CONTRACTS

(1) K Formed? (3) Breach of K? (c) Rescission

(a) Offer? (revoked/rejected/irrevocable?) (a) Perfect Tender Rule (d) Novation
(b) Acceptance? (mirror image, 2-207) Cure? Installments? (e) Accord/Satisfaction
(c) Consideration (estoppel?) (b) Material Breach (6) Remedies?
(d) Defenses? (SoF, Duress, etc.) (4) Third Party Issue? (a) Specific Performanc
(2) Terms of K? (a) TPB? Vesting? (b) Damages
(a) Parol Evidence Rule (b) Assignment? (c) Restitution
(b) Conduct (c) Delegation? (d) Rescission
(c) Modification of Terms (5) Performance Excuses? (e) Reformation
(d) UCC Warranty Terms (a) Impossibility/Impracticability
(e) UCC delivery obligations/RoL (b) Frustration of Purpose

CONTRACT FORMATION

1. Contract = legally enforceable agreement

Offer

1. General Test: Offer = the offerors manifestation of willingness to contract (test – whether a reasonable person in the
position of the offeree would believe that assent creates contract). Elements:
a. (1) an expression of a promise, undertaking, or commitment to enter into a contract;
b. (2) with certain and definite terms;
c. (3) communicated to the offeree
2. Offer legally binds offeror
3. Ad/quote =/= offer. Exception: offer if specifies quantity and who can accept
4. Vague/Ambiguous Material Term =/= Contract (UCC + CL)
a. Ex. “fair”, “reasonable”
5. Real Estate = must have price term + land description
6. Sale of Goods
a. Offer w/o price term valid if parties so intend
b. Quantity term required - can be stated in terms of
i. (a) buyer’s requirements; or
ii. (b) seller’s output
c. Can increase requirements if in line w/ prior demands
7. Missing Terms: does not prevent formation of a contract if it appears that parties intended to make a contract and there is a
reasonably certain basis for giving a remedy.
a. Majority & UCC  court can supply reasonable terms for those that are missing

Termination of Offers

1. 4 Methods
a. (1) Lapse of Time
b. (2) Death of Either Party
c. (3) Revocation of Offer
d. (4) Rejection
2. (1) Lapse of Time
a. Time stated or reasonable time
3. (2) Death of Either Party
a. Prior to acceptance
b. Death/incapacity terminates offer except irrevocable offers
4. (3) Revocation of an Offer
a. (a) later unambiguous statement by offeror to offeree of unwillingness/inability to contract; OR
b. (b) later unambiguous conduct by offeror indicating an unwillingness/inability to contract that offeree is aware of.
c. Multiple offers =/= revocation
d. Irrevocable Offers:
e. (a) Options
i. Offer + (i) promise not to revoke AND (ii) consideration for that promise
 f. (b) Firm Offer Rule (UCC)
i. Offer + (i) signed (ii) written promise by (iii) merchant not to revoke is irrevocable during time stated (up
to 3 months
g. (c) Reliance
i. Offer irrevocable if (i) reliance that is (ii) reasonably foreseeable and (iii) detrimental
h. (d) Unilateral Contract
i. Offer that can be accepted only by offeree’s acceptance can’t be revoked once performance started (mere
preparation not enough)
ii. Mere preparation does not make offer irrevocable
5. (4) Rejection
a. Methods of Indirect Rejection
i. (1) Counteroffers
ii. (2) Conditional Acceptance
iii. (3) Additional Terms (Mirror Image Rule)
b. (1) Counteroffers
i. Counteroffers terminate offer and create a new offer
ii. Distinguish from bargaining = response to offer in from of question
iii. Option Exception
c. (2) Conditional Acceptance
i. Terminate offer
ii. “accept” + “if” “on condition” “provided”
iii. Common Law Rule – Conditional acceptance = rejection and counteroffer that can be accepted by conduct
iv. UCC Rule – Conditional acceptance = rejection but NOT counteroffer that can be accepted by conduct
d. (3) Mirror Image Rule
i. Rule: a response to an offer that adds new terms = counteroffer (not acceptance)
ii. Applies unless change immaterial
iii. Compare UCC 2-207

UCC 2-207

1. Rule 1: In an offer to buy/sell goods, a response to an offer that adds additional/different terms but doesn’t make the new
terms a condition of acceptance, is generally treated as an acceptance (parties need not be merchants)
2. Rule 2: Additional Terms do not become part of the contract UNLESS:
a. (i) both parties are merchants;
b. (ii) additional term is not material (money, liability, remedies); AND
c. (iii) additional term is not objected to by original offeror within a reasonable time

