specific performance.
CONTRACTS 1
Remedies
What are the four basic types of relief for

contractual breaches?
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1
1. Damages;
2. Specific performance;
3. Rescission and restitution;
4. Reformation.
NOTE: Quasi-contractual relief isn't based on a
contract but on unjust enrichment; in fact, it's
prerequisite is the lack of an enforceable contract.
However, in the contract context, quasi-contract
should be discussed as well.
MNEMONIC: SPREADER (Specific Performance;
Reformation; Damages; Rescission).
CONTRACTS 2
Remedies
In terms of consequences for contract

breaches, at common law, is there any real
difference between minor and material
breaches?
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2
Yes. A material breach relieves the aggrieved party of his contractual

duty to perform; a minor breach does not. With a minor breach, the
aggrieved party must perform and then sue for damages.
RELATED ISSUE: The UCC does not adopt this view. Under the
UCC, the buyer, in a single delivery contract, has the right, in theory,
to reject the goods if they "fail in any respect to conform to the
contract." § 2-601. However, this isn't the buyer's panacea that it
sounds, since the seller can cure defects, as long as he notifies buyer
of his intent to cure, under § 2-508, if:
1. the time for performance has not run out, and seller can cure within
that time, or
2. seller has reason to believe buyer would accept nonconforming
goods - in which case seller can go reasonably beyond the time
allowed for performance in curing the defects.
CONTRACTS 3
Remedies
What is the rule on recoverability of

damages from Hadley v. Baxendale?
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3
The rule from Hadley v. Baxendale,
followed by most states, is that money is
recoverable for damages which:
1. Necessarily, naturally or probably
resulted from the contract breach, or
2. At the time of contract formation, may
reasonably be within the contemplation of
both contracting parties.
CONTRACTS 4
Remedies
What is the aim of the damages remedy?
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4
To place the non-breacher in the position

he would have been in had the contract
been fully performed.
CONTRACTS 5
Remedies
What are "consequential damages"?
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5
Losses foreseeable to the reasonable
person at the time the contract was entered
into. Consequential damages are always
the result of the special situation or needs
of the buyer, and not capable of mitigation
by the injured party. Consequential
damages reflect the damage caused by
preventing the injured party from being able
to use the contract's subject matter.
CONTRACTS 6
Remedies
What are "nominal" damages?
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6
Nominal damages are "token" damages,

e.g., $1. Where there is a clear breach of
contract, but no proof of actual damages,
nominal damages are appropriate.
CONTRACTS 7
Remedies
What's the difference between the aim of

the "damages" remedy, and that of
"rescission and restitution"?
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7
The damages remedy involves putting the
party in the situation he would have enjoyed
had the contract been fulfilled;
Rescission and restitution, on the other
hand, involves returning the parties to their
position before the contract was formed.
CONTRACTS 8
Remedies
If money damages will put a plaintiff in as

good a position as he would have been in
had a contractual breach not occurred,
might a court grant him specific
performance?
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8
No. Specific performance is an equitable
remedy requiring, as a prerequisite, that
there be no adequate remedy "at law" *(i.e.,
money damages). This occurs, for
instance, where the subject is
unique - *e.g., a piece of land or an
antique - and/or the money value is not
ascertainable.
CONTRACTS 9
Remedies
What is a "liquidated damages clause"?
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9
It is a contractual clause providing the amount of damages in the case of a

contract breach.
The three elements of a valid liquidated damages clause are:
1. The clause must reasonably forecast the probable loss due to breach (as
calculated at contract formation);
2. Harm caused by breach must be difficult to calculate, and
3. Parties must tailor the clause to the contract's circumstances (i.e., it cannot
be a penalty).
MNEMONIC: CiDeR (Circumstances; Difficulty of calculation; Reasonable
forecast).
NOTE: There is not duty to mitigate damages under a valid liquidated
damages clause. Note that, with a valid liquidated damages clause, the
innocent party can recover even if he didn't actually suffer any damages.
NOTE: If the contract gives the party a choice of liquidated damages OR
actual damages, the liquidated damages clause is probably unenforceable.
CONTRACTS 10
Remedies
In construction contracts, the buyer's

