NEW YORK COURSE
CONTRACTS
(Including Article 2 Sales and Article 2A Leases)
Prof. David Epstein
INTRODUCTION
A. MULTISTATE RESPONSIBILITY (TWO BODIES OF LAW)
FIRST: Article Two of the Uniform Commercial only if agreement primarily for sale of goods
#1. Southwest Airlines agrees to sell 4 airplanes to Braniff Air for $80,000,000.
#2. Sara agrees to sell her bike to Bob for $80.
#3. Southwest Airlines agrees to sell 4 airplanes to Braniff Air. Agreement includes painting of
airplanes before delivery.
o
Art 2 applies IF K is primarily for sale of goods
SECOND: “Common law” of contracts for all agreements [Again, some special UCC rules for
contracts for sales of goods are covered in this lecture. Some special rules for contracts relate to real
estate are covered in the Property lecture]
#4. Royal Aircraft Inc. agrees to hire Eva to sell airplanes.
o
employment K ~ C/L
#5. CT Aircraft Financing Ltd. agrees to lend Braniff Air $75,000,000 to be used to buy used
airplanes from Southwest Airlines.
o
lending ~ C/L
1
#6. O and P agree that P will paint O’s house for $1,000 with O providing the paint.
© copyright Bar/Bri Bar Review, A Thomson Business.
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[Introduction]
#7. O and P agree that P will paint O’s house for $1,200 including the paint provided by P.
o
primarily services
#8. S agrees to sell Blackacre to B.
o
land ~ C/L
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[INTRODUCTION]
#9. T agrees lease a building from L.
o
C/L
B. NEW YORK RESPONSIBILITY (THREE BODIES OF LAW)
FIRST: Common law of contracts with New York variations for all agreements. [Again, some special rules
related to real estate that are covered in the Property lecture.]
SECOND; Article 2 of the Uniform Commercial Code for agreement for the sale of goods.
THIRD: Article 2A of the Uniform Commercial Code for agreements for the lease of goods.
#10. Royal Aircraft Leasing, Inc. agrees to lease an airplane to Excel Mfg. Co.
o
UCC 2A applies
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[INTRODUCTION]
#11. Cort Rentals agrees to lease furniture to Max.
o
UCC 2A applies
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[INTRODUCTION]
C. Definition of CONTRACT
AGREEMENT ENFORCEABLE BY COURTS; agreement plus
D. Definition of EXPRESS CONTRACT
WORDS CREATE AGREEMENT
E. Definition of IMPLIED CONTRACT
WORDS DO NOT CREATE AGREEMENT. AGREEMENT BASED IN PART ON CONDUCT.
F. Definition of QUASI CONTRACT
EQUITABLE REMEDY
PART ONE: DISPUTE OVER HOW COURTS SHOULD ENFORCE CONTRACTS
A. IN REM REMEDIES
1. SPECIFIC PERFORMANCE
#12. S contracts to sell Blackacre to B for $100,000. S breaches. B sues. B wants Blackacre,
not money.
o
land – always specific performance
#13. S contracts to sell a rare antique watch to B for $100,000. S breaches. B sues. B wants
the watch, not money.
o
S/P applies b/c “antique”
#14. Rich contracts to lecture for BAR/BRI. Rich breaches. BAR/BRI sues. BAR/BRI wants
Rich to lecture.
o
no compelling work as S/P
#15. Paula contracts to lecture for BAR/BRI. Paula breaches and instead lectures for Papaya
King’s Bar Review. BAR/BRI sues. BAR/BRI wants to keep Paula from lecturing for Papaya King’s Bar
Review.
o
injunctive relief possible as S/P
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[REMEDIES]
2. RECLAMATION
[WHAT IS RECLAMATION AND WHEN WILL COURT AWARD RECLAMATION? Recovery of goods by
unpaid seller from buyer who was insolvent at time of delivery of goods]
#16. B buys goods from S on January 10. Goods are delivered to B on January 20. B is
insolvent on January 20. On January 29, S learns of B’s insolvency and makes a reclamation demand. B
still has the goods on January 29. Can S reclaim?
o
o
YES – S gets goods back by reclamation
note – sale of goods on CR + not paid for yet + B is insolvent
#17. On January 10, S delivers goods to B on credit. B does not pay. S makes a reclamation
demand for return of goods on January 19. B sold goods it received from S to T on January 15. Can S
reclaim?
o
o
NO reclamation
only right is to sue for conversion
3. ENTRUSTMENT
#18. O takes a watch that she owns to J Jewelers to be repaired. J Jewelers wrongfully sells O’s
watch to B, a bona fide purchaser for value. Can O recover the watch from B?
o
only sue for conversion
B. DAMAGES - “In dollars” remedy concepts
1.
NO PUNITIVE DAMAGES
2. LIQUIDATED DAMAGES
[Contract provision regarding the amount of damages: Difficult to forecast and reasonably forecast]
#19. B contracts to build a store for O. Contract requires that building be completed by
December 7 and provides for damages of $500 a day for each day the building is late, and $500 a day is
the average daily profit of O’s other stores. B is 20 days late. Is the liquidated damages provision valid?
o
valid
#20. Same facts as #19 except that contract provides for $10,000 damages if B is late. B is 20
days late. Is the liquidated damages provision valid?
o
invalid – b/c fixed amount
3. EXPECTATION DAMAGES
[Damages that put the plaintiff in the same position as if the contract had been performed without breach]
#21. O contracts with P to paint her house for $1,000 payable when the house is painted. P
breaches – does not paint the house. O pays another painter T $1,400 to paint the house. How much
can O recover from P for P’s breach of contract?
o
$400
#22. T contracts to lease building from L for one year for $1,000.
T breaches. L is able to lease that building to X for $800. How much can L recover for T’s breach of
contract?
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[REMEDIES]
o
$200
#23. B contracts to buy widgets from S for $400 payable on delivery. S does not deliver the
widgets. B has to pay another supplier T $600 for the same widgets. How much can B recover for S’s
breach of contract?
o
$200
#24. B contracts to buy antique desk from S for $20,000. Contract provides that all of the
drawers in the desk were original to the desk. B pays S; S delivers the desk to B. B discovers that one of
the drawers in the desk is a replacement. B sues S for breach of contract. Court finds that the desk with
the replacement drawer is worth $18,000 and that the desk with all original drawers would be worth
$25,000. How much can B recover for S’s breach of contract?
o
$7000
#25. B contracts to buy antique desk from S for $20,000. B breaches. S sells the same desk to
T for $20,000. How much can S recover for B’s breach of contract?
o
$0
#26. B contracts to buy a desk from S Desk Store’s regular inventory for $2,000. B breaches.
The next day, T buys the same model desk from S Desk Store for $2,000. How much can S recover for
B’s breach of contract? [COMPARE WITH #25]
o
lost volume seller- damages is the provable lost profit
4.
CONSEQUENTIAL OR SPECIAL DAMAGES AS
PART OF EXPECTATION DAMAGES [contemplation of parties as time of contract]
o
#27. M mill owner contracts with C carrier to transport a broken mill shaft to a mill shaft maker in
a neighboring village for $100. C breaches by nonperformance. M pays $180 to T to transport the shaft.
How much can M recover for C’s breach of contract?
o
$90 as ordinary expectation damages – no special damages – b/c any PL w/h this dmg against the
carrier
#28. M mill owner contracts with C carrier to transport by rail a broken mill shaft to a mill shaft
maker in neighboring village for $10. C carrier breaches contract by improper performance, by using
slower method of transportation. M sues for profits lost for additional days the mill was closed. C claims
that he did not know that M’s mill was closed – that he thought M had a replacement shaft. Can M
recover her lost profits from C?
o
NO – PL is suing for consequential damages but dmgs NOT foreseeable
#29. O contracts with P to paint his house for $1,000. The house is a beach house and O informs
P before P agrees to paint the house for $1,000 that he has a contract to lease the house to T for the
weekend for $200 and that the paint work must be completed by Friday or O will lose T’s $200. P
breaches. O is unable to find another painter who can complete the paint work by Friday. T finds another
beach house. O finally finds another painter to paint the beach house for $1,400. What amount of
damages should O be able to recover in a breach of contract action?
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[REMEDIES]
o
$600 – 400 are expectation damages + 200 is consequential damages
5.
Incidental damages
#30.
Same facts as #29 except that O also spends $25 in finding a
replacement painter after P breached. Is that $25 also recoverable as part of O’s damages from P’s
breach of contract?
o
o
YES
covers cost of entering into replacement K
6.
Avoidable damages
#31.
L Law School hires Professor P to work as a professor for the 20052006 school year for $100,000. L Law School breaches. P sues for breach of contract. If L Law School
is able to show that M Law School in the same city offered P a job for the 2006-2006 school year for
$80,000 and P rejected the offer, how much can P recover from L Law School?
o
$20,000
PART TWO. DISPUTE OVER WHETHER THERE IS AN AGREEMENT
[three stages of agreement process]
A. FIRST STAGE OF AGREEMENT PROCESS: OFFER
[manifestation [words or conduct] of commitment]
1. Context
#32. S Cars publishes the following advertisement: “Incredible offer:
2004 Fords for sale at $500 below dealer’s costs.” Is that an offer?
2. Content
2.1 Vague or ambiguous material terms
[“appropriate”, “fair”, “reasonable”]
#33. S offers to sell B a car at a “reasonable price.” Is that an offer?
o
NO – b/c vague language
2.2 “Requirements” provision
#34. B offers to buy all of its requirements of widgets for the next 5 years from S for $1 per
widget. Is that an offer?
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[AGREEMENT PROCESS]
#35. Same facts as #34. S accepts the offer. For the last ten years, B has used 1000 widgets a
year. Can B now require S to deliver 2000 widgets in 2004?
o
NO – b/c not in line w/ prior requirements
2.3 Missing price term in sale contract
#36. S sends B a telefax in which she “offers to sell Blackacre.” The telefax does not set a
purchase price. Is the fax an offer?
o
land sale offer – requires description of land + state P
#37. B sends S an email in which B offers to buy S’s painting of Blackacre. The email does not
set a purchase price. Is the email an offer?
o
o
YES – if parties intend t/b offer (~UCC)
better than question 33  saying nothing about P reflects parties willingness to allow court to supply
the missing P term (in 33, the parties are limiting what the P term can be)
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[AGREEMENT PROCESS]
B. SECOND STAGE OF AGREEMENT PROCESS:
TERMINATION OF OFFER
[four different termination possibilities]
1. First termination of an offer possibility: termination of offer by death of offeror
#38. On January 15, X makes an offer to Y. On January 20, X dies. Can Y still accept X’s offer?
o
NO
#39. On January 15, X makes an offer to Y. Y pays X $10 for an 7 day option, i.e., X promises
not to revoke the offer for 7 days in exchange for Y’s payment of $10. On January 20, X dies. Can Y still
accept X’s offer?
o
YES – SLA as accepts during offer period
2. Second termination of an offer possibility: termination of offer by lapse of time
[contract provision or reasonable time]
#40. On January 15, X makes an offer to Y; the offer provides that it will terminate on January 30.
