• Applicable Law
• Formation of Contracts
• Terms of Contract
• Performance
• Remedies for Unexcused Nonperformance
• Excuse of Nonperformance
• Third-Party Problems

• Legally enforceable agreement

• Equitable Remedy (Restitution)
• Elements

1. P has conferred a benefit on D (more than detrimental reliance), and
2. P reasonably expected to be paid, and
3. D realized unjust enrichment if P not compensated

• Contract price is not the measure of recovery
• Focus on value of benefit conferred
• The contract price is the ceiling if P is in default

• Offer that is open as to the method of acceptance

• Offer that expressly requires performance as the only possible method of acceptance
• Assume bilateral contract unless:

1. Reward, prize, contest
2. Offer expressly requires performance for acceptance

• "Offer only by" is a signal for unilateral contract on Bar

• Common law of contracts (general case law)
• UCC Article 2 of sales (largely statutory)
• Services contract - common law
• Real estate - common law
• Sale of goods (i.e., tangible, personal property) - UCC Article 2
• Mixed Deal - General Rule: All or Nothing/More Important Part
• Mixed Deal - Exception: If contract divides payment, then apply UCC to sale of goods part and common law to the rest

• Look first for an agreement, then determine whether the agreement is legally enforceable
• In looking for an agreement, watch for info in the question about:

1. "Level One" - the initial communication ("Offer")
2. "Level Two" - what happens after the initial communication ("Termination of the Offer")
3. "Level Three" - who responds and how she responds ("Acceptance")

• General Test: Manifestation of Commitment
• An offer is a manifestation of an intention to contract - words or conduct showing commitment
• The Basic Test: Whether a reasonable person in the position of the offeree would believe that his or her assent creates a contract

• Content of First Communication
• Context of First Communication

• Issue: Is offer required to contain all materials?
• Specific Problems to watch for:
• Missing price term in sales contracts:

1. Sale of Real Estate - Common Law - price and description required or else not an offer
2. Sale of Goods - UCC - no price requirement, but still an offer if parties so intend

• Vague or Ambiguous Material Terms not an offer under either common law or UCC
• Requirements Contracts/Output Contracts:

1. A contract for the sale of goods can state the quantity of goods to be delivered  under the contract in terms of the buyer's requirements or seller's output in terms of exclusivity (look for "requirements" "all" "only" "sole/solely")
2. Not unreasonable Disproportionate Limitation on Increases
3. Rule: Buyer can increase requirements so long as the increase in in line with prior demands

• General Rule: An advertisement is not an offer, merely an invitation to deal
• Exceptions:

1. An advertisement can be an offer if it is the nature of a reward
2. An advertisement can be an offer if it is specific as to quantity and expressly indicates who can accept

• An offer cannot be accepted if it has terminated, an offer that has been terminated is "dead"
• Four Methods of Termination:

1. Lapse of Time - Time stated or reasonable time
2. Words or Conduct of Offeror; i.e., Revocation of an offer (only offeror can revoke, offeree can reject)
3. Words or Conduct of Offeree - Rejection
4. Death of a Party Prior to Acceptance

1. Unambiguous statement by offeror to offeree of unwillingness or inability to contract, or
2. Unambiguous conduct by offeror indicating an unwillingness or inability to contract that offeree is aware of

• Both parties must know about the revocation

1. Revocation of an offer sent through mail is not effective until received
2. An offer cannot be revoked after it has been accepted

• Generally offers can be freely revoked by the offeror, but there are 4 situations in which an offer cannot be revoked:

1. An offer cannot be revoked if the offeror has (i) promised to keep the offer open AND (ii) promise is supported by consideration ("option" contract)
2. Merchant Firm Offer Rule: An offer cannot be revoked for up to 3 months if (i) offer to buy or sell goods, (ii) signed, written promise to keep the offer open, and (iii) party is a merchant. (Merchant is generally a person in business)
3. Reliance: An offer cannot be revoked if there has been detrimental reliance by the offeree that is reasonably foreseeable
4. The start of performance pursuant to an offer to enter into a unilateral contract makes that offer irrevocable for a reasonable time to complete performance. Need performance, mere preparation is not enough.

