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UCC Firm Offer Rule
an offer cannot be revoked for up to 3 months if (i) offer to buy or sell goods, (ii) signed, written promise to keep the offer open, and (iii) party is a merchant
mirror image rule (common law)
- - indirect rejection
- a response to an offer that adds new terms is treated like a counteroffer rather than an acceptance.
- Constrast with - additional terms (UCC A2 (2-207)): seasonable expression of acceptance.
- fact pattern in which there is (i) offer to buy or sell goods and (ii) a response with additional terms raises two seperate questions:
- a. is there a K? under UCC, response to an offer that adds new terms (but does not make the new terms a condition of acceptance) is generally treated as acceptance--is generally a "seasonable expression of acceptance." Whether parties are merchants is irrelevant in answering this first question.
- b. is the additional term a part of the contract? it is part of the K only if (i) both parties are merchants AND (ii) additional term is not "material" AND (iii) the additional term is not objected to by offeror.
Acceptance fact pattern: distance and delay in communications
- 1. all communications other than acceptance are effective only when received.
- 2. acceptance is generally effective when mailed.
- 3. if a rejection is mailed before an acceptance is mailed, then neither is effective until received.
- 4. you cannot use the mailbox rule to meet an option deadline.
preexisting contractual or statutory duty rule
- common law version -
- doing what you are already legally obligated to do is not new consideration for a new promise. under common law new consideration is required for contract modification.
- (exceptions) - addition to or change in performance; unforeseen difficulty so severe as to excuse performance; 3rd party promise to pay
- Article 2 - DOES NOT HAVE a preesisting legal duty rule. New consideration is not required to modify a sale of goods K. Good faith is the test for changes to an existing sale of goods K.
contracts within the statute of frauds
- 1. promises to answer for the debts of another (a guarantee). however, if the "main purpose" of the obligation allegedly guaranteed was to benefit the guarantor, then not even that guarantee is within the SOF.
- 2. service K not "capable" of being performed within a year from the time of K. (a) specific time period, more than a year - SFO applies. (b) specific time, more than a year from date of K - SFO applies. (c) task (nothing said about time) - SFO does not apply. (d) life - SFO does nto apply (person can die in less than a year).
- 3. transfers of interest in real estate (with exception for leases of year or less)
- 4. sale of goods for $500 or more
performance - SOF can be satisfied by performance.
a. performance and transfer of real estate - part performance satisfies the SOF in transfer of real estate. part performance requires any 2 of the 3: (i) improvements to the land, (ii) payment and (iii) possession.
SOF can be satisfied by -
performance and service contracts
full performance by either party satisfies the SOF
SOF - part performance and sale of goods contracts
- general rule is that part performance of a K for the sale of goods satisfies the SOF but only to the extent of the part performance. More specifically see if question is about delivered or undelivered goods.
- delivered - part perf satisfies SOF
- undelivered - part perf does not satisfy SOF
SOF - writing
- requirement of the SOF can also be satisfied by a writing. Look at the contents of the writing or writings -- all material terms test (who and what).
- look at who signed the writing. the writing satisfies the SOF as that there is no SOF defense only if the writing has been signed by the person who is asserting the SOF defense -- by the person who is saying that there is no such agreement.
Article 2 SOF
- look to the contents of the writing and who signed the writing. the writing must indicate that there is a K for the sale of goods and contain the quantity term.
- generally, the writing must be signed by the person asserting the SOF defense (the defendant). the UCC, however, has an exception to this rule: based on that person's failure to respond to a signed writing. both parties must be merchants and the person who receives a signed writing with a quantity term that claims there is a K fails to respond within 10 days of receipt.
(SOF) authorization to enter into contract for someone else
- when do rules of law require that a person have written authorization in order to execute a K for someone else?
- A: the authorization must be in writing only if the contract to be signed is within the SOF (authorization must be of "equal dignity" with the contract)
(SOF) contract modification
- when do rules of law require written evidence of modification of a written contract?
- 1. look at the deal with the alleged change and
- 2. determine whether the deal with the change would be within the SOF.
- 3. if deal with change would be within the SOF, then the alleged modification agreement must be in writing.
- Q: What if the agreement is in writing and requires that all modifications be in writing?
- A: under common law, such provisions are not effective. Under UCC requiring writen modifications are effective unless waived.
public policy reasons for not enforcing an agreement
look for exculpatory agreement that exempts intentional or reckless conduct from liability, a covenant not to compete without a reasonable need or reasonable time and place limits.
empowers a court to refuse to enforce all or part of an agreement. 2 basic tests: unfair surprise and oppressive terms.