Can Y accept the offer on February 2?
o
NO – lapse per K
#41. On January 15, X makes an offer to Y. The offer does not contain a termination date. Can
Y accept the offer on December 7?
o
NO – lapse of reasonable time
3. Third termination of an offer possibility: termination of offer by offeror’s revocation of
an offer [need to know three things about termination of offer by offeror’s reovcation: what is revocation,
when is revocation effective, and when is offeror unable to revoke]
o
NO -
3.1 what is revocation
[offeror’s statement or conduct unambiguously indicating change of mind that offeree is aware of]
#42. S offers to sell his car to B for $1,000. S later sells the car to T.
B learns from T that she has bought the car from S. Can B still accept S’s offer?
o
NO – Def aware of conduct
#43. S offers to sell his car to B for $1,000. S later offers to sell the same car to T, and B learns
from T that S has offered to sell the car to T. Can B still accept S’s offer?
o
YES – b/c multiple offers <> unambiguous re offer to B
#44. S offers to sell his car to B for $1,000. S later tells T that he has changed his mind about
selling the car to B. Can B still accept S’s offer?
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[AGREEMENT PROCESS]
o
YES – b/c B not aware of change
#45. S offers to sell his car to B for $1,000. S later sells the car to T. Can B still accept S’s offer?
[Compare with #42]
o
YES -
3.2 When revocation is effective
[time of receipt; before acceptance]
#46. S offers to sell Blackacre to B. On Monday, S mails letter to B revoking offer. Letter arrives
on Thursday. When is the revocation effective?
o
Thursday – time of receipt
#47. S offers to sell Blackacre to B for $400. B accepts the offer. S then learns that T would pay
$500 for Blackacre. Can S revoke the offer to sell to B?
o
NO
3.3 When offeror is unable to revoke
[detrimental reliance, or part performance of unilateral contract offer, or
option, or firm offer rule]
#48. R, a New York company, offers E, a resident of Texas, a job. E sells her house in Texas
and moves to New York in reliance on R’s offer. Can R revoke?
o
NO
#49. O offers P $1,000 to paint her house. The offer states that it can be accepted only by
performance. P starts painting her house. Can O still revoke? [Later, compare with #71]
o
NO – part performance to unilateral K offer rule
#50. O offers P $1,000 to paint his house a unique shade of purple. The offer states that it can
be accepted only by performance. P pays for the purple paint, and takes the paint to O’s house -- but has
not started to paint. Can O still revoke?
o
NO – no revocation when detrimental reliance
#51. O offers P $1,000 to paint his house. P starts painting the house. Can O still revoke?
o
this was bilateral K – whose acceptance was reflected by the beginning of performance
#52. S offers to sell Blackacre to B for $1,000. S promises not to revoke the offer for 10 days in
exchange for B’s payment of $25. B pays $25 for the option. Can S revoke?
o
NO
#53. Sam offers to sell his 1973 Cadillac to Bess. Sam orally promises not to revoke the offer.
Can Sam still revoke?
o
YES – this is not an option b/c not supported by consideration
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[AGREEMENT PROCESS]
#54. Superior Auto Sales, Inc. makes a written offer to sell a 1973 Cadillac to Bess. The offer is
in writing and signed by Superior and provides that Superior will not revoke the offer for two weeks. Can
Superior still revoke?
o
NO – not for 2 weeks
#55. Same facts as #54 except that writing provides that Superior will not revoke for four months.
o
Superior cannot revoke for 3 mos
#56. Superior Auto Sales, Inc. makes a written offer to sell a 1973 Cadillac to Bess. The offer is
in writing and signed by Superior. Can Superior still revoke? [Compare with #54]
o
YES
#57. S Land Sales Co. makes a written offer to sell Blackacre to B. The offer is in writing and
signed by S and provides that S will not revoke for four months. Can S still revoke?
o
YES – b/c land – no firm offer rule possible
o
BUT in NY – option is valid w/o consideration
4. Fourth termination of an offer possibility: termination of
an offer because of the offeree’s response. [counteroffers, conditional acceptance, common law mirror
image rule]
#58. S offers to sell Blackacre to B for $10,000. B tells S he will only pay $9,000. S refuses to
sell for $9,000. Can B later accept S’s offer to sell Blackacre for $10,000?
o
NO – this is counter-offer
#59. S offers to sell Blackacre to B for $10,000. B asks S if he will take $9,000. S refuses to sell
for $9,000. Can B later accept S’s offer to sell Blackacre for $10,000?
o
YES
#60. S offers to sell his house to B for $200,000. B tells S he will buy the house for $200,000. if (
or “provided that”or “so long as” or “on condition that”) the house is appraised at $200.000. Is there an
agreement? [compare to 217]
o
o
NO – treat just like counter-offer – rejects / replaces the original offer
note – words not in the K, merely in counter offer
#61. S offers to sell 100 widgets to B for $10,000. The offer makes no mention of the color of the
widgets. B adds the words “on condition that all the widgets are purple”, signs S’s offer, and sends it back
to S. Is there an agreement?
o
NO
#62. Same facts as #61 except that S then ships B 100 purple widgets. Is there an agreement?
o
YES – S accepts  implied K arises when
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[AGREEMENT PROCESS]
#63. L sends T a lease for an apartment. The lease makes no mention of pets. T adds a
provision “tenant will be permitted to keep a parrot,” signs the lease, and sends it back to L. Is there an
agreement?
o
NO – b/c governed by C/L + not mirror image
#64. S offers to sell B 100 widgets for $10,000 by signed writing. The offer does not mention the
color of the widgets. B adds the words “all widgets to be purple”, signs S’s writing and sends it back to S,
Is there an agreement? [compare with #61]
o
YES - b/c no mirror image rule in UCC + no mention that color is a condition of the acceptance
#65. Same facts as #64 except that both S and B are merchants. Does the agreement require
that all widgets be purple?
o
YES – new term becomes part of deal UNLESS … new term is material change (question of fact) + if
objected by S / offeror
#66. Same facts as #64 and #65 except that S is a merchant but B is not a merchant.
C. THIRD STAGE OF AGREEMENT PROCESS: ACCEPTANCE)
1. Offer controlling method of acceptance
[offer can (but usually does not) control method of acceptance]
#67. On Monday, Royal Mfg. emails Ed an offer of employment that states - “you can accept this
offer only by reporting for work on Wednesday.” That same day, Ed emails the following response “I am
pleased to accept your offer.” Is Ed’s email an acceptance of Royal Mfg.’s offer?
o
reading comprehension
#68. B telefaxes S an order for widgets that provides “need widgets immediately. This offer can
be accepted only by shipping widgets within 24 hours.” S sends B a telefax stating “Accept your order.
Will ship within 24 hours.” Is this an acceptance? What if S does not ship within 24 hours?
o
o
NO – unilateral K
No breach b/c no K existed b/c lacked proper acceptance
#69. B telefaxes S an order for widgets that provides “need widgets immediately. Widgets must
be shipped within 24 hours.” S sends B a telefax stating “Accept your order. Will ship within 24 hours.” Is
this an acceptance? What if S does not ship within 24 hours?
o
YES – assume bilateral K UNLESS facts include “only by”
2. Start of performance as acceptance
[start of performance generally acceptance; unilateral contract exception]
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[AGREEMENT PROCESS]
#70. O offers P $1,000 to paint his house. P does not respond with words. Instead, P starts
painting O’s house. Is P’s part performance acceptance so that P has agreed to paint O’s house?
o
YES – this is bilateral K
#71. O offers P $1,000 to paint his house. O’s offer states that it can be accepted only by
performance. P does not respond with words. Instead, P starts painting O’s house. Is P’s part
performance acceptance so that P has agreed to paint O’s house? [See #49]
o
o
NO – is unilateral K  part performance is not acceptance  can stop w/o breach
compare to 49
3. Improper performance as acceptance
#72. O offers P $1,000 to paint his house white. P does not respond with words. Instead P
paints O’s house purple. Is P’s improper performance acceptance so that (I) there is a contract and (II) O
can sue P for breach of contract?
o
YES - acceptance + breach of K
#73. B orders 1000 white widgets. S does not respond with words. Instead S ships 1000 purple
widgets. Is S’s improper performance acceptance so that (I) there is a contract and (II) B can sue S for
breach of contract?
o
YES / YES
#74. B orders 1000 white widgets. S does not respond with words. S ships 1000 purple widgets
with the explanation - “out of white widgets. Only have purple widgets and so am sending the purple
widgets with the hope that meets your needs.” Is S’s improper performance acceptance so that (I) there is
a contract and (II) B can sue S for breach of contract?
o
accommodation exception – NO / NO
4. Conflicting communications and acceptance [“Mailbox
Rule”] [general rule: communications effective when received;
exception: acceptance effective when sent; exception to exception: if rejection is sent before acceptance,
both rejection and acceptance effective when received]
o
key –


people dealing w/ each other at distance +
conflicting communications  which controls
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[AGREEMENT PROCESS]
#75. Revocation of offer and acceptance. On January 5, L sends T a letter offering to lease
Blackacre for $100. On January 10, L sends T a letter revoking the offer. On January 12, T sends L a
letter accepting the offer. T receives L’s revocation letter on January 14, L receives T’s acceptance letter
on January 16. Is the acceptance letter effective?
o
Acceptance effective
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[ENFORCEABILITY OF AGREEMENT - PROCESS]
#76. Acceptance and then rejection: L sends T a letter offering to lease Blackacre for $100. On
January 10, T sends L a letter accepting the offer. On January 12, T sends L a letter rejecting the offer.
T’s rejection letter arrives on January 14. T’s acceptance letter arrives on January 15. Is the acceptance
letter effective?
o
YES – acceptance controls b/c effective when sent (ignore that rejection arrived first)
#77. Rejection and then acceptance: L sends T a letter offering to lease Blackacre for 100. On
January 10, T sends L a letter rejecting the offer. On January 11, T sends L a letter accepting the offer.
Which is effective – the rejection that was sent first or the acceptance?
o
depends which arrives first – an exception
PART THREE: DISPUTE OVER WHETHER AGREEMENT IS UNENFORCEABLE BECAUSE OF A
FLAWED AGREEMENT PROCESS
A. LACK OF CAPACITY OF DEFENDANT
1. Defendant’s capacity and right to disaffirm.
#78. Ollie makes an agreement with Minnie.
Minnie enforce the agreement?
o
Minnie is only 17 years old. Ollie breaches. Can
YES – only care about Def capacity (ignore PL capacity)
#79. Same facts as #78. Minnie breaches. Can Ollie enforce the agreement?
o
NO -
#80. Same facts as #78 except that Ollie believes Minnie is 18. Can Ollie enforce the
agreement?
o
NO – simple fact issue
#81. Same facts as #78 except that Ollie believes Minnie is 18 because Minnie told Ollie she was
18. Can Ollie enforce the agreement?
o
NO – simple fact issue
2. Implied reaffirmation
[Agreement made by person without capacity who later gains capacity and retains benefits of agreement
without complaint]
#82. Ollie enters into an agreement with Minnie to sell Minnie a car on credit. Minnie is only 17.
