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Course: Contracts Outline Spring 2003
School: University of Detroit
Year: 2003
Professor: Spalding
Course Outline provided by

    1. K: legally enforceable agreement.

      1. Express K: K that results from words; whether oral or written

      2. Implied K; K that results from conduct. A reasonable person would infer a promise to pay.

        1. Ex; rec’ a haircut. You pay after hair is cut.

      3. Quasi K; implied in fact

        1. Elements;

          1. P has conferred a benefit on D; AND

          2. P reasonably expected to be paid; AND

          3. D would realize unjust enrichment if P not compensated. D knows that P expects to be paid.

        2. Measure of recovery: it may as justice requires be measured by either:

          1. Reasonable value of the services render; “Quantum Meruits

          2. The extent to which the other party’s property has been increases in value or his interests advanced.

        3. Ex;

          1. Piano lesson and second kid sits in.

          2. Doctor confers a benefit on unconscious patient. Doctor s/ rec’ pmt. No express K; No implied K b/c patient was unconscious.

          3. Give 3 out of 10 singing lessons; didn’t substantially perform but under Quasi K would recover for reasonable value of services performed.

          4. “A” intentionally breached K. Breaching party can recover under Quasi K so long as party acted in gd faith. Cant be willful breach for party’s own convenience or financial advantage.

      4. Bilateral K; K formed from an offer that is open to the method of acceptance

        1. “I will pay you $1K if you ship me 1K widgets. Can accept by promise or by act of shipping the gds.

      5. Unilateral K; K formed from an offer & requires performance as method of acceptance.

        1. Uni offer is irrev if EE made a subst’l start. In this case ee “intensified his efforts”. B#48.

        2. Offer expressly requires you to perform “I’ll pay you $5K if you refrain from smoking”.

        3. Offer of a reward/prize/contest. No bargain so you must perform.

        4. An order for prompt or current shipment normally invites acceptance either by prompt promise or current shipment. R#30.

      6. Waiver; explicitly or implicitly forgives a term or condition to be performed.

        1. Can waive delivery date by pushing it back & still reserve rt to sue for damages. R#50.

        2. Express condition subsequent and subsequent oral modification. Duty to pay was cont’l a condition maybe waived b/c it’s an int’l relinquishment of a known rt. Effective even if K states no oral modif. 2/88.



    1. Art 2 applies to sale of gds.

      1. Look at:

        1. Type of transaction – a sale; passing of title from S to B for a price.

        2. Subject matter of transaction – gds; movable personal property.

          1. Art 2 does NOT apply to:

            1. Renting a car

            2. Buying real estate

            3. Service K’s

          2. Art 2 does apply to:

            1. Sale of gds regardless as to whether S is a merchant; ex sell your toupe. Sale of pencil for 5cents is a Art 2 transaction.

            2. Hybrid K/mixed K transactions; both gds & services

              1. Predominant purpose test: 7/97; what is the main purpose of the K? gds or services?

                1. Factors to consider:

                  1. How much $ was spent on the gds vs. services?

                  2. How much time spent on labor

                  3. How much sophistication was labor

                  4. Does K have sales language?

                2. Majority rule; if Art 2 applies, apply it to the entire transaction







  1. OFFERS;

    1. What is an offer? An offer is a “manifestation of an intention to K.” The basic test is whether a reasonable person in the position of the offeree (EE) would believe that his or her assent creates a K. The key word is “manifestation”. Focus on what the person said or wrote or did.

      1. Addressed to 3 people is not a commitment. 6D

    2. An offer must be definite and certain on its terms.

      1. Missing price terms:

        1. Real estate K’s; if no price is mentioned then offer is invalid.

        2. Sale of Gds; YES, UCC gap filler rules apply. Price is not required we will look to see if the parties intended to bind themselves. Cts will infer a reasonable price.

      2. Vague or ambiguous material terms;

        1. S offers to sell to B 10 hogs for a “fair price”. Offer?

          1. NO because there was an effort to express the price but wasn’t done correctly b/c its an ambiguous material term.

      3. Requirements K;

        1. B agrees to buy all of its wine requirements from S. B is obligated to buy in good faith through the requirements K.

        2. Not unreasonably disproportionate limitation; No quantity unreasonably disproportionate to any stated estimate, or if there is no stated estimate, to any normal or otherwise comparable prior output or requirements may be tendered or demanded. Gd faith reduction is allows 6D#32.

        3. Specific performance to remedy requirements K. 6D#33.

        4. Assignment; gd faith & cant materially change duties or increase burdens; no disproport quanity

      4. Advertisement;

        1. General rule; an advertisement is NOT an offer. It is a mere invitation for offers. This is b/c demand could exceed supply.

          1. If unaware then can’t reply to it. 6D#6.

        2. Exception; an advertisement can be an offer if it is specific as to quantity (10 Honda’s) and indicates who can accept (e.g. first come first served).

      5. Auctions;

        1. What is an offer? The bid, not the auctioneer asking for bids, is the offer. The auctioneer is inviting offers.

        2. Without reserve; if the auction is being conducted “w/o reserve” the auctioneer is OBLIGATED to sell to the highest bidder. Auction is “with reserve unless terms state that is “w/o reserve”.



    1. Termination by lapse of time;

      1. If no time is stated as to the offer’s duration then the offer is open for a reasonable time. SNOW MELTING

    2. Termination of an offer b/c of words or conduct;

      1. How?

        1. Offer ended at end of conversation 3D#183

        2. Offer open for reasonable time. If snow melted then offer terminated.

        3. K says “not subject to countermand” (not revocable) can still revoke. MBE #199

        4. Stmt by OR to EE indicating an unwillingness to K; OR need not say, “revoke” to revoke.

        5. Conduct of E that is inconsistent with an intention to make the K AND which the EE is aware.

          1. If S offers car to B and then sells the car to C w/o B knowing of the sale, B can accept the offer.

          2. If B sees C driving the car then B cant enforce offer by accepting it.

          3. Advertisement for lost dog/reward; to revoke; must give notice of termination publicity equal to that given to the offer.

