Commitment, communicated to an identified offeree, with certain and definite terms.

A. Commitment: Listening to the language and considering the circumstances, would a reasonable person believe the speaker intended to enter into a K?

1. Advertising: is usually an invitation to receive offers, but offer where specific as to quantity and indicates who can accept.

B. Communicated to an identified offerree, which is effective on receipt.

1. Rewards: do not have to identify specific offeree

C. Certain and definite terms

1. Land: property and price

2. Goods: must describe quantity and goods involved.

a. do not have to state specific quantity if it calls for all seller's output or all buyer requires.

3. Service Ks: duration and nature of services.

a. Duration does not have to be included but K is then terminable at will.

4. Vague or ambiguous Terms = No offer because no commitment.

A. Merchant's Firm offer 

1. Offer cannot be revoked if made by merchant, is in writing, is signed and says it will be held open for some period or indefinitely (90 day limit)

B. Enforceable options contracts

1. There is an enforceable option contract if offeree gives consideration to the offeror to keep the offer open.

C. Offeree foreseeably relies on offer

* Sub-contractor offers to general contractor to work on construction project. GC uses sub's offer in making bid to developer. Developer accepts bid. Before general accepts sub's bid, sub tries to revoke. GC can still accept.

D. Offer to make unilateral K if performance has begun.

1. Divisible K's can be revoked after divisible part/s have been preformed. 1. Performance of each party is divided into two or more parts. 2. numbers of parts on each side is the same. 3. each part of the performance by one party has corresponding part in the other party's performance.

*Indifferent offer to sell land or offers seeking services can only be accepted by express promise, unless it is an offer for a reward.

1. Revocation: offeror can revoke expressly (if offeror says anything that puts commitment in doubt) or by conduct (does something inconsistent with maintenance of offer). Effective on receipt.

2. Rejection: Offeree indicates intent not to accept either expressly, via counter-offer, or by conduct (lets offer lapse by stated deadline or within a reasonable time). effective on receipt.

3. Operation of law.

a. Illegality prevents performance of promise in offer.

b. Death, destruction, or incapacity of the subject matter of the offer/offeror/offeree.

1. Exception: unless the contract is irrevocable during that time.

1. Express Acceptance of a bilateral contract (commitment, communicated by proper method, at the right time)

a. Commitment same as offer

b. Proper method.

1. if an offer requires use of a particular method of acceptance, use of any other method is a counter-offer

2. If offer suggests a method, can use suggested method or different reasonable method.

3. If no suggestion, may use same method used for offer or different reasonable method.

c. Mailbox Rule makes acceptance effective on delivery if offeree uses proper method, unless exception:

1. offer says it doesn't apply

2. offeror suggests method of acceptance and different but reasonable method is used.

3. If offer is pursuant to an options K

4. If offeree dispatches acceptance, then sends rejection.

5. Offeree sends rejection first and then acceptance.

2. Acceptance by conduct.

a. if offer states that assent may be communicated through conduct.

3. Acceptance by silence.

a. Offeree can suggest it as a method or where there is a course of dealing between the parties that creates a duty on offeree to object if he doesn't accept., but offeror cannot.

4. Where bilateral K can be formed by beginning performance, offeree must give notice of the beginning within reasonable time if offeror would not otherwise be aware of the beginning. 

5. UCC acceptance of bilateral K

a. By beginning ANY performance

1. Must give offeror notice if performance will take time (i.e. shipment).

2. Sending non-conforming goods is acceptance (but also a breach) unless seller clearly indicates goods are sent merely as an accomodation.

a. IF non-conforming, buyer can accept all, reject all, or accept parts.

b. If seller sends accomodation note, then it is treated as a C-O only, and buyer can either accept all or reject all.

1. Acceptance requires complete performance that a reasonable person would believed is called for in the offer.

*Compare to bilateral contract that allows performance (acceptance occurs when performance has begun)

a. Once performance has been completed, notice of completion may be necessary to make acceptance effective if offer requires it or offeror would not otherwise be aware of completion.

1. Common Law: acceptance must mirror offer exactly. ANY change is a c-o

a. However, once c-o has been made, performance is considered acceptance of c-o.