Acceptance

1. General Rule: start of performance is acceptance

a. If the offeror won’t be aware that performance has started, then acceptance requires notice
b. Except Unilateral Contracts (complete performance = acceptance)
2. Mailbox Rule
a. All communications Other Than Acceptance are effective When Received
b. Acceptance is effective When Mailed
3. Offers Not Assignable unless Option
4. Once an offer has been accepted, no longer possible for offeror to revoke or offeree to reject

CONSIDERATION

1. Consideration = (1) Bargained for (2) Legal Detriment

a. Bargained For = asked for by the promisor in exchange for her promises
b. Legal Detriment – includes asking someone not to do something they are legally entitled to do
2. One promise can be consideration for another promise
3. Illusory Promises
a. Both sides not bound by agreement =/= consideration
4. Past Consideration
a. Something given or performed before promise made =/= consideration
5. Pre-Existing Legal Duty (CL)
a. Rule: promise to perform, or performance of, an existing legal duty =/= consideration
 b. Exception: if past obligation (debt) would be enforceable but for technical defense (statute of limitations), promise
enforceable if in writing OR partially performed (Consideration Substitute #1)
c. Exception: third-party promise to pay
d. Exception: unexpected circumstances
e. **NOTE: UCC = new consideration not required to modify a sale of goods contract (just need good faith)
6. Consideration Substitutes
a. (1) Written Promise to satisfy an obligation for which there is a legal defense
b. (2) Promissory Estoppel: Elements:
i. (a) Promise;
ii. (b) Reliance that is reasonable, detrimental, and foreseeable; AND
iii. (c) Enforcement necessary to avoid injustice
iv. Remedy may be limited by reliance

DEFENSES TO CONTRACT FORMATION

1. (1) Incapacity of the D

a. Three kinds of Incapacity:
i. (1) Infants (<18)
ii. (2) Mental Incompetents
iii. (3) Intoxicated Persons if the other party has reason to know
b. Two consequences
i. (1) right to disaffirm by person w/o capacity
ii. (2) Quasi-contract liability for necessities
2. (2) Economic Duress; Elements:
a. (1) Improper threat
b. (2) To a person who is vulnerable
3. (3) Unconscionability
a. (1) procedural unconscionability – unfair surprise
b. (2) substantive unconscionability – oppressive terms
c. Tested at time of agreement
4. (4) Public Policy
a. Crt can refuse to enforce K for public policy reasons
b. Ex. exculpatory agreement that attempts to eliminate liability for intentional/reckless conduct or a non-compete
clause w/o reasonable limits
5. (5) Misrepresentation
a. Elements: (1) statement of “fact” before contract; (2) by contracting party/agent; (3) that is false (4) that is
fraudulent or material (5) that induces the contact
b. Wrongdoing is not necessary
6. (6) Nondisclosure
a. General Rule: party has no duty to disclose
b. Exceptions:
i. (1) Fiduciary Relationship
ii. (2) Concealment
7. (7) Mistaken Assumption of Existing Fact
a. General Rule: No relief for mistake
b. Exceptions:
i. (1) Mutual Mistake of existing facts
ii. (2) Palpable Mistake = unilateral mistake that other party had reason to know of

STATUTE OF FRAUDS

1. SoF applies to MY LEGS:

a. M - Marriage
b. Y – Contracts not Completed w/in 1yr (Service/Leases)
c. L – Transfer of Interest in Land
d. E - Executors and Administrators
e. G – Goods > $500
f. S – Suretyship – promise to answer for the debts of another
2. (1) Service K not capable of being performed in 1 yr from time of K
 a. Includes:
i. Specific time period > 1yr (ex. 3-yr employment K)
ii. Specific date > 1yr from date of K (ex. performance scheduled 2 yrs later)
iii. Tasks – applies if not theoretically possible to complete w/in 1 yr.
b. NOTES
i. Life = SoF doesn’t apply (life theoretically could be < 1yr)
3. (2) Transfer Interest in Real Estate
a. Except Leases < 1yr.
b. Includes Easements
c. Must be transfer of an interest in land