standard remedies depend on when the
builder breaches before, during, or by
delaying completion. What are the three
standard measures of damages?
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10
BEFORE CONSTRUCTION: Cost of completion (plus any
reasonable recovery for delay in performance);
DURING CONSTRUCTION: Cost of completion (plus any
reasonable recovery for delay in performance), less any
payments not yet made. HOWEVER - if completion
involves undue economic waste, damages will be the
value of the property at the time of the breach.
FURTHERMORE - If the breach is intentional, the builder
cannot get quasi-contractual relief; if it's intentional,
builder CAN get quasi-contractual relief.
DELAYED COMPLETION: Lost income (e.g., from rents).
N.B.: Keep mitigation in mind, and deduct it from damages
where applicable.
CONTRACTS 11
Remedies
In construction contracts, the builder's

standard remedies depend on when the
buyer breaches before, during, or upon
completion of the project, What are the
three standard measures of damages?
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11
BEFORE CONSTRUCTION BEGINS: Full
profits under contract.
DURING CONSTRUCTION: Contract price
less cost to complete (less amount already
paid by owner). AFTER CONSTRUCTION:
Full contract price, plus interest (if
applicable).
N.B.: Savings due to mitigation must be
deducted from all of these!
CONTRACTS 12
Remedies
Are the same remedies for breach of

contract available for anticipatory
repudiation?
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12
Yes. Damages, specific performance, and

rescission and restitution are all viable
remedies for anticipatory repudiation.
Quasi-contract is also possible, although
not as likely since neither party is likely to
have suffered a detriment when one party
repudiates in advance.
CONTRACTS 13
Remedies
Under the UCC, in contracts for the sale of

goods, what are the seller's general
remedies when the buyer wrongfully rejects
goods or fails to pay?
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13
Under § 2-703, seller can:
1. Withhold delivery;
2. Stop delivery by carrier/ bailee;
3. Finish unfinished goods (if commercially feasible under § 2-704);
4. Resell the goods and recover damages under (§ 2-706);
5. Recover damages for non-acceptance (§ 2-708);
6. Recover the price of the goods (§ 2-709); or
7. Cancel the contract.
MNEMONIC: FINISH CREW PADS (Finish; Cancel; Resell; Withhold;
Price; Damages; Stop)
NOTE: If the seller resells, he is not liable to buyer if he resells at a
profit. If he doesn't resell, his damages will be limited to the difference
between the contract price and the market value at the time set for
performance.
CONTRACTS 14
Remedies
Under the UCC, what are the buyer's

general remedies when the seller breaches
a contract for the sale of goods?
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14
Under UCC § 2-711, buyer can;

1. Cancel;
2. "Cover" - buy substitute goods and recover difference
between their price and market price (note that buyer must attempt to
cover, as mitigation; if the buyer does not attempt to cover, his
damages will be limited to the difference between contract price and
market value, and he will not be entitled to consequentials, under §
2-715);
3. If all or part of the goods were paid for, buyer can recover
goods identified to the contract;
4. Get specific performance (under § 2-716);
5. Damages for non-delivery: The difference between market
price at the time the buyer learned of the breach, and the contract
price (plus incidentals AND consequentials).
CONTRACTS 15
Remedies
In determining a buyer's remedies for

breach under the UCC, what is the single
most important factor?
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15
Acceptance. Buyer's remedies differ

significantly between pre-acceptance and
post-acceptance.
CONTRACTS 16
Remedies
A buyer receives non-conforming goods.