• Three Methods of Indirect Rejection:

1. Counteroffer
2. Conditional Acceptance
3. Additional Terms to a Common Law Contract: "Mirror Image Rule"

• Counteroffer terminates the offer and becomes a new offer
• Where a counteroffer has been made, there is no express contract unless that counteroffer itself has been accepted
• Counteroffers need to be distinguished from bargaining
• Bargaining does not terminate the offer

• A conditional acceptance operates the same way as a counteroffer
• It terminates the offer and becomes a new offer
• Look for phrases such as "if" "but" "provided" "so long as" "on condition that"

Additional Terms to a Common Law Contract:

"Mirror Image Rule"

• Under common law, an "acceptance" that adds new terms is treated like a counteroffer rather than an acceptance
• This rule applies to common law only, not UCC

• When there is (i) offer to buy or sell goods and (ii) a response with additional terms raises two separate questions: 1) Is there a contract? and 2) Is additional term part of the contract
• Under the UCC, a response to an offer that adds new terms (but does not make the new terms a condition of acceptance), is generally treated as an acceptance; generally a "seasonable expression of acceptance"
• Look to see whether both parties are merchants, if so:
• General Rule: The additional term is part of the contract
• Exceptions:

1. The additional term is NOT a part of the contract between merchants if it materially changes the offer
2. The additional term is NOT a part of the contract between merchants if the offeror objects to the change

• If one or both parties is not a merchant, the additional term is merely a proposal that is to be separately accepted or rejected

• General Rule: Death of incapacity of either party terminates the offer
• Exceptions:

1. Option
2. Part Performance of offer to enter into unilateral contract

• Who Can Accept?
• Methods of Accepting an Offer (6 fact patterns):

1. If the offeree fully performs
2. If the offeree starts to perform
3. The offeree promises to perform
4. The offeror and the offeree are at different places and there are conflicting communications
5. Seller of Goods sends wrong Goods
6. The offeree is silent

• Generally an offer can only be accepted by:

1. A person who knows about the offer; and
2. Who is the person to whom it was made

• Offers cannot be assigned; however, options can be assigned unless the option otherwise provides

• Only possible issue is whether notice of performance is required
• Answer to that question turns on:

1. What offer provides, and
2. Whether offeree has reason to believe that offeror will not learn of that acceptance

• General Rule: Start of performance is acceptance of an offer to enter into a bilateral contract but is not acceptance of an offer to enter into a unilateral contract
• Bilateral - Offer is open as method of acceptance so start of performance is acceptance
• Unilateral - Offers require "performance" for acceptance.  "Performance" means completion of performance.  Start of performance is not acceptance; completion of performance is required.

• Most offers can be accepted by a promise to perform
• Offers that expressly require performance for acceptance and reward offers require performance

• Mail Box Rule: If an offeree is "invited" to accept by mail, acceptance is effective when posted
• Three Rules to Remember:

1. Generally, communications are effective only when received
2. Generally, Acceptance is effective when SENT
3. If Rejection is received first, ignore Rule 2

• General Rule: Acceptance and Breach
• Accommodation (i.e., Explanation) Exception: Counteroffer and no Breach

• General Rule: Silence is not Acceptance
• Exception: If custom indicates silent acceptance is reasonable, or offeree words or conduct agrees that silence is acceptance then silence IS Acceptance

• Bargained-for legal detriment, always person specific
• Forms of Consideration:

1. Performance
2. Forbearance
3. Promise to Perform
4. Promise to Forbear

1. "Bargained For" - Asked for by the promisor in exchange for her promise
2. "Legal Detriment" - Giving up something you can legally do
3. Promise (Alone) as Consideration - If both parties make a promise acts as consideration for the other party's promise then consideration. If one party promises and the other doesn't (illusory promise), no consideration.
4. Adequacy of Consideration - Not relevant
5. "Past Consideration"
6. "Preexisting contractual or statutory duty rule"
7. Part Payment as Consideration for Release

• General Rule: Past consideration is not consideration
• Exception: Expressly requested and expectation of payment

"Preexisting Contractual or Statutory Duty Rule"

(Common Law Different from UCC)

• Common Law General Rule: Doing what you are already legally obligated to do is not consideration for a promise to pay more to do merely that. You need new consideration to modify contract governed by law. Also called Preexisting Duty Rule.
• Exception 1: Addition to or Change in Performance
• Exception 2: Unforeseen Circumstances: Under MBE/Restatement View, no consideration is fair and equitable in view of unforeseen circumstances. Under traditional view, the unforeseen difficulty must rise to the level of impracticability.
• Exception 3: Third Party promises to pay
• UCC: Does not have preexisting duty rule; Good faith is the test for changes in an existing sale of goods contracts