4. Satisfying the Statute of Frauds

a. Even if no writing, SoF can still be satisfied w/ objective evidence of K
b. (1) Part Performance
i. (a) Real Estate: must show 2/3:
1. (1) improvements to land
2. (2) Payment
3. (3) Possession
ii. (b) Service Ks:
1. full performance by either party satisfies SoF
2. ** part performance NOT enough
iii. (c) Sale of Goods
1. Part performance satisfies, but only to extent of performance
2. Ex. payment for goods already delivered
3. Specially Manufactured Goods – SoF satisfied as soon as seller makes “substantial beginning”
c. (2) Writing
i. (a) UCC
1. Only requires that K says that is K for sale of goods AND quantity term
2. Generally must also be signed by D, unless K between 2 merchants and delay in response
3. Merchant’s Confirmatory Memo: (between merchants) if one party, w/in a reasonable time after
an oral agreement has been made, sends to the other a written communication of the understanding
that is sufficient under SoF to bind the sender, will also bind the recipient IF: (1) he has reason to
know of confirmation’s contents AND (2) he doesn’t object w/in 10 days of receipt
ii. (b) Other Ks
1. Writing satisfies SoF if writing signed by D and material terms present (who/what)
d. (3) Judicial Admission
i. If D admits in pleading/testimony that entered into K, SoF satisfied
5. Additional Notes on SoF
a. (1) Written evidence of authority to contact on behalf of someone else required only if K w/in SoF
b. (2) Modifications of K must be in writing if original K was within SoF
c. (3) Contract Provisions Requiring Written Modification
i. (a) Unenforceable at CL
ii. (b) Enforceable under UCC (unless waived)

DETERMINING TERMS OF CONTRACT

1. Parol Evidence Rule

a. RULE: Final written version (integration) of a deal replaces earlier agreements, negotiations and conversations
i. Issue is whether certain evidence can be considered
ii. Parol Evidence = words (oral or written) of party before integration
b. 5 Fact Patterns
i. (1) Changing/Contradicting Terms of Written Deal – Parol Evidence NOT allowed
ii. (2) Mistake in Integration (ex. Clerical Mistake) – Parol Evidence OK
iii. (3) Defenses (Getting out of Deal, fraud, misrep) – Parol Evidence OK
iv. (4) Ambiguity (Explaining Term in Written Deal) – Parol Evidence OK
v. (5) Adding to Written Deal – Parol Evidence NOT OK unless:
1. (a) the written agreement was only a partial integration (written/final but not complete); OR
2. (b) additional terms would ordinarily be in a separate agreement
 2. Conduct
a. Conduct can be used to explain words in K or fill gaps in K. 3 Forms:
b. (1) Course of Performance: Same People, Same Contract
c. (2) Course of Dealing: Same People, Different But Similar Contract
d. (3) Custom and Usage: Different But Similar People, Different But Similar Contract
3. Modification of Contract
a. General Rule: no modification of existing contract UNLESS supported by new consideration
b. Modern View: Modification w/o consideration permitted if: (1) modification is due to circumstances that were
unanticipated by the parties AND (2) it is fair and equitable (MBA approach)
c. UCC Approach: Modification w/o consideration is valid if and enforceable if in good faith

UCC: WARRANTY TERMS

1. (1) Express Warranty

a. Words that promise, describe or state facts
2. (2) Implied Warranty of Merchantability
a. If person buys goods from a MERCHANT who deals in goods of that KIND, warranty automatically added to
contract that goods are fit for ordinary purposes
3. (3) Implied Warranty of Fitness for a Particular Purpose
a. Elements: (1) Buyer has 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 particular purpose
4. Limitations on Warranty Liability
a. (1) Statute of Limitations
i. 4 yr Statute of Limitation which starts running when “tender of delivery is made”
b. (2) Buyer’s Examination of Goods
i. No implied warranties as to defects which would be obvious on examination
c. (3) Disclaimers
i. Express warranties can’t be disclaimed
ii. Implied Warranties disclaimed w/ either:
1. (a) Conspicuous language mentioning merchantability
2. (b) “as is” or “with all faults”
d. (3) Limits on Remedies
i. Can limit all warranties (including express)
ii. Test: unconscionability