What are his remedies before acceptance,
according to the UCC?
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16
1. Cancellation (and recovery of anything
already paid, as well as damages measured by
either cover (substitute) price, or market price,
UCC § 2-712-13);
2. Where damages are inadequate to put
buyer in the position he would have enjoyed had
there been no breach, specific performance is
possible, under UCC § 2-716.
Note that these remedies are much more
attractive than post acceptance remedies, since
upon acceptance the buyer must pay seller the
contract price and recover damages.
CONTRACTS 17
Remedies
There are three, general situations where

rescission and restitution is the appropriate
remedy. What are they?
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17
1. Contract formulation involves mutual mistake;
2. Contract formulation involves unilateral mistake
due to fraud, duress or undue influence; or
3. The breacher has committed a material breach.
MNEMONIC: MUM (Mutual mistake; Unilateral mistake;
Material breach)
NOTE: The recovery under rescission and restitution is
calculated as the value rendered to defendant, regardless
of how much it cost plaintiff to render that value, and
regardless of plaintiff's injury due to defendant's breach.
However, most of the time this will amount to the market
value of plaintiff's performance. N.B.: For rescission and
restitution to apply, it must be possible to restore the
parties to their pre-contract state.
CONTRACTS 18
Remedies
Under what circumstances is the

contractual remedy of "reformation"
granted?
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18
When fraud or mistake results in a written

contract that does not accurately reflect the
parties' agreement, the court will "reform"
the contract so that it is accurate.
Reformation is an equitable remedy.
CONTRACTS 19
Remedies
If a plaintiff seeks recovery based on

promissory estoppel, how will the amount of
recovery be determined?
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19
Promissory estoppel recovery is limited to the
amount necessary to:
1. Prevent injustice; or
2. Replace a party's actual losses as a result
of change in position.
Note: that promissory estoppel is a substitute for
consideration - thus, if there's consideration (i.e.,
due to the presence of a bargained-for
exchange), promissory estoppel does not apply.
CONTRACTS 20
Remedies
When is quasi-contractual recovery

permitted?
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20
Quasi-contractual recovery is typically implied when plaintiff confers a benefit

on the defendant, under circumstances where defendant would be unjustly
enriched if he were allowed to retain the benefit without paying for it. At that
point a duty to pay is implied even though no contractual duty exists. Such a
situation exists when:
1. No contract existed and no attempt was made to form one; An
attempt was made to form a contract, but the contract is unenforceable (due
to noncompliance with the Statute of Frauds, illegality, etc.);
2. Plaintiff is guilty of a material (but not willful) breach; and thus he
would not be able to recover contractually.
MNEMONIC: NUMB (No contract; Unenforceable; Material Breach). NOTE:
The "special defenses" of duress, fraud, incapacity, and undue influence are
not applicable to quasi-contracts, since quasi-contracts are only designed to
avoid unjust enrichment. RECOVERY: Reasonable value of services.
N.B.: A prerequisite of quasi-contractual recovery is the lack of an enforceable
contract.
CONTRACTS 21
Remedies
What is "mitigation of damages"?
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21
It is the non-breaching party's attempt to lessen - or "mitigate" - his

damages due to the breach, by finding substitute performance. The
nonbreaching party has a duty to mitigate his damages; if he can
mitigate and doesn't, his damages will be decreased by the amount
he could have saved through mitigation.
NOTE: In some situations, mitigation can require that a non-breaching
party deal with the mitigating party. Say, for instance, Faberjay sells
ornate carved eggs. The Banana Split Gift Shop gets several special
orders for the eggs from customers, and orders them from Faberjay,
agreeing to pay $50 apiece as long as they are delivered by
Christmas. On December 10, Faberjay calls and refuses to ship the
eggs unless Banana Split pays $60 apiece. The eggs are unique and
cannot be obtained anywhere else. if Banana Split refuses, it will lose
$200 in profits; if it pays, it will make $50 instead of $150. Banana
Split might have to deal with Faberjay, to mitigate (and it could, of
course, also sue for damages).
CONTRACTS 22
Remedies
Why is restitution an inappropriate remedy

in construction contracts?
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22
Restitution involves putting the parties in

the state they were in prior to the contract.
Unless the construction has not yet begun,
the owner has received a benefit which
cannot be returned.
CONTRACTS 23
Remedies
According to the UCC, under what

circumstances can a buyer revoke his
acceptance of goods?
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23
Under UCC § 2-608, buyer can revoke a prior acceptance of