• Promise to forgive payment of debt
• Key is whether debt is due and undisputed
• If debt is due and undisputed, then payment is not consideration for the release
• If debt is not due, agreed upon part payment is consideration for the release

• A written promise to satisfy an obligation for which there is legal defense is enforceable without consideration
• Ex: If SoF has run, but person in debt agrees in writing to pay part of the debt anyway, that promise is enforceable even though there is no consideration

• Elements:

1. Promise
2. Reliance that is reasonable, detrimental, and foreseeable
3. Enforcement necessary to prevent injustice

• Infant - under 18
• Mental Incompetents - lacks ability to understand agreement
• Intoxicated persons if other party has reason to know

1. Right to Disaffirm by person without capacity
2. Implied affirmation by retaining Benefits after gaining capacity
3. Liability for Necessaries: A person who does not have capacity is legally obligated to pay for things that are necessary such as food, clothing, medical care, or shelter but that liability is based on quasi-contract law, not contract law

• Statute of Frauds is a statute(s) designed to prevent fraudulent claims - more specifically to make it harder to make a false claim that there is a contract
• SoF makes it harder to make such a false or fraudulent claim by requiring "special" proof that a contract exists
• Three Primary SoF Issues:

1. Is the contract within the SoF?
2. If so, is the SoF satisfied?
3. Is there a SoF Defense?

• The SoF does not cover all contracts
• At c/l , five kinds of contracts were covered ("within') by the SoF
• The UCC brings an additional kind of contract "within" the SoF

• The SoF is evidentiary
• The SoF requirement of "special" proof that the alleged agreement is made is generally satisfied by either performance or by writing

• The SoF is a defense to enforcement of the agreement that is within that statute is the statute is not satisfied

• Promise in Consideration of Marriage - Not merely a promise to marry but rather a promise to do something or refrain from doing something if we marry
• Promise by Executor or Administrator to Pay Obligation of Estate from His Own Funds - Not merely a promise to pay the estate's expenses but rather a promise to pay the estate's expenses from other funds
• Promises to Answer for the Debts of Another (Suretyship Promises) - Not merely a promise to pay but rather a promise to pay if someone else does not, i.e., a guarantee

1. Main Purpose Exception: If the main purpose or leading object of the promisor is to serve a pecuniary interest of his own, the contract is not within the SoF even though the effect is still to pay the debt of another

• Service Contract not Capable of Being Performed within 1 year from Time of Contract:

1. Specific time period more than 1 year - SoF applies
2. Specific time, more than 1 year from date of contract - SoF applies
3. Task (nothing said about time) - SoF does not apply; ignore what actually happens, key is what might have happened with unlimited resources
4. Lifetime Contract - SoF does not apply

• Transfers of Interest in Real Estate of a Term of More than 1 year
• Sale of Goods for $500+ (UCC)

• Performance - SoF can be satisfied by performance. The rules for satisfaction of the SoF by performance vary depending on whether the contract is a:

1. Services Contract
2. Goods Contract
3. Real Estate Transfer Contract

• Full performance by either party satisfies the SoF
• Part performance of a services contract does not satisfy the SoF

• Ordinary Goods:
• General Rule: Part performance of a contract for the sale of goods satisfies the SoF but only to the extent of the part performance
• Specially Manufactured Goods Exception: If the contract is for a sale of goods that are to be specifically manufactured, then the SoF is satisfied as soon as the seller makes a "substantial beginning" of making or obtaining the goods

• "Part Performance" by the buyer of real estate can satisfy the statute
• Part Performance is generally 2 of the following 3:

1. Payment (full or partial);
2. Possession; and/or
3. Improvements

• Full payment by buyer of real estate does not satisfy the statute (still need possession or improvements)

• Look at:

1. The contents of the writing OR WRITINGS - All Material Terms Test (answer questions who and what); and
2. Who signed the writing - signed by the person to charged, i.e., the defendant

• Look to the terms of the writing(s) and who signed the writing
• The writing must contain a quantity term
• Generally, the writing must be signed by the person to be charged
• UCC Exception (Merchant Confirmatory Memorandum Rule): Both parties must be merchants and the person who receives a signed writing with a quantity term that claims there is a contract fails to respond within 10 days of receipt