OTHER IMPORTANT UCC TERMS

1. Seller’s Delivery Obligations

a. (1) Shipment Contract – seller completes delivery obligation when it:
i. (a) gets goods to a common carrier;
ii. (b) makes reasonable arrangements for delivery; AND
iii. (c) notifies buyer
iv. “FOB” followed by seller’s location
b. (2) Destination Contract – seller completes delivery obligation when goods arrive at destination
i. “FOB” followed by city NOT where seller located
2. Risk of Loss – Four Rules (in order):
a. (1) Agreement – agreement of parties controls
b. (2) Breach – breaching party liable for uninsured losses even if breach unrelated to loss
c. (3) Common Carrier Delivery – risk of loss shifts from seller to buyer at time seller completes delivery obligations
d. (4) Default – if none of above, then:
i. (a) Merchant-Seller = risk of loss shifts to buyer on buyer’s receipt of goods
ii. (b) Nonmerchant-Seller = risk of loss shifts to buyer when seller tenders goods
 PERFORMANCE ISSUES
UCC: SELLER’S OBLIGATIONS

1. (1) Perfect Tender

a. Goods and delivery must comply w/ contract terms (perfect tender)
b. Seller’s failure to make PT= an acceptance and a breach of K. Gives buyer 3 options:
i. (1) keep goods, pay contract price & sue for damages
ii. (2) return goods, recover payments & (maybe) sue for damages (unless installment contract)
iii. (3) accept any commercial units and reject the rest
c. Notice of Accommodation: if delivery of not perfect tender accompanied by notice of accommodation =/=
acceptance and breach, but is rather a counteroffer.
2. (2) Installment Contract Obligations (exception to PT Rule)
a. Installment Contract: requires/authorizes (i) delivery of goods in separate lots (ii) to be separately accepted.
b. Rule: buyer can reject an installment only where there is substantial impairment in installment that can’t be cured
3. (3) Cure Opportunity
a. (a) Time for Performance not yet Expired
b. (b) Seller had reasonable ground to believe tender would be acceptable (prior deals)

UCC: BUYER’S OPTIONS

1. (1) Rejection of Goods

a. (a) less than perfect tender gives buyer option to reject as long as good faith
b. (b) if reject, must take reasonable care of goods and not use them
c. (c) rejecting buyer can sue for damages
d. (c) option of rejection limited by cure, installment contracts, and acceptance
2. (2) Acceptance of Goods
a. (a) If buyer accepts, cannot later reject
b. (b) If accepts nonconforming goods, still must pay contract price (can sue for damages + might be able to revoke)
c. (c) payment w/o opportunity to inspect =/=acceptance
d. (d) rejection must be timely (w/in reasonable time) or else = acceptance
e. (e) Retention (keeping goods w/o objection) = acceptance
3. (3) Revocation of Acceptance of Goods (3 reqs)
a. (i) Nonconformity substantially impairs value of goods; AND
b. (ii) Excusable ignorance of grounds for revocation or reasonable reliance on seller’s assurance of satisfaction; AND
c. (iii) Revocation w/in reasonable time after discovery of nonconformity

EFFECTS ON THIRD PARTIES

THIRD PARTY BENEFICIARIES

a. Third Party Beneficiary (TPB): not party to K. Can enforce contact others made for her benefit
b. Promisor: makes promise that benefits third party
c. Promisee: obtains promise that benefits third party
d. Intended/Incidental Beneficiaries: only intended beneficiaries have K rights (look at intent of two parties to K)
e. Creditor/Donee: Intended Beneficiaries are either donees or creditors (is TPB creditor of promise before K?)
2. Efforts to Cancel of Modify K
a. An intended beneficiary can enforce a contract (K can’t be canceled/modified w/o their consent) only after rights
have vested. Rights vest when:
i. (1) Third party (i) knows of AND (ii) has relied on or assented to contract as requested, then TPB’s rights
have vested unless K provides otherwise)
ii. (2) Third party brings suit to enforce promise; OR
iii. (3) Third party manifests assent to the promise in a manner invited or requested by the parties
3. Who can Sue Whom? (4 Rules) Promisor Promisee
a. (1) Beneficiary can recover from Promisor
b. (2) Promisee can recover from Promisor
c. (3) General Rule: Beneficiary CAN’T recover from Promisee
(creditor)
Except: Creditor B can recover but only on preexist debt
Beneficiary
 4. Defenses
a. If TPB sues Promisor, Promisor can assert same defenses would have if had been sued by Promisee