nonconforming goods, where the defect has substantially impaired
their value, if:
1. Acceptance included the reasonable assumption that the
defects would be cured in a reasonable time, and they haven't been;
OR
2. Acceptance was predicated on seller's assurances of
conformity; OR
3. The defect was difficult to discover.
Note that buyer must notify seller of revocation within a reasonable
time after buyer discovered or should have discovered the breach,
Note also that a revocation puts the buyer in the same position as if
he had rejected the goods initially, and gives the buyer more attractive
remedies than post-acceptance.
CONTRACTS 1
Third-Party Beneficiary Contracts
What is a third party beneficiary?
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1
It is one who:
1. Is not a party to a contract;
2. But whose enforceable rights;
3. Are created when the contract is formed; and
4. The contract was created specifically for
his/her benefit.
N.B.: A beneficiary's rights are only enforceable
once they "vest;" before vesting takes place, the
contracting parties can modify or rescind the
contract without the beneficiary's consent.
CONTRACTS 2
Intended beneficiaries have enforceable

rights; incidental beneficiaries do not. How
can you tell if a beneficiary is intended or
incidental?
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2
Look to the intent of the promises (the one to whom the
duty in question is owed). If it is his primary intent that the
third party receive benefit from promisor's performance,
the third party is an intended beneficiary - otherwise, the
third party is an incidental beneficiary with no enforceable
rights.
Criteria to examine include:
1. A statement of intent in the contract;
2. Close relationship between promisee and
beneficiary;
3. Identifiability of the beneficiary (before contract is
discharged, not at formation);
4. Promisor's performance directly to third party.
CONTRACTS 3
How can you distinguish between creditor

beneficiaries and donee beneficiaries?
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Creditor beneficiary: promisee owes beneficiary a
preexisting duty, which promisor's performance will fulfill.
Donee beneficiary: every other intended beneficiary.
Courts strongly favor classifying intended beneficiaries as
donee beneficiaries.
SIGNIFICANCE: This distinction traditionally determines
whom the beneficiary can sue when their rights vest. A
donee beneficiary can sue the promisor while a creditor
beneficiary can sue either the promisor or the promisee.
NOTE: Although many courts divide intended
beneficiaries into creditor beneficiaries and donee
beneficiaries, the Second Restatement only categorizes
beneficiaries as intended (with rights) and incidental
(without rights).
CONTRACTS 4
When do a creditor beneficiary's rights vest,

making his consent necessary before the
contract can be modified or rescinded?
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MAJORITY (AND RESTATEMENT) VIEW: Most modern
courts agree with the Restatement 2d of Contracts,
sec. 311, which ignores the donee-creditor distinction,
and rather views the rights of both as vesting when
one of these three events occurs:
1. the beneficiary manifests assent to the promise;
2. the beneficiary sues to enforce the promise; or
3. the beneficiary justifiably relies on the promise to his
detriment.
TRADITIONAL VIEW: Rights vest only when creditor
beneficiary has detrimentally relied on the contract.
N. B.: A beneficiary's rights can't vest until he knows
about the contract.
CONTRACTS 5
When do a donee beneficiary's rights vest,

making his consent necessary before the
contract can be modified or rescinded?
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5
MAJORITY (AND RESTATEMENT) VIEW: Most modern courts agree

with the Restatement 2d of Contracts, sec. 311,
which ignores the donee-creditor distinction, and rather views the
rights of both as vesting when one of these three events occurs:
1. the beneficiary manifests assent to the promise;
2. the beneficiary sues to enforce the promise;
or
3. the beneficiary justifiably relies on the promise to his detriment.
TRADITIONAL VIEW (followed by some states): Rights vest
immediately upon contract.
MINORITY VIEW: Only upon detrimental reliance.
CONTRACTS 6
May a beneficiary to a contract sue a

promisee for breach, or is he limited to a
claim against the promisor?
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6
It depends whether the beneficiary is a creditor beneficiary or a donee

beneficiary.
Creditor Beneficiary: Unless there has been a novation, a creditor
beneficiary can always sue the promisee on the original debt,
because the promisor/promisee contract does not discharge the
promisee's debt to the creditor. Note that if the creditor beneficiary
sues the promisee, he's only suing on the basis of the original
debt - he's not suing as a beneficiary!
Donee Beneficiary: The donee beneficiary cannot sue the promisee,
even if he detrimentally relied on the contract. Needless to say,
there's an exception – donee beneficiaries can only recover money
from the promisee that should have gone to the beneficiary - under no
other circumstances, even detrimental reliance, can the donee
beneficiary recover from the promisee!
CONTRACTS 7
Where a promisor fails to perform for a third

party beneficiary, can the promisee sue the
promisor?
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Yes, but his recovery is strictly limited.

