k 2 outline road map

8/8/2019 K 2 Outline Road Map

http://slidepdf.com/reader/full/k-2-outline-road-map 1/63

If NOT substantially perform

1

Condition OR Promise ***LOOK AT INTENT ***IF INTENT NOT CLEAR USE ***GUILDLINES***

CONDITION (Dependent)

EXPRESS

IMPLIED “in fact”

CONSTRUCTIVE “in law[POMISE]

PRECEDENT “Triggers” SUBSEQUENT “Terminates”

CONCURRENT (Bi-lateral K) (Ind. / Dep.)

“Paid when Paid Clause”Condition if use “magicwords” If NOTPromise to avoid forfeiture[vs. time term]

“Satisfaction Clause”I. PERSONAL- Taste or Judgment- SUBJECTIVE satisfaction

- Can be unreasonable, BUTMUST us “GOOD FAITH”

II. COMMERCIAL- (value or quality) – Industry- OBJECTIVE satisfaction

- Reasonable Person Standard

III. 3RD

PARTY- (Majority) SUBJECTIVE- Must prove refusal was in

BAD FAITH- Must prove refusal was

Unreasonable- GOOD FAITH +

REASONALBENOTE courts usually favorOBJECTIVE standard

Note Burden of Proof Precedent PLSubse uent DF

RES II 240 Divisible v. EntireDivisible vs. Entire(10 Houses) (1 House)

I. WHO GOES FIRST? “TIMING”: Note condition is silent.

[conditions of exchange(RES II) 234 : If SILENT SIMULTANEOUS

(RES II) 234: LONGER PERFORMANCE GOES FIRST

II. WAS IT GOOD ENOUGH? “SUBSTANTIAL PERFORMANCE”(CARDOZA ) – tools for Df. Let him slide w/o this u need to finish – not fair

P D. E C + W (why should pay when he did no get what he bargained

MINOR VS. MATERIALSUBSTANTIAL =

= LESS THAN SUBSTANTIALConstructive condtiiton thatsubstantial performance duty hasNot occurred.

ISSUE : IS THE BREACH MATERIAL?

MINOR BREACH Thus it wasSubstantially PerformedBREACHER IS ENTITLED TODIMINUTION (K PRICE – DAMAGES)

ISSUE : REACTION TO BREACHNon-breacher has a “CHOICE”

TOTAL END K.Injured party can “choose” to End K

PARTIAL PERSEVE K Aka. Continue K.

OR

Breacher can recover quantim meriuit.(most you can recover.) Restitution forthe benefit conserved. Reasonable valuefor services render to build 7 houses

“time of essence clause”works like a condition. This is aform of expressed condition. If condition is not performed byspecified time, the K is void.

**substantial performance NOTapply** Expressly states time is of the essence. You do NOT need togo to guidelines[get damages even if sub. Perform}

Note K price will not limit recover because they are NON – Breacher. IF breacher QM recover can not exceed K price

(merely controlled by value of services rendered). Innocentparties can recover more than breachers can.

“Was it Good Enough?SUBSTANTIAL PERFORMANCE V. TARR RULES

**use TARR rules if dealing with goods instead of SubstantialPerformance when dealing with service**

NOTE

SUBTANTIALPERFORMANCEAka CONDITIONOFPERFORMANCEapplies to PROMISEAND CONDITIONS

DEFENSES: to avoid conditions [IF WEEP]PreventionForfeiture (only pick one restatement)Waiver (multiple choice) [majority v. minority view]Estoppel (multiple choice) [waiver + reliance]Election (multiple choice) [waiver + time expired]Impossibility [look at restatement. Also may have totalk about impossibility when talking about Forfeiture.



***FOR CONSTRUCTIVE CONDITIONS, YOU HAVE A BILATERAL CONTRACT ANDTHE COURT IS IMPOSING A CONSTRUCTIVE CONDITION ON IT TO MAKE IT FAIR.CORDOZA IS SAYING THAT IT IS NOT FAIR FOR THE PERSON PROVIDING SERVICETO HAVE COMPLETE THE WORK TO GET SOME COMPENSATION AND IT IS NOTFAIR FOR THE HOME OWNER TO PAY IN FULL WHEN HE HAS NOT RECEIVEDWHAT HE HAS BARGAINED FOR. THUS THE GUILDLINES TO DETERMINE HOWMUCH WAS PERFORMED AND RESOLVE THE ISSUE OF WHO GETS WHAT IN A FAIR WAY***

You already have a Contract. You are now dealing with the performance of a contract. How the parties owe each other performance under the contract and with how the existence of a breach of contract is determine. (First determine whether you have a promise or condition )

Promise a contractual undertaking to do or to refrain form doing something (interpretation of any written K is aquestion of law for a judge)

Conditions is an event/ fact, the occurrence or non-occurrence of which, determines when and if a party must performtheir contractual duties.

Forfeiture the denial of compensation that results when a condition does not occur,after the other party has relied substantially on the expectation of that exchange,

through preparation or performance ELEMENTS:The denial of compensation that resultsWhen a condition does NOT occur

After the other party has RELIED SUBSTANTIALLY On the expectation of THAT exchangeThrough preparation or performance

How do you know how determine whether condition or promise?To determine if a clause is promise or condition depends on the intent of the drafter (by looking at the language theyuse). Is this a condition? (it is for the judge to decide)***USE THE GUILDLINES IF INTENT IS NOT CLEAR***

Guidelines: (IF INTENT IS NOT CLEAR)General legal policy opposes forfeiture (this guideline leads us towards a promise because we are trying to avoidforfeiture).Insurance policies are generally construed most strongly against the insurer (AGAINST THE DRAFTER becausedrafter should have did a good job drafting – to teach him a lesson)When in DOUBT whether words are promise or condition precedent, they will be construed as a creating PROMISE(avoid forfeiture)

[Howard (farmers) v. Federal Crop Insurance Corp.]

2



************************CONDITIONS************************

TERMS:

Condition (definition) is an event, the occurrence or nonoccurrence of which determines when and if a party must perform their contractual duties.