ASSIGNMENT

1. Assignment = one party to K transfer his rights under K. All Ks assignable except unique personal services/long-term
requirements Ks.
a. Can be oral or in writing and can be gratuitous (revocable) or for consideration (irrevocable)
2. Terms
a. Assignor – Party to K who transfers rights to another
b. Assignee – Not party to K but able to enforce b/c assignment
c. Obligor – Other party to K
3. 3 Limits on Assignment
a. (1) Prohibition
i. Contract provision that prohibits assignment = takes away right to assign but NOT power to assign which
means that assignor is still liable for breach of K, but if assignee who doesn’t know of prohibition can still
enforce assignment.
ii. “rights hereunder are not assignable”
b. (2) Invalidation
i. K provision that takes away both right and power to assign so that there is a breach by assignor and no
rights to assignee
ii. “all assignments of rights under this K are void.”
c. (3) CL bars assignment that substantially changes duties of obligor
i. (a) Assignment of Right to Payment =/= Substantial Change
ii. (b) Assignment of Other Rights Usually = Substantial Change
4. Requirements for Assignment
a. General Rule: Consideration NOT required but gratuitous assignments can be REVOKED
5. Who can Sue Whom?
a. (1) Assignee can recover from Obligor
i. Ex. A contracts w/ B. B then assigns rights to C. C can sue A if fail to perform.
b. (2) Assignor for Consideration CAN’T recover from Obligor
i. Ex. A contracts w/ B. B then assigns rights to C for $10. B CANNOT recover from A.
c. (3) Obligor has same defenses against Assignee as would have against Assignor
i. Ex. A contracts w/ B. B assigns to C. B fails to perform. C CANNOT recover from A.
d. (4) Payment by Obligor to Assignee is Effective Until Obligor Knows of Assignment
i. Ex. A contracts w/ B. B assigns to C. A doesn’t know of assignment and makes 2 payments to B. C
CANNOT sue A for two payments.
e. (5) Assignor Makes Implied Warranties in an Assignment for Consideration
i. (a) right to assignment actually exists
ii. (b) rights assigned is NOT subject to any then existing defenses by obligor
iii. (c) assignor will do nothing after assignment to impair value of assignment
6. Multiple Assignments
a. (1) All Gratuitous Assignments = Last Assignee Wins
i. Ex. A contracts with B. B assigns to first C then D gratuitously. D wins.
b. (2) Multiple Assignments for Consideration = First Assignee for Consideration Wins
i. Ex. A contracts with B. B assigns to first C then D, both for consideration. C wins.
ii. Exception: Subsequent assignee takes priority IF:
1. (i) does not know of earlier assignment; AND
2. (ii) is first to obtain (1) payment, (2) judgment, (3) novation, OR (4) indicia of ownership

DELEGATION OF DUTIES

1. Delegation: Contract Party Transfers work/duties/burdens to 3rd Party

2. Limitations on Ability to Delegate
a. (1) Contract Prohibits Delegations or Assignments
b. (2) Personal Services Contracts that call for Very Special Skills
3. Consequences of Delegation
a. (1) Delegating Party ALWAYS Remains Liable
 b. (2) Delegatee liable ONLY IF Receives Consideration from Delegating Party

REMEDIES
SPECIFIC PERFORMANCE

1. Specific Performance = Equitable Remedy

a. (a) remedy at law must be inadequate
b. (b) plaintiff must have clean hands
2. Contracts for Sale of Real Estate
3. Contracts for Sale of Unique Goods
a. Antiques, Art, Custom-Made
4. Contracts for Services = NO Specific Performance
a. Injunctive Relief May Be Available

DAMAGES

1. Policy: Compensate P, Not Punish D

2. General Approach: Expectation Damages – place P where would have been had there been NO breach
3. UCC - Damages for Seller’s Breach:
a. Seller Breaches, Buyer Keeps Goods
i. (1) Fair Market Value if Perfect MINUS Fair Market Value as Delivered; OR
ii. (2) Cost of Repair
b. Seller Breaches, Seller Has Goods
i. (1) Market Price at Time of Discovery of Breach MINUS Contract Price; OR
ii. (2) Reasonable Replacement Price MINUS Contract Price (whichever is greater)
c. Buyer Breaches, Buyer Keeps Goods
i. Contract Price
d. Buyer Breaches, Seller Has Goods
i. Contract Price MINUS Resale Price UNLESS seller cannot resell in which case seller can recover contract
price or maybe provable lost profits.
4. Additions/Limitations
a. (+) Incidental Damages = costs incurred in dealing w/ breach always recoverable
b. (+) Foreseeable Consequential Damages = losses arising from P’s special circumstances
i. D MUST have reason to know of special circumstances at time of K
c. (–) Avoidable Damages
i. (a) Continuing to perform after breach
ii. (b) Turning down other, comparable opportunities
d. (–) Damages that Can’t be Established w/ Reasonable Certainty
i. Ex. P engaged in new business (don’t know how much profit lost)
5. Liquidated Damages
a. = K Provision fixing amount of damages. Issue is validity.
b. Too high = penalty (not valid)
c. TEST:
i. (1) Damages difficult to forecast at time K was made
ii. (2) Provision = reasonable forecast
6. UCC – Contract Provisions Limiting Remedies
a. Test = Unconscionability
b. Exception: personal injury from goods
c. K that limits to remedies to Repair. Test = Fail of its essential purpose (K provision usually fails this test)\