          4. Telling B that car was sold even though it wasn’t is still revocation. 6D#14., MBE #350.

      2. When does revocation become effective?

        1. Revocation of an offer sent through the mails is not effective until it is RECEIVED by EE.

        2. Mailbox rule only applies to acceptance not revocation.

        3. Offer can’t be revoked after it has been accepted. Offer can be revoked any time prior to acceptance.

      3. Offers that cant be revoked (4);

        1. Option K;

          1. OR has promised to keep the offer open

          2. The promise is supported by consideration. 25cent

            1. S promises to keep offer open w/o consideration. S can revoke b/c no consideration given.

              1. Cts don’t inquire into the adequacy of consideration;

              2. But a mere “sham” then no consideration. Nominal consideration is sufficient to support an option K.

            2. $1 can be “acknowledged” even if never paid and cts wont inquire into sufficiency of consideration. R#39. Ct will not use parol evidence to show that $1 wasn’t paid.

        2. Firm Offer;

          1. An offer cant be revoked if its:

            1. A K for sales of gds;

            2. There is a written promise to keep open, mention quantity.

            3. The promise is made by merchant;

            4. If no time is stated; Irrevocable for 3 months.

            5. Must be in writing. Can’t be oral.

        3. Offer can’t be revoked if there has been RELIANCE by EE that is reasonably foreseeable.

          1. G the general contractor (aka K’r) solicits bid from S the subk’r. G uses S bid in making his bid for a construction K. Can S revoke his bid? No b/s G relied on S’s bid and the reliance was foreseeable.

          2. L leases a bldg to T. L offers the bldg to T. T prior to accepting L’s offer makes improvements. L can still revoke offer b/c the improvements that T make were not reasonably foreseeable

        4. An offer to enter into a unilateral K can’t be revoked if performance has begun.

          1. H K w/ P for P to paint H’s home. H starts painting; J cant revoke offer b/c of P’s performance has begun.

          2. If P only ordered the paint then P has merely “prepared to perform and therefore H can still revoke the offer.

          3. Divisible K; H hires P to paint 10 homes. If P paints 3 of the homes then H cant revoke his offer as to the 3 homes but can revoke as to the 7 un-painted homes.

    3. Termination of an offer b/c of words or conduct of the EE – rejection.

      1. General;

        1. Rejection by the EE terminates any rt to accept the offer

        2. Rejection sent through the mail is effective when RECEIVED.

        3. A counteroffer serves as a rejection.

      2. A counteroffer terminates the offer. But bargaining does NOT terminate the offer.

        1. Rejection: “S offers land to B for 10K & S responds: “I will only pay 9K”. B can’t later accept the offer b/c of rejection.

        2. If B responds: “will you take K” this is an inquiry and doesn’t kill the offer.

          1. If B’s response is in the form of a Q it usually ok.

      3. A rejection or counteroffer doesn’t terminate the offer under an option K.

        1. In an option K the EE can reject the OR’s offer and still accept b4 the expiration of the option.

          1. BUT estoppel would apply; OR may have relied on EE’s rejection and sold property to someone else.

        2. Conditional acceptance as rejection;

          1. A conditional acceptance terminates the offer. This rule applies to BOTH cmn law & UCC.

          2. If the reply has a condition then the letter is considered a counteroffer.

      4. Acceptance with additional terms;

        1. Common Law;

          1. Acceptance must be a mirror image of the offer or it operates as a rejection.

          2. L sends T a lease. The lease is silent about pets on the premises. T adds a clause about having pets on the premises and signs. Result: cant change offer w/out killing it.

        2. UCC acceptance can add terms;

          1. Adding arbitration clause addition usually doesn’t materially alter the K.

      5. Acceptance with different terms – Conflicting terms;

        1. Common law; acceptance must be mirror image of the offer or it operates as a rejection.

        2. UCC; acceptance can contain different terms (so long as still have a “definite and seasonable expression of acceptance

          1. Under UCC if terms conflict both terms drop out; aka knock out doctrine; the UCC then fills in the gaps.

          2. If EE’s response calls for a different delivery date that OR’s offer then ask the Q: does it materially alter the K.


      1. Termination of an offer b/c of death of the party prior to acceptance;

        1. General rule; death of a party terminates the offer

        2. Exceptions: death doesn’t terminate the offer when;

          1. Option K

          2. Part performance of offer to enter into a unilateral K



    1. Who can accept? Generally only the person whom the offer is made can accept the offer. In addition, the person must be AWARE of the offer in order to accept it.

      1. I post a reward for whomever finds my lost dog. If you return my dog w/o knowing of the reward you get nothing.

      2. If offer was made to your friend then you can’t accept, only your friend can.

    2. Methods of accepting an offer:

      1. EE starts to perform;

        1. Offers to enter into a unilateral K.

          1. If OR’s offer states that it can only be accepted by performance then once EE starts performance then the offer is irrevocable. EE can’t complete acceptance until he has finished performance.

        2. Offers open as to methods of acceptance;

          1. If offer is silent as to acceptance then a bilateral K with open acceptance. That is starting to perform is valid acceptance.

      2. EE promises to perform;

        1. B orders gds from S requesting immediate shpmnt. Can S accept this offer by sending a fax promising to ship the gds? YES can promise (even with different terms R#30) or perform.

        2. H offers P $1K to paint hm. The offer states that it can only be accepted by performance. P promises to perform. Has a K been formed? NO b/c offer for a unilateral K.

      3. EE sends its acceptance through the mails;

        1. If it is reasonable for the EE to accept by mail then acceptance is effective when posted (upon dispatch) aka MAILBOX RULE.

          1. General rule;

            1. Revocation is effective upon receipt; acceptance is effective upon dispatch.

            2. What if the letter never arrives? Doesn’t matter its effective acceptance. However, there would be a problem with evidence.

        2. Exceptions; p17

          1. Cross communication; Rejection mailed 1st, then letter of acceptance; rejection rec’d 1st letter of acceptance operates as a counter-offer.

          2. Acceptance mailed 1st, then rejection sent—rejection rec’d 1st. If OR relied on letter of rejection b4 the acceptance is rec’d, estoppel may apply.

          3. Option deadlines; cant use mailbox rule to meet an option deadline.

      4. The seller of gds sends the wrong gds;

        1. General rule; acceptance & breach

        2. Accommodations exception;

          1. If S made it clear that it was sending an accommodation then this is not acceptance but a counter offer. B can’t then sue for breach & B doesn’t have to accept.