If the beneficiary is a creditor beneficiary - the promisee owed him a
preexisting debt - the promisee can sue the promisor for the contract
amount OR, if the situation merits it, he can demand specific
performance (e.g., the consideration is a piece of land or a "unique"
item, like an antique).
If the beneficiary is a donee beneficiary, specific performance is
available to the promisee, since the promisee has no money damages
(since he is not indebted to the beneficiary), and as such money
damages would be inadequate.
Note that the promisor cannot be forced to pay twice - either the
beneficiary or the promisee can recover where merited, but not both of
them.
CONTRACTS 8
DISTINGUISHING ASSIGNEES FROM

THIRD PARTY BENEFICIARIES
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8
The rights of third party beneficiaries are

created in the contract;
An assignment involves the subsequent
transfer of rights under a contract.
SALES 1
What are "goods"?
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1
According to UCC § 2-105, goods are "all things which are

moveable at the time of identification to the contract for sale,"
specifically INCLUDING:
1. Specially manufactured goods;
2. Unborn young of animals;
3. Growing crops; and, under § 2-107:
4. Crops and fixtures which can be removed without material
harm to the land; and
5. Timber, minerals, and structures to be removed from land by
the SELLER, not the BUYER.
Goods specifically DO NOT include:
1. "money in which the price is to be paid"
2. "investment securities" (covered by Article 8); and
3. "things in action."
SALES 2
What is a "merchant"?
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2
Essentially, a merchant is one who, by dint of his job,

would appear to know what he's talking about in relation to
a specific transaction. This specialized knowledge can be
as to goods, business practices, or both. According to
UCC § 2-104(1), a merchant is "a person who deals in
goods of the kind OR otherwise holds himself out as
having knowledge or skill peculiar to the practices or
goods involved in the transaction OR to whom such
knowledge or skill may be attributed by his
employment of an agent or broker or other intermediary
who by his occupation holds himself out as having such
knowledge or skill." (emphasis added).
SALES 3
Does the UCC make offers binding without

consideration?
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No - except under certain conditions. Under
UCC § 2-205, an offer can be irrevocable in the
absence of consideration - a "firm offer" - as
long as the offeror is a merchant, the
transaction concerns the sale of goods, and
the assurance not to revoke was embodied in
a "signed writing." (The maximum length of a
"firm offer" is three months; if the parties state a
longer period, it's only valid to three months.)
NOTE: A merchant is one experienced in dealing
with the type of goods involved in the transaction.
SALES 4
What is a "firm offer?"
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4
It is a merchant's offer, irrevocable without

con-sideration (unlike an option, which requires
consideration). Under UCC § 2-205, it is an
offer, in writing and signed, made by a
merchant, with assurances that it will be
irrevocable for a stated time period, or a
reasonable time, if no time period is given. Note
that the period of revocability cannot exceed
three months.
SALES 5
Under the UCC, can a non-merchant make

an offer irrevocable in the absence of
consideration?
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5
No. UCC § 2-205 allows irrevocable offers without
consideration, or "firm offers," only where the
offeror is a merchant and the offer of irrevocability
is made in a "signed writing" (and, naturally, the
offer must involve the sale of goods). Also, the
time period of the "firm offer" is limited to three
months, Therefore, under the UCC, a
non-merchant cannot make an ir-revocable offer.
COMMON LAW RULE: Consideration is required
to create an option.
SALES 6
There are three ways a buyer can accept