Ollie delivers the car to Minnie. Minnie becomes 18. Minnie retains the car without complaint and without
paying for it. Can Ollie enforce Minnie’s agreement to pay for the car?
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[ENFORCEABILITY OF AGREEMENT-PROCESS]
o
YES – retain benefit of agreement w/o complaint
3. Liability for necessaries
[quasi contract liability for food, clothing shelter, medical care]
#83. L leases an apartment to T for $800 a month. T is mentally incompetent. Is T legally
obligated to pay L for T’s use of the apartment?
o
o
o
YES –
BUT – NEVER K liability for person lacking capacity to pay for necessities
liability is quasi K  amount depends not on agreement P but on the value
B. DURESS
#84. T threatens to shoot L’s child unless L agrees to sublease her
apartment to T. L agrees. Is L’s sublease agreement legally enforceable?
o
NO
#85. S and B enter into a contract which provides that S will deliver 1000 purple widgets and B
will pay S $1,000. S later refuses to deliver the purple widgets unless B also agrees to buy 1,000 white
widgets for $2,000. B agrees to buy the white widgets because S is the only source for obtaining purple
widgets and B needs purple widgets immediately for an important customer. S delivers the purple
widgets. Is the white widget agreement enforceable?
o
o
NO – flaw in agreement process – based on economic duress
keys –
 party threatens to breach existing agreement unless gets new / better deal
 other party makes new agreement only b/c desperately needs the goods
#86. S, an umbrella vendor, usually sells umbrellas for $3. When it rains, S increases his price to
$10. During a rain storm, B agrees to buy an umbrella from S for $10. B pays S $10 and receives an
umbrella. After the rain storm, can B recover any or all of the $10 from S on the ground of duress?
o
NO – not economic duress
C. MISREPRESENTATION THAT INDUCES AGREEMENT
#87. S tells B that his house has never had any cockroaches. That statement induces B to agree
to buy S’s house. Although S honestly and innocently believes that the house never had any
cockroaches, the house has cockroaches. Is B’s agreement to buy S’s house legally enforceable?
o
o
NO – b/c material misrepresentation that induced the agreement  flaw in the agreement process
honest and innocent misrepresentations matter – ignore lack of intent / negligence / etc.
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[ENFORCEABILITY OF AGREEMENT-PROCESS]
D. MISTAKE OF FACT IN EXISTENCE AT TIME OF AGREEMENT
1. Mutual mistake of material existing fact
#88. B agrees to buy Rose, a cow, from S for $400. Although the agreement does not provide
that Rose is barren and neither party represented that Rose is barren, both B and S believe that Rose is
barren. After the agreement but before performance of the agreement, B and S learn that Rose is fertile.
Is the agreement legally enforceable?
o
NO
#89. B and S agree on the sale of S’s painting to B for $50,000. Although the agreement does
not provide that the painting is a Warhol and S never represented to B that the painting was a Warhol,
both S and B believe that the painting is a Warhol. After the agreement but before performance, B and S
learn that the painting is not a Warhol. Is the agreement enforceable?
o
NO
#90. B and S agree on the sale of S’s painting to B for $50,000. Although the agreement does
not provide that the painting has a value of $50,000 and S never represented that the painting is worth
$50,000, both S and B believe that the painting is worth approximately $50,000. After the agreement, but
before performance B and S learn that the painting is worth approximately $1,000. Is the agreement
enforceable?
o
YES – key is material
 mistake re what something is ~ material
 mistake re monetary value alone ~ never material
2. Unilateral mistake of existing fact
#91. B and S agree on the sale of S’s painting to B for $50,000. Although the agreement does
not provide that the painting is a Warhol and S never represented to B that the painting was a Warhol, B
believes that the painting is a Warhol. S does not believe that the painting is a Warhol and does not know
that B believes that the painting is a Warhol. After the agreement but before performance, B learns that
the painting is not a Warhol. Is the agreement enforceable?
o
YES – mere fact that one party misunderstands  not flaw in K agreement process SLA other party
not aware of the mistake
E. STATUTE OF FRAUDS
1. Contracts within the Statute of Frauds.
[“Within the Statute of Frauds” means that the “Statute of Frauds” applies – means that you have to apply
the Statute of Frauds]
1.1 Transfer of an interest in real estate of more than one year duration
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CONTRACTS
[ENFORCEABILITY OF AGREEMENT-PROCESS]
#92. T alleges that L orally agreed to lease an apartment to her for one year. Is any such an
agreement within the Statute of Frauds?
o
NO
#93. B alleges that S orally agreed to sell Blackacre to her. Is any such agreement within the
Statute of Frauds?
o
YES – permanent duration
#94. B alleges that S orally agreed to sell her a two year easement on Blackacre. Is any such
agreement within the Statute of Frauds?
o
YES
#95. O alleges that B orally agreed to build a fence around O’s land. Is any such agreement
within the Statute of Frauds?
o
NO – this is services – not re an interest in the land itself
1.2 Services contract not capable of being performed within a year from the time
of the agreement.
#96. O alleges that T orally agreed to cut all of the trees on O’s land. Is any such agreement
within the Statute of Frauds?
o
o
o
NO – c/b performed w/i one year
remember – if subject matter is performance of specific task  never SoF issue b/c capable means
theoretically possible w/ unlimited resources
remember -
#97. Erica alleges that Royal, Inc. orally agreed to employ her for the rest of Erica’s life. Is any
such agreement within the Statute of Frauds?
o
o
MBE – NO – b/c may be satisfied w/i 1 yr
NY -
#98.
Ed alleges that Regal Co. orally agreed to employ him for two years. Is such an
agreement within the Statute of Frauds?
o
YES
#99. Erin alleges that Regent Co. orally agreed to employ her for one year. Is any such
agreement within the Statute of Frauds?
o
NO – not > 1 yr
#100. Ella alleges that Regis Corporation orally agreed to employ her for one year, starting next
month. Is any such agreement within the Statute of Frauds?
o
YES – > 1 yr from date of agreement
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CONTRACTS
[ENFORCEABILITY OF AGREEMENT-PROCESS]
#101. Erwin alleges that BAR/BRI orally agreed on December 7, 2002, that he would be paid
$800 for doing four hours of lectures on Con. Law in New York in January 2004. Is such an agreement
within the Statute of Frauds?
o
YES - > 1 yr from date of agreement
1.3 Sale of goods for $500 or more
#102. S, a merchant, alleges that B, a merchant, orally agreed to buy widgets for $500. Is such
an agreement within the Statute of Frauds?
o
YES
#103. Same facts as #102 except that B is not a merchant. Is such an agreement within the
Statute of Frauds?
o
YES
#104. B alleges that S orally agreed to sell widgets for $400. Is such an agreement within the
Statute of Frauds?
o
NO – m/b 500 or more
1.4 Lease of goods with lease payments totaling 1,000 or more
#105. Rex Leasing Co. alleges that Excel Corp. orally agreed to lease a computer for one year
for $900 a month. Is such an agreement within the Statute of Frauds?
o
YES – b/c for greater than $1,000 in total
1.5 Promise to “answer for” the debt of another [“Answer for” is limited to
guarantees]
#106. D owes C $1,000. C alleges that G orally agreed to pay the $1,000. Is such an agreement
to pay within the Statute of Frauds?
o
NO – not promise to pay another’s debt / only for answering for another’s debt
#107. D owes C $1,000. C alleges that G orally agreed to pay the $1,000 if D did not pay. Is
such an agreement to pay if D doesn’t pay within the Statute of Frauds?
o
YES -
#108. Same facts as #107. D’s debt to C is for paint that D bought to use in painting G’s house.
Is such an agreement within the Statute of Frauds?
o
NO – main purpose exception
1.6 Promise by estate representative to pay estate’s expenses from her own funds
#109. F Funeral Home alleges that E, executrix for D’s estate, orally promised to use her own
funds to pay debts owing by D’s estate. Is such an agreement within the Statute of Frauds?
o
YES – b/c so unusual for estate rep to use her own money
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CONTRACTS
[ENFORCEABILITY OF AGREEMENT-PROCESS]
1.7 Promise in consideration of marriage
#110. M alleges that W orally agreed to renounce all claims to his assets if he would marry her.
Is such an agreement within the Statute of Frauds?
o
YES
#111. M alleges that W orally agreed to marry him. Is such an agreement within the Statute of
Frauds?
o
NO -
1.8 Other Statutes of Fraud: assignment of insurance
policy; promise to name beneficiary of insurance policy; agreements to pay commissions or finders’ fees
2. Statute of Frauds defense if (I) agreement is within Statute of Frauds AND (II) Statute of
Frauds not satisfied
#112. B sues S alleging S orally agreed to sell him Blackacre and that a priest, a rabbi, and a
minister heard the oral agreement. S files a motion for summary judgment alleging (I) the agreement is
within the Statute of Frauds and (II) the Statute of Frauds is not satisfied. What result?
o
no enforceable agreement
3. Satisfying the Statute of Frauds without a writing
3.1 FULL performance of services contracts
#113. P alleges that O orally agreed to keep a sign on his fence for two years, “This fence has
been painted by P”, in exchange for P’s painting the fence. P paints the fence. O does not post the sign.
P sues for breach of contract. O asserts a Statute of Frauds defense. Does P’s painting the fence (“full
performance”) satisfy the Statute of Frauds?
o
YES
#114. Ella alleges that Regina Corp. orally agreed to employ her for 15 months. Ella works for
two months. Regina Corp. does not pay her. Ella sues for breach of contract. Regina Corp. asserts a
Statute of Frauds defense. Does Ella’s working for two months (“part performance”) satisfy the Statute of
Frauds?
o
NO – m/b full performance (part performance of services K <> satisfy SoF)
3.2 Payment plus and real estate
#115. B alleges that S orally agreed to sell Blackacre to her for $10,000. B has paid S $5,000 in
cash and has made improvements on Blackacre. S now is refusing to sell Blackacre to B. When B sues
for breach of contract, S asserts a Statute of Frauds defense. Does B’s part payment plus improvements
satisfy the Statute of Frauds?
o
YES –
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[ENFORCEABILITY OF AGREEMENT-PROCESS]
o
part performance DOES work for R/E deal – need two of three part payment / possession /
improvement
#116. B alleges that S orally agreed to sell Blackacre to her for $10,000. B has paid S $10,000 in
cash. S is now refusing to sell Blackacre to B. When B sues for breach of contract, S asserts a Statute
of Frauds defense. Does B’s full payment satisfy the Statute of Frauds?
o
NO – payment alone (even full payment) not enough
3.3 Suit over delivered goods
#117. S alleges that B orally agreed to buy 2000 widgets for $1 a widget. S delivers 600 widgets.
B keeps the widgets and does not pay. S sues B for $600 for the delivered widgets. B asserts a Statute
of Frauds defense. Does S’s delivery satisfy the Statute of Frauds?
o
YES – suit re goods already delivered
#118. B alleges that S orally agreed to sell 2000 widgets for $1 widget. S delivers 600 widgets.