      5. The EE is silent;

        1. General rule; the OR cant unilaterally turn the EE’s silence into acceptance

        2. Exceptions; industry customs & prior dealings (e.g. every yr for 20 yrs)



    1. Elements of consideration;

      1. EE must suffer a legal detriment;

      2. The detriment must induce the promise;

      3. The promise must induce the detriment

    2. Forms of “legal detriment”. Must induce conduct of EE and OR bargained for something.

      1. Performance

      2. Forbearance

      3. Promise to perform

      4. Promise to forebear

    3. Issues;

      1. Conditional gift;

        1. If you come to my hm I’ll give you my TV. No benefit to OR. Need benefit to OR & EE.

      2. Legal detriment; there is a bargained for exchange aka legal detriment in this example.

        1. If you stop listening the Barry Manalow I’ll pay you $200. You have a legal rt to listen to Barry.

      3. Past consideration;

        1. General rule; not consideration. Past consideration can’t be bargained for. 7/86.

          1. I promise to give you $200 “in consideration” for your years of good service. NO consideration.

          2. A saves B’s luggage from falling & B promises to pay A. “value of services is too uncertain is WRONG answer. B#14.

        2. Moral obligation; no consideration.

        3. Promissory estoppel; detrimental reliance and is valid consideration.

      4. Adequacy of consideration. Cts don’t inquiry as to the adequacy of consideration. Cts will look for fraud.

      5. Pre-existing duty rule;

        1. Common law; the performance of a pre-existing legal duty is not consideration. No detriment

          1. Police officer is already under a duty to catch criminals. But if off duty? 3D#155

          2. A K’s with B to play music for 15K. A later demands more $. IF B promises to give A more $ the promise to pay is not enforceable b/c of pre-existing legal duty.

          3. Pre-existing legal duty owed to 3rd person;

            1. Must owe a legal duty to 3rd P in order for 3rd P to enforce the K btwn A & B.

          4. Unforeseen difficulty exception;

            1. Restatements; modification is enforceable so long as it is fair & equitable under the circumstances

              1. P wanted D to: “BE CAREFULL”; D wanted P to pay 300 more. Was 1st K RECINDED?, Can D claim RELIANCE? Not UCC K. P claims DURESS. 2/91

            2. Cmn law; promise to pay add’l $ when unforeseen difficulty is severe that duty to perform would be excused b/c of impracticability.

        2. Art 2; no consideration is required for modification;

          1. S contracts to sell jeans to B for $1000. S subsequently tells B that it must raise the price to $1300. No pre-existing duty rule. Modification is ok.

        3. Art 2 good faith &commercial reasonableness.

      6. Part payment for promise to forgive balance of debt.

        1. If debt is due & undisputed; if debt is due & undisputed; a promise by A to release B of remaining 1K is not enforceable b/c of lack of consideration.

        2. If debt was not yet due or disputed; then early pmt w/be consideration b/c not obligated to pay earlier.

      7. Settlement of claim;

        1. P sues D. D promises to pay P $1K if P will dismiss the lawsuit. Can P enforce D’s promise to pay the $1K? YES so long as party giving up claim in gd faith believes its valid otherwise its extortion.

      8. Promise to pay debt barred by the statute of limitation;

        1. General rule; a written promise to pay debt barred by statute of limitation is enforceable regardless of no consideration. Only the new promise is enforceable; not the old one barred by S of L.

      9. Illusory promises; is a promise in form but not substance. Such a promise Is not consideration for the other promise;

        1. S offers to sell to B her hm for $100K. B responds that she will buy the home “if she decides that she wants it. NO K b/c no promise.

        2. Same as above but B conditions her acceptance on obtaining “satisfactory financing”. This is OK.

        3. Advertisement; “Reserve rt to revoke offer” 2/90

        4. Promise to pay a bonus to be determined by the parties after profits have been ascertained is too indefinite and vague. May never have profits. R#72.

        5. Requirements K’s, B must purchase in gd faith. This is a valid promise.

    4. Promissory estoppel as consideration substitute; k /subk’r creates an option K. R#16

      1. Elements;

        1. Promise

        2. Reliance that is both foreseeable & justifiable (keep working & I’ll make payments to you B#23).

        3. Enforcement necessary to avoid injustice.

        4. Defense; D claims prediction of future events & not a promise & its indefinite”.

      2. Comparison of consideration and promissory estoppel;

        1. Relative promises to give you a lot of $. You quit your job & buy a new car. Is promise enforceable? YES promissory estoppel applies.

        2. Restatements; Remedy may be limited, as justice requires; ex: once pay for the car and not other costs.



    1. Who lacks capacity?

      1. Infants (minors): a person under 18 yrs of age. Void-able. R#58.

        1. Minor made offer to ratify make a settlement R#59.

      2. Mental incompetents; a person who is unable to understand in a reasonable manner the nature and consequences of the transaction.

      3. Intoxicated person; the other party has reason to know that, by reason of intoxication, he is unable to understand in a reasonable manner the nature and consequences of the transaction, or he is unable to act in a reasonable manner in relation to the transaction.

    2. Consequences of incapacity;

      1. Right to disaffirm;

        1. S sells bike to B (17yrs old). B may disaffirm while an infant or within a reasonable time after he reaches the age of majority/adult.

        2. This is regardless as to whether S knew or was lied to that B was under 18.

        3. S can’t disaffirm the K. Only the person who lacks capacity can disaffirm

      2. Liability for necessaries;

        1. Minor is living on his own & purchases a motorcycle to get back & forth to work. Infant is not liable on the K but is liable for necessaries on quasi K. Must pay the reasonable value for what you rec’d.


  1. DEFENSES – STATUTE OF FRAUDS; makes Ks void able.

    1. K’s w/in statue of frauds (aka S/F);

      1. Promise to answer the debt of another;

        1. Surety can’t orally promise to pay.

          1. X promises to pay C if D doesn’t pay. Must be in writing.

          2. Compare with X promises to pay C without mention to “if D doesn’t pay C”. This doesn’t need to be in writing b/c no “guaranty language”.

        2. Primary benefits exception; “main purpose” exception

          1. Shareholder orally promises to pay back bank the money the corporation borrows. Promise was made to benefit the shareholder so not within S/F and the oral promise is enforceable.

            1. 25% owner guarantees loan for corp.

      2. Service K not being capable of being performed w/in 1yr of the date that the K was entered into.

        1. Doesn’t matter how many trees are to be cut down

        2. If K for services is to take 9months but takes 15months no S/F problem. Look at the time of K if it c/have been performed w/in 1 yr.

        3. 3yr oral employment K must be in writing.

        4. Compare: employ X for life. Doesn’t need to be in writing b/c X could die sin 2 months.

        5. If A hires B to perform 2yrs from now no S/F problem.

      3. Promise creating an interest in land;

        1. Easements for more than a yr must be in writing.

        2. B K’s with O to build a house. No S/F problem b/c no interest in land. This is a services K.

        3. 1 yr lease is not within S/F. Must be >than 1 yr.

        4. Equal dignity rule; since K for sale of land must be in writing; the person witnessing the writing to authorize in writing.

      4. Sale of gd $500 or more;

      5. Modifications;

        1. Look at K as modified. If the K with the modification is w/in S of F, the modification agreement m/be in writing.

          1. If you have a 3 yr lease any modifications must also be in writing

          2. Reduce the duration of the lease from 3yrs to 11months? No writing is required.

          3. If original writing has a clause that requires that any subsequent modifications must be in writing the cmn law usually ignores this provision.


        1. UCC;

          1. If original was in writing b/c $500 or more and then K quantity is increased then the modification must be in writing

          2. The original must be in writing but the modification takes it out of the statute of frauds then NO writing is needed for the modification.

          3. If original writing states that all modifications must be in writing then this is enforceable under UCC Art2. Compare w/ cmn law K’s.

        2. How the S/F is satisfied.

          1. K’s other than the sale of gds;

            1. Writing;

              1. Contents: R#51 return memo m/ mention the following:

                1. ID the parties

                2. ID the K subject matter

                3. Contain all essential terms

                4. Signed by the party to be charged.

            2. Part performance of oral agreement to but RE; this overcomes the S/F

              1. Part pmt alone is not enough need:

                1. Pmt + improvements OR

                2. Pmt + possession

            3. Part performance of an oral agreement that cannot be performed w/in 1 yr.

              1. P orally agrees to work for D for 5yrs. P works for 6months and then is fired. Part performance doesn’t satisfy the S/F. No exception to S/F to a K that can’t be performed in 1yr. However, P can’t sue based on Quasi K & get paid for the reasonable value of the services performed.

              2. If P had fully performed the most cts w/enforce the K.

            4. Estoppel to plead S/F

              1. MI; If A while relying on B’s oral promise changes his position by selling his home and moving; this reliance is foreseeable & reasonable & A can sue B based on estoppel.

              2. If B orally promised to draw up a written K the RULE is that when reliance to put an oral agreement into writing estoppel will apply.

          2. Sale of goods for $500 or more.

            1. Contents:

              1. State the quantity – this is mandatory.

              2. Indicate that a K for a sale has been made. This affords a basis for believing there is a K.

              3. Signed by the party to be charged.

            2. “I agree to buy 10 dolls”. This is a gd K b/c quantity, signed. Affords a reasonable basis for believing there is a K.

            3. Non-objecting Merchant Rule aka 10 day rule (6D#45); Exception to the S/F

              1. If merchant A rec’s a letter from another merchant B asserting the existence of a K, and A does not believe that such K exists, A s/respond. A delay in responding will result in a loss of the S/F defense under §2-201(2).

                1. Elements of 2-201(2)

                  1. Both parties are merchants

                  2. Writing claims that there is a K.

                  3. Writing signed and states quantity

                  4. Failure to object in writing w/in 10 days of receipt.

          3. Part performance for K of sale of gds.

            1. Generally, part performance of a K for the sale of gds satisfies the S/F to the extent of performance.

              1. B orally orders 2000 dolls from S @ $1 and B rec 600 dolls. B Must pay for dolls rec’d.

              2. Suit for gds not shipped; S can can’t be sued for failure to deliver remaining dolls.

          4. Specially mfg’rd gds.

            1. If B cancels order S can sue B if S has made a substantial beginning of mfgr. The K is enforceable.

            2. Not suitable for sale to others.

          5. Judicial Admissions; part admits @ trial or in a pleading or discovery that an agreement was entered into.

        3. Effects of failure to satisfy the S/F when the promise is w/in S/F

          1. If unenforceable, not “void” or “not unconscionable”.



    1. Mistake: Ambiguity (mutual misunderstanding)

      1. There is no K if:

        1. Parties use terms in negotiations that are open to 2 reasonable interpretations AND

        2. Each party attaches different meaning to the terms AND

        3. Neither party knows or has reason to know the meaning that attached to the other party.

      2. Mutual Mistake of material fact; thought cow could not have kids.

        1. There is no K if:

          1. Both parties are mistaken

          2. About a basic assumption of fact

          3. Which materially affects the agreed exchange

          4. Both though violin was XX & it wasn’t so rescind K. 6D#25

          5. A thought performance required XX & B thought performance required XAX R#28. .

        2. Key is whether the agreed upon subject matter exists;

          1. Mistake as to subject matter (SM):

            1. S sells a painting to B for 50K & both believe that it’s genuine Warhol. Its not. No K b/c Mutual mistake.

            2. A buys hot dog stand from B b/c its on fair grounds. If fair grounds closes then A claims MM. But its assumption of risk. 2/89.

            3. Mistake as to value of SM;

              1. If painting is worth 12K not 50K then no relief to B. Just bad decision.

        3. Unilateral mistake;

          1. General rule; cts have been reluctant to allow a party to avoid a K for a mistake that was not shared by the other party. Ex. SubK’r bid 12K instead of 12.5K

          2. Exceptions;

            1. Obvious mistake; other party knew or s/have known of the mistake. Ct will grant relief.

            2. Avoidance b4 significant reliance by the other party.

              1. Allow a party to correct a clerical error.

    2. Duress; Defined: a party is left with no reasonable alternative but to enter into a K.

      1. Personal duress (gun to head)

      2. Economic duress (aka ED) (day b4 wedding caterer demand more money)

        1. Pre-existing duty rule usually applies with economic duress.

        2. K is voidable under ED

    3. Fraud in the inducement; cant be raised by HDC. Deceived about nature of what you’re signing.

      1. S to sell land to B and S lies about the total acreage.

        1. B understands what he is signing but lied to as about the subject matter.

        2. K is voidable.

      2. Fraud in the Factum (in the execution)

        1. Real defense that can be raised by HDC

        2. Actually deceived about nature of document your signing. No mutual assent.

        3. K is VOID.

      3. Innocent misrepresentation

        1. Claim hm is 2400 sq/ft but turns out to be 2000 sq/ft; If B reasonably relies he can void K.

        2. If home is 2375 sq/ft instead of 2400; this is not a material misrepresentation but rather a minor misrep. Not voidable b/c not material. Can sue for damages but cant sue to void K.

    4. Un-conscionability; ex. Contract with an old man that cant reason.

      1. Based on “unfair surprise” and “oppression

      2. Look for “procedural” and “substantive” unconscionability

        1. Procedural uncon goes to disparity of bargaining power; i.e. the terms are hidden.

        2. Substantive uncon – grossly unfair terms; ex. Low-income housing.

      3. Judged at time K is entered into

      4. Decided by judge; no jury

    5. Illegal K’s; Void.

      1. K maybe illegal as to subject matter.

        1. Ex. Gambling; sell drugs. K is VOID.

      2. Illegal purpose;

        1. A leases plane to B-drug dealer. Lease of plane is legal but illegal purpose. A can enforce K if he didn’t know of B’s illegal purpose.

        2. Pay son to refrain from smoking pot. R#53

      3. K’s considered illegal if against public policy.


  1. TERMS;

    1. Sources;

      1. Words

      2. Custom & usage; how things are done in this trade.

      3. Past dealings btwn parties;

      4. UCC, if sale of gds, certain terms are implied like warranties and implied unless specifically excluded.

    2. Parol evidence rule; this rule prevents terms from becoming part of the K.

      1. RULE; where the parties have agreed to a written K as a final expression of their agreement, a prior written or oral agreement, or a contemporaneous oral agreement cant be used to vary the terms of the agreement.

      2. Exception;

        1. Ambiguous terms

        2. Condition precedent; R#33 that cook has to accept quality of goods; yet not in K.

        3. Formation defects; 7/89 mistake in drafting- orally agreed to 800 in rent but K said 600.

        4. Consideration was never paid.

        5. Collateral agreement; omitted a term that’s naturally omitted (where $ is to be paid)

      3. Judges look for;

        1. Merger clause

        2. See how complete the K looks

      4. Comparison to the S/F; S/F relates to formation & Parol evidence rule deals with an existing K and want to know what the terms are.

    3. Delivery obligations of seller of gds.

      1. Shipment K’s;

        1. FOB S’s business location or the loading dock.

        2. CIF

        3. C&F

        4. FAS

      2. Destination K’s;

        1. FOB B’s business location

        2. Ex-ship

    4. Risk of loss (ROL);

      1. Who has risk of loss?

        1. Agreement controls.

        2. Breach; were gds non-conforming so the B c/reject or revoke or did B wrongfully repudiate?

      2. ROL shifts from S to B at time that S complete his delivery obligations.

      3. If no agreement the ROL shift to B upon “receipt” of gds if S is a merchant

      4. If S is not a merchant then ROL transfer to B upon S’s “tender” of the gds. Gds are tendered when the S is holding the gds for the B and lets the B know that the gds are available to be picked up.

      5. If FOB sellers place of business & if S holds goods for B & B never picks up the gds; after a commercially reasonable time its obvious that B will not show up & S is no longer entitled to K price.

      6. Sale or return; aka consignment; ROL is on B.

      7. Sale on approval; ROL is with S till B approves.

    5. Warranties;

      1. Express warranties (can be given by merchant S or non-merchant S)

          1. Words; words have a natural tendency to induce reliance.

            1. S/be in writing

            2. The more specific the better

            3. May depend on industry involved

              1. Puffing can’t be relied on; it’s NOT a warranty.

          2. Conduct; use of a sample or model; become a basis of the bargain if B believes that gds will conform to the sample.

      2. Implied warranty of merchantability; ONLY given by merchant S

        1. Implied provision that is automatically added to the terms of the K by operation of law – that the goods are FIT FOR THE ORDINARY PURPOSES for which they are to be used.

          1. Misuse of the product; no breach of warranty unless it was foreseeable misuse.

      3. Implied warranty of fitness; can be given by merchant or non-merchant S.

        1. Gds are fit for the particular purpose.

          1. B tells Salesman that he need an air conditioner to cool a 5000sq/ft bldg. Salesmen sell him one that doesn’t do the job. Breach of warranty b/c B relied on S’s recommendation.

      4. Implied warranty of title; can be given by merchant or non-merchant S

        1. S claims there are no liens on property.

      5. Limitations on warranty liability;

        1. Contractual limitations;

          1. Disclaimer; eliminates implied warranties. 2/90 if breach of implied warranty can reject gds.

            1. An express warranty cant be disclaimed

            2. Implied warranty of merchantability and fitness for a particular purpose may be disclaimed.

              1. Must use “conspicuous” language; so that a reasonable person would notice it.

              2. Must mention “merchantability” or may be more general language which in cmn understanding calls B’s attention to the exclusion of warranties and makes plain there is no implied warranty. EX. “As is” or “with all faults”.

            3. Implied warranty of title. Can only be excluded by specific language (not general language) EX. A sheriff’s sales, sale by foreclosing lienors.


          1. Limitation of remedies;

            1. A limitation of remedies clause controls recovery for any breach of warranty. It doesn’t eliminate the warranty.

              1. Ex. S is not responsible for consequential damages. Such remedy limitation is valid so long as it is not unconscionable and so long as the limited remedy doesn’t fail of its essential purpose.

                1. Limitation of remedies is fine but if S is unable or unwilling to make repairs the limiting provision fails of its essential purpose.

              2. Ex. Microwave starts a fire in B’s kitchen & S offers to replace the microwave but nothing else. You can claim this is unconscionable.


      1. Statute of Limitations;

        1. 6yrs K’s non sale of gds

        2. 4 yrs for breach of warranty. Starts to run from tender of delivery.

          1. If breach occurs during the warranty period then you have 4yrs from the date pf the breach.

        3. Exception; when warranty explicitly extends to future performance of gds. Ex 5yr warranty.



    1. Conditions;

      1. Conditions; modifies performance.

      2. Conditions coupled with a covenant: is an event that affects the duty to perform that is to some extent within the control of one of the parties and creates a legal obligation on the party to use reasonable good faith efforts to cause the event to occur.

        1. B agrees to buy S’s house if B can obtain financing. B has control b/c B may not go & get financing.

      3. Constructive conditions; (implied)

        1. S to sell RE to B. Agreement is silent as to when B is to pay S. This is a constructive concurrent condition.

        2. In service K’s, unless stated otherwise the services are to be performed first b4 the $ is paid.

        3. Law creates a constructive condition to prevent injustice (A placed bet at diff casino b/c other one was closed) R#120

    2. Excuse of conditions;

      1. IF B makes no attempt to get financing then condition is excused & B is absolutely liable on the K.

      2. Estopple/waiver;

        1. Estoppel is based on a stmt or conduct by the person protected by a condition B & the conditioning of an event that was to occur and requires a change of position.

          1. S relies on B’s stmt to

        2. Waiver; stmt or conduct made AFTER the conditioning event was to occur and does not require a change of position.

          1. No reliance

    3. Satisfaction of conditions;

      1. Express conditions; need strict compliance – it’s the std for satisfaction of an express condition.

        1. B to buys S’s RE base on the condition that the house is appraised for $175K. If appraisal returns at $170 – no K & B is excused from performance.

        2. Personal taste or judgment;

          1. When subject matter involves personal taste – cts apply SUBJECTIVE gd faith of buyer. B must at least look at the pictures and in gd faith decide if he wants them.

          2. If K purports to have product installed in a “workman like manner” then use OBJECTIVE gd faith.

        3. Constructive conditions;

          1. Substantial performance card #39 (substl perform applies to constructive conditions not express conditions. It’s a general std for satisfaction of a constructive condition.

            1. Ex. Paint everything but one shutter on the house.

      2. Ins co has an independent duty to pay unless K says pmt is dependant on premium rec’d



    1. Perfect tender rule;

      1. De minimus defect is ok but if it fails in any other way B can reject. NC #40

    2. Cure;

      1. Contractual rt to cure

      2. Time for performance has not expired.

        1. S sends B a newer model and B says that they wanted the older model. S reasonably believed that the newer model would be accepted so S has rt to cure.

    3. Rejection of gds;

      1. HOW; B must give prompt/timely notice so that S has the opportunity to cure.

      2. WHEN; rejection must occur b4 acceptance.

      3. If B wrongfully rejects gds then (1) stop delivery (2) resell (private or public) & recover (3) recover damages. R#31.

    4. Installment sales K; (ISK)

      1. ISK requires or authorizes delivery in separate lots to be separately accepted. Even it its states that each shpmt is a separate K. R#166.

      2. B has the rt to reject an installment only where there is a substantial impairment (material breach) in that the installment can’t be cured.

        1. B orders 5 kegs each night for 3 nights. If B rec’s only 4 kegs no substantial impairment.

      3. EX. One delivery comes with a part that is not repairable and is necessary for the operation of the machine. B can reject entire installment K.

    5. Acceptance of gds;

      1. Can accept after a reasonable opportunity to inspect B indicates to S that the gds conform to requirements.

      2. B fails to make an effective rejection; timely

      3. B does any act inconsistent with S’s ownership.

      4. B buys bike & it’s the wrong color. If B rides the bike for 50 miles even though it’s the wrong color.

      5. COD orders; B must pay 1st but no acceptance till reasonable opportunity to inspect.

    6. Revocation of acceptance of the gds;

      1. The non-conformity must substantially impair the goods to B (SUBJECTIVE) AND

      2. Excusable ignorance of grounds for revocation or reasonable (OBJECTIVE) reliance of satisfaction AND

      3. Revocation w/in a reasonable time after the discovery of the nonconformity.

        1. Usually happens with the defect is difficult to discover. Must give prompt notice.

        2. Can revoke even of the gd incurs normal wear & tear

    7. B’s Payment Obligation;

      1. In absence to an agreement otherwise B must pay cash

      2. Checks are ok

      3. S can refuse the check then B has a reasonable time to pay in $.

    8. Effect of breach on ROL;

      1. If gds are so defective that B has a rt to reject them, then ROL remains on the S until the defects are cured or the B accepts the gds in spite of their defects.

      2. If gds are defective and B rightfully revokes her acceptance, the ROL is on the S to the extent of any deficiency in B’s insurance coverage.

        1. Ex; B rejects gds 8months later after inspection; B’s insurance will cover B & S’ swill cover the deficiency.

      3. Where S has identified conforming gds to the K, and the B repudiates before the ROL has passed to B, the ROL falls on the B to the extent of any deficiency in S’s insurance.

        1. Look for S “segregating/marking the gds” “labels gds in his inventory for B”.



    1. Excuse by reason of failure of an express condition;

      1. Ex. Condition precedent that the home must appraise for $500K. If it appraised for less-no K.

    2. Excuse by reason of other party’s nonperformance;

      1. Sale of gds; S must make perfect tender; if less than perfect tender, B can reject gds & w/h pmt.

      2. Other K’s; cmn law requires substantial performance. A minor breach by one party will not excuse the other party. A substantial performance of a K is said to be a constructive condition of the other party’s obligation to perform.

        1. Material breach & minor breach are usually found in construction K’s.

      3. Divisible K’s; the consideration can be broken dwn into segments;

        1. Ex. K provides for $5K for interior paint & 2K for exterior painting. If A substantially performs one part of a divisible K, B will have to pay A for the substantially performed part.

      4. Express condition; cts require strict compliance with the express condition.

        1. If someone substantially performs then they can recover under Quasi K-to prevent unjust enrichment.


        1. Is a stmt;

          1. That the repudiating party cant or will not perform creating reasonable grounds for insecurity;

          2. Made prior to the performance due date

        2. Procedure;

          1. P demands in writing assurances. D’s failure to provide assurances w/in reasonable time not to exceed 30 days constitutes repudiation.

          2. Repudiation excuses P’s performance.

            1. If P erroneously believes that D has materially breached this doesn’t excuse P from performing.

        3. Damages; entitled to expectation damages; i.e. get K price.

        4. If uni-K & one side completely perform then must waits to sue when pmt is do. R#152, #92 delivered dogs and pmt was due a month later & B repudiated

      6. Excuse by reason of agreement of the parties

        1. Modification; changing the duties under the K. This discharges the original obligations at the time of the new agreement. WE ARE NOT CHANGING THE PEOPLE.

          1. Oral modification is ok if the original K didn’t require being in writing.

        2. Accord (new agreement with same parties) & Satisfaction (new performance);

          1. Original duty (under old K) is not discharged until performance of the new K is made.

            1. Usually in debt K’s.

            2. If there is a breach of the accord agreement then P can sue on the original un-discharged K or on the accord agreement.

            3. When debt is liquidated and undisputed there can be no A & S. B/c no consideration supports obliges lesser performance. B#5

            4. “Pmt in Full” Stated on ck & cashed when obligation is disputed & unliquidated acts as an agreed acceptance of lesser pmt & cannot thereafter try to enforce full. B#5

        3. Rescission;

          1. Cancellation of duties under the K. Discharge occurs at the time of the new agreement.

          2. Oral agreement to rescind is effective to cancel a written K.

            1. Exceptions;

              1. Interest involving transfer of land

              2. UCC; if K states that rescission must be in writing.

        4. Novation;

          1. Substitution of a party/ immediate excuse. It requires the agreement of both of the parties to the original K and the new party. So at least 3 people must sign the new K.

          2. Occurs in delegations; delegating party remains liable.

        5. Impossibility or impracticability;

          1. Look for:

            1. Something that wasn’t reasonably foreseeable at the time of the K.

              1. Sever weather prevented timely deliver. 3D#196, R#124.

            2. Renders performance impossible or commercially impracticable

            3. No fault on the party seeking to be excused.

          2. Common law;

            1. Person who provides some services and can’t finish his obligations can recover under Quasi K.

            2. A builder’s duty to construct a bldg is NOT dischargeable by destruction of the work in progress.

          3. UCC;

            1. Look for;

              1. The gds destroyed the “subject matter of the K”.

                1. A & B (merchant) K for a car, the car is destroyed by fire. B is excused b/c subject matter has been destroyed.

              2. Did B have ROL?

                1. If ROL is on S & the crop is destroyed then S would not be excused from performing. S would have to get wheat from somewhere else to fulfill his obligation to B.

            2. Partial impossibility;

              1. S can only deliver some of the gds to B b/c a fire destroy a lot of his inventory. B can’t sue S if the S allocated the goods reasonably & fair among all his customers.


            1. ROL;

              1. Merchants; ROL of loss is on S until B receipts gds.

              2. NON-Merchants; ROL shifts upon S’s tender of delivery—make the item ready for B to pick up. Ex horse was ready & burns in fire waiting for B to pick it up. B gets dead horse.

          1. Incapacity of a person NECESSARY to perform; p65.

            1. Usually in non-delegable personal services K’s.

              1. Wrester hurts himself; manager can’t sue him for breach.

          2. Governmental regulation order;

            1. If the K is now illegal b/c of statute then both sides are excused from performance.

          3. Increase in cost of performance;

            1. Increase in cost alone is not enough to excuse the obligations under the K. S assumed the risk.

          4. Temporary impossibility;

            1. Bad weather; suspends contractual duties but does not discharge them.

        1. Excuse by reason of FRUSTRATION OF PURPOSE;

          1. Happens after K is made

          2. Not reasonably foreseeable at the time the K was entered into

            1. D to pay S as long as head coach. Of S is fired then frustration. 2/87.

          3. Totally (no possibility to do the thing) or nearly destroys the purpose or value of the K

          4. The purpose of the K was known to both parties at the time of the K

            1. Rent a room to watch the grand prix; then the grand prix is canceled.



    1. Liquidated damages;

      1. K can stipulate the damages or method to compute damages; CAN’T BE A PENALTY.

      2. Must;

        1. Have been difficult to estimate damages at time of K’ing. Liq dam cl & no loss incurred so provision is unenforceable. R#181.

        2. Provision is reasonable forecast of possible damages; cant be a penalty R#22.

      3. Actual damages are not relevant

    2. Punitive damages;

      1. Are not recoverable in K actions;

    3. Damages rules for ordinary K’s; Expectation damages.

      1. Ordinary K;

        1. Injured party can recover Expectation damages;

      2. RE;

        1. Mkt value minus K price = damages

      3. Construction K’s; substantial performance 3D#176.

        1. Owner repudiates;

          1. Builder (B) can recover cst incurred to date + profit he would have made.

        2. B repudiates;

          1. Cst to pay another builder minus K price. B can recover for portion performed under Quasi K.

      4. Employment K’s; are dividable i.e can get paid for # of months worked. R#73

        1. K price minus avoidable damages; EE must make reasonable effort to find substituted employment.

      5. Limitations and additions; May be a clause in the K;

        1. Plus incidental damages;

          1. Include costs incurred in a reasonable effort to avoid loss resulting form breach.

        2. Plus foreseeable consequential damages

          1. Include injury to a person or property and lost profits.

        3. Minus avoidable damages;

          1. Injured party must make reasonable efforts to mitigate damages; not required to take on an undue burden or risk humiliation.

        4. Minus speculative damages;

          1. Damages must be reasonably certain; if P’s expectation damages are too speculative then reliance damages may be awarded.

    4. Damages for sale of gds;

      1. S breaches & B keeps gds; award:(fair mkt value for perfect gds – fmv of gds as delivered)

      2. S breaches & S keeps gds; award:(Replacement price – K price)

      3. B breaches & B keeps gds; award:(K price)

      4. B breaches & S keeps gds; award:(K price – mkt price at the time & place for tender (price in the city where deliver takes place) or (K price – resale price).

      5. Lost volume seller;

        1. B breached and S loses a sale b/c of B’s breach. S is a lost volume seller if he could have sold to both buyers. S can recover for lost profits.