(reason for not enforcing agreement)
Mistake of fact existing at time of K
- a. mutual mistake of material fact and not assumed risk (no K).
- b. unilateral mistake of material fact - courts generally reluctant to allow party to avoid a K for a mistake made by only one party - unless the other party had reason to know of the mistake.
- not a K at all.
- one party is unjuectly enriched at the expense of the other party, so that the enriched party must pay restitution to the other party equal to the unject enrichment.
"requirements" and "output" contract
- it is assumed that the parties will act in good faith; there may not be a tender of or a demand for a quantity unreasonably disproportionate to
- (i) any stated estimate, or
- (ii) in the absence of a stated estimate - any normal or otherwise comparable prior output or requirements.
mutual mistake to existing facts
- if both entering into K are mistaken about existing facts (not future happenings) relating to agreement, the K may be voidable by the the adversely affected party if:
- 1. the mistake concerns a basic assumption on which the K is made.
- 2. mistake has a material effect on the agreed-upon exchange.
- 3. party seeking avoidance did not assume the risk of the mistake.
- Assumption of risk - mutual mistake not a defense if the adversely affected party bore the risk that the assumption was mistaken.
- Mistake in value - generally not a defense.
- Unilateral mistake - if only one of the parties is mistaken about facts relating to the agreement, the mistake will not prevent formation of K. however, if the nonmistaken party knew or had reason to know of the mistake made by the other, the K is voidable by the mistaken one.
mistake by the intermediary (transmission)
when there is a mistake in the transmission of an offer or acceptance by an intermediary, the prevailing view is that the message as transmitted is operative unless the other party knew or should have known of the mistake.
ambiguous contract language
- 1. neither party aware - no K unless both intended same meaning.
- 2. both parties aware - no K unless both intended same meaning.
- 3. one party aware - binding K based on what the ignorant party reasonably believed to be the meaning of ambiguous words.
(SOF) executor or administrator promises personally to pay estate debts
a promise by an executor or administrator to pay the estate's debts out of his own funds must be evidenced by a writing
K may be discharged by an express agreement between the parties to rescind. the agreement to rescind is itself a binding K supported by consideration, namely, the giving up by each party of her right to counterperformance from the other.
- an agreement in which one party to an existing K agrees to accept, in lieu of the performance that she is supposed to receive from the other party to the existing K, some other, different performance.
- * generally, accord must be supported by consideration.
- * effect of accord - taken alone, will not discharge the prior K. it merely suspends the right to enforce it in accordance with the terms of the accord K.
is the performance of the accord agreement. its effect is to discharge not only the original K, but also the accord K as well.
breach of accord
- if debtor breaches an accord agreement, the creditor may sue either on the original undischarged K or for breach of the accord agreement.
- if creditor breaches an accord (i.e., sues on original K), the debtor has 2 courses of action: 1. raise the accord agreement as an equitable defense and ask that the K action be dismissed; or 2. wait until she is damaged (i.e., the creditor is successful in his action on the original K) and then bring an action at law for damages for breach of the accord K.
Equitable Defenses available (action for spedific performance is subject to the equitable defenses of):
- 1. Laches - a claim that the plaintiff has delayed bringing the action and that the delay has prejudiced the defendant.
- 2. unclean hands - a clam that the party seeking specific performance is guilty of wrongdoing in the transaction being sued upon; and
- 3. sale to a bona fide purchaser - a claim that the subject matter has been sold to a person who purchased for vlaue and in good faith.
when do the rights of the beneficiary vest?
- a 3rd party can enforce a K only if his rights have vested. this occurs when he (i) manifests assent to a promise in the manner requested by the parties; (ii) brings a suit to enforce the promise; or (iii) materially changes position in justifiable reliance on the promise. prior to vesting, the promisee and promisor are free to modify or rescind the beneficiary's rights under the K.
- * before the intended 3rd-party beneficiary's rights vest, the promisor and promisee are free to modify their K--including removing the 3rd-party beneficiary altogether--without consulting the 3rd party. once the 3rd party's rights vest, the promisor and promisee cannot vary his rights without his consent.
effect of assignment
the effect of an assignment is to establish privity of K between the obligor and the assignee while extinguishing privity between the obligor and the assignor
substitutes a new party for an original party to the K. It requires assent of all parties and completely releases the original party.
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