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1 ESSAY APPROACH CONTRACTS ESSAY I. DOES THE UCC APPLY? a. The UCC governs all Ks for the sale of goods b. The UCC also has special rule governing transactions between merchants c. If UCC does not apply, then apply common law II. IS THERE A VALID K? a. Offer i. Manifestation of a present intent to contract demonstrated by a promise, undertaking o commitment ii. Definite and certain terms iii. Communicated to an identified offeree b. Has the offer been terminated? i. Lapse of time ii. Revocation: words or conduct of the offeror terminating the offer 1. Effective when received by the offeree 2. Unless the offer is irrevocable a. Option K b. Merchant s firm offer under UCC c. Detrimental reliance iii. Rejection: words or conduct of the offeree rejecting the offer 1. Effective when received 2. Counteroffer acts as rejection iv. Termination by operation of law 1. Death or insanity of either party 2. Destruction of subject matter of the K 3. Supervening illegality c. Acceptance i. Under CL, acceptance must mirror the offer ii. Under the UCC, an acceptance which adds terms to the offer is valid 1. Between merchants, the additional terms become part of the K unless they materially alter the K unless the offeror objects or unless the offer is limited to its terms UC iii. Method of acceptance 1. Promise to perform 2. Starting to perform 3. Complete performance iv. Mode of acceptance 1. Manner authorized by offer 2. Any reasonable manner v. Effective upon dispatch 1. Mailbox rule 2. Limits on mailbox rule 1
2 d. Consideration i. Bargained for exchange ii. Legal detriment or legal benefit 1. Adequacy generally irrelevant 2. Past consideration 3. Pre-existing duty rule 4. Part payment to settle existing debt 5. Payment to settle legal claim 6. Payment of debt barred by SoL iii. Promissory estoppel or detrimental reliance as a substitute for consideration e. Defenses to formation i. SoF ii. Mistake iii. Illegality iv. Incapacity v. Unconscionability vi. Duress vii. Fraud III. TERMS OF THE CONTRACT a. Interpretation of terms i. Custom and usage in the industry ii. Course of dealing between the parties b. Mistake and ambiguous terms c. Parol evidence rule d. Modification i. Additional consideration needed under the common law ii. Under UCC, no consideration needed so long as in good faith iii. Modification may need to satisfy SoF IV. THIRD PARTIES RIGHTS OR OBLIGATIONS a. Third party beneficiaries i. Intended or incidental TPB? ii. Creditor or donee TPB? iii. Have rights vested? iv. Who can sue whom? 1. TPB v. promisor 2. Promisee v. promisor 3. TPB v. promisee b. Assignment of rights i. Assignments are generally valid unless they materially alter the obligor s duty or risk or unless they are prohibited by law ii. Does obligor have defenses against assignee? iii. What happens when there is more than one assignment of the same right? c. Delegation of duties i. Delegation of duties is permitted except where prohibited by the K, where the duties involved personal judgment and skill or where the delegation would change the obligee s obligations. ii. Obligee may sue delegator and delegatee. V. PERFORMANCE a. Conditions 2
3 VI. i. Types of conditions 1. Express, implied, constructive 2. Precedent, concurrent, subsequent ii. Satisfaction of conditions iii. Excuse of conditions 1. Wrongful prevention 2. Voluntary disablement 3. Anticipatory repudiation 4. Waiver 5. Estoppel b. Discharge of duties i. Impossibility objective test 1. Death or physical incapacity 2. Illegality 3. Destruction of subject matter ii. Impracticability 1. Extreme and unreasonable difficulty that was unanticipated 2. Subjective test iii. Frustration of purpose 1. Rescission 2. Novation 3. Accord and satisfaction iv. Breach REMEDIES a. Damages i. Compensatory 1. Expectation damages (benefit of the bargain) 2. Consequential damages must be foreseeable ii. Liquidated damages 1. Actual damages difficult to calculate at the time the K was formed 2. Amount is a reasonable forecast of damages iii. Punitive damages b. Duty to mitigate c. Restitution quasi-contractual relief d. Specific performance e. Rescission f. Reformation SPECIFIC TORTS: POTENTIALLY AVAILABLE REMEDIES (THE CHEAT SHEET) a. Personal property torts i. Destroyed property ii. Damaged property iii. Dispossession 3
4 b. Restitutionary damages i. If D benefits c. Replevin d. Mandatory injunction i. If chattel unique and damages and replevin won t work e. Constructive trusts/equitable liens i. Particularly if D is insolvent and/or tracing facts are involved f. Self-help i. Reasonable force to recapture b. Real property torts i. Simple trespass a. Nominal damages b. Restitutionary damages c. Injunction: avoiding multiplicity of actions ii. Destruction/damage of realty b. Injunction iii. Dispossession b. Restitutionary damages c. Ejectment: since it s available, no injunction d. Constructive trusts/equitable liens iv. Encroachment b. Injunction: probably emphasize balancing of hardships c. NO restitution 2. Nuisance a. Available remedies i. Compensatory damages ii. Injunction: probably emphasize balancing of hardships iii. NO restitution c. Personal injury torts a. Economic losses/special damages: certainty rules apply b. Non-economic losses/general damages: certainty rules do not apply c. Lump sum payment: discounted to present value (for special damages). Inflation NOT taken into account. 2. Injunction a. Only against prospective intentional tortious conduct. d. Fraud 1. Damages 2. Constructive trusts/equitable liens 4
5 II. 3. TIP: always consider if (i) it also should be analyzed as a Ks case and (ii) whether punitive damages should be awarded. SPECIFIC CONTRACTS: POTENTIALLY AVAILABLE REMEDIES (THE CHEAT SHEET) a. Personal property sale Ks 2. Restitution 4. Rescission 5. Reformation b. Real property sales Ks 2. Restitution 4. Rescission 5. Reformation c. Construction Ks 2. Restitution (only builder, for work done, unless owner pre-paid) (only owner, but difficult because of enforcement problems) d. Personal service Ks 2. Restitution (only employee for services rendered, unless employer pre-paid) a. No: employment K b. Yes: valid covenant not to compete 5
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