Promise (definition) contractual undertaking to do or refrain from doing something .

Tender Manifestation of readiness, willingness, and present ability to perform

Implied K No words are exchanged

Progress payments intervals of payment. Just because there are progress payments in K, Does not mean it isintended to be divisible. It is probably Entire. But if 3 specific jobs added up to get total job then it can be divisible.

Ex. Roof 10K, Wall 20K, Plumbing 30K.

Implied Condition does not arise from any particular language rather it arises form conduct or relationship

(ex. Master / servant relationship). It is implied that you need to have loyalty with this relationship [Bright v. Ganas]

Expressed Condition a condition is specifically stated in the K between the parties . (when they have agreedeither explicitly or implicitly. When parties have agreed to an expressed condition, strict compliance with the condition isordinarily required before the performance will be due). Must be satisfied with 100% literal performance. If YES dutyACTIVATED; if NO duty DISCHARGED. Words are usually in writing but does not have to be in writing[Gary v. Gardner]

Note: Expressed condition can give rise to an implied duty Expressed promises can give rise to constructive conditions [IN REGARDS TO RES-II 240]

Constructive condition legal fiction Quasi K (avoid unjust enrichment )

Note use for both Promise and Condition

Note Promise [substantial performance]

Note Condition [condition of performance]

Condition Precedent:• Event has occurred before the duty (no duty to pay until…)• TRIGGERS THE DUTY• A specified fact/ event must be met before performance is due• Activates a duty (if) ?• Burden of Proof on PL (must prove condition was met)• The party to whom a duty is owed must prove the occurrence of the condition to activate the other party’s duty

3

SAME THING



Condition Subsequent:• Obligation to perform but if event occurs your performance is excuses.• TERMINATES THAT DUTY• Performance is due but will cease to exist upon the occurrence of a specified event• Discharges a duty (until, But if)• Burden of Proof on DF• The party who owes the duty has to prove that he has been released from his obligation by the occurrence of the

condition

Concurrent promise/condition to happen simultaneously (promises due at same time

Condition of Satisfaction :[use objective standard unless (1) impractical to use objective standard (2)language requires subjectivity (3) taste fancy, aesthetics, personal judgment (4) 3 rd party referee in construction

case]• Personalo Taste or judgmento SUBJECTIVE satisfaction

Can be unreasonable, but MUST us Good Faith• Commercial (value or quality) – Industry

o OBJECTIVE satisfaction

Reasonable person standard• 3td Party

o Majority: SUBJECTIVEMust prove refusal was in bad faithMust prove refusal was unreasonable

Good faith + ReasonableNote courts usually favor OBJECTIVE standard

Note time of essence clauses are treated like Expressed Conditions

Note whoever has burden of proof will usually loose

Paid when Paid Clause Is a Condition : in a K, “under no circumstances shall general contractor beobligated to make payments until after contract is paid”. [vs. time term – see below]

• Note paid when paid clauses are USUALLY considered A PROMISE.• Note Gap Filler: when not specific times then use a reasonable time• Note if ways “WHEN” = condition. If says “PAID WHEN PAID” = promise [thus time term]

Time Term Term fixing time: if a mere time term won’t work, there is a gap in the contract and the courts will look to a reasonable time for payment. Merely a promise to pay at a particular time

• Courts will usually determine as a time term unless clear, express language is used.• Example: “I’ll pay you when my Aunt arrives” – time term – court would give nephew a

reasonable time to pay the debt

Promissory condition Clause that is both a promise or condition.

4



He is liable for all damages resulting for breach of a promise. That I wont sue you for 6 months Also failure is expressed condition precedent which prevents him from suing them.

Time of the essence Deadline does not make “time of the essence” unless contract uses the language ex.“not on time this K will be void” EX : TIME OF ESSENCE CLUASE MAKES THE PERFORMANCE AEXPRESSED CONDITION PRECEDENT

• Note ONLY WAY THIS IS A EXPRESSED CONDITION IS IF IT SAYS “TIME OF ESSENCE”.• Note if dealing with GOODS, time is ALWAYS OF THE ESSENCE • Note Option K is always “TIME OF THE ESSENCE”

Forfeiture (another definition ) “one side has partly performed and not get the agreed exchange”

Dependent v. IndependentDependent the performance of one depends on the prior performance of another and thereforetill this prior condition is performed, the other party is liable to an action on his covenant. (do not have to do X until Y is done)

• Ex. Bi-lateral contract (dependent)• Work before I could pay you

Note IN BILATERAL K PROMISES ARE GOING TO BE TREATED AS DEPENDTENT

Independent where either party may recover damages from the other, for the injury he mayhave received by breach of the covenants in his favor, and where it is no excuse for the defendant,to allege a breach of covenants on the part of the plaintiff (still have to do X even though breacher did not do Y)

• Ex. Promise to pay, child support/visitation• Alimony• Apartment rents• Commercial leases are independent promises• Contract clearly states that it is an independent promise

Note estate Leases the promises are independent (rent v. promise to keep up the place)

Note:• Promise (are either dependent or independent) if dependent constructive condition• If independent do not give rise to constructive conditions.

Substantial performance (5 guidelines ) to determine what is substantial performance: (HOWMUCH TO PAY)

(P) Purpose to be served (this pipe will serve purpose of green pipe)(D) Desire to be gratified (we do not know why he wants reading pipe)(E) Excuse for deviation (K offers excuse blames on sub contractor – not

because it was cheaper)(C) And cruelty of enforcement adherence (if we make them live up to contractthere would be cruelty because they would have to pay to rebuild the house toreplace pipes)(W) ** (most important factor) 5 TH FACTOR – willfulness (badfaith v.goodfaith (non-willful) bad faith will cause the breacher to be responsible

5



Material v. Minor Breach & Substantial v. Less than Substantial Performance [Farnsworth &8.15 Four Terms to describe breaches] • Magnitude of the Breach

Material Breach : performance has been less than substantial, or • Note If Material Breach, choose either partial OR total. The breaching party

does NOT pay the contract price but rather quantum meruit (if there has been abenefit conferred to the non-breaching party) : damages (either the cost of

performance or the diminution of value ).• Note Quantum Meruit: L “as much as he/she deserves” The reasonable value of

services; damages awarded in an amount considered reasonable to compensate a person who has rendered services in a quasi K relationship. Breacher can NEVERrecover more than the contract price

Minor Breach: performance has been substantial • Note If minor breach, partial only Breaching party pays contract price – damages

(either the cost of performance or the diminution of value).• Injured Party’s response to the Breach

Treat the breach as a Partial Breach OR Total Breach: K terminates .