2. UCC Battle of the Forms: reply to an offer for sale or purchase of goods which changes or adds terms of the offer is an effective acceptance unless:

a. Seller sends nonconforming goods indicating it is being done as an accommodation.

b. There is no expression of acceptance.

c. words of acceptance expressly conditioned on the original offeror agreeing to accept new and different terms

d. If none of the above apply, there has been an acceptance with the following terms:

a. K contains all terms common to both offer and acceptance.

b. If the offeror or offeree are NOT both merchants, new or different terms from acceptance are part of K only if offeror agrees.

c. If parties are both merchants, new terms will be a part of K unless a. offer stated to the contrary, b. terms are a material alteration, c. offeror objects within reasonable time.

d. if parties are both merchants, different terms will be treated like a. additional terms (apply rules above) or b. Conflicting terms will be knocked out and gap-filled with UCC gap fillers.

*Under UCC, language that turns acceptance into a C-O will create K upon the other person's performance, but not based on the C-O (conflicting terms are knocked out).

1. Promise to pay for past work is not enforceable unless there was an expectation of payment or SOL on debt has passed but debtor has renewed promise to pay (to extent of renewed promise)

*AZ requires promise to pay a debt barred by SOL to be in writing and signed by debtor

2. Promise must demand legal detriment from the promisee (bind them to something they are not legally obligated to do or keep them from doing something they are legally allowed to do)

a. Pre-existing duty rule: Promise to perform something one already was obligated to do is not consideration (unless discharged from it).

1. if there is a good faith dispute over preexisting duties, any settlement within the range of dispute is enforceable.

3. Ks must not be illusory.

a. However, requirements Ks are acceptable and not illusory because they require reasonableness and good faith.

4. Promises subject to a condition of satisfaction.

a. If subject of promise is subjective, promisor must act in good faith.

b. if subject of of promise is not a matter of taste (subjective), work must be reasonably satisfactory (objective)

5. Consideration substitutes

a. UCC

1. Merchant's firm offer

2. Modifications of an existing K need no consideration (no pre-existing duty rule under UCC).

b. Common law

1. AZ says if K is in writing, then presumption that K is supported by consideration.

2. Promissory estoppel: a promise is enforceable when it induces determental, reasonable, and foreseeable reliance.

1. Statute of Frauds makes K voidable 

a. Marriage K

b. Suretyship K's where promise is not made for promisor's personal benefit.

c. interest in land lasting more than one year

1. Brokerage agreements apply

2. Also applies when you authorize someone to make a land sale agreement on your behalf.

d. service Ks not capable of completion (no logical possibility) within one year from formation.

e. Sale of goods  for $500 or more UNLESS:

1. Specially manufactured goods not readily resalable.

2. Merchant's confirmatory memo: In a contract between merchants where one orally places an order and the other sends written confirmation, that is signed and states quantity, if the ordering merchant doesn't object to confirmation within 10 days, the SOF is satisfied for both parties.

3. Judicial admissions.

f. Other exceptions

a. Part performance of a sales contract will satisfy SOF but only to extent of performance.

b. Part performance of land contract will satisfy SOF if  $ AND possession OR improvement

c. Full performance of a service contract will satisfy SOF.

* A party can be estopped from claiming SOF where other party relied on oral K

2. Incapacity is a voidable K defense

a. Under 18 unless K is one of necessity (quasi-K)

b. Mental incompetency based on inability to understand nature and significance of K.

1. adjudicated incompetent=void

2. Otherwise, K is voidable only if other side knew or should have known of the problem.

c. Intoxication: cannot understand nature and significance of K.

1. K is voidable only if other side knew or should have known of the problem.

3. Illegality renders a K Void

a. if the subject matter is not illegal but purpose of K is illegal, the K is voidable at the option of the innocent party.

4. Misrepresentation or Fraud

a. Fraud in the execution is Void

b. Misrepresentation (negligent misstatement) is a defense if it goes to a material factor and there is reasonable reliance. Fraud (intentional misstatement) is a defense if it goes to a material factor  and there is actual reliance. these are voidable.

5. Personal and Economic Duress are voidable.

6. Unconscionability (at formation) makes K voidable.

*Most Jx require both procedural and substantive elements. AZ only requires substantive.

a. Procedural: Unfairness in the bargaining process due to fine print and complex language.

b. Substantive: unreasonably one sided or contrary to public policy

a. Is there a one-sided term

b. does it protect a legitimate interest?

c. Is it a reasonable way to protect that interest or does it go beyond what is necessary?