B pays $600 but S does not deliver any more widgets. B sues S for breach of contract by non-delivery. S
asserts a Statute of Frauds defense. Does S’s delivery satisfy the Statute of Frauds?
o
NO – suit re goods yet t/b delivered
3.4 Judicial admission
o
comes during discovery, pleading, testimony
#119. B sues S alleging that S orally agreed to sell B his 1973 Cadillac for $600. During a
deposition, S admits that he orally agreed to sell B his 1973 Cadillac. Does such an admission satisfy the
Statute of Frauds?
o
YES – deposition / discovery
4. Satisfying the Statute of Frauds with a writing
4.1 Writing for sale of goods that mentions quantity that is signed by the
person who asserts the Statute of Frauds defense
#120. S sues B for $500 alleging that B agreed to buy 200 widgets for $500. B asserts a Statute
of Frauds defense. There is a writing: “I agree to buy 200 widgets,” signed by B. Does this writing
satisfy the Statute of Frauds?
o
YES – quantity + signed by party t/b charged
#121. S sues B for $500 alleging that B agreed to buy 200 widgets for $500. B asserts a Statute
of Frauds defense. There is a writing: “ I agree to sell 200 widgets to B, signed by S.” Does this writing
satisfy the Statute of frauds?
o
NO – b/c B is party t/b charged
4.2 Merchant’s failure to respond timely to a written assertion of contract by
another merchant
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CONTRACTS
[ENFORCEABILITY OF AGREEMENT-PROCESS]
#122. B, a merchant, sends S, a merchant, the following fax “This is to confirm our agreement
that you will deliver 100 widgets for $500 s/B.” S receives the fax; S neither responds to the fax nor
delivers the widgets for more than 10 days. B sues S for breach of contract. S asserts a Statute of
Frauds defense. Does B’s fax satisfy the Statute of Frauds?
o
YES – both parties merchants + written assertion + w/i 10 days
4.3 Writing for lease of goods
#123.
o
Evon signs the following writing: “I agree to lease one widget making machine from Rex
Leasing Co. for two years for $200 a month.” Evon breaches. Rex Leasing Co. sues
Evon for breach of contract. Evon asserts a Statute of Frauds defense. Does the writing
satisfy the Statute of Frauds?
YES -
#124. Evans signs the following writing: “I agree to lease one widget making machine from Royal
Leasing Co.” Evans breaches. Royal Leasing Co. sues for breach of contract. Evans asserts a Statute
of Frauds defense. Does the writing satisfy the Statute of Frauds?
o
NO 4.5 Writing for transfers of real estate, or services contracts, or guarantees.
[“all material terms” which means “who” and “what”; signed by the person against
whom the agreement is being enforced]
#125. X mails Y the following signed writing: “I accept your offer.” Y sues X for breach of a
contract for the sale of Blackacre for $1,000. X asserts a Statute of Frauds defense.” Does the writing
satisfy the Statute of Frauds?
o
NO - <> identify who nor what
#126. Century Co. signs the following writing: “Allison agrees to work as an attorney for Century
co. for three years and Century Co. agrees to pay her for $100,000 a year.” One month later, Century
Co. terminates Allison’s employment without cause. Allison sues Century Co. for breach of contract.
Century Co. asserts a Statute of Frauds defense. Does the writing satisfy the Statute of Frauds?
o
YES -
#127. Century Co. signs the following writing: “Allison agrees to work as an attorney for Century
Co. for three years and Century Co. agrees to pay her for $100,000 a year.” One month later, Allison
quits working for Century Co. and goes to work for Third Bank. Century Co. sues Allison for breach of
contract. Allison asserts a Statute of Frauds defense. Does the writing satisfy the Statute of Frauds?
o
NO – not signed by party t/b charged
5. Application of statute of frauds to allegations of contract modifications
[In determining whether, as a matter of law, there must be written evidence of a contract modification look
to the statute of frauds and apply the statute of frauds to the agreement with the alleged change. If the
contract as allegedly modified is within the Statute of Frauds, then, as a matter of law, there must be
written evidence of the modification.]
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CONTRACTS
[ENFORCEABILITY OF AGREEMENT-PROCESS]
#128. Erica has a contract to work for BAR/BRI for 36 months for $10,000 a month. Erica alleges
that BAR/BRI agreed to increase her salary to $15,000 a month. Is it necessary, as a matter of law, that
Erica produce written evidence signed by BAR/BRI of the alleged modification agreement?
o
YES
#129. Same facts as #128 except that the Erica-BAR/BRI employment contract is only for 12
months.
o
NO – b/c SoF only if > 1 yr
#130. T has leased a building from L for one year. L alleges that T later agreed to extend that
lease to 36 months. Is it necessary, as a matter of law, that L have written evidence of the alleged
modification agreement signed by T?
o
YES – b/c agreement w/ modification is w/i SoF
#131. B has agreed to buy widgets from S for $600. B alleges that S agreed to reduce the
purchase price to $400. Is it necessary, as a matter of law, that B have written evidence of the alleged
modification agreement signed by S?
o
NO – b/c modified K not w/i SoF
#132. Erica has a contract to work for BAR/BRI for 10 months for $10,000 a month. The contract
provides that all modifications must be in writing. Erica alleges that BAR/BRI agreed to increase her
salary to $15,000 a month. Is it necessary, as a matter of law, that Erica produce written evidence signed
by BAR/BRI of the alleged modification agreement?
o
NO – at C/LK provision requiring written modification ~ ignored
F. WRITTEN AUTHORITY TO SIGN REAL ESTATE AGREEMENT FOR ANOTHER
[“equal dignity rule”]
#133. Alice claims that she is authorized to sign a lease for Paul in which Paul is leasing
Blackacre from Lea for two years. Does Alice need written authorization?
o
YES – under equal dignity
#134. Alexis claims that she is authorized to sign a lease for Pete in which Pete is leasing
Blackacre from Lee for one year. Does Alexis need written authorization?
o
NO -
G. LACK OF CONSIDERATION OR CONSIDERATION SUBSTITUTE
1. Detriment [or benefit] bargained for exchange by person who is taking the
position that her promise is not enforceable.
#135. The agreement between B and S provides for the sale of a book by S and the payment of
$100 by B. B now refuses to pay S the $100. Was there consideration for B’s promise to buy the book?
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[ENFORCEABILITY OF AGREEMENT-PROCESS]
o
YES – one promise c/b consideration for another promise
2. Adequacy of consideration irrelevant
#136. Same facts as #135 except that the book is only worth $5. Was there consideration for B’s
promise to buy the book?
o
YES – no requirement for adequacy of consideration
3. Past consideration and no bargained for exchange
#137. In October, Steve helps his neighbor Nan assemble furniture. In November, Nan promises
to pay Steve $100 for his help in assembling furniture. Nan now refuses to pay Steve. Was there
consideration for Nan’s promise?
o
NO – ignore prior bene / detriment
#138. Same facts as #137 except Nan’s promise to pay Steve for his earlier help was in writing?
o
o
YES in NY
NO for MBE
4.
#139.
o
Pre-existing legal duty and no new detriment or benefit
P contracts to paint O’s house for $4,000. After P begins work, she asks O for an
additional $500 for exactly the same work. O is so impressed with P’s work that O orally
agrees to pay P an additional $500 for exactly the same work covered by the contract. O
now refuses to pay the additional $500. Was there consideration for O’s promise to pay
the additional $500?
NO – no new bene / detriment to P
#140. Same facts as #139 except that O’s promise to pay the additional $500 is in writing.
o
o
YES in NY  see problem 57
NO for MBE
#141. Same facts as #139 except that P agrees also to paint O’s small porch bench in exchange
for the additional $500.
o
YES – there is consideration
#142. P contracts to paint O’s house for $4,000. After P begins work, N, O’s neighbor, is so
pleased that O’s unsightly house is being repainted that he promises to pay an additional $500 for P’s
painting O’s house as contracted. N now refuses to pay the additional $500. Was there consideration for
N’s consideration to pay the additional $500?
o
YES – T/P exception – if promise to pay additional money comes from T/P  is enforceable
#143.
S contracts to sell B 1000 widgets for $300. Later S and B
orally agree to increase the price for the 1000 widgets by $120 to $420. Is the promise to pay the
additional $120 legally enforceable?
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CONTRACTS
[ENFORCEABILITY OF AGREEMENT-PROCESS]
o
o
YES if in G/F
NO – pre-existing legal duty rule in sale of goods K  do not need new consideration to modify
existing K
5. Part payment of a due and undisputed debt and no new detriment (or benefit)
from the creditor’s promise to release the rest of the debt.
#144. D owes C $1,000. On March 3, the debt is due and undisputed. On March 3, D and C
orally agree that if D pays $600 immediately C will not take any legal action to collect the other $400. D
pays C $600. C sues D for the other $400. D asserts the March 3 oral agreement as a defense. C
argues that the March 3 agreement is not enforceable because of the lack of consideration. Was D’s
payment of $600 consideration for C’s agreement not to collect the rest of the debt?
o
NO – if debt is undisputedly due NOW 
#145. Same facts as #144 except that the March 3 agreement was in writing.
o
NY – is valid
#146. Same facts as #144 except that the $1,000 debt was disputed.
o
YES then agreement of release is legally enforce
6. Promissory estoppel as a consideration substitute [promise, and foreseeable,
detrimental reliance]
#147. T leases an apartment from L under a lease that expires next month. L promises T that L
will renew the lease at the same rent for another year. In reliance on L’s promise, T repaints the
apartment. L now refuses to renew the lease; L takes the position that the promise to re-new the lease is
unenforceable because of a lack of consideration. Was T’s painting the house consideration for L’s
promise to renew the lease?
o
NO – no bargained for eachange
#148. In #147, Can T enforce L’s promise on the basis of promissory estoppel?
o
Possibly Yes 7. Written promise to pay debt barred by legal defense as a consideration substitute
#149. D owed C $1,000. Legal action to collect the debt is barred by the statute of limitations.