[To determine magnitude of breach:] • RESTATEMENT II 241 Circumstances Significant in Determining Whether a Failure is

Material: In determining whether a failure to render or to offer to performance is material, the following circumstances are significant:(a) the extent to which the injured party will be deprived of the benefit he reasonableexpected;(b) The extent to which the injured party can be adequately compensated for the part of thebenefit of which he will be deprived;(c) The extent to which the party failing to perform or to offer to perform will suffer

forfeiture;(d) The likelihiood that the party failing to perform or to offer to perform will cure his failure,taking account of all the circumstances including any reasonable assurances;(e) The extent to which the behavior of the party failing to perform or to offer to performcomports with standards of food faith and fail dealing. (note that this is now not quite asimportant as under Cardoza’s rule)

6



When can we treat K as divisible Res II. 240? [ONLY IF NO SUBST. PERFROM]

• (1) Can K be broken up into pieces (mathematically)? [apportioned] • (2) Would it be proper to treat these as divisible? [proper to apportion]

[RESTATEMENT 240 PART PERFORMANCE AS]

AGREED EQUIVAENTS

If the performance to be exchanged under an exchange of promises can be apportioned into corresponding pairs of part performances so that the parts of each pair are properly regarded as agreed equivalents, a party’s performanceof his part of such a pair has the same effect on the other’s duties to render performance of the agreed equivalent asit would have if only that pair of performances had been promised. “Entire” is opposite of “divisible”

PERFECT TENDER RULE (TARR RULES)******time is always of the essence when dealing with goods********

(Under substantial performance under constructive condition)o Only applies to goods NOT serviceso If services use common law (that performance needs to be substantial).

GOOD do not have to be perfect but they HAVE TO PERFECTLY CONFORM TO WHATEVER THE K REQUIRES (ex. K says used goods)

Note If HYPRID transaction (applies goods and services) Dominate factor test – rendition of services or goods (which is moredominate)?Violation of perfect rule is in fact a total breach.

Term • Goods anything that is tangible (touch it) and movable.

Ex: Electricity is a good

**********IMPORTANT FIRST TALK ABOUT UCC V. CL*****************

DETERMINE BY USING THE PREDOMINATE FACTOR TEST TO SEEWHETHER IT IS A SERVICE OR GOOD THEN IT LEADS YOU DOWN THEROAD MAP.

7



**********************************************************************

TARR RULES

Res II (2-307) TENDER “delivery in Single Lot or several Lots” Unless otherwise agreed all goods called for by a contract for sale must be tendered in a singledelivery and payment is due only on such tender but where the circumstances give either party theright to make or demand delivery in lots the price if it can be apportioned my be demanded for each lot

Res II (2-206) ACCEPTANCE “what constitutes an acceptance of goods?(1) Acceptance of goods occurs when the buyer:• (a) after a reasonable opportunity to inspect the goods signifies to the seller that the goods

are conforming or that he will take or retain them in spite of their non-conformities, or • (b) fails to make an effective rejection, but such acceptance does not occur until the buyer

has had a reasonable opportunity to inspect them, or • (c) does any act inconsistent with the seller’s ownership; but if such act is wrongful as

against the seller it is an acceptance only if ratified by him.(2) Acceptance of a part of any commercial unit is acceptance of that entire unit

Note Reasonable opportunity to inspect the good. (acceptance does not mean driving car off the lot) if accept you can not reject BUT you can REVOKE (2-608)

Res II (2-608) REVOCATION When can you REVOKE? When the Defect is SUBSTANTIAL & IMPAIRS THE VALUE OF THE GOOD.

(1) The buyer may revoke his acceptance for a lot or commercial unit whose non-conformity substantially impairs its value to him if he accepted it.

• (a) on the reasonable assumption that its non-conformity would be cured and it has not been seasonably cured; or

• (b) without discovery of such non- conformity if his acceptance was reasonably induced either by the difficulty before acceptance or by the seller’s assurance.

(2) Revocation of acceptance must occur within reasonable time after the buyer discovers or should have discovered the ground for it and before any substantial change in condition of goodswhich is not caused by their own defects. It is not affective until the buyer notifies the seller of it.(3) A buyer who so revokes has the same rights and duties with regard to the goods involved as if he had rejected them

Res II (2-601 ) REJECTION “Buyer’s rights on Improper Delivery” Subject to the provisions of this Article on breach in installment contracts (2-612) and unlessotherwise agreed under the sections on contractual limitations of remedy, IF THE GOODS ORTHE TENDER OF DELIVERY FAIL IN ANY RESPECT (quality or time) TO CONFORM TOTHE CONTRACT, THE BUYER MAY:

• (a) reject the whole (in good faith)• (b) accept the whole (in good faith)• (c) accept any commercial unit or units and reject the rest

Note even if very small defect Res II (2-508) REJECTION “Cure by seller or Improper Tender or Delivery, Replacement.

8



**************************EXCUSES*************************

• EXCUSING CONDITIONS we are excusing the non – occurrence of the condition(NOT APPLY TO CONSTRUCTIVE CONDITIONS)

NOTE [CONDITIONS] STRICT COMPLIANCE

NOTE [PROMISE] DO NOT NEED STRICT COMPLAINCE

10

EXCUSES

1ST CONSTRUE CONDITION AS PROMISE

2ND Extreme Forfeiture [BK case] severe forfeiture.