*K can never ask you to waive your right to personal injury damages in a K for consumer goods.

*Hold harmless clause in construction K that provides that a contractor is not responsible for its own negligence is unconscionable. 

7. Mistake and ambiguity are voidable 

a. Mutual mistake of material fact: both parties are mistaken as to a matter that is central to the contract and there is no assumption of risk (conciously aware of some doubt or that you might be wrong)

1. Mistakes as to value will not give you mistake defense because risk is inherent in purchase.

b. Unilateral mistake: one party is mistaken as a matter that is central to the K and there is not assumption of risk . Defense applies where other party knew or should have known of mistake.

1. Consulting an expert concerning value or good will eliminate AOR.

c. ambiguity: where K describes its subject using terms reasonably susceptible to more than one meaning, there is no K unless 

1. both parties subjectively had same meaning in mind.

2. one party knew or should have known that other party had a different meaning in mind = K means what unknowing party had in mind.

Purpose is to promote ability of parties to rely on written contracts by excluding evidence that the parties agreed to something other than what appears in the written K.

1. Integrated agreements: when there is a writing that is a final expression of the terms of the K, evidence of conflicting in a prior or contemporaneous oral or written agreement is inadmissable.

2. Where the writing is final but is not complete, parol evidence is inadmissible to contradict but is admissible to add term.

3. Where the writing is final and complete, cannot be changed or added by any prior or contemporaneous oral or written agreement.

a. However, can be gap filled by court.

b. In the absence of a merger clause establishing completeness, ask: would reasonable people in the position of these parties intending  the parol evidence to be a part of the K have put it in writing? If so, writing is completely integrated and parol is inadmissible. However, if reasonable parties intending the parol to be part of their K could have left it out of writing, the writing is not completely integrated and parol is admissible.

*Remember, parol evidence is only unavailable to try and change terms of a written K, but is available to show defense such as fraud, duress, or mistake.

*The parol evidence rule does not limit admissibility of parol evidence to interpret an agreement.

1. Common law plaint meaning: no interpretation needed if there is a plain meaning of the term on its face (i.e. compare "los angeles" with "LA").

2. UCC: admits parol evidence to prove any meaning to which contract language is reasonably susceptible (AZ follows this for all Ks).

*Distinguish Parol Evidence from Modification

*Distinguish Parol Evidence from Trade usage (what people in trade mean when term is used), Course of Performance (Parties' history in performing K), and Course of Dealing (Parties' history in other transactions).

*PE does not apply to evidence proving a collateral agreement (agreement between same  parties to a written K but on a different subject).

A. Third party rights are derivative, and they derive from the rights and obligations of the original parties. If a defense is good against an original party, it is good against any third party deriving rights from that original party.

B. Third party beneficiary Ks: created at formation

1. The beneficiary is identified in the promise

2. The k calls for the rendering of performance by the promisor to the identified benefic.

3. Some relationship between Promisee and beneficiary that indicates that the promisee intended to benefit the benefit.

3. Benefic's rights must then vest

a. Benefic learns of the promise and either assents to it, changes position in reliance on it, or sues on it.

4 benefic as a creditor or a donee?

a. Donee gets performance as a gift

b. Creditor is one whom promisee already owes an obligation and uses this promise to satisfy that existing obligation (AZ imposes high burden of showing creditor beneficiary and must be stated in K)

1. Significance of difference is that donee will only have rights against promisor, while creditor will have rights against both.

5. If these elements are met, then benefic or promisee can enforce K against promisor, and benefic can enforce the promise in the form it was in when benefic's rights vested.

*Watch out for modifications and whether those modifications took place before or after benefic's rights vested.

*Watch out for defenses that promisor can use against buyer, which will also be enforceable against benefic. (i.e. Fraud)

*Watch out for obligations that Promisee no longer owes to benefic. this does not effect obligations that promisor has to benefic.

*Watch out for situations where agreement allows changing the benefic. (i.e. life insurance)

An assignment occurs when a party to a K that has already been formed unilaterally assigns his rights to a third party. (i.e. Seller assigns right to receive money from buyer to Church)

1. Right must be assignable. 

a. K prohibiting it is not an effective restriction. Under common law, you can assign but might also be in breach. Under UCC, you can assign.

b. Law prohibiting the assignment is effective.

*However, watch out for fact pattern that establishes a 3rd party benefic. K and a statute that prohibits assignment.

c. A right involving the performance of personal services is ok so long as it does not change character or nature of performance.

1. Requirement Ks for services will differ from one person to the next.

2. However, UCC requirement's Ks is ok because it implies reasonable requirements in light of historical requirements.

2. Must be properly assigned

a. right assigned must be described

b. The assignor must use words of present transfer.

3. Assignee's rights

a. Obligor owes to assignee duties owed to assignor.

1. However, assignee is subject to any defenses the K obligor acquires prior to the obligor receiving notice of assignment.

b. The assignee gets from the assignor implied warranties of assignment, breach of which gives the assignee the right to sue.

1. assignments for consideration:

1. Assignor impliedly warrants to do nothing after the assignments to defeat the assignment right.

2. Assignor impliedly warrants there are no defenses to the assigned right unless notice is given at time of assignment.

c. Subsequent gratuitous assignment takes priority over prior gratuitous assignment, unless:

1. first assignment was in writing

2. Involved transfer of indicia of ownership (deed, stock, certificates, a bank book)

3. first assignee detrimentally relied.

4. assignment for consideration

d. multiple assignments for consideration goest to first in time, unless second assignee doesn't know of first and:

1. gets the performance from obligor

2. gets a judgment against obligor

3. enters into a novation K with obligor that supersedes the K with the assignor

4. Receives indicia of ownership

1. Four limits on the power to delegate

a. If the K prohibits delegation

b. if the law prohibits delegation

c. if the duty involves the performance of personal services.

d. If the delegation would change the character and nature of the performance involved.

a.  common law output Ks (not ok) v. UCC output Ks (ok)

2.  Assuming delegation is proper, what are the rights and obligations?

a. Obligee must accept the performance of the delegate

b. The delegator remains a surety for the performance of the delegate.

c. If delegation was gratuitous, obligee can't require delegate to perform..

d. if it is for consideration, obligee has right to sue delegate because obligee is creditor beneficiary of K between delegate and delagator.

An event that must occur or be excused before promisor has a duty to perform.

1. Express conditions

*Look at order of language to determine whose promise the condition modifies.

2. Constructive (implied) conditions.

a. Where one performance will take longer than the other and order is not expressed in writing, the rendering of the longer performance is a constructive condition to the other party's promise. (i.e. payment is conditioned on painting house)

b. Where both will take the same amount of time and K does not state order, tender each party's performance is a constructive condition on the other party's promise.

3. Excuse of Conditions: Party cannot be guilty of breach for failure to perform unless condition is satisfied or excused:

a. Failure to cooperate or prevention of duty party has control over.

b. Anticipatory repudiation: where party unequivocally repudiates before performance is due (innocent party can sue immediatly)

1.  If repudiation after performance by innocent party, repudiator cannot be sued immediately. Has to give repudiator chance to retract.

3. reasonable doubt as to performance, innocent party can demand adequate assurance of performance in writing. If no written assurance in reasonable time, then repudiation.

c. Voluntary disablement: where party engages in conduct that makes her unable to perform.

d.Estoppel: Condition is excused on the grounds of estoppel where 1. the party whose duty is conditioned says, before the condition was to be fulfilled, that it will perform even if the condition is not fulfilled and 2. other party changes position in reliance  on this statement.

e. Waiver: condition is excused by waiver when, after the condition was to have been fulfilled but was not, the party whose performance was conditioned, knowing there was failure of condition, states it will still perform.

4. Satisfaction of conditions

a. Express conditions: complete satisfaction

b. Constructive conditions: substantial satisfaction.

c. UCC single delivery: perfect satisfaction (perfect tender).

After conditions have been excused or satisfied, promisor's duty to perform is absolute. That duty must be performed to avoid breach unless the duty is discharged.

1. Modification discharges duties so long as they are enforceable.

*Remember that UCC modifications are enforceable without consideration.

2. Mutual rescission: neither party performs

3. Accord and satisfaction: new agreement to clarify duties (settlement) and performance of settlement.

a. good faith dispute of pre-existing duty

b. settlement is in range of dispute

b. satisfaction

4. Novation: all the parties to an existing K agree to extinguish the rights and duties of one party and substitute another person in her place.

5. Imppossibility: after formation, something happens that makes it impossible to perform.

a. UCC special rules regarding destruction of goods.

1. If seller delivers goods directly to buyer without carrier and seller is a merchant, risk transfers when buyer receives goods.

2. If seller delivers goods directly to buyer without carrier and not a merchant, risk

passes when seller makes the goods available to the buyer for a reasonable time and gives notice of availability

3. If seller uses common carrier, seller must get goods to place listed on FOB. Anything else means that seller's only obligation is to get goods to carrier.

6. Impracticability: something happens that was unforeseeable at time of formation that now makes it unreasonably difficult  or expensive to perform.

7.: Frustration of purpose: Where party's purpose for contract is destroyed  by some unforeseeable event and other party knew of this purpose at time of formation.

8. Conditions subsequent: an event, that if it occurs after the performance, duty goes away. (i.e. duty to pay insurance discharged when stolen items are recovered).

1. If all conditions have been satisfied or excused and the duty has not been discharged, duty must be adequately performed or there has been a breach. 

a. Complete performance: Perfect Tender

b. Substantial performance: Everything else

*non-breaching party will not be able to cancel K for minor breaches.

1. Expectancy Damages: difference between net value of what was promised and net value of what you received, if anything, from breacher. Recoverable except to extent they could be reasonably mitigated.

2. Consequential damages: losses caused by the breach so long as reasonably foreseeable to breacher at time of formation.

3. Incidental damages: Reasonable costs of mitigation.

4. Quasi-K: if there is no K but someone receives a benefit from the other, then party may recover reasonable value (not K price).

5. Liquidated Damages: clause is enforceable if 1. at the time of formation damages for breach were difficult to estimate and 2. amount specified in the clause was a reasonable forecast of actual damages.

6. Specific performance: Usually only available if money damages would be inadequate and subject is unique (i.e. land)

a. No SP in personal services K.

b. Enforcement must be feasible (D or land in question is in Jx).

c. subject to some defenses

1. Laches: No SP if buyer unreasonably delayed suing for breach and delay prejudices D (D made improvements)

2. Unclean Hands: Wrongful conduct by P in the inducement or performance of K.

*covenants not to compete will be enforceable if reasonable in scope.

1. Seller's Warranties

a. Express Warranties: makes promise, gives description or factual affirmation about the goods, or exhibits sample.

1. Opinions and puffing don't count.

b. Implied Warranties

1. Warranty of of title (good title)

2. Warranty of Merchantability (sold by merchant  and that goods are safe and fit for ordinary use.

3. Warranty of Fitness (buyer relies on seller's skill to select goods suitable for purpose and that goods are fit for that specific purpose).

c. Limitation on warranties

1. Disclaimers can eliminate all but express warranties.

a. Merchantability must mention merchantability and if in writing must be conspicuous.

b. Fitness must be in writing and conspicuous. 

2. Limits on remedies

a. Warranty survives but the remedies available for breach are reduced. Limitation on remedy is enforceable unless it makes the remedy fail its essential purpose or is unconscionable.

2. buyer's remedies for seller's breach of warranty.

a. in a K for single delivery, buyer can reject any nonconforming shipment before accepting the goods, no matter how trivial the nonconformity.

b. Buyer can revoke acceptance for substantial defect or noncomformity if problem was difficult to discover at the time goods were accepted or seller said defect would be cured and it has not. Acceptance will occur if buyer does anything inconsistent with seller's ownership.

*for both revocation and rejection, buyer must give seller reasonable notice of the defects and use of these remedies, then wait for instructions on what to do with the goods. if instructions are reasonable, buyer must follow them. if not, buyer can do anything reasonable with goods.

c. If buyer decides to keep goods, he can sue for any breach of warranty, diminished value of goods. if buyer rejects or revokes acceptance, buyer can cover by purchasing substitute goods and get expectancy costs. If they do not cover, then difference is beween market price at time buyer learned of breach and K price. Buyer can also get consequential and incidental damages.

d. Specific performance available if goods are unique (in short supply)

3. Seller's remedies for buyer's breach

a. Right to withhold goods or stop shipment if buyer is insolvent. If buyer is not insolvent, seller can only recover large shipments.

b. substitute sale (must give buyer notice unless goods are perishable or decline in value quickly). Alternatively, can get difference between market price at time and place delivery was made and contract price. If not resalable, seller can sue for price of goods. Can also get incidental damages.

c. Lost volume sellers: gets profit of the sale.