Nonetheless, D writes C: “I know I owe you $1,000. I will pay you $600.” Is D’s promise to pay the $600
legally enforceable?
o
YES – promissory estoppel
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CONTRACTS
[ENFORCEABILITY OF AGREEMENT-CONTENTS]
PART FOUR: DISPUTE OVER WHETHER AGREEMENT IS UNENFORCEABLE BECAUSE
OF WHAT IS IN THE AGREEMENT
A. ILLEGALITY AT TIME OF AGREEMENT
[Illegal Subject Matter: Void
Illegal Purpose: Voidable Against Person with Illegal Purpose]
#150. Mal hires Uma to kill Vic for $1,000. If Uma does not kill Vic, can Mal sue for breach of
contract?
o
NO – illegal subject matter
#151. Uma agrees to buy a non-refundable ticket from American Airlines to fly from Dallas where
Uma lives to New York where Vic lives. If Uma does not pay for the ticket, can American Airlines sue
Uma?
o
YES – assuming did not know of illegal purpose
B. PUBLIC POLICY
1. COVENANTS NOT TO COMPETE [Look to need, scope]
#152. S sells his bar, S Bistro, to B. Contract provides that S will not open another bar within five
miles of S Bistro for one year. Is this covenant not to compete legally enforceable?
o
depends on – reasonableness of time limitation + geographic limitation
#153. Ray’s Restaurant in Union Square requires all of its employees to sign a contract that
prohibits any employee from working for another restaurant in New York City for 90 days. Is this covenant
not to compete enforceable?
o
depends on – reasonableness of time limitation + geographic limitation + business need
2. EXCULPATORY CLAUSE
#154. B contracts to remodel O’s building. The contract provides that B shall not be liable for
damages caused by the negligence of B’s employees. Is this exculpatory clause enforceable?
o
o
o
depends on facts
K away liab for negligence <> against public policy in appropriate circumstances
NEVER have K away liability for intentional torts / gross negligence
C. UNCONSCIONABILITY (oppressive terms, unfair surprise, at time of contract)
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[TERMS]
PART FIVE: DISPUTE OVER THE TERMS OF THE AGREEMENT
A. WORDS OF THE PARTIES
1. PAROL EVIDENCE RULE: EFFECT OF WRITTEN AGREEMENT
1.1 Vocabulary
Integrated agreement
Parol evidence
Complete integration
Partial integration
Merger clause
Parol evidence rule
Reformation
1.2 Parol evidence rule and use of earlier (or contemporaneous) words to change words
in (reform) a later written agreement (reformation)
o
#155.
Prince Corp. and Amy sign a contract that provides that Amy will be Prince Corp.’s sales
representative in Dallas exclusively. Prince Corp. now claims that the deal was that Amy would work in
either Dallas or Yonkers and has telefaxes sent before the written contract that support the claim. If
Prince Corp. sues for reformation of the contract, can the court consider the telefaxes?
o
NO – parol evidence rule prevents court from considering evidence contradicting integration
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[TERMS]
#156.
S and B sign a contract for the sale of chickens that provides that S will deliver 100
chickens a month for 12 months. B now contends that just prior to B’s signing the contract, S told B that S
would deliver as many chickens a month as B needs. B’s minister who happened to be at the closing is
willing to testify to this. If B sues S for reformation of the contract can the court consider the testimony of
B and her minister as to what S told B about the amount of chickens to be delivered?
o
NO – parol evidence rule
#157. S and B sign a contract providing for the sale of 100 chickens a month for 12 months. B
now claims that the deal was supposed to be that S would sell 120 chickens a month for 10 months – that
there was some sort of clerical error that result in the numbers being “transposed.” B has emails from S,
sent prior to the written contract, that state that S will deliver 120 chickens a month for 10 months. B sues
for reformation of the contract. Can the court consider the telefaxes?
o
Yes – mistake in integration exception
1.3 Parol evidence rule and use of earlier words of the parties to establish a defense to
the enforcement of the agreement (rescission)
#158. S and B sign a contract for the sale of chickens that provides that S will deliver 100
chickens a month for 12 months. B now contends that just prior to B’s signing the contract, S told B that S
would deliver as many chickens a month as B needs. B’s rabbi who happened to be at the closing is
willing to testify to this. B sues for rescission: a judicial determination that the chicken sale agreement is
unenforceable because of S’s misrepresentation. S’s position is that the writing controls - that he is only
obligated to deliver 100 chickens a month and B is obligated to buy them. Can the court consider the
testimony of B and her rabbi as to what S told B about the amount of chickens to be delivered?
o
parol evidence OK b/c suing for rescission
1.4 Parol evidence rule and the use of earlier words of the parties to explain words in
the written contract
#159. S and B sign a contract for the sale of chickens that provides that S will deliver 100
chickens a month for 12 months. B now contends the word “chickens” in the contract is limited to fryers
and broilers while S takes the position that “chickens” includes all chickens. In litigation that raises the
issue of what is a “chicken,” can the court consider correspondence from S to B before the contract that
indicates that the contract would be limited to fryers and broilers?
o
YES – explanation exception
1.5 Parol evidence and the use of earlier words of the parties to add to the words in
the written contract
#160. S and B sign a contract for the sale of chickens that provides that S will deliver 100
chickens a month for 12 months. B now contends that S is obligated to “freeze-wrap” the chickens and
that S had repeatedly told this to B before B signed the contract. The written contract has no provision
stating how the chickens are to be packaged. The written contract, however, does have lots of provisions
– 99 pages of provisions, including a “merger clause”. In litigation as to whether S is contractually
obligated to “”freeze-wrap” the chickens, can the court consider testimony relating to pre-contract
statements by S as to how the chickens would be wrapped?
o
DEPENDS – whether integration complete or not ~ additional words corollary
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CONTRACTS
[TERMS]
2.
CHANGING A WRITTEN AGREEMENT BY WORDS OF THE PARTIES AFTER
THE AGREEMENT [modification rules, not parol evidence rule]
#161. On January 15, Prince Corp. and Amy sign an agreement that provides that Amy will be
Prince Corp.’s exclusive sales representative in Dallas. On April 5, Prince Corp. now claims that the deal
was changed after January 15 so Y could be moved to Yonkers and has telefaxes sent after the contract
that support the claim. Any parol evidence rule issue? Any other issues?
o
NO – only involves evidence after the K
3. REFUSAL TO ENFORCE AN UNCONSCIONABLE CLAUSE OF THE CONTRACT
B. EFFECT OF CONDUCT OF PARTIES ON TERMS [conduct is relevant to (1) explaining
words that are in the contract and (2) filling gaps; Look first course of performance - what parties have
done under this contract; then course of dealing - what parties have done under earlier, similar contracts;
and last to custom and usage - what others have done under similar contracts.]
#162. B and S contract for the sale of chickens each week in 2004. In a dispute over whether
“chickens” includes “boiling hens”, what extrinsic evidence would the court consider and in what order of
“priority”?
o
o
o
course of performance
course of dealing
custom and usage
C. UCC AS A SOURCE OF TERMS IN SALES AND LEASES OF GOODS
1. Seller’s delivery obligation in common carrier contracts
[Two possibilities (1) Shipment contract - (a) get the goods to a common carrier, (b) make reasonable
delivery arrangements, and (c) notify the buyer or (2) Destination contract - get the goods to the buyer]
#163. S a seller in Snook, Texas, contracts to sell armadillos to B, a buyer in Buffalo New York.
When does S complete its delivery obligation if the contract is a shipment contract?
o
when delivers goods to common carrier
2. Risk of loss in sales of goods
2.1 What is risk of loss? [After contract, but before buyer gets the goods,
the goods are damaged and neither the buyer nor the seller is to blame.]
2.2 What if the buyer has the risk of loss? [Buyer pays contract price for
damaged or destroyed goods.]
2.3 What if the seller has the risk of loss? [Seller has to provide new
goods at no cost to the buyer.]
2.4 Basic risk of loss rules
[#1 agreement controls
#2 breaching party liable for any uninsured loss
#3 if common carrier, seller has risk of loss until completion of delivery obligation
#4A if no common carrier, merchant seller has risk of loss until buyer actually receives (i.e., takes physical
possession) of the goods
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[TERMS]
#4B if no common carrier, nonmerchant seller has risk of loss until seller tenders (i.e. makes the goods
available)]
o
#164. S, a Snook, Texas pet store, sells armadillos to B, a Buffalo New York pet store. While in
transit from Snook to Buffalo, armadillos become ill with Mad Armadillo Disease. Neither S nor B is to
blame. Who has the risk of loss if S shipped the armadillos two weeks after the contract deadline?
o
#165. S, a Snook, Texas pet store, sells armadillos to B, a Buffalo New York pet store. While in
transit from Snook to Buffalo, armadillos become ill with Mad Armadillo Disease. Who has the risk of loss
if the contract was a shipment contract?
o
Buyer has risk of loss
#166.
o
Same facts as #165 except that the contract is a destination contract.
Seller has risk of loss
#167. Sol Appliance Store, contracts to sell B a refrigerator. The deal is that B will drive his SUV
to Sol’s loading dock and pick up the refrigerator there. Before B picks up the refrigerator, the refrigerator
is struck by lightning. Does B have to pay for the refrigerator?
o
NO – merchant seller has risk until delivery to buyer
#168. In a yard sale, Sally sells her refrigerator to her neighbor B. The deal is that B will drive his
SUV to Sally’s driveway and pick up the refrigerator. Before B picks up the refrigerator, the refrigerator is
struck by lightning. Does B have to pay for the refrigerator? What if B is in the business of buying and
selling appliances?
o
YES / YES – b/c seller is merchant – ALWAYS look at seller only
3. Risk of loss in leases of goods
#169. X leases a computer from C Computer Company for five years for $1,000 a month. Three
months after the computer is delivered to X, the computer is destroyed by a tornado. Who has the risk of
loss?
o
C computer company
#170. X finds a computer it wants to lease at C Computer Inc. It leases it from B Bank which had
bought it from C Computer Company. The lease has a five year term had provides for rent of $11,000 a
month. Three months after the computer is delivered to X, it is destroyed by a flood. Who has the risk of
loss?
o
X4. Express warranties in sales of goods [fact or promise, not opinion]
#171. Which of the following is an express warranty:
(a) “all parts are steel”?
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[TERMS]
o
express
(b) “all parts are guaranteed for two years”?
o
express
(c) “all parts are top quality”?
o
NOT express
(d) seller’s showing buyer a sample?
o
express ALWAYS
5. Implied warranty of merchantability in sale of goods [goods sold by “merchant”
fit for ordinary purposes]
#172. S Widget Company sells widgets to B. Contract is silent as to the quality of the widgets.
Is there any warranty?
o
YES
#173. S Widget Company sells one of its company cars to B. Is there an implied warranty of
merchantability?
o
NO
6. Implied warranty of fitness for a particular purpose in sales of goods
#174. B tells the clerk at S shoe store that he needs shoes for interviews with Wall Street firms
and he does not know what kind of shoes are appropriate. The clerk sells B a pair of white, patent leather
loafers. Lawyers terminate B’s interview when they see his shoes. Can B recover from S for breach of
contract?
o
YES – there was an implied warranty of merchantability
7. Implied warranty in leases of goods
#175. X leases a computer from C Computer Co. Is there an implied warranty of
merchantability?
o
YES =
#176. In a finance lease, X leases a computer from B Bank which had bought the computer from
C Computer Co. Is there an implied warranty of merchantability?
o
Not for B BUT yes for C
8. Disclaimer of express warranties in sales and leases
#177. Sale (or lease) provides that all widgets are “all steel” and that “all parts are guaranteed for
two years.” What if that same contract provides “all warranties are disclaimed”?
o
disclaimer is invalid
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[TERMS]
9. Disclaimer of implied warranties in sales and leases
#178. Contract for sale (or lease) of widgets from W Widget Company provides for sale (or lease)
of widgets “as is.” No other statement about the quality of the widgets. Is there any warranty?
o
NO – disclaimer allowed by “as is” or “w/ all faults”
#179. Same facts as #178 except that the contract provides “no
express or implied warranties of merchantability or fitness” instead of “as is.”
o
no implied warranties IF conspicuous
10. Limitation of Remedies
#180. B buys an oven from S Stove Store. The contract provides that “all operating parts are
guaranteed for two years” and “warranty liability shall be limited to replacement parts.” A year later, a
defective heating element causes a fire. What if the fire causes $10,000,000 of damages? What if B is
injured in the fire?
o
o
o
mixed warranty is possible
possible to limit remedies for both express and implied warranties
test of validity ~ unconscionability at time K entered
o
B recovers for personal injury - prima facie unconscionable to limit remedies to prevent recovery for
personal injury re consumer good deals
PART SIX: DISPUTES OVER PERFORMANCE OF THE CONTRACT
A. Performance of contracts for sale of goods
[Six concepts: (1) perfect tender and rejection of the goods, (2) cure,
(3) installment sale contracts, (4) acceptance, (5) revocation of acceptance and (6) payment]
1. Perfect tender and rejection of the goods
#181. B and S enter into a contract that provides that S will deliver 100 green widgets, and B will
pay $100. S delivers 90 green widgets and 10 yellow widgets. What are B’s legal rights?
o
buyer gains option to reject ~ excuses buyer from accepting / paying
2. Cure
#182. Same facts as #181 except that contract provides that green widgets must be delivered by
July 13th and S’s delivery of green and yellow widgets arrives on April 5. B refuses to keep the widgets.
What can S do?
o
S can cure SLA does before deadline
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[PERFORMANCE]
#183. Same facts as #181 except that previously B had accepted shipments of widgets in colors
different from contract specifications.
o
b/c facts show S had reasonable grounds to believe goods sent w/b accepted
3. Installment sales contract [Look for contract language].
#184. Contract between Jumbo Bagels and BAR/BRI provides that Jumbo Bagels will deliver 500
bagels by 9:00 each morning of the bar review course and that BAR/BRI will pay on delivery. On
Tuesday, Jumbo only delivers 450 bagels at 9:15. What are BAR/BRI’s rights?
o
o
BB cannot reject that deliver or the K as a whole
K specifically requires separate delivery
#185.
o
B buys 10,000 widgets from S. S makes 20 shipments of 500 each. Is this an
installment sales contract?
NO – b/c K does not specify delivery s/b in installments
4. Acceptance of goods
Look for whether acceptance has occurred and, if so, the effect of acceptance.
o
if acceptance has occurred  no rejection possible
#186. B, a Dallas buyer, contracts to buy widgets from S, a New York seller. The contract
provides for payment in advance. B makes the payment. The widgets have not yet arrived in Texas. Has
B accepted the goods even though the goods have not yet arrived?
o
NO – prior payment <> acceptance
#187. B buys a sleeping bag from S in June. B pays S but never expressly accepts the goods. B
has had the sleeping bag since June, and it is now November. Has B accepted the goods?
o
YES – B had opportunity to inspect  delay ~ acceptance
5. Revocation of acceptance of the goods
#188. Same facts as #187 except that the sale contract warranted the sleeping bag to be suitable
for use in temperatures as low as 10 degrees. It is only when using the sleeping bag in November that B
learns that the sleeping bag is not suitable for use in temperatures as low as 10 degrees. What are B’s
remedies?
o
o
can revoke after acceptance IF gives goods back
revoking acceptance of goods – ALLOWED if ALL of  substantial impairment of goods + difficulty of
discovery buyer gives goods back
6. Payment obligation
#189. S contracts to sell her car to B. Contract provides a payment deadline of 5 on Saturday.
What if B delivers a check to S just before 5 on Saturday?
o
o
OK to pay buy check
Seller <> have to take B check
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[PERFORMANCE]
o
gives Buyer additional reasonable time
B. Performance of common law contracts [substantial performance (material breach), divisible
contracts]
#190. J&Y, Inc. contracts to build a house for Kent. Contract provides that “all pipe shall be
Reading pipe.” J&Y, Inc. instead uses Cohoe pipe. The court finds Cohoe pipe is comparable to Reading
pipe. Is this substantial performance? [Later compare with #221]
o
YES – note lack of one of key phrases at 221
#191. Same facts as #190. Can Kent sue J&Y, Inc. for breach of contract and recover damages?
o
YES – any breach (even where substantial performance) gives right to money dmgs
#192. Same facts as #190. Is Kent excused from paying for the house because of J&Y’s, Inc.
breach?
o
NO under C/L K  only material breach excuses other party from performing
#193. P contracts to paint 10 identical apartments for O for $2,000. P paints 9 of the apartments
and stops. Can O sue P for breach of contract? ___ Can P recover under contract law for painting the 9
apartments?
o
o
YES any breach for money damages
YES – b/c substantially performed
#194. Same facts as #193 except that P only paints 3 of the apartments.
o
o
o
o
P cannot recover under K law for 3 apts
 NOT substantial performance ~ material breach
material breach excuses K performance  no right to recover for part performance
NY – quasi K right to recover (governed by equity)
#195. Same facts as #194 except that the contract provides for the payment of $200 a apartment
instead of $2,000 for all 10 apartments.
o
is divisible K – where K explicitly divides payment unit-by-unit + substantial performance tested unitby-unit
C. EXCUSE OF PERFORMANCE BECAUSE OF SOMETHING THAT HAPPENS AFTER THE
CONTRACT
1. Excuse of contract performance because of the other party’s breach: review
#196. B contracts to buy 100 green widgets from S. S delivers 90 green widgets and 10 yellow
widgets. Is B excused from performing, i.e., paying for the widgets?
o
YES – if B elects to rejects
#197. P contracts to paint H’s house white. P instead paints H’s house purple. Is H excused
from performing, i.e., paying for the paint job?
[compare #192]
o
YES - C/L ~ no substantial performance + material breach + excuses perfomance
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[PERFORMANCE]
2. Excuse of contract performance because of other party’s repudiation through words or conduct
#198. P contracts to paint H’s house for $1,000, payable 30 days after P completes her work.
After P begins painting, H tells P that he is not going to pay her for her work. Is P excused from
performing?
o
YES – anticipatory repud excuses
#199. Same facts as #198. Can P sue H for breach of contract?
o
YES
#200. Same facts as #198. H later tells P that H will pay her for
her work so that P should resume work. What are P’s contract duties and rights?
o
o
depends whether H retraction is timely
P can condition return to work on adequate assurance of H future performance
#201. P contracts to paint H’s house in exchange for a unique autographed picture H owns.
While P is painting the house, H sells the unique autographed picture to T. Is P excused from performing
the painting contract?
o
o
barter issue
YES b/c of H’s inability to perform
3. Excuse of contract performance because of later agreement
[Four forms of later agreements that excuse: (1) accord and satisfaction,
(2) substituted agreement (A/K/A modification), (3) novation and (4) rescission]
3.1 Accord and satisfaction
#202. D borrows $1,000 from C and agrees to repay the loan with interest. Later, D and C agree
that if D delivers 500 widgets to C within 30 days, then C will cancel the debt. What is the accord and
what is the satisfaction?
o
o
o
accord ~ new agreement b/w parties already subject to existing agreement + to do something different
instead (not just less of same thing) + that releases old agreement when / if the different acts
performed
satisfaction ~ actual performance of accord
need both accord AND satisfaction  O/W party elects to sue on original K OR breach of accord
#203. Same facts as #202. What if D does not deliver the widgets?
o
sue under either old K or new accord
3.2 Substituted agreement (A/K/A modification)
#204. D borrows $1,000 from C and promises to repay the debt with interest. Later D and C
agree that C will discharge the debt now if D will promise to deliver 500 widgets to C within 30 days. What
if D does not deliver the widgets?
o
C only remedy ~ sue on widget deal b/c substituted agreement excuse immediately
3.3. Novation
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[PERFORMANCE]
#205. P contracts to paint H’s house. Later P and H and X agree that X will paint H’s house
instead of P. If X does not paint the house, can H sue P for breach of contract?
o
no P’s performance is excused
#206. P contracts to paint H’s house. Later P and X agree that X will paint H’s house instead of
P. (H, a party to the original contract, is not a party to this new contract.) If X does not paint the house,
can H sue P for breach of contract?
o
YES – no novation here  m/b mutual agreement
3.4 Rescission
#207. P contracts to paint H’s house, payment 30 days after P completes work. After P has
painted part of the house, P has the opportunity to go to law school and P and H agree to cancel the
contract. What are the effects of this later agreement?
o
all K obligations excused by rescission
#208. P contracts to paint H’s house, payment 30 days after P completes work. After P has
finished painting the house, H tells P she has unexpected hospital bills and they agree to cancel the
contract. Is H’s performance obligation excused by this later agreement?
o
NO – rescissionK was too late
4. Excuse of contract performance because of later unforeseen occurrence that makes
performance impossible, impracticable or frustrates the purpose of the performance
4.1 Destruction of thing necessary for performance
#209. O, owner of concert hall, leases her concert hall to P, a concert promoter, for a concert on
July 13. The concert hall burns to the ground on July 11. P sues O for breach of contract. Is O’s
performance of the contract excused?
o
YES – later + unforeseen + makes impossible
#210. B contracts to build a house for O for $200,000. After B has done a substantial amount of
work on the house, it is destroyed by fire. B refuses to re-build the house. O sues for breach of contract.
Is B’s performance of the contract excused?
o
NO – can rebuild the house – the thing not destroyed
#211. S contracts to sell his 1973 Cadillac to B for $10,000. After the contract but before S has
tendered delivery of the car to B (so that S still has the risk of loss), the car is destroyed by a fire. B sues
S for breach of contract. Is S’s performance of the contract excused?
o
YES – in sale of goods K where seller has ROL  seller’s non-delivery excused if goods identified in
K subsequently destroyed
#212. S contracts to sell his 1973 Cadillac to B for $10,000. After S has tendered delivery of the
car to B (so that B has the risk of loss) but before B has the car, it is destroyed by a fire. B refuses to pay
for the destroyed car. S sues B for breach of contract. Is B’s performance of the contract excused?
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[PERFORMANCE]
o
NO – b/c B has ROL and the thing for B’s performance (money) not destroyed
#213. S contracts to sell B 1000 pounds of cow manure for $200. After the contract but before
the risk of loss has passed to B, fire destroys S’s cow manure. Is S’s performance of the contract
excused?
o
NO – in K for sale of commodity/ fungible item  later unforeseen occurrence that damages seller’s
quantity <> excuse seller’s performance
4.2 Death of a person necessary for performance
#214. F, a famous architect contracts to design a house for O, for $100,000. F dies. O pays X
$130,000 to design the house. O sues F’s estate for $30,000 for damages resulting from F’s
nonperformance (i.e. breach) of contract. Is F’s performance of the contract excused?
o
YES – b/c decedent’s skill / reputation
#215. P contracts to paint H’s house for $1,000. P dies. P’s estate refuses to complete
performance or hire someone to complete performance. H has to pay X $1,300 to paint the house. H
sues P’s estate for $300 for breach of contract. Is P’s performance of the contract excused?
o
NO –
4.3 Frustration of purpose
#216. X agrees to rent Y’s apartment for Thursday afternoon. Y knows that X’s purpose in
renting the apartment is to watch the coronation parade scheduled for Thursday. The parade is cancelled
on Tuesday. X refuses to pay Y the rent, Y sues X for breach of contract. Is X’s performance of the
contract excused?
o
YES – by reason of frustration of purpose
5. Excuse of performance because of express condition
5.1 WHAT IS AN EXPRESS CONDITION?
[CONTRACT LANGUAGE THAT DOES NOT CREATE AN OBLIGATION BUT LIMITS OBLIGATIONS
CREATED BY OTHER LANGUAGE IN THE K]
[Watch for “if,” “provided,” “on condition that,” “so long as,” “unless,” “when.”]
#217. Contract between B and S provides that B will buy S’s house for $200,000 “on the
condition that” the house is appraised at $200,000. The house is appraised at $195,000. Is B’s
performance excused? [Compare with #60]
o
o
YES – appears in K
condition precedent – occurrence must precede performance
#218. Same facts as #217. Can B sue S for breach of contract?
o
NO – words of conditional do not create obligation – merely limit obligations elsewhere created
#219. C and D agree that D will pay a fee of $5,000 and C will provide a $1,000,000 line of credit
available to D so long as the value of D’s inventory is $1,500,000. What are the contract law
consequences of the value of D’s inventory dropping below $1,500,000?
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[PERFORMANCE]
o
o
C’s performance obligation of providing Line of credit ~ excusedb/c of occurrence of condition
subsequent
condition subsequent – performance occurs first  then worry about occurrence
5.2 Strict compliance with express conditions
#220. J&Y, Inc. contracts to build a house for Kent. Contract provides that “Kent’s obligation to
pay for the house is conditioned on J&Y’s use of only Reading pipe.” J&Y, Inc. instead uses Cohoe pipe
which the court finds is comparable to Reading pipe. Is Kent excused from paying for the house?
[Compare with #217 and #190-192]
o
o
language of express condition + m/b strictly complied w/ + if not strict compliance  excuses K
performance
compare to 190 – key difference is the key words above
5.3 Excuse (elimination) of condition by later action or inaction of person
“protected” by condition
#221. O contracts with B for the construction of a building. The contract provides for monthly
progress payments by O but conditions O’s obligation to make progress payments on B’s providing a
certificate by architect A stating the work done in the prior month was satisfactory. O is so pleased with
B’s work that O tells B that he will make future progress payments without any certificate from A. The
next month B does not provide an architect’s certificate and O refuses to pay. B sues O. What result?
o
O must pay  O gave up the protection (estoppel)
#222. B contracts to buy H’s house on the condition that B obtains a $100,000 mortgage loan at
7% or less. B does not obtain a mortgage because she does not even apply for a mortgage. B refuses to
buy the house. H sues B for breach of contract. What result?
o
H can recover from B b/c occurrence was excused b/c failure to cooperate by party protected
PART SEVEN: DISPUTES ARISING OUT OF A THIRD PARTY’S PERFORMING A CONTRACT SHE
DID NOT MAKE
A. CAN SOMEONE ELSE PERFORM CONTRACT?
1. General rule: performance of contract can be delegated
#223. H contracts with P to paint his house for $1,000. P delegates the duty to paint the house.
to X. X paints H’s house and does an outstanding job. H was out of town while X was painting. When H
returns, he objects to P’s delegating the work to X. Does H have to pay P?
o
YES -
2. Exception to the general rule that performance of a contract can be delegated:
contract provisions prohibiting delegation or “assignment”
#224. Same facts as #223 except that the contract between P and H provides “P can not
delegate the painting to any one else.”
o
CANNOT be delegated
#225. Same facts as #223 except that the contract between P and H provides “no assignments.”
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[DELEGATION]
o
same result
3. Another exception to the general rule that performance of
a contract can be delegated: contract performance requires special skills or party to contract has special
reputation
#226. Chipper Jones has a contract to play baseball for the Atlanta Braves. There is no contract
language regarding delegation or assignment. Can he delegate the duty to play baseball for the Atlanta
Braves to Epstein?
o
NO - Too easy
#227. Same facts as #226. Can Chipper Jones delegate to Derek Jeter?
o
NO -
B. WHAT IF THIRD PARTY DOES NOT PERFORM?
#228. H contracts with P to paint his house. P delegated the duty to paint the house to X. X
agrees to paint the house because P had earlier repaired X’s truck. X does not paint the house. Can H
sue P for breach of contract?
o
o
this was mere delegation by P to X
H can sue everyone
#229. Same facts as #226. Can P sue X for not painting H’s house?
o
NO
PART EIGHT: DISPUTES ARISING OUT OF A THIRD PARTY’S TRYING TO ENFORCE
CONTRACTS THAT SHE DID NOT MAKE
A. Assignment
1. Vocabulary
#230. On January 15, Batman enters into a contract with Gotham. The contract provides that
Batman will provide security services for Gotham from July 13 until December 7 and Gotham will pay
Batman $300,000. On April 5, Batman transfers the contract right to be paid to Robin. Under these facts,
the assignor is _B__
the assignee is _R__
the obligor is _G__
How is an assignment different from a delegation?
o
o
o
assignment transfers rights
delegation transfers duties
on Bar – most often these are treated separately
2. Requirements for the making of assignment
#231. Same facts as #230 except that P assigns the right to payment from H to the United
Jewish Appeal.
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[ASSIGNMENT, 3PB]
o
no consideration necessary
#232. Same facts as #230 except that P promises to assign the right to receive the $1,000 from
H to A.
o
m/b language of present assignment
#233. H contracts with P to paint his house for $5,000. P owes A $5,000. P orally assigns to A
the right to receive the $5,000 from H in exchange for a release of the debt. Is the oral assignment of the
right to receive $5,000 enforceable?
o
YES – need writing only if amount assigned > $5,000
3. Restrictions on assignments
3.1.
Contract Provisions
[Determine whether contract (a) prohibits assignments or (b) invalidates assignments.]
(a)
prohibition
[Language of 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.]
#234. Batman agrees to provide security services for Gotham and Gotham agrees to pay Batman
$300,000. Batman-Gotham contract provides "rights hereunder are not assignable." Notwithstanding this
contract provision, Batman assigns the right to the $300,000 payment to Robin. Can Robin collect from
Gotham?
o
o
“don’t do that” –
YES – R collects if <> know of prohibition
(b) invalidation
[Language of invalidation takes away both the right to assign and the power to assign so that there is a
breach by the assignor and no rights in the assignee.]
#235. Batman-Gotham contract provides "all assignments of rights under this contract are void."
Notwithstanding this contract provision, Batman assigns the right to the $300,000 payment to Robin. Can
Robin collect from Gotham?
o
o
“if you do that, it’s not valid”
NO – b/c language of invalidation
3.2 Court-imposed (“Common law”) limitations on assignments
[Even if a contract does not in any way limit the right to assign, common law bars an assignment that
substantially changes the duties of the obligor.]
o
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[ASSIGNMENT, 3PB]
#236. Assignment of right to payment: Batman assigns his rights under the contract with Gotham
to Robin, i.e., Gotham is to pay Robin, not Batman. Does this substantially change the duty of the
obligor?
o
assigning right to payment – NEVER changes duties of obligor
#237. Assignment of other contract performance rights: Gotham assigns its rights to security
services to Metropolis, i.e. Batman is to defend Metropolis, not Gotham. Does this substantially change
the duty of the obligor?
o
YES – b/c substantially changes performance right
4. Rights of an assignee
#238. Assignee can sue the obligor: Batman contracts to perform security services for Gotham
for $300,000. Batman then assigns his rights under the contract to Robin. Batman then performs the
contract. Can Robin sue Gotham if he is not paid for Batman's work?
o
YES -
5. Defenses against assignee
[Obligor has same defenses against assignee as it would have against assignor]
#239. If Batman fails to perform the services, can Robin still collect from Gotham?
o
NO -
6. Notice to obligor of assignment
[Payment by obligor to assignor is effective until obligor knows of assignment. Similarly, modification
agreements between obligor and assignor are effective if the obligor did not know of the assignment.]
#240. You rent furniture from Acme Furniture Rentals. In March, Acme assigns your rental
contract to Baker Rents. You do not know of the assignment and so make your next two rental payments
to Acme. Baker then sues you for the two payments it has not received. Does your two payments to the
assignor Acme satisfy your contract obligations for those two months?
o
YES
7. Multiple Assignments
7.1.
Multiple gratuitous assignments
[General rule: last assignee wins because the making of a later assignment revokes a gift assignment.]
#241. D borrows $1000 from C and contracts to repay the $1000 with interest in April . In
January, C orally assigns her right to payment from D to the 92d Street Y. C assigns that same right of
payment to UJA. Whom should D pay?
o
UJA – b/c later assignment revokes prior gratuitous assignments
#242. Same facts as #241 except that the January gift assignment to 92d Street Y was in
writing.
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[ASSIGNMENT, 3PB]
o
NY – writing is sufficient  treated as if assignment for consideration (~ not gratuitous)
7.2 Assignments for Consideration
[General rule: First assignee for consideration wins].
#243. On January 10, Batman promises to assign his rights under the contract with Gotham to
Alfred for $100. On February 2, Batman assigns his rights under the contract with Gotham to Robin for
$1. On March 3, Batman assigns his rights under the same contract with Gotham to Epstein for
$250,000. Whom should Gotham pay?
o
o
assignment to Alfred <> language of present assignment  NOT effective
Robin is first assignee for consideration
#244. As before, Batman assigns to Robin for consideration and then assigns to Epstein for
consideration. Epstein is the first to notify Gotham that he is an assignee. Gotham learns of the earlier
assignment to Robin before it pays Epstein. To whom should Gotham make the payment?
o
o
pay Robin – first assignee for value + Gotham on notice of this fact
being first to notify is irrelevant
7.3 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.]
#245. Again, Batman assigns his rights to the $300,000 payment from Gotham for security
services to first Robin, then Epstein, receiving consideration from each. Gotham pays the $300,000 to
Robin, the first assignee. What are Epstein’s rights against his assignor Batman?
o
o
o
implied warranty - assignor warrants that rights assigned ~ assignable AND enforceable
assignee remedy – breach of warranty of assignment
Epstein sues for breach
B. Third party beneficiary
1. Examples of third party beneficiaries
#246. Holly owes Lawrence $300. Holly loans Fox $300, and Fox agrees to repay the $300 to
Lawrence to satisfy Holly’s debt to Lawrence. If Fox does not pay Lawrence, can Lawrence sue Fox
under contract law and collect the $300 from Fox for breach of contract?
o
YES as T/P bene
#247. X enters into a $10,000 life insurance contract with Y Ins. Co. Under the contract, X
agrees to make annual premium payments and Y Ins. Co agrees to pay the $10,000 policy benefits to B
when X dies. X makes all required premium payments and dies. Y Ins. Co. refuses to pay B. Can B sue
Y Ins. Co. under contract law and collect the $10,000 for breach of contract?
o
YES – not special rule to life insurance – simply T/P bene under K law
#248. Kramer pays H&H Bagels $100 to send a 200 bagels to Epstein in Dallas. Epstein never
gets the bagels. Can Epstein sue H&H Bagels under contract law and collect for breach of contract?
o
YES -
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[ASSIGNMENT, 3PB]
#249. On January 15, Batman enters into a contract with Gotham. The contract provides that
Batman will provide security services to Gotham from July 13 until December 7 and Gotham will pay
Robin $300,000. Can Robin collect the $300,000 from Gotham? [Compare with #230]
o
YES – as intended T/P beneficiary
2. Vocabulary of third party beneficiary
Third party beneficiary Promisor –
Promisee Creditor beneficiary – see 246
Donee beneficiary – see 247-249
Intended beneficiary/incidental beneficiary
3. Cancellation or modification [knowledge and either (1) detrimental reliance or
(2) assent as requested]
#250. Same facts as #248. Can Kramer and H&H Bagels agree to rescind the bagel contract
before Epstein learns of it?
o
YES – no vesting
#251. Same facts as #248. Can Kramer and H&H Bagels agree to rescind the bagel contract
after Epstein learns of it and empties his freezer to make space for the H&H bagels?
o
NO – b/c knew + detrimental reliance
4. Rights of third party beneficiary
#252. Same facts as #248. Can Epstein sue H&H Bagels under contract law if he does not
receive the bagels?
o
YES – even if no vesting / privity
#253. Same facts as #248. Can Epstein recover damages for H&H Bagels under contract law if
he does not receive the bagels and the reason that H&H Bagels has not sent the bagels is that Kramer
paid by check and the check “bounced”?
o
NO – any defense of promisor against promise ~ valid against T/P
#254. Same facts as #248. Can Epstein recover damages from Kramer under contract law if
Epstein does not receive the bagels from H&H?
o
rule - T/P <> sue promisee
#255. Holly owes Lawrence $300. Holly loans Fox $300, and Fox agrees to repay the $300 to
Lawrence to satisfy Holly’s debt to Lawrence. If Fox does not pay Lawrence, can Lawrence sue Fox
under contract law and collect the $300 from Fox for breach of contract? ___________ Can Lawrence
sue Holly?
o
o
L ~ T/P
F ~ promisor
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[QUESTIONS]
o
o
o
H ~ promisee
YES – T/P bene can sue promisor
T/P can sue promise only IF
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CONTRACTS
[QUESTIONS]
REVIEW QUESTIONS
A. MULTISTATE
#256. While negligently driving his father's uninsured automobile, 25-year-old Arthur crashed into
an automobile driven by Betty. Both Arthur and Betty were injured. Charles, Arthur's father, erroneously
believing that he was liable because he owned the automobile, said to Betty: "I will see to it that you are
reimbursed for any losses you incur as a result of the accident.” In an action by Betty against Charles for
wages lost while she was incapacitated as a result of the accident, which of the following would be
Charles's best defense?
(a)
Lack of consideration.
(b)
Mistake of fact as to basic assumption.
(c)
Statute of Frauds.
(d)
Indefiniteness of Charles's promise.
#257. Arthur, having no assets, died as a result of his injuries. Dodge, one of Arthur's creditors,
wrote to Charles stating that Arthur owed him a clothing bill of $200 and that he was going to file a claim
against Arthur's estate. Charles replied: "If you don't file a claim against Arthur's estate, I will pay what he
owed you." If Dodge did not file an action against Arthur's estate, would Dodge succeed in an action
against Charles for $200?
(a)
Yes, because Dodge had detrimentally relied on Charles's promise.
(b)
Yes, because Charles's promise was supported by a bargained-for exchange.
(c)
No, because Dodge's claim against Arthur's estate was worthless.
(d)
No, because Charles at most had only a moral obligation to pay Arthur's debts.
#258. Assume that Charles, honestly believing that he owed Dodge nothing, refused to pay
anything to Dodge, who honestly believed that Charles owed him $200. If Dodge then accepts $150 from
Charles in final settlement of the claim, will Dodge succeed in an action against Charles for the remaining
$50?
(a)
Yes, because Arthur's debt of $200 was liquidated and undisputed.
(b)
Yes, because Dodge honestly believed that he had a legal right against Charles for the
full $200.
(c)
No, because Charles honestly believed that Dodge did not have a legal right against him
for the $200.
(d)
No, because Charles was not contractually obligated to pay Dodge $200 in the first place.
#259. On March 1, Zeller orally agreed to sell his land, Homestead, to Byer for $46,000 to be
paid on March 31. Byer orally agreed to pay $25,000 of the purchase price to Quincy in satisfaction of a
debt which Zeller said he had promised to pay Quincy.
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CONTRACTS
[QUESTIONS]
On March 10, Byer dictated the agreement to his secretary but omitted all reference to the
payment of the $25,000 to Quincy. In typing the agreement, the secretary mistakenly typed in $45,000
rather than $46,000 as the purchase price. Neither Byer nor Zeller carefully read the writing before
signing it on March 15. Neither noticed the error in price and neither raised any question concerning
omission of the payment to Quincy.
In an action by Quincy against Byer for $25,000, which of the following is (are) correct?
I.
Byer could successfully raise the Statute of Frauds as a defense because
the Byer-Zeller agreement was to answer for the debt of another.
II.
Byer could successfully raise the Statute of Frauds as a defense because
the Byer-Zeller agreement was for the sale of an interest in land.
(a)
I only.
(b)
II only.
(c)
Both I and II.
(d)
Neither I nor II.
#260. Which of the following would be most important in deciding an action by Quincy against
Byer for $25,000?
(a)
Whether the Byer-Zeller agreement was completely integrated.
(b)
Whether Byer was negligent in not having carefully read the written agreement.
(c)
Whether Zeller was negligent in not having carefully read the written agreement.
(d)
Whether Zeller was a party to the contract.
#261. If Byer refused to pay more than $45,000 for Homestead, in an action by Zeller against
Byer for an additional $1,000, it would be to Zeller's advantage to try to prove that
(a)
The writing was intended only as a sham.
(b)
The writing was only a partial integration.
(c)
There was a mistake in integration.
(d)
There was a misunderstanding between Zeller and Byer concerning the purchase
price.
B. New York (summer 2001)
#262. You are an associate with an upstate New York law firm. A senior partner seeks your
assistance concerning a matter presented by a new corporate client, Chips, Inc. ("Chips"). Chips
manufactures two different computer chips, one designed for laptop computers and one designed for
handheld computing devices.
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BAR/BRI Bar Review
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CONTRACTS
[QUESTIONS]
The partner shares with you that on October 28, 1999, Devices Corp. ("Devices") faxed Chips offer to buy
1,000 chips for handheld computing devices. The offer provided for payment in the sum of $500,000 on
delivery, which was to take place by December 15, 1999.
One day later, Chips faxed Devices written confirmation that Chips would provide the 1,000 computer
chips as specified, but "would suggest shipment in the year 2000 on or before January 16, 2000 to avoid
Y2K problems."
On January 9, 2000, Devices faxed Chips instructions for shipping the computer chips. That same day,
Chips forwarded 1,000 computer chips to Devices. On January 10, immediately upon receiving the lot of
1,000 computer chips, Devices overnighted a check to Chips in the amount of $500,000. The following
day, on inspecting the shipment, Devices noticed that the chips received were for laptop computers, not
handheld devices. That same day, Devices received word that the ultimate purchaser of the handheld
devices for which the chips were to be utilized was canceling its order. Devices immediately stopped
payment on its $500,000 check, and notified Chips that, because the shipment was non-conforming, it
was canceling the order. On that same day, but following receipt of the notice advising that the wrong
chips had been delivered, Chips called Devices and said it would
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CONTRACTS
[QUESTIONS]
cure the problem immediately. Chips then forwarded the correct chips, which were received by Devices
on January 15, 2000.
Devices inspected that shipment and found it to conform with the order. Nevertheless, Devices returned
the entire shipment to Chips, accompanied by an acknowledgment of receipt form, which included an
unequivocal general release of Devices for any and all claims Chips might have against Devices. The
receipt form was signed by the supervising clerk in the shipping department of Chips and returned to
Devices. When Chips presented the $500,000 check for payment, Devices' bank refused to honor it due
to the stop payment order. On January 31, 2000, Chips brought suit against Devices seeking full payment
for the chips.
Upon proof of the foregoing facts, Devices moved for summary judgment. The court granted the motion
dismissing Chips' claim. The court found that there was a valid contract, but that Chips had breached the
contract by initially delivering non-conforming goods and, in any event, Chips’ representative had signed a
release of all claims. The attorneys previously representing Chips have advised that an appeal is not
worth pursuing.
The partner would like you to prepare a memorandum discussing:
1. Whether a valid contract was formed.
2. Whether, assuming a valid contract, Chips' non-conforming delivery afforded Devices the right to
cancel.
3. Whether the general release bars a successful claim by Chips.
----------------------------------------------------------------------------------------------------
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[QUESTIONS]
Some possible discussion points
1. Whether a valid contract was formed
- sale of goods so Article 2
- contract formation requires mutual manifestations of assent to the same deal (usually offer and
acceptance)
- Devices’ October 28 fax as offer (mentions quantity)
- Chaps’ October 29 fax as acceptance (no “mirror image rule”, 2-207. “seasonable expression of
acceptance” even though additional or different term)
- Whether delivery date is “additional” term or “different” and whether it matters
- Devices’ January 9 fax as acceptance as Chaps’ October 29 fax if it was a counter-offer instead
of an acceptance
- Chips’ shipment of nonconforming goods as acceptance if Devices’ January 9 fax was a new
offer rather than an acceptance of a counter-offer
2. Whether there was a right to cancel
- perfect tender standard and right to reject goods
- no right to reject goods after acceptance of the goods
- payment by check permissible form of payment but payment without prior opportunity to inspect
not acceptance
- implied term of good faith and cancellation by ultimate buyer
- cure
3. General release
- general release as modification of contract
- UCC good faith test in lieu of consideration
[agency issues]
SUGGESTIONS
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A. ALWAYS START WITH APPLICABLE LAW
B. THINK ABOUT SEVEN QUESTIONS THAT ARISE IN LIFE CYCLE OF CONTRACT
1.
Was there even an agreement? (offer and acceptance and possibility of revocation/rejection, etc
in gap)
2.
Is there any contract law reason that a court would not enforce the agreement? (problems with
agreement process or with terms of agreement: consideration and Statute of Frauds and . . . )
3.
What was agreed to? (parol evidence, sources of terms other than words)
4.
Have the people who agreed done what they agreed to do? (perfect tender or substantial
performance, conditions of performance)
5.
Is there any “contract law” reason that permits a person’s not doing what she agreed to do? (after
the agreement: other party’s breach or anticipatory repudiation or impossibility or . . .)
6.
How should the court enforce an enforceable agreement where there has been an unexcused
nonperformance? (damages or specific performance or)
7.
What are the “contract law” effects of “contracts” on others? (delegation, assignment, third party
beneficiary)
52