goods under the UCC. What are they?
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According to UCC § 2-606(1) buyer can:
1. After a reasonable opportunity to inspect,
convey to seller that the goods are
conforming, OR that he'll keep them in spite of
their non-conformity;
2. Fall to reject the goods effectively, after a
reasonable opportunity to inspect them; or
3. Act Inconsistently with the seller's
ownership (i.e., resell the goods).
MNEMONIC: FRAI CASE (Fail to Reject, Act
Inconsistently, Convey Acceptance to Seller).
SALES 7
Under the UCC, may a contract still be

binding even though one or more terms are
left open?
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7
Yes. Under UCC § 2-204(3), the contract can be
enforced as long as:
1. The parties intended to make a contract
(the more terms that are left open, the less likely
this is); and
2. There is a reasonably certain basis on
which to determine an appropriate remedy.
NOTE: The quality term must be supplied in
order to have an enforceable agreement.
SALES 8
There are two principal changes that Article

2 makes to the common law of
consideration, as it relates to transactions in
goods. What are they?
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8
1. "Firm offers," which are irrevocable offers
made by merchants, in a signed writing, for three
months or less, § 2-205. No consideration is
needed, whereas at common law, as "option
contracts," consideration was required; and
2. Modifications, which can be binding under
the UCC without consideration, pursuant to §
2-209. At common law, under the "preexisting
duty rule," modifications required consideration.
SALES 9
Between merchants, under what

circumstances do additional terms in an
acceptance become part of the contract?
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Under UCC § 2-207, additional terms become part of the contract

unless:
1. MATERIAL ALTERATIONS: They materially alter the terms
of the offer; OR
2. EXPRESSLY LIMITED: The offeror expressly limited
acceptance to the original terms; OR
3. OFFEROR OBJECTS: Offeror has objected to the new terms
already, or does so within a reasonable time after he's received notice
of them.
MNEMONIC: MALE LOON (Material Alterations; Expressly Limited;
Offeror Objects)
NOTE: This only applies to contracts formed by writings, not oral
contracts
NOTE: If one of the parties is a non-merchant, common law rules
apply, there can be no new terms in the acceptance.
SALES 10
What are "output" or "requirements"

contracts?
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10
They are contracts which do not mention a specific

quantity, but measure the quantity by an easily
determinable figure buyer's requirements, or seller's
output, for a given period of time.
UCC PROVISION: § 2-306(1) - A term which measures
the quantity by the output of the seller or the requirements
of the buyer means such actual output or requirements as
may occur in good faith, except that no quantity
unreasonably disproportionate to any stated estimate or in
the absence of a stated estimate to any normal or
otherwise comparable prior output or requirements may
be tendered or demanded."
SALES 11
What elements must appear in a writing to

satisfy the Statute of Frauds in Article 2?
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According to the Official Comment to § 2-201, the writing must:

1. BE EVIDENCE OF CONTRACT- Evidence a contract for the
sale of goods, (i.e., "a basis for believing that the offered oral
evidence rests on a real transaction”);
2. BE SIGNED (i.e., it need only appear on one's letterhead; it
need not be an actual signature. § 1-201(39); AND
3. SHOW QUANTITY: "It must specify a quantity."
MNEMONIC: ESQ. (Evidence; Signed; Quantity)
Note: that price, time and place of payment or delivery, warranties and
quality of goods may all be missing, leaving the contract enforceable
nonetheless – although the more missing terms there are, the less
likely it is the parties intended to be bound.
SALES 12
Can modifications to a contract be binding

under the UCC in the absence of
consideration?
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Yes, under § 2-209, as long as they are

made in good faith. This contrasts with the
common law rule, under which
modifications must be supported by
consideration in accordance with the
“preexisting duty rule.”
SALES 13
Under the UCC, must contract

modifications be in writing to be
enforceable?
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Only "if the contract, as modified, is within
(The Statute of Frauds)
provisions," UCC § 2-209(3), OR the
parties provided in the initial agreement that
modifications must be in writing. §
2-209(2). Otherwise, no writing is
necessary nor is consideration required.
SALES 14
What are the four principal types of