QUASI-CONTRACT REMEDIES

1. Even if a contract is found unenforceable, a plaintiff may still be entitled to some type of restitution in order to prevent unjust
enrichment by the defendant. When a defendant receives a benefit as a result of an unenforceable contract, the defendant may
be required to pay for any unjust gain.
2. If services are involved, the general measure is the value of the services and the contract rate is admissible as evidence of the
value of the services but is not conclusive. Value may be more or less.
 PERFORMANCE EXCUSES
MATERIAL BREACH (CL)

1. Basic Rules
a. (1) Damages can be recovered for any breach
b. (2) Performance is only excused by a material breach
c. (3) If there is Substantial Performance, breach is NOT material
2. Quality of Performance = No breach if “roughly comparable”
3. Quantity of Performance = Less than half = Material Breach (Don’t have to Pay)
4. Anticipatory Repudiation
a. Elements:
i. (1) Unambiguous Statement/Conduct
ii. (2) that the Repudiating Party Will Not Perform
iii. (3) Made Prior to the Time that Performance was Due
b. Anticipatory Repudiation by 1 Party Excuses Other Party’s Duty to Perform
c. **Gives Rise to Immediate Claim for Damages UNLESS claimant has already finished performance
i. Ex. P contracts w/ D to paint house. P finishes painting, then D repudiates. P must wait until contract date
for payment passes before suing D.
d. Retraction
i. Anticipatory Repudiation can be withdrawn as long as no material change in position by other party.
5. UCC – Excuse Because Insecurity About Other Party’s Performance
a. If not unambiguous, but instead “reasonable grounds for insecurity” then can
i. (1) make written demand for adequate assurance; AND
ii. (2) if commercially reasonable, can suspend performance until get adequate assurance

NONOCCURRENCE OF CONTRACT CONDITION

1. Triggering Words = “if” “only if” “provided that” “so long as” “unless”
2. The nonoccurrence of condition results in excuse, not breach
3. General Rule: Strict Compliance is required for satisfaction of K condition
a. Ex. sell house on condition that appraised at $100k. Only appraised at $98k. Contract excused.
4. Exception for Condition of Personal Satisfaction = condition satisfied if reasonable person would be satisfied

EXCUSE BY REASON OF LATER CONTRACT

1. (1) Rescission
a. Mutual – K discharged by express agreement between parties to rescind
b. Unilateral – party seeking rescission must have adequate legal grounds (fraud, misrep, duress, failure of consid)
2. (2) Accord AND Satisfaction
a. Parties agree about already existing K to accept different performance in satisfaction of that existing obligation.
b. RULE: if new agreement (accord) is performed (satisfaction), performance on original obligation excused
c. RULE: if accord but no satisfaction, then party can recover on either original obligation or accord
3. (3) Novation
a. Novation = later agreement by both parties to substitute new party (same performance, difference party)
b. RULE: Novation excuses performance of party who is substituted
c. NOTE* - delegation done by one party, novation requires agreement of BOTH parties

UNANTICIPATED POST-CONTRACT OCCURENCES

1. (1) Damage/Destruction of Subject Matter of Contract

a. UCC – do risk of loss first
b. Contractor’s duty to construct a building NOT discharged by destruction of work in progress (is excused for promise
to repair/remodel and entitled to restitution for value of work)
2. (2) Subsequent Law/Regulation
a. RULE: later law makes performance of K illegal = excuse by impossibility
b. RULE: later law makes mutually understood purpose of K illegal = excuse by frustration of purpose
3. (3) Death after K
a. General Rule: Death does NOT make person’s K obligations disappear.
b. Exception: Death of party to K who is “special” person excuses performance