3RD Waiver [Moe v. John Deere]

4TH Estoppel

5TH Election

6TH Impossibility

7TH Prevention

8TH Forfeiture



Prevention [Sullivan case]

In every contract there is generally “an implied promise not to prevent or hinder performance of the condition. Such prevention, if the condition could otherwise have been performed, is,therefore, and immediate breach of contract. Implied condition of good faithImplied duty of cooperation has been brokenApply to express and constructive conditionsConstructive condition of substantial performance is excused (his failure) because she prevented contractor from continuing to perform .You can not deliberately cause condition to fail. (gotcha!!!). only another party can cause.

PREVENTION CAN APPLY TO CONSTRUCTIVE CONDITION AND EXPRESSEDCONDITIONS

Forfeiture / Extreme Forfeiturethe resulting denial of compensation where the nonoccurrence of a condition where the obligors dutycauses the obligee to lose his right to the agrees exchange after he has relied substantially on theexpectation of that exchange as by preparation or performance.Extreme forfeiture (res I 302) to excuse condition where no other grounds exist it may beexcused (1) if enforcement made an extreme forfeiture and (2) not essential part of K

(deadlines in this case are not essential part of the deadline)the main purpose was to get BK built not the deadlines.Forfeiture 1 party has performed her duties in reliance on the K and is denied the agreed exchange based on the failure of a conditionExtreme performance party has performed a lot and is losing a lotSchedule which formed the condition was not essential part of the exchange therefore we can excusethem

• Res II (2-229) “Excuse of a condition to Avoid Forfeiture” To the extent the non-occurrence of a condition would cause disproportionate forfeiture, a court may excuse the non-occurrence of that condition unless its occurrence was a material part of theagreed exchange

As you might expect, the line between these two uses of the forfeiture concept blurs in the real world as courts try to give effect to the parties’ agreement and traditional contract doctrine whilereaching a just result

o Comparison of Res I and II (forfeiture)

Degree of forfeiture : says extreme (RES I) to Disproportionate (RES II) forfeiture isdisproportion. Importance of Condition (Not essential – RES I) to (NOT ‘material – RES II)**only memorize one of them** just remember adj. extreme or disproportionate. Essential or material. PROF prefers the RES II.

Construe Condition as a Promise:

11



Party will argue term/clause is not a condition but a promise and courts prefer promises. If clearly a condition then see if can be excused

Waiver:(giving up your rights) Intentional relinquishment of known right the intentional relinquishment of a known right (Give up your right

•

Seller waived his right to strictly enforce• Can reinstate by sending notice of strict enforcement, but must do this after everyacceptance of late payment

• Non- waiver clause can be waived by not strictly enforcing the K Ex. Acceptance of late payment imposes a waiver.

• They want to cash the late check but don’t want to waive. Can you do that? Majority will not enforce a non-waiver clause if the parties, by their conduct, waive it.

NOTE Talk about MINORITY VIEW [don’t need to give notice every month] & MAJORITY VIEW [can waive – need to give notice]

Estoppel:• Foreseeable, detrimental reliance ON THE CONDUCT OF THE CREDITOR

A legally imposed bar resulting from one’s own conduct and precluding any denial or assertionregarding a fact. (Ex. Keep sending late payment and they keep accepting it and you rely on themcontinually accepting it so they can not reinstate the waiver clauseWaiver + Reliance = Estoppel (No reinstatement allowed – unfair)Foreseeable detrimental reliance on a waiver

Election: Election they had 2 paths they could have gone down. Once they have gone down that paththey have to keep going down that path. (it is like a waiver)Waiver + time expired = election too late to reinstate

Electing one course of action over another; where a party waives a condition after the time has

elapsed. Once you elect to waiver the condition, you cannot reinstate it later • Note [Acceleration clause] declare entire unpaid balance immediately due and

they can take it away [mortgage has acceleration clause]

Impossibility: Sec 272 and excuse condition if forfeiture and material part Restatement II sec. 271 “Impracticability (impossibility) excuses the non-occurrence of acondition if occurrence of the condition is not a material part of the exchange and forfeiturewould otherwise result.

Definition the fact or condition of not being able to occur, exist, or be done. In contract law, a fact excusing performance because:

• The subject or means of performance has deteriorated, has been destroyed, or is no longer availableOR

• The method of delivery or payment has failed OR• A law now prevents performance OR• Death or illness prevents performance

2 Elements:(1) Condition is impossible and unforeseeable(2) did not form an essential term of the K

Note Generally results with death of person (illness) or damage or destruction of object of the K. (cant perform K because the cow had died)

12



Note Impossibility can excuse duties and conditions. NOTE MAY HAVE TO TALK ABOUT IMPOSSIBILITY WHEN TALKING ABOUT FORFEITURE.

Employment: “ At Will” v. “Just Cause”

At will Most employees are at will employee and can be terminated at any time for any reason

or no reason at all (common law) employee works at own will as well so this rule applies toboth parties. Just cause only terminated by just cause (some justifiable reason) have to have employer K which guarantees job security. (ex. Teacher that have tenure or labor union member under collective bargaining agreement)

Even a life time K does not turn K into Just cause K. so permanent still means “at will”. Modern view employee can not be fired for wrong reason. No reason or any reason is ok. But smart employer will not give a reason. Employment is a contractual relationship.

*************ANTICIPATORY REPUDIATION******************

REPUDITATION IS EQUIVALENT TO A TOTAL BREACH

Anticipatory Repudiation (definition):

[Restatement II Sec. 250] When a Statement or an Act Is a Repudiation

A repudiation is:(a) a STATEMENT by the OBLIGOR to the OBLIGEE (can NOT be 3 rd party) indicating a

MATERIAL BREACH that would itself give the OBLIGEE a claim FOR DAMAGES FOR TOTAL BREACH, OR

(b) a VOLUNTARY AFFIRMATIVE act which renders the OBLIGEE or apparently (1 st wife can die& he may still marry you) unable to perform without such a MATERIAL BREACH .