warranties under the UCC?
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1. Express warranties, § 2-213;
2. Warranty of title, § 2-312;
3. Implied warranty of merchantability, § 2-314;
4. Implied warranty of fitness for a particular
purpose, § 2-315.
MNEMONIC: MET FloPPy (Merchantability;
Express; Title, Fitness for a Particular Purpose)
SALES 15
What is the "implied warranty of

merchantability"?
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It is an implied warranty, applicable to
merchants only with respect to goods of the
kind involved in the transaction only, which
provides that the goods must be of
adequate quality, and fit for the ordinary
purpose for which such goods are used. §
2-314(2). Note that the warranty of
merchantability may be disclaimed.
UCC PROVISION: § 2-314(1) and (2).
SALES 16
Under what circumstances does the implied

warranty of fitness for a particular purpose
arise?
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According to UCC § 2-315, the implied warranty of fitness for a
particular purpose is imposed against the seller when he has reason
to know:
1. any particular purpose for which the goods are required, and
2. the buyer is relying on the seller's skill or judgment to select or
furnish suitable goods.
Note: That whether or not the warranty exists is a question of fact to
be determined by the circumstances of the contract. O.C. 1 to §
2-315.
MNEMONIC: PoP JUDGMENT (Particular Purpose; Judgment)
NOTE: The seller need not be a merchant in goods of the kind to be
liable for breach of the "particular purpose" warranty. However, one
who is not normally a merchant in goods of the kind is unlikely to be
held liable for breach because a buyer is unlikely to rely on the "skill
and judgment" of a seller who isn't a merchant in the goods (note,
however, that a nonmerchant could be liable if the particular
circumstances justified it. O.C. 4 to § 2-315),

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Multistate

What standard is applied to determine

Whether or not there is a reasonably certain basis

Does Article 2 of the UCC specifically cover

No - the UCC deals with transactions in

What are the four essential terms of an

Mnemonic: TOPPS (Time; Parties; Price; Subject)

Is a subjective standard used to determine

It is an offer made irrevocable by consideration - i.e., offeree pays

Can offers made in jest ever be the basis of

Yes, as long as a reasonable person would

Does an offer continue until it is expressly

Must the offeror expressly revoke his offer

No. Any act which is inconsistent with the

May an offeror revoke his offer under a

Traditionally, does an offer for a bilateral

Must a statement sufficiently identify the

Does a missing quantity term invalidate a

What are the six ways in which an offer

There are three means of acceptance

If posted properly, by acceptable means,

Is a subjective standard used to determine

How is a unilateral contract accepted?

Under common law, in accepting an offer,

Is a revocation effective when dispatched

What are the two basic elements of valid

1. Legal value (detriment to promisee or benefit to promisor); and

NOTE: The bargain element is the key to consideration. Bargained-

What is an "unconscionable contract"?

What is an "aleatory contract"?

What's the difference between fraud and

If one of the parties to a contract lacks the

Can minors refuse to uphold any contract

Since mutual mistake is a ground for

What's the difference between a contract

A contract implied-in-fact is one where the conduct of the parties and

Does the UCC make offers binding without

Under the UCC, can a non-merchant make

What is the consideration in a unilateral

The promisee's continued performance

As a general rule, does a promise to

Generally not. Consideration requires bargained-for exchange and

Does a moral obligation constitute

No, as a general rule - however, under Restatement (2d) of Contracts section

Are oral contract modifications, without

A "condition" is the occurrence or

How can you tell the difference between a

There are three types of conditions

What is a "condition precedent"?

What is a "concurrent condition"?

What is a "condition subsequent"?

What is a "constructive" (or "implied")

Is substantial performance sufficient to

To what six criteria should you turn to

The Restatement of Contracts sec. 275 looks to these six, to be taken

What is "anticipatory repudiation"?

What are the elements of promissory

Basically, promissory estoppel is a substitute for consideration, to

What's the difference between promissory

The bargain element.

Does the UCC implied requirement of

No. The "good faith" requirement of UCC §

What's the difference between "anticipatory

In anticipatory repudiation, a party refuses