• Issue is when does a person need a written authorization in order to execute a contract for someone else
• The authorization must be in writing if the contract to be signed is within the SoF, i.e., the authorization must be of "equal dignity"

• When is there a legal requirement of a written evidence of a contract modification? Resolve this issue by:

1. Looking at the deal with the alleged change; and
2. Determining whether the deal with the alleged change would be written within the SoF; if so, as a matter of law, the alleged modification agreement must be in writing

• Under c/l contract provisions requiring all modifications be in writing are ignored
• Under the UCC contract provisions requiring written modifications are effective unless waived

• If the subject matter is illegal, the contract is VOID
• If the subject matter is legal but the purpose is illegal, the agreement is enforceable only by the person who did not know of the illegal purpose

• A false assertion of fact (S tells B house has no termite damage when it does) or concealment of facts (S puts carpet over termite damage)
• No requirement of fraud

• Physical or Economic, but Economic more typical
• Elements of Economic Duress:

1. "Bad guy" - proper threat
2. "Vulnerable guy" - no reasonable alternative

• Originally only applicable to sale of goods but:

1. Now a part of contracts law generally
2. Empowers a court to refuse to enforce all or part of an agreement

• Two Basic Tests:

1. Unfair surprise and oppressive terms, are
2. Tested as of the time the agreement was made* by the court (*Bar favorite: long term contract that now looks one-sided is unconscionable)

• There will be no contract if:

1. Parties use a material term that is open to at least two reasonable interpretations, and
2. Each party attaches different meanings to the term, and
3. Neither party knows or has reason to know the term is open to at least two reasonable interpretations

• There will be no contract if:

1. Both parties mistaken, and
2. Basic assumption of fact, and
3. Materially affects the agreed exchange

• Key is whether the agreed upon subject matter exists
• Mutual mistake as to what it is, i.e., existence of subject matter, means the agreement is not legally enforceable
• If mutual mistake is merely what it is worth, then the agreement is still legally enforceable

• General Rule: Generally, courts have been reluctant to allow a party to avoid a contract for a mistake made by only one party
• Exceptions:

1. "Palpable" (Obvious) Mistakes - If the other party to the contract knows or should have known of the mistake, courts grant relief to the mistaken party; or
2. Mistakes discovered before significant reliance by the other party

• Look for info about words used by people making the contract, particularly info about words in the last written version of the deal

• "Rule" of contract law, not evidence
• Importance of written contract as source of complete terms, exclusionary effect of written contract on earlier (or contemporaneous) agreements as a possible source of terms of the contract
• Final writing supersedes prior negotiations or agreements

• Integration - Written agreement that court finds is the final agreement, triggers the parol evidence rule
• Partial Integration - Written and final, but not complete (probably wrong answer choice on Bar)
• Complete Integration - Written and final and complete (probably wrong answer on Bar)
• Merger Clause - Contract clause such as "This is the complete and final agreement"

1. Parol Evidence is limited to the words of the parties
2. Parol Evidence can be oral or written
3. Parol evidence comes in before the integration, i.e., the writing

1. Changing the Written Deal
2. Establishing a Defense to Enforcement of the Written Deal
3. Explaining Terms in the Written Deal
4. Adding to the Written Deal

• General Rule: Regardless of whether the writing is complete or partial integration, the parol evidence rule prevents a court from considering earlier agreements as a source of terms that are inconsistent with the terms of the written contract
• Exception: A court may consider evidence of such terms for the limited purpose of determining whether there was a mistake in integration

• Regardless of whether the writing is a complete or partial integration, the parol evidence rule does not prevent a court from considering earlier words of the parties for the limited purpose of determining whether there is a defense to the enforcement of the agreement such as fraud, misrepresentation, duress

• Notwithstanding the parol evidence rule, earlier agreements can be considered to resolve ambiguities in the written contract

• The parol evidence rule prevents a court from considering earlier agreements as a source of consistent, additional terms unless the court finds that the written agreement was only a partial integration

• If "oral" think about SoF
• Need written integration before can do Parol Evidence Rule analysis

• The words of the parties are not the only source of the contract term
• Courts look also to course of performance, then to course of dealing, then to trade custom and usage to explain words in contracts or to fill gaps in contracts

1. Course of Performance - same people, same contract
2. Course of Dealing - same people, different but similar contract
3. Custom and Usage - different but similar people, different but similar contract

• Delivery Obligations of Seller of Goods
• Risk of Loss
• Warranties of Quality
• Contractual Limitations on Warranty Liability

• Usually not worried about actual delivery on Bar
• Two Situations:

1. No place of delivery has been agreed upon
2. Place of delivery by a common carrier has been agreed upon

• Absent an agreement as to place of delivery, then the place of delivery is the seller's place of business unless both parties know that the goods are some place else, in which case that place is the place of delivery

• If there is an agreement as to place of delivery by common carrier, then the question is 'what does the seller have to do to complete its delivery obligation?'
• Two possible answers:

1. Shipment Contracts - Seller completes its delivery obligation when it (i) gets the goods to a common carrier, and (ii) makes a reasonable arrangement for delivery, and (iii) notifies the buyer
2. Destination Contracts - The seller does not complete its delivery obligation until the goods arrive where the buyer is

• Most contracts with delivery obligations are shipment contracts
• Watch for the use of FOB - free on board (city name) - as a source determining whether the contract is a shipment or destination contract
• FOB followed by city where the seller is means shipping contract
• FOB followed by any other city means destination contract

• Risk of Loss issues arise where:

1. After the contract has been formed but before the buyer receives the goods,
2. The goods are damaged or destroyed, and
3. Neither the buyer nor the seller is to blame

• If the risk of loss is on the buyer, he has to pay the full contract price for the lost or damaged goods
• If the seller has the risk of loss, no obligation on the buyer; possible liability on seller for nondelivery

1. Agreement allocates risk (not likely on Bar) - agreement of the parties controls
2. Breach - Breaching party is liable for any uninsured loss even though the breach in unrelated to the problem
3. Delivery by Common Carrier other than Seller - Risk of loss shifts from seller to buyer at the time the seller completes its delivery obligations
4. No Agreement Allocating Risk, no Breach, no Delivery by a Carrier - Determining factor is whether the seller is a merchant.  Whether the buyer is a merchant is irrelevant.  Risk of loss shifts from a merchant-seller to the buyer on the buyer's "receipt" of the goods; risk of loss shifts from the non-merchant seller when he "tenders" the goods

• Express Warranty
• Implied Warrant of Merchantability
• Implied Warranty of Fitness for a Particular Purpose

• Look for words that promise, describe, or state facts
• Distinguish from sales talk which is more general, an opinion

• When any person buys any goods from any merchant, a term is automatically added to the contract by operation of law - that the goods are fit for the ordinary purpose for which such goods are used
• Triggering Fact: Seller is a merchant (which here means it deals in goods of that kind)
• Warranty: Goods are fit for ordinary purposes

• Triggering Facts:

1. Buyer has a particular purpose;
2. Buyer is relying on seller to select suitable goods;
3. Seller has reason to know of purpose and reliance

• Warranty: Goods fit for that particular purpose

1. Disclaimer (e.g., "there are no warranties")
2. Limitation of Remedies

• Eliminates implied warranties
• Express warranties cannot be disclaimed
• Implied Warranties of Merchantability and Fitness can be disclaimed"

1. "As is" or "with all faults", or
2. Conspicuous language of disclaimer, mentioning Merchantability (so written that a reasonable person would notice it)

• Does not eliminate warranty, simply limits or sets recovery for any breach of warranty
• It is possible to limit remedies even for express warranties
• General Test is unconscionability
• Prima Facie unconscionable if breach of warranty on consumer goods causes personal injury

• Common Law Performance Concept - Look to Terms of Contract
• Sale of Goods Performance Concepts - Goods Concepts; Payment Concepts
• 6 Goods Concepts:

1. Perfect Tender Rule
2. Rejection of the Goods
3. Cure
4. Installment Sales Contracts
5. Acceptance of the Goods
6. Revocation of Acceptance of the Goods

• "Perfect Tender" is the general standard of UCC
• Subject to limited exceptions, the seller is obligated to deliver perfect goods

• General Rules:

1. If the goods are less than perfect, the buyer has the option to reject unless cure or an installment sales contract
2. Rejection of the goods must occur before acceptance of the goods (must notify seller of rejection and give reason why)

• In some instances, a seller who fails to make a perfect tender will be given a "second chance," an option of curing
• Note: Every seller does not have the opportunity to "cure," and that the buyer cannot compel the seller to cure

1. Time for Performance has Expired

• In very limited situations, a seller has the option of curing even after the contract delivery date
• Statutory Test: Whether the seller has reasonable grounds for believing that the improper tender would be acceptable, perhaps with a money allowance
• Look for info in the question about prior deals between that buyer and seller with such an allowance

2. Time for Performance has not yet expired

• Substantial Impairment Rule, no Perfect Tender Rule
• An installment sales contract requires or authorizes   (i) delivery in separate lots (ii) to be separately accepted
• Buyer has the right to reject an installment only where there is a substantial impairment in that installment that can't be cured

• Effect of Acceptance of the Goods - If the buyer accepts the goods, it cannot later reject them
• When has the buyer accepted

1. Express Acceptance
2. Payment without opportunity for inspection not Acceptance
3. Implied Acceptance - Retention after opportunity for inspection without objection

• Look for the buyer keeping goods without objection

• Nonmonetary Remedies:

1. Specific Performance/Injunction
2. Reformation
3. Reclamation
4. Rights of Good Faith Purchaser in Entrustment

• Money Damages for Breach of Contract

• General Rule: Courts reluctant to grant equitable remedy of SP.  Historically, equitable remedies are available only if legal remedy is inadequate. 
• Secondly, judicial administration of SP decree would be difficult (but courts are now more open to granting SP)

1. Contracts for Sale of Real Estate
2. Contract for Sale of Goods - Unique Goods: (antiques, art, custom-made) or other appropriate circumstances
3. Contract for Services - No SP, possible injunctive relief

1. Nature of Remedy

• Equitable Remedy: court changes (reforms) the contract
• Courts and Bar examiners are slow to go with reformation

2. Facts to Watch for

• Mistake in Writing the Agreement (omissions, clerical errors, etc.):
• People make an agreement and then do not correctly express the agreement in writing
• Look for problems in the wording of the written agreement
• Fraudulent Misrepresentation as to what is in the Agreement:
• Reformation is also available when one party's mistake about what is in the writing is due to the other party's fraudulent misrepresentation

• Right of an unpaid seller to get its goods back
• Always for credit sales
• Key Facts:

1. The buyer must have been insolvent at the time that it received the goods, and
2. That seller demand return goods within 10 days of receipt (this "10 Day Rule" becomes a "Reasonable Time Rule" if before delivery there had been an express representation of solvency by the buyer), and
3. Buyer still has goods at time of demand

• If an owner leaves her goods with a person who sells goods of that kind and that person wrongfully sells the goods to a third party, then such a good faith purchaser from dealer cuts off rights of the original owner/entruster

• Purpose: Compensate plaintiff, not punish defendant
• Measure of Damages:

1. General Rule: Expectation interest (Benefit of the Bargain Method); put plaintiff in same economic position as if contract had been performed
2. Another Approach - Reliance Interest: Put plaintiff in same economic position as if contract had never happened
3. Another Approach - Restitution Interest: Put defendant in same economic position as if contract had never happened (prevent Unjust Enrichment)

• Article 2 Section 7, reflects general contract damages policy of putting innocent party where it would have been had contract not been performed
• Two relevant facts: (1) who breached, and (2) who has the goods
• 4 basic Article 2 damages fact patterns and 4 sets of rules:

1. Seller breaches, Buyer keeps the goods

• Rule: FMV if perfect minus FMV as delivered

2. Seller breaches, Seller keeps the goods

• Rule: Market price at time of discovery of the breach minus the contract price OR Replacement price minus contract price

3. Buyer breaches, Buyer has the goods

• Rule: Seller gets contract price

4. Buyer breaches, Seller has the goods

• Rule: Contract price minus market price at time and place of delivery OR contract price minus resale price
• In some situations, provable lost profits

1. Plus Incidental Damages - Costs incurred in dealing with breach are always recoverable
2. Plus Foreseeable Consequential (Special) Damages - Damages arising from P's special circumstances; recoverable only if D had reason to know at time of contract
3. Less Avoidable Damages - No recovery damages that could have been avoided without undue burden on P. Burdens of pleading and proof on D.
4. Certainty Limitation - Reasonable certainty: Damages can't be "speculative"