    5. Quasi K;

    6. Non-monetary remedies;

      1. Equitable remedies;

        1. Fairness/discretionary by ct/balance the hardship

          1. Only if money damages are not adequate

        2. Specific performance; $ damages are insufficient R#25.

          1. Usually for RE b/c it’s unique. Purebred dogs B#13

          2. Not for services K’s b/c of involuntary servitude

          3. Can get it for it requirements Ks. 6D#33

        3. Equitable rescission;

          1. Where performance is excused b/c of impossibility or impracticability,

        4. Reformation;

          1. Re-title a deed incorrectly recorded.

      2. UCC remedies;

        1. Reasonable grounds for insecurity/B can demand adequate assurances;

          1. Demand in writing

          2. Can suspend performance if commercially reasonable

          3. If assurance is not rec’d w/in 30 days it can be treated as a breach of K.

          4. B only has a rt to rec adequate assurances not a surety;

        2. Restatements;

          1. Demand doesn’t need to be in writing & no 30-day requirement.

        3. S’s rt of reclamation PMSI;

          1. An unpaid S can reclaim the gds if;

            1. It was a credit sale

            2. B is insolvent when IT REC’s the gds; not a week later

            3. Demand for return w/in 10 days of B’s receipt of the gds.




    1. Incidental bene;

      1. A special orders car from B. B hires C to paint car. If A repudiates C cant sue A b/c C is incidental bene. R#184.

      2. Surety was incidental bene not 3rd party bene so bank owned him no duty to sell at the highest price upon foreclosure R#94.

      3. Have no rts under the K;

      4. Ex. RE agent is incidental bene against buyer.

    2. Creditor bene (under a K)

      1. Ex. RE agent is 3rd P bene to seller so can enforce a sale.

    3. Donee (heir to an estate)

    4. Vesting of rts for 3rd P bene’s;

      1. When does vesting occur? Knowledge & reliance.

        1. Can’t modify 3rd P rts if they have vested.

        2. 3rd P materially changes his position in justifiable reliance; Ex quits jobs & waits for $ to come in. B#31.

        3. Restatements; 3rd p manifests assent to promise in a manner invited or requested by the party

      2. Exception;

        1. When K language is contrary the K language controls;

        2. Ex; K says that policyholder can change the bene’s are any time.



    1. Delagtor/delagate/obligee

    2. Is K obligation delegable?

      1. NO if K prohibits delegation

      2. NO is K prohibits assignments;

      3. NO if K requires;

        1. Special skill

          1. Delegate duty to paint barn requires no special judgment. MBE#180 Original painter remains liable & doesn’t have to go after painter #2. MBE#181.

        2. Special reputation; painting a portrait

    3. What are the requirements for delegation?

      1. Consent of obligee is NOT required.

      2. Consideration is NOT required; delegate is not liable to obligee.

    4. Consequences of delegation;

      1. Delegating party remains liable

      2. Delegate liable only if “he rec’s consideration” from the delegating party.



    1. Need not be in writing.

    2. Irrevocable if: in writing & supported by $. R#127

    3. Revocable if: Oral gratuitous assignments are revocable. 6D#17

    4. Assignments substitutes one person’s rts for another whereas 3rd P beneficiaries add a new person.

    5. Assignor/assignee/obligor

    6. Limitations on assignment;

      1. Assignment cant substantially change the duties of the obligor

        1. Batman’s services cant be assigned to another city this substantially changes the duties/new villains.

        2. A sells business to B and C has 3 yr K to work there. If B wants C to relocate out of state then substantially changes C’s duties. 2/88.

      2. Cant assign a future K rt; Assignment of a rt to be expected to be under a K = future K b/c no K is in existence now. R#132.

      3. Non assignment cl; Assignment requires consent. If assignor breaches K provision forbidding assignments then assignor can assign K but is liable for breach. R$108, MBE #163

      4. Notice; payor must have notice of assignment in order to be liable. MBE#164

      5. Can assign rt to rec $

      6. Outputs/requirements K’s

        1. UCC gd faith variation cant be unreasonably disproportionate. If not then assignable.

    7. K clauses;

      1. Prohibition is valid

    8. Requirements for assignment;

      1. Language of PRESENT assignment;

        1. “I assign” NOT “I promise to assign” or “I intent to assign”

      2. A writing is NOT required to have an effective assignment;

      3. If the K is required to be in writing then the assignment must also be in writing.

    9. Assignee vs Obligor issues;

      1. Assignee can sue the obligor is obligor doesn’t pay obligee/assignor

      2. Obligor defenses against assignee;

        1. Any defense obligor has against the obligee/assignor the obligor can assert against the assignee.

      3. Modification by obligor and assignor;

        1. Can be modified until obligor has notice of the assignment

      4. Payments to assignor;

        1. Must pay assignee if obligor knows of the assignment

      5. Assignee vs sub-assignee’s;

        1. Sub-assignee needs POC to sue assignor. Otherwise can only sue assignee. R#91.

        2. Assignee is primarily liable b/c of POE & assignor is secondarily liable b/c of POC. Therefore obligor can recover from either under joint & several liability. 3D#118.

        3. Last in time rule;

        4. Exceptions to last in time rule;

          1. A gratuitous assignment is not revocable if

            1. The assignment is in a writing either signed or under seal that is delivered by the assignor

            2. OR, the assignment is accompanied by delivery of a writing of a type customarily accepted as a symbol or as evidence of the rt assigned.

              1. A gratuitously delivers to B a promissory note. The delivery operates as an effective and irrevocable assignment of both rts and the documents.

          2. Assignment for consideration;

            1. The 1st assignee for consideration has priority over all subsequent assignees and all creditors of the assignor.

            2. Exceptions;

              1. a subsequent assignee for value can take priority over earlier assignees if it is without notice of a prior assignment and;

                1. its the 1st to obtain pmt from obligor OR

                2. it enters into a new K w/ obligor by novation OR

                3. it gets the 1st delivery of a tangible token or writing OR

                4. it can set up estoppel against the 1st assignee.

      6. Assignee v Assignor;

        1. The assignor makes certain implied warranties to the assignee.

        2. Assignee may sue for:

          1. Wrongfully exercising the power to revoke in an irrevocable assignment

          2. OR where the assignee brings an action against the obligor to enforce the obligation and the obligor successfully asserts against the assignee a defense, which it has against the assignor.



    1. Bailment entrust your personal property with another. Bailor has the power to transfer the property to a customer. If bailor sells your property to a customer you can’t get it back b/c the customer is a buyer in the ordinary course of business. **You can sue the bailor for conversion (intentional tort) & get punitive damages;



































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