This outline is meant to be brief and focuses on the areas I feel like I most need to improve for the bar exam. Clearly, this is not a complete outline.
Applicable Law
Common law – governs contracts for services, land, etc.
UCC Article 2 – governs contracts for the sale of goods
Formation
Use mnumanic “All Contracts Don’t Stink”
A – Agreement. Includes Offer and Acceptance
C – Consideration
D – Defenses to formation (duress, incapacity, etc.)
S – Statute of Frauds
Offer
Offeror’s willingness to enter into an agreement. May be revoked at any time prior to acceptance.
Common law – must contain essential terms.
UCC – only requires the quantity to be specified (requirement contracts are sufficient).
Acceptance
Offeree’s assent to enter into the agreement based on the terms provided by the offeror.
Common law – must mirror the terms provided by offeror, otherwise it is a counteroffer.
UCC – additional terms provided in an acceptance does not constitute a counteroffer. Acceptance is made, but the additional terms will only come into play if they do not alter or contradict the material terms.
Rejection
May be revoked by the offeror prior to acceptance.
May be revoked by the offeree.
Counteroffer counts as a rejection and a new offer.
Mailbag rule
The acceptance is considered made as of the date it is sent in the mail (not received by the offeror).
Consideration
Legal destriment for a bargained for exchange.
Defenses to Formation
Incapacity – minors. Makes the contract voidable.
Duress – Primarily economic duress. Allows rescission of the contract.
Mistake
Misunderstanding
Misrepresentation
Undue Influence
Statute of Frauds
Remember by the mnumanic “Mr. SOUR”. Any of the following contracts need to be in writing.
M – Marriage
S – Surety
O – One year (performance cannot be done in less than one year)
U – UCC. Contracts for the sale of goods over $500 must be in writing.
R – Real property. Contracts for the sale of real property must be in writing unless: (1) two of the following steps were taken by the buyer: (a) Payment, (b) possession, and (c) land improvement, or (2) the buyer detrimentally relied on the contract.
Parol Evidence Rule
No written or oral evidence may come in to contradict the terms of the agreement. If the document is fully integrated, then the parol evidence rule prohibits the evidence to supplement or contradict (partial integration allows supplemental terms). Parol evidence may still be permitted to clear up ambiguous terms.
Third Parties
Beneficiaries
Third parties may be interested in the contract developing. The two contracting parties may contract to benefit a third party (known as the donee beneficiary). If the donee beneficiary relies on the promise, his right to the contract will vest and he will be able to seek a remedy against the contracting parties in the event of a breach.
Incidental beneficiaries are third parties who receive a benefit from the contract, but they were not intended to be the beneficiary. Even if these beneficiaries detrimentially rely on the contract, they have no rights to vest and cannot recover in the event of a breach.
Assignment and Delegation
Unless stated in the contract, there is a presumption that either party could assign rights or delegate duties (unless the contrat was for the certain skills of the contracting party) to another party. For a delegation the original party remains liable unless if the other party agrees to release the original party of performance (called a novation).
Performance and Excuses
Performance
Substantial performance in the common law is sufficient to satisfy the contractual terms. The party that has substntially performed is entitled to the full value of the contract. Any damages caused by incomplete performance may offset the value to be received.
Under the UCC, parties are to provide perfect tender. If a good is not in conformance with the agreed upon terms, the buyer is entitled to either accept or reject the good. If rejected, the buyer must take reasonable steps to return the nonconforming good to the seller.
Excuses
A party may breach a contract, but sometimes they may be excused for doing so. These include:
- Impracticability
- Impossibility
- Illegality of contract provisions
- Destruction of bargained for terms
- Unconscionability
- Violation of public policy
- Frustration of Purpose
- Release
- Recsession
Remedies
There are several types of remedies with the two main categories being (1) compensentory and (2) equitable.
Compensentory Damages
The three main categories of compensation damages include:
- Expectation damages including
- Incidental damages
- Consequential damages
- Lost profits
- Reliance damages
- Restitution damages
Expectation damages are calculated by putting the nonbreaching party in the position they would have been in if there was no breach. That is, contract bargained for – contract received = expectation damages.
Reliance damages are calculated by putting the nonbreaching party in the same position they would have been in if they had never entered the contract. That is, in reliance of the contract, I made these expenses. I expect reimbursement for those expenses.
A nonbreaching party can recover either Expectation damages or reliance damages, but not both.
Restitution damages are calculated by restoring the nonbreaching party to the position he was in because the breaching party was unjustly enriched. That is, the nonbreaching party performed but did not receive the promised benefit. As such, the nonbreaching party expects to take back any unjust compensation the breaching party was not entitled to. For example, contractor pays subcontractor $50,000 to complete a project. Subcontractor never starts work on the project. Contractor can recover $50,000 of restitutionary damages.
Parties must make reasonable efforts to mitigate their damages.
Equitable Damages
(1) Injunction – A court remedy telling the breaching party to stop breaching.
(2) Specific performance – only available when compensation damages is not adequate. Typically only applies in the sale of real property or unique goods. Never utilized for services.
