Contracts

UCC Intro

UCC governs the sale of goods. In addition, the UCC has special rules that apply to merchants. FACTS. Thus, the special rules for merchants apply to this contract.

Offer requires:

1) a manifestation of a present intent to contract,
2) definite and certain terms (no price requirement in UCC), and
3) communicated to an identified offeree

Output/requirement contracts:

numerical terms not used, but instead based on buyer's requirements. No problem with vagueness

Termination of offers (4 methods)

1. Lapse of time
2. Death of a party (except options and part performance in unilateral K)
3. Revocation by offeror (unambiguous words or conduct by offeror AND awareness by offeree)
4. Rejection by offeree

Option contracts irrevocable when:

1. promised to keep offer open AND supported by consideration

2. UCC: Firm offer rule (irrevocable up to three months): no consideration needed, but must have i) offer to buy or sell goods, ii) signed, written promise to keep offer open, and iii) party is a merchant.

Offers irrevocable when:

1. Option contract (see UCC distinction)
2. Detrimental reliance (reliance that is reasonably foreseeable and detrimental)
3. Performance: start of performance in a unilateral K. Mere preparation is not enough

Rejection by offeree occurs by:

1. counteroffer (bargaining allowed, not a rejection)
2. conditional acceptance (acts similarly to counteroffer)
3. additional terms (common law only. Any add'l terms treated as a counteroffer. UCC: add'l terms may be part of K)

Additional terms in a contract under UCC, added or not?

If both parties merchants, then part of the K.

If one is not merchant, then term is not valid.

If one is not merchant, then additional term is part of K unless it is a MATERIAL alteration, or if offeror objects to the change.

Acceptance

Manifestation of assent to the terms of an offer in the manner prescribed or authorized by the offer.

Mailbox rule

Acceptance effective upon dispatch. All other communications effective on receipt.

Mailbox rule ineffective to meet option deadline.

Consideration

Requires a bargained for exchange between the parties involving legal value.

Methods of accepting an offer fact patterns:

1. No verbal response, but conduct acting like a K formed: common law = treated as acceptance of counteroffer; UCC = treated like new K based on conduct)

2. No response, just full performance: always acceptance of K

3. No response, but part performance: start of performance is acceptance of offer to enter bilateral K; not for unilateral (need full performance)

4. Verbal promise to perform: acceptance valid, except unilateral K which require performance

5. Mailbox rule

6. Seller sends wrong goods: treated as acceptance and breach (except accomodation rule: if provide explanation with goods, then it is treated as a counteroffer: no breach, no K)

Illusory promise exception in consideration

Promise is not 100% ("unless I change my mind")

Modification of good K

No new consideration required, just good faith

4 forms of consideration:

1. performance
2. forbearance
3. promise to perform
4. promise to forbear

3 consideration substitutes:

1. Seal
2. Written promise to satisfy an obligation for which there is no longer a legal obligation (e.g., SOL has run)
3. detrimental reliance/primissory estoppel (promise, reasonable reliance that is detrimental and foreseeable, and needed to avoid injustice)

4. UCC: no new consideration for modifications

Ks w/in the SOF

1. Promises to answer for debts of another (except in main purpose exception);
2. promises by executor to guarantee debts of decedent
3. promise in consideration of marriage
4. Service Ks not able to be performed w/in a year from time of K
5. Transfers of interest in real estate (except leases of year or less)
6. Sale of goods for $500 or more

SOF satisfied by

1. Writing
2. Performance (differs b/w service and goods Ks)
3. Judicial admission

SOF performance distinctions

i. Performance and services contracts:
1. Full performance by either party satisfies the SOF.
2. Part performance of a services contract does NOT satisfy the SOF
a. NOTE: where part performance causes a contract to be unenforceable because SOF not satisfied, P may recover under quasi-contract, but not contract
ii. Sale of goods contracts
1. Seller’s part performance of ordinary goods
a. General rule: part performance of a contract for the sale of goods satisfied the SOF but only to the extent of the part performance.
i. Delivered goods – part performance by seller satisfies the SOF
ii. Undelivered goods – part performance by seller does not satisfy SOF
2. Seller’s part performance for specially manufactured goods
a. Substantial beginning rule – SOF satisfied when seller done enough on the goods so it is clear that what she is working on is specially manufactured, i.e., custom made. No SOF defense.
3. Buyer’s part performance (multiple items): SOF satisfied as to the proportional amou

Material breach is

when promisee does not receive the substantial benefit of the bargain as a result of the breach

Limits on assignments

1. Prohibition: right to assign taken away, but not power to assign. on assignment, assignor liable for breach, but assignee who does not know of prohibition can enforce the assignment.

2. Invalidation: both right and power to assign are taken away.

Assignment that changes duties of the obligor (common law). Valid?

No, if it "substantially changes" the obligor's duty.

Who to pay = not substantial.
Re: performance = usually substantial. Assignment unenforceable.

Assignee's rights are:

1. Recover from obligor
2. Payments from obligor to assignor valid until obligor knows of assignment
3. Assignor can't recover from obligor if it receives consideration for assignment

duties that are delegable:

All contractual duties, except:

1. K prohibits delegations or assigments
2. duties that are special skills
3. special personal services Ks

Liability for non-performance by delegatee:

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