1. Liquidated Damages

• Look for contract provision fixing amount of damages
• Issue will be validity
• Concern is whether provision is too high (a penalty)
• Test for Enforceability:

1. Damages were difficult to forecast at time contract was made, and
2. Provision is a reasonable forecast

2. Limitation of Remedies

• Look for contract provision limiting amount that can be recoverd
• Concern is whether provision is too low

• Look for info of:

1. Nonperformance of contract, and
2. Something happening after contract

• Common Law Material Breach Rule (3 general rules):

1. Damages can be recovered for any breach (expectation interest)
2. Only a material breach by one guy excuses the other guy from performing (undermines substantial benefit of bargain)
3. Whether a breach is material is a fact question (whether a breach is material not likely Bar question)

• Divisible Contract Exception: If a contract is divisible and a party performs one of the units in the contract, he is entitled to the agreed-on equivalent for that unit even if he fails to perform the other units
• Three tests must be concurrently satisfied to make a contract divisible:

1. The performance of each party is divided into two or more parts under the contract;
2. The number of parts due from each party is the same; and
3. The performance of each part by one party is agreed on as the equivalent of the corresponding part from the other party, i.e., each performance is the quid pro quo of the other

• Article 2 and the Perfect Tender Rule again

• Performance Condition: A condition is a mutually agreed upon promise modifier. It's language in a contract - not merely language to in response to an offer - that does not create a new obligation, but merely limits obligations created by other language in the contract
• Identifying a Contract Provision as an Express Condition: Express conditions are created by language of the contract
• Watch for words such as "if" "provided that" "so long as" "subject to" "in the event that" "unless" "when" "until" and "on condition that"
• Most contracts and Bar fact patterns do not have express conditions

• General Rule: Strict compliance with express conditions
• Reasonable Person Exception: Condition based on approval of one of the contracting parties is treated as satisfied if a reasonable person would approve, unless subject is art or other matters that are inherently discretionary

1. Estoppel

• Identify the person who benefits from or is protected by the condition
• Then look for a statement by that person giving up the benefits and protection of the condition
• Estoppel is based on a statement by the person protected by the condition before the conditioning event was to occur and requires a change of position

2. Waiver

• Based on a statement by the person protected by the condition after the conditioning event was to occur and does not require a change of position
• If one party does not satisfy a condition but the other party says she will pay anyway, this is waiver not estoppel

1. Anticipatory Repudiation:

• An unambiguous statement (i) that the repudiating party will not perform (ii) made prior to the time performance was due (early statement of breach)
• AR by one party excuses other party's duty to perform
• It also generally gives rise to an immediate claim for damages for breach
• BUT: AR can be retracted so long as there has not been a material change in position by the other party
• If the repudiation is timely retracted, the duty to perform is reimposed but performance can be delayed until adequate assurance provided

2. Inability to Perform

1. Rescission
2. Accord and Satisfaction
3. Modification
4. Novation

• The key is whether performance is still remaining from each of the contract parties (executory)

• Accord: An agreement by the parties to an already existing obligation to accept a different performance in satisfaction of the existing obligation
• Satisfaction: That different performance
• Effect of Accord and Satisfaction: If the accord is not performed, then the other party can sue on either the original obligation or the accord

• An agreement by parties to an existing obligation to accept a different agreement in satisfaction of the existing obligation

• Novation: An agreement between both parties to an existing contract for the substitution of a new party, i.e., same performance, different party
• Who is Liable after a Novation: Novation excuses the contracted performance of the party who is substituted for or replaced
• How Delegation is different from Novation:

1. Novation requires the agreement of both parties to the original contract and excuses the person replaced from any liability for nonperformance
2. Delegation does not require the agreement of both parties and does not excuse

• Performance of contractual duties (other than contractual duty to pay money) can be excuse under impossibility, impracticability, or frustration of purpose

1. Something that happens after contract formation but before the completion of contract performance; and
2. That was unforeseen; and
3. That makes performance impossible or commercially impracticable or frustrates the purpose of performance

• Possible differences between impossibility and impracticability include:

1. Former is objective/latter subjective
2. Former means can't be done while latter means can only be done with extreme and unreasonable difficulty and expense

1. Seller's risk of loss and damage or destruction
2. Buyer's risk of loss and damage or destruction

• *See examples 205-209 on pg. 63 of Handout*

1. Party to contract who is a "special" person
2. Person not party to the contract
3. Party to the contract but not a "special" person

• *See examples 210-212 on pg. 64 of Handout*

1. Later law makes performance of contract illegal - excuse by impossibility
2. Later law (or other event) makes mutually understood purpose of contract illegal - excuse by frustration of purpose

• Need to know about third party beneficiaries, assignments of contract rights, and delegation of contractual duties
• Identifying Third Party Beneficiary Problems: Look for two parties contracting with the express intent of benefiting a third party

1. Third Party Beneficiary: Not a party to the contract. Able to enforce contract others made for her benefit
2. Promisor - Look for a person who is making the promise that benefits the third party
3. Promisee - Look for a person who obtains the promise that benefits the third party
4. Intended vs. Incidental - Only intended beneficiary has contract rights, if Third Party's name is mentioned in contract, treat as intended Third Party Beneficiary

• Intended beneficiaries are either donees or creditors, usually donees
• Look at whether beneficiary was a creditor of the promisee

• Test: Whether the third party knows of and has relied on or assented as requested
• If so, her rights have vested and the contract cannot be canceled or modified without her consent unless the contract otherwise provides

1. Beneficiary can sue promisor directly
2. Promisee can sue promisor directly
3. Donee beneficiary cannot sue promisee but creditor beneficiary can sue promisee on pre-existing debt

• Defenses:

• Assignment: Transfer of rights under a contract in two separate steps:

1. Contract between only two parties; and
2. One of the party's later transfer of rights under that contract to a third party

• Vocabulary:

1. Assignor: Party to the contract who later transfers rights under the contract to another
2. Assignee: Not a party to the contract; able to enforce the contract because of the assignment
3. Obligor: Other party to the contract

• Two types of Contract Provisions
• Determine whether contract (1) "prohibits" assignments, or (2) "invalidates" assignments

1. Prohibition: Language of a prohibition takes away the right to assign but not the power to assign, which means that the assignor is liable for breach of contract but an assignee who does not know of the prohibition can still enforce the assignment
2. Invalidation: Language of invalidation takes away both the right to assign and the power to assign, so there is no breach by the assignor and no rights in the assignee

• Even if a contract does not in any way limit the right to assign, c/l bars an assignment that substantially changes the duties of the obligor

1. Assignments of Right to Payment
2. Assignments of Other Performance Rights

• *See examples on pg. 69 of Handout*

1. Watch for language of present assignment
2. Consideration is not required

• *See examples on pg. 70 of Handout*

1. Assignee can sue the obligor
2. Obligor has same defenses against assignee as it would have against assignor
3. Payment by obligor to assignor is effective until obligor knows of assignment

• General Rule: Last assignee wins
• It is possible to make a gratuitous assignment
• Generally, such a gift assignment can be freely revoked
• Revocation can be accomplished directly or indirectly by bankruptcy, death, the assignor taking performance directly from the obligor, or the making of another assignment
• Since a later gift assignment revokes an earlier gift assignment, the general rule for resolving claims among assignees who did not provide consideration is a last in time rule

• General Rule: First assignee for consideration wins
• Very Limited Exception: A subsequent assignee takes priority over an earlier assignee for value only if he both (i) does not know of the earlier assignment and (ii) is the first to obtain payment, a judgment, a novation, or indicia of ownership
• Multiple Assignments for Consideration as Breach of Warranty: In an assignment for consideration, the assignor makes a warranty that the rights assigned are assignable and enforceable

1. Delegation: Party to a contract transferring work under that contract to a third party
2. Relationship of Assignment and Delegation:

• A contract creates both rights and duties
• Assignment is the transfer by a third party to a contract of his rights or benefits under the contract to a third party who was not a party to the contract
• Delegation is the transfer by a party to a contract of his duties or burdens under the contract to a third party who was not a party to the contract
• Often a contracting party makes both an assignment and a delegation of his rights and duties under the contract to a third party
• Often examiners use the term "assignment" in a problem involving an assignment and a delegation, and even in a problem only involving a delegation

• Generally contractual duties are delegable
• The limitations on delegation are very limited
• Delegations are permitted unless either:

1. Contract prohibits delegations or prohibits assignments, or
2. Contract calls for very special skills, or
3. Person to perform contract has very special reputation

1. Delegating party always remains liable
2. Delegatee liable only if she receives consideration from delegating party