CONTRACTS BASIC ESSAY OUTLINE

1. GOVERNING LAW – UCC OR CL
2. CONTRACT FORMATION
a. OFFER
i. An offer is (i) an expression of a promise, undertaking, or commitment to enter into a contract, (ii) with certain and definite
terms, (iii) communicated to the offeree.
b. ACCEPTANCE
i. An acceptance is a manifestation of assent to the terms of the offer.
ii. CL – requires absolute and unequivocal acceptance of each and every contract term of the offer (the mirror image rule)
iii. UCC –
c. CONSIDERATION
i. A contract requires consideration on both sides. Consideration is a bargained-for exchange involving legal value. One promise
can be consideration for another promise.
d. PROMISSORY ESTOPPEL
i. If a defendant’s conduct or promise foreseeably induces a plaintiff to change position in reliance on an agreement, the courts
may use the doctrine of promissory estoppel to enforce the agreement or award damages even if there was no consideration or
the agreement violated the Statute of Frauds.
3. DEFENSES TO CONTRACT FORMATION
a. STATUTE OF FRAUDS
i. To be enforceable, certain agreements must be evidenced by a writing reflecting the essential terms of the contract signed by
the party sought to be bound. Agreements that must be evidenced by a writing under the Statute of Frauds include…
4. BREACH OF CONTRACT
a. GENERALLY
i. If a promisor is under an absolute duty to perform that has not been discharged, failure to perform in accordance with the
contract terms is a breach of contract. The nonbreaching party must show that he is willing and able to perform but for the
breaching party’s failure to perform
b. MATERIAL BREACH
i. If the obligee has not received the substantial benefit of his bargain, the breach is considered material. If the breach is
material, the nonbreaching party may treat the contract as at an end and may sue immediately for remedies for breach.
5. TERMS OF THE CONTRACT
a. PAROL EVIDENCE RULE
i. If the parties to a contract express their agreement in a writing with the intent that it embody the final expression of their
bargain, the writing is an “integration.” Any other expressions – written or oral – made prior to the writing, as well as those
oral expressions made contemporaneous with the writing, are inadmissible to vary the terms of the writing.
6. DEFENSES
a. MISREPRESENTATION
i. If a party induces another to enter into a contract by using fraudulent misrepresentations (asserting information that he
knows is untrue), the contract is voidable by the innocent party if she justifiably relied on the misrepresentation
b. IMPOSSIBILITY/IMPRACTICABILITY
i. The occurrence of an unanticipated or extraordinary event may make contractual duties impossible or impracticable to
perform. If the nonoccurrence of the event was a basic assumption of the parties in making the contract and neither party
assumed the risk of the event occurring, contractual duties may be discharged.
ii. IMPOSSIBILITY: those contractual duties will be discharged if it has become objectively impossible to perform them.
iii. IMPRACTICABILITY: those contractual duties will be discharged if performance has become impracticable: they can be
performed only with extreme and unreasonable difficulty or expense.
c. FRUSTRATION OF PURPOSE
i. Frustration of purpose occurs when the purpose of the contract becomes valueless because of a supervening event, not
reasonably foreseeable and not the fault of the party seeking discharge
d. UNCONSCIONABILITY
i. A court may refuse to enforce a contract (or a contract provision) to avoid unfair terms. Unconscionability is determined by
the circumstances that existed at the time the K was formed.
7. REMEDIES
a. DAMAGES
i. A plaintiff can seek damages for breach of contract. Damages should put the nonbreaching party in the position he would have
been had the contract been performed.
ii. Incidental damages include expenses reasonably incurred by plaintiff incident to defendant’s breach
iii. Consequential damages are special damages resulting from the nonbreaching party’s particular circumstances and reflect
losses over and above standard expectation damages. The defendant is liable for consequential damages if he had reason to
know of plaintiff’s special circumstances at the time of contract.
iv. The nonbreaching party has a duty to mitigate damages
b. SPECIFIC PERFORMANCE
i. Specific Performance is an equitable remedy in which a court orders a breaching party to perform that which he has promised
to perform under the contract. It is available when damages are an inadequate remedy
c. QUASI-CONTRACT
i. Even if a contract is found unenforceable, a plaintiff may still be entitled to some type of restitution in order to prevent unjust
enrichment by the defendant. When a defendant receives a benefit as a result of an unenforceable contract, the defendant may
be required to pay for any unjust gain.