• Note you can either announce/statement REPUDIATION or by action/ conduct showing REPUDIATION

• Note [NATURE OF STATEMENT] In order to constitute a repudiation, a party’s

LANGUAGE MUST be sufficiently positive to be REASONABLY INTERPERATED to mean that the party will NOT OR CANNOT PERFORM. Mere expression of DOUBT as to his willingnessor ability to perform is NOT ENOUGH to constitute repudiation, although such an expressionmay give an OBLIGEE REASONABLE grounds to believe that the OBLIGOR will commit a

serious BREACH and may ultimately result in a REPUDIATION under RES II sec. 251

• Note [NATURE OF ACT] In order to constitute a REPUDIATION, a party’s ACT MUST BE BOTH VOLUNTARY and AFFIRMATIVE (sure), and MUST make it actually or apparently IMPOSSIBLE for him to PERFORM. An ACT that FAILS short of these REQUIREMENTS may, however, give REASONABLE GROUNDS to believe that the OBLIGOR will commit a

serious BREACH for the purposes of the rule stated in sex. 251/

13



[Restatment II sec. 251] When a Failure to Give Assurance May Be Treated as a Repudiation

(1) where REASONABLE GROUNDS arise to believe that the OBLIGOR will commit a BREACH by NON-PERFORMANCE that would of itself give the OBLIGEE a claim for damages for total breach…the OBLIGEE may DEMAND ADEQUATE ASSURANCES OF DUE

PERFORMANCE AND may, if reasonable, suspend ANY PERFORMANCE for which he has not already received the agreed exchange UNTIL he RECEIVES ASSURANCE

(2) The OBLIGEE may treat as a REPUDIATION the OBLIGOR’S FAILURE to provide within a REASONABLE TIME such ASSURANCES of due performance as is adequate in thecircumstances of the particular case.

ANTICIPATORY REPUDIATION DIAGRAM

then

REPUDIATION (IF INTENTION &

ALL ELEMENTS MET)

14

1 st YOU NEED A BILATERAIL CONTRACT [ IF THERE IS A DUTY LEFT TO PERORM, YOU STILL HAVE A BI-LATERAL CONTRACT

[Note / Exception] anticipatory repudiation does not apply to unilateral K or bilateral K that have become unilateral K]

[OBLIGOR INDICATS TO OBLIGEE THAT HE MAY BREACH} (2 WAYS TO INDICATE)

[STATEMENT] OR [CONDUCT]

Statement [elements]• LANGUAGE must be sufficiently

positive to be REASONABLYINTERPERATED TO MEAN thatparty WILL NOT OR CANTPERFORM

• Mere EXPRESSION OF DOUBTTO WILLINGNESS OR ABILITY TO PERFORM IS NOTENOUGH

• STATEMENTS THAT SHOWINTENTION NOT TOPERFORM = REPUDIATION

• NOTE IF DOUBT

Conduct [elements]• The act MUST be BOTH

o Voluntary &o Affirmative

NOTE AFFIRMATIVE MEANSPRESENT TENSE NOT IN THEFUTURE• MUST make it ACTUALLY or

APPARENTLY IMPOSSIBLE• for him to PERFORM

• Note voluntary affirmative act DOES NOT have to comedirectly from obligor

• NOTE IF ALL ELEMENTSARE MEET = REPUDIATION

• NOTE IF ACT DOES NOTMEET THESE ELEMENTS,

NOTE ANTICIPARTORY REPUDIATION:A repudiating promisor may retract his repudiation, as long as notice of the retraction comes to thenon-repudiating promise before the latter materially changes his position in reliance on therepudiation or indicates to the promisor that he considers the repudiation to be final.

Even if failure for adequate occurs you better notify repudiator that you are cancelling thecontract



RES 251 IF YOU RECEIVE IF NOT RECEIVE ASSURANCES ASSURANCES IN

[REASONABLE TIME]

CONTINUE TO CAN REASONABLY SUSPEND PERFORMANCE PERFORM

What Kind of Damages can you get?

• Cover day damages from the day you covered

• Repudiation day if you decide to not cover and get $$ from date of repudiation

• Law day Date when person is to perform. Does don’t have to what until law day before he can sue. Wait

until law day and sue for entire loss (but UCC says you should cover) Ex: if two parties enter into a K for performance starting on June 1, the non-breaching partycan sue before June 1 if the breaching party terminates the K before then.

Answer P does not have to wait till law day because he can find another job now and mitigate his damages. The contract has been repudiated so P can sue at the time of repudiation.The actual breach has not occurred until the time of performance arises. That’s why we need an anticipatory repudiation because it’s in anticipation of the breach.

• Note You can get money damages by not mitigating and waiting for law day but you should not do that

• Note If the contract is UNIQUE you can ask for specific performance rather then $$

Damages

• Note Argument against repudiation = total breach is that there is not yet a breachtechnically. Until law day comes.

• Note REPUDIATION CAN NOT BE USED IF THERE IS A MINOR BREACH

[Hochster v. De La Tour]• 1st case where law suit can be based on words• Note Common law you could breach a promise to marry. (1/3 of states, this is still available).

15

THEN YOU CAN ASK FOR

ADEQUATE ASSURANCES [IF IN DOUBT}

NO YES ANTICIPATORY REPUDIATION!!!

Note Once in repudiation you don’t have to continue with your performance but youhave to show but for the repudiation you were ready and willing and able to tender

payment or do performance.

********NOTE*********RES. 252

INSOLVENCY IS NOT

ANTICIPATORYREPUDIATIONHOWEVER, FILINGBANKRUPTCY IS AVOLUNTARY ACTTHAT CAN BEANTICIPATORYREPUDIATION



• Note if breach has already occurred then breaching party can NOT seek adequate assurance ONLY non breaching party can.

Insolvency: [restatement II sec. 252]

• Definition Insolvency is having more liabilities than assets. Or you fail to meet your debts as they become due. A person is insolvent when she has ceased to pay their debts when they become due.

• Insolvency can be grounds for seeking assurances [CAN TRIGGER ASKING FOR ASSURANCES] Balance sheet approach: more liabilities than assets.Cash flow approach : fail to pay debts as they become due. You may have assets but they may not be liquid to use it to pay bills

Can Repudiation be retracted?

A Repudiation can be retracted UNLESS:1) Unless the other party has acted in reliance on your repudiation

2) If the party expressly cancels the K 3) Once the victim of the repudiation has filed suit

*******************ASSIGNMENT/ DELEGATION***************

Notes:

Rights are assigned [IS THE WORD ASSIGMENT BEING USED CORRECTLY?] Assignement can also be used to describe a total transfer or right and duties. (transferof K) ALWAYS SEE HOW THE WORD IS BEING USED= ENTIRE K OR JUST $$NOT DUTY. A DIFFERENT WORD TO DESCRIBE ALL RIGHTS AND DUTIES ISTRANSFER

Duties are delegated (DD)

Transfer: total transfer of rights AND duties

Assumption: promise to assume someone’s debt or duty. Transaction has to involve a DELEGATION and the Partyowned the DUTY 3 rd Party Beneficiary once DELEGATEE (express) PROMISES TO ASSUME THE DUTY

Novation: once there is an ASSUMPTION of duty BOTH DELEGATOR and DELEGATEE are LIABLE to 3 rd partybeneficiary UNLESS there was a NOVATION.

Assignment of rights ALONE can NOT become TPBTransfer can create a TPB.

16



Note If the third party was present at the creation of a K, then they are likely a TPB. If they comeafter the K has been formed, they’re an assignee or delegatee.

Note Duties can not be delegated if they are too personal or unique Note Anti-assignment clauses are unforeseeable. Anti-delegation clauses are enforceable. It’s adifference between assignment of rights like assents (money) where duty is more personal. The

parties can bar delegation even if it’s a routine duty.

g.WHAT CAN BE ASSIGNED / DELEGATED ?

In the absence of a provision in a K, RIGHTS and DUTIES under an executory bilateral K [if K has not been fully performed] you may assign and delegate EXCEPT the duties under K to provide PERSONAL SERVICE many NEVER be delegated ANDCan NOT assign rights under K where the Choice of person was an ingredient of the bargain.

CAN DELEGATE UNLESS: DUTIES ARE OF PERSONAL SERVICE & SERVICES THAT ARE UNIQUE

ASSIGNMENT WAS OF A RIGHT THAT PARTY ENTERED INTO AGREEMENT B/C OF SUCH SPECIFIC PERSON/ COMPANY [USUALLY BECAUSE OF REP] *REP may be unique

LIMITATIONS UNDER UCC

UNDER UCC SEC. 2-210 BUYER OR SELLER CAN ASSIGN FOR SERVICES [SEC. 317] EXCEPT:

The assignment would MATERIALLY CHANGE DUTY of the OTHER PARTY; OR

Increase MATERIALLY THE BURDEN or RISK imposed on him; OR

Impair MATERIALLY his CHANCE OF OBTAINING RETURN PROMISE

[Note even though K may state, by its language, that it can NOT be assigned / delegated, such provisions arenot valid and it could be assigned / delegated]

CAN ASSIGN UNLESS:

FORBIDDEN BY STATUTE OR PUBLIC POLICY

WAGES (CANT BE ASSIGNED)

DEFENSES [ASSIGNMENT/ DELEGATTION]

ASSIGNEE’S RIGHTS ARE DERIVATIVE [ARISES OUT OF K]

ASSIGNEE HAS SAME RIGHTS AS ASSIGNOR AGAINST OBLIGOR

17



NOTE until you get NOTICE you continue to pay party that you have been paying. After NOTICE, you have to send the payment to the correct party [assignee] or you may end up paying twice.

NOTE You’re always free to deduct damages on the first K from payments due on the second K. Instead of suingfor damages, you just deduct from the second K. If the difference is monetary damages that can be computed, thereis a right between the P and D to make the deductions rather than sue each other.

NOTE There are two types of deductions to be fair to each party. If there’s a problem with the K, the assignee takesdamages for that breach. For other claims, there’s a cutoff date using the setoff. The court wants to encourage giving notification so they use the date of notification as the cutoff date.

NOVATION - Restatement §280 A novation is a substituted K that includes as a party one who was neither the obligor nor the oblige of the original duty

1) SUBSTITUTION OF ANOTHER 2) DISCHARGE OF ONE PARTY3) BY AGREEMENT OF ALL THREE PARTIES

Note:• The substitution by mutual agreement of one debtor for another whereby the old debt is extinguished.

(substitution)

• A novation substitutes a new party and discharges one of the original parties to a contract byagreement of all three parties (discharge by agreement of all three parties)

IMPLIED NOVATION

IMPLIED NOVATION IS: DELEGATOR RENOUNCES HIS/HER LIABILITY [HE/SHE IS OUT OF PICTURE] AND 3 RD PARTY BENEFICIARTY WITHOUT PROTEST ACCEPTS PERFORMANCE OF DELEGEE.

ELEMENT:1. delegator renounces duty &2. obligeE accepts performance by delegate &3. (without) fails to protest

Note Easy way out of this is I accept the performance but under protest. Thus not all elements are met.

DIFFERENCE BETWEEN ASSINGMENT AND TPB IS THAT: TPBARE CONTEMPLATED AT TIME OF K WHEREAS ASSIGNMENTSARE DONE AFTER FORMATION OF K.

18



1 step

Is the 3 rd party a beneficiary or a assignee/delegate?3rd party present at creation of K Assignee/delegate wonder in after K fully formed

Problem 181 ASSIGNMENT

noticeassignment

rightto $$ to wonder spa

Note if obligor gets notification and pays assignor (the wrong person) instead of assignee he may be forced to pay twice. (he mayhave to pay Assignee & Assignor)

19

Night flyer/ EE

Wonder spa / OR Armstrong/ obligor



CAN SUE

RES. 318 RULE DUTIES CAN NOT BE DELEGATED IF THEY ARE TOO PERSONAL OR UNIQUE

RULE [DELEGATION] CAN HAVE A NO DELEGATION CLAUSE

Summary: Virgina contacted with Pizza to provide and service machines then assigned and delegated to MACKE.

Pizza fired MACKE because Virginia use to pay in cash. (CHALLENGING THE TRANSFER)So Macke sues PIZZA

COURT RULES FOR MACKE BECAUSE THEY ARE LIVING UP TO THE K. THERE WAS NOTHING IN THECONTRACT ABOUT PAYING CASH AND YOU CAN NOT ASK FOR MORE THAN WHAT IS IN THE CONTRACT

Hypo assume that Macke had refused to provide the drink machines and Pizza co. had sued Virginia for the Breach. (can delegation by Virginia be a defense?) NO

ANSWER:

RULE [UCC 2-210 (1)] can transfer your duties but CANNOT transfer liability ABSENCE OF NOVATION

Macke (breaches)

Pizza CAN NOT sue Macke [no assumption at this point]

Virginia PizzaSuing Virginia for Macke’s Breach.

RULE #2 : OBLIGEE CAN SUE DELEGATOR BECAUSE DELEGATOR IS STILL LIABLE [Absent novation]

RULE #3: IF NOVATION, OBLIGEE (PIZZA) CAN NOT SUE DELEGATOR (VIRGINA)

RULE #4: OBLIGOR (PIZZA) CAN NOT SUE ASSIGNOR (VIRGINIA) UNLESSTHERE IS AN ASSUMPTION

21



(shifts) Macke Macke (promisor) *****BECAME 3 RD PARTY BENEFICIARY***BECAUSE OF ASSUMPTION (DUTY & RIGHTS)

Assumption D R notification

Virginia D & R Pizza (becomes 3 rd party)(privity of K)

RULE #5: OBLIGEE/OBLIGOR (PIZZA) CAN SUE TRANSFORER (VIRGINIA), IFAN ASSUMPTION (3 RD PARTY BENEFICIARTY)

NOTE there is Privity between Virginia and Pizza.

Note Pizza company is not in privity with Macke so cant sue Mack UNLESS there was a ASSUMPTION (promise toassume someone else’s contractual duties)

NOTE If there was an assumption (“I Make promise you Virginia to fulfill your contractual duties to Pizza company”),then Pizza company becomes 3 rd party beneficiary.

NOTE Virginia should demand an assumption so if Macke screw up Pizza would sue Macke instead of Virginia, eventhough Macke ccould technically still sue Virginia in a 3 rd party beneficiary UNLESS there is an NOVATION. [withoutthe 3 rd party beneficiary relationship, Pizza would Not be able to sue Macke (no privity of K) they would ONLY be able tosue Virginia]

Assumption promise to do or perform somebody else’s duties

IMPLIED ASSUMPTION look below

NOVATION Look above

[ASSIGNMENT OF ENTIRE CONTRACT:Court says this is an “ASSIGNMENT” = transfer (rights & duties)

2 MEANINGS:1. Assignment can mean JUST RIGHTS2. Assignment can means assignment of rights and duties. TRANSFER

THINGS YOU CAN READ TO MEAN TRANSFER:“OF THE CONTRACT” ; “OF ENTIRE”

**assignment all by itself PURE ASSIGNMENT**

assignee

assignee can ONLY sue obligee.rights only

obligor can NOT sue Assignee or Assignor

22



assignor obligor

Note courts like assignments and protect the assignee. Note obligor can ask for authentication of the assignment

**delegation all by itself PURE DELEGAION**

delegatee

Can oblige sue delegate? NO, because no privity of K.duty only no privity of K

Obligee can ONLY sue delegator

delegator obligee

obligee can sue delegator because you can not get out of duty by delegating

Problem 185 [Gift Assignment]RES 332Travis (needs money) *assigns all money in bank account to Travis. But before bank gets notice, Len dies.

Len’s friend is witness to the assignment from Len to Travis

bank Len Brown(has extra money )

Gratuitous assignment which have no consideration .

[Rest. 332] Gratuitous assignment is revocable UNLESS you have a signed writing that is deliveredOR by delivery of a symbol. (ex. bank statement)

• Death terminates assignment• If you get hand on the money you can keep it• If novation you can not revoke gift assignment• If promissory estoppel can not revoke a gift assignment

[Rest. 324]

23



Assignment does not have to be in writing and can be oral UNLESS statute of Frauds does not allowit. (if real property no matter what, assignment has to be in written)

Problem 183Texas auto (big company)

Assigns rights to Texas to buy all mufflers he needed [RES 317]

Requirement contract to sell Gerald ALL the Mufflers he needGerald check J. East River(small company)

REQUIRMENT K Look Below

NOTE Texas auto is a lot bigger company than Gerald check company and J. East River may have a difficult timesupplying mufflers. [material change]

NOTE CAN MATERIAL CHANGES CHANGE THE DUTY OF THE OBLIGOR? YES, the obligation of east river ischanged so he can ask for ASSURANCES.

***Talk about assurances if the Obligee is uncertain about the assignment***OUTPUT, REQUIREMENT, AND EXCLUSIVE DEALINGSDoes UCC 2-306 provide any protection to J.East River? YES, provides protection.

(1) Needs to be in good faith and can not order unreasonably disproportionate amount. Texas auto can order to muchand has to act in good faith And if the party can uncertain J. East River ask for assurances.

(2)

Rules of General AssignmentRes. 328Can NOT assign if materially changes the K.[If would it material change burden, risk, ability take return performance]

Problem 186[Partial assignment]Res 326Same as restatement 328 (general assumption).

ASSIGNING WAGESRES 317 (2) (b) You can assign wages (like security). But legislature has placed limitation so you canassign ONLY a fraction of wages and in other states you may need to have your wife sign as well before youcan assign your wages.

Ex. purchase boat by assigning 3 years of wages. Your boss will not like this because workers that assign futurewages are worse workers. They are not getting paid any so why show up to work on the time

***IMPORTANT ANTI- ASSIGNMENT CLAUSES***

24



Offer, acceptance, consideration, breach unless there’s an anticipatory repudiation which creates an earlier datethan the breach.

Set off / Recoupment ExamplesProblem 191 EXAMPLES (of deductions)1) Joe Armstrong dropped dumbbell on his foot. The doctor bill arises from the K with the spa and therefore the deductionwould be a recoupment because there’s an express or implied term that the spa will do Armstrong no harm. He would beable to deduct.2) Owner of spa drove over Armstrong’s dog will driving around town. The spa would be liable as a setoff because the car and the dog are unrelated. If the dog was run over after he received the assignment then he can not deduct. Armstrongwould have to get an attorney and sue the spa instead of getting a deduction

Contract Modification (which the rights have been assigned)

After the assignment, may the 2 parties modify the K? based on UCC 9-405 MODIFICATION CAN BE MADE IFIN GOOD FAITH. [With UCC you can modify even after VESTING has occurred more broad than under therestatement where you can not modify K after vesting]

Rest 333 Warranties of Assignor(1a) assignor warrants to the assignee that he will do nothing to defeat or impair the value of the assignment. [Ipromise I will not fuck you shit up](2) assignor is not guaranteeing that the obligor is solvent or will perform obligation.[assignor not guaranteeing that the obligor will act right]

REST. 164Note [Rest. section 164] if you have a bilateral agreement and you are assigning, you are assigning rightsand delegating duties.

RULE CAN YOU IMPLY AN ASSUMPTION [IMPLIED ASSUMPTION]? YES, EXCEPT INNEWYORK.

3 STEP WALTZ [REST II. 328](RIGHTS & DUTIES)

• GENERAL ASSIGNMENT IS PRESUMED TO INCLUDE A DELEGATION• ACCEPTANCE OF ASSIGNMENT [ASSIGNMENT AND DELEGATON] IS PRESUMED TO CREATE

AN ASSUMPTION• AND ASSIMPTION IS TO CREATE 3 RD PARTY RIGHTS

(UCC 2-210 (5) MIRRORS REST. 328)

EX. ASKING FOR TIME CAN BE USED TO IMPLY AN ASSUMPTION

26



IMPLIED NOVATION

A

DELEGATE

B C

NOTE B IS NOT ALLOWED TO SAY I HAVE NO DUTY BUT IF SHE DOES:

BASIC FACT PATTERN: [implied novation] If A after delegated duties to B renounces any further obligation to C, If A unlawfully renouncesher duty and B accepts without protest, then an implied novation has occurred and A is off thehook.

• Elements for Implied Novation1) The delegator (B) renounces her duty AND2) The obligee (C) accepts performance by the delegatee (A) AND3) Fails to protest

*********Assignment And Delegation For Dummies*********Assignemnt

Assignee

Notice CAN NOT SUE (BECAUSE NO PRIVITY)

Can sueASSIGNEE CAN ONLY SUE OBLIGOR

Assignor ObligorCAN SUE IF ASSIGNOR FAILES TO PERFORM DUTY BUT NOT FOR RIGHTS

(BECAUSE ASSIGNOR GAVE UP ALL RIGHTS TO ASSIGNEE)

27



Delegation:THIS IS VERY RARE; USUALLY A DELGATION COMES WITH RIGHTS (TO GET $$)

Delegatee

NoticeCAN NOT SUE (BECAUSE NO PRIVITY)

OBLIGEE CAN ONLY SUE DELEGATOR

Delegator ObligorCAN SUE

Transfer: [ key: assignment= delegation= ]Transferor

Rights duties

Notice is given CAN NOT SUE FOR ASSIGNT OR DELEGATION

Transferee Obligor of rights/ Obligee of DutiesCAN SUE FOR DELEGATION

CAN NOT SUE FOR ASSIGNMENT

Transfer with assumption:

[ key: assignment= delegation=]

Transferor

Rights duties

assumption Notice is given CAN NOT SUE FOR ASSIGNT OR DELEGATION

28



Transferee Obligor of rights/ Obligee of DutiesCAN SUE FOR DELEGATION

CAN NOT SUE FOR ASSIGNMENT

Once you have ASSUMPTION creation of 3 rd PARTYRIGHTS

******************3 RD PARTY BENEFICIARIES *****************

Can have 3 rd party beneficiary [2 ways]

ASSUMPTION 2 TYPES:1. EXPRESSED ASSUMPTION (K STATES) EX. ASSUME MORTGAGE2. GENERAL ASSUMPTION TRANSFER (RIGHTS AND DUTIES)

29

PROMISOR

PROMISEE 3 RD PARTY

RES I 3 CATAGORIES OF RELATIONSHIP(1) CREDITIOR BENEFICIARY ABSOLVE DEBT.VESTING [relied](2) DONEES (GIFT) HAS TO BE RELATIONSHIPEx. Wife, Fiancé, or Child. VESTING [automatic]

NOTE CHECK WITHBOTH RESTATMENTS

RES II 2 CATAGORIES OF RELATIONSHIP(1) INTENTIONAL [CREDITOR AND DONEES]VESTING [reliance; file lawsuit; or assent to K]

Note A donee beneficiary isn’t as good

because you can’t sue the third party .

Delegatee & assignee CAN shifts to become promisor (transfer)

ALWAYS PLCT. PROTECT PL

ALWAYS DF

K RIGHT AT TIME OF K (3 RD PARTY IS INTENDEDBENEFICIARY). IT CAN BE WRITTEN OR ORAL

WHEN PROMISEE TRANSFERS RIGHTS TO PROMISOR AFTER K HAS ALREADY BEEN MADE [ASSUMPTION]

MAJORITY VIEW:Y CAN SUE X [DONEE ] FOR SPECIFIC PERFORMANCE(nominal damages)Note In the past Y could notsue X

[CREDITOR]Y CAN SUE (recover) FROM XB/C Y HAS PAID DEBT TO3RD PARTY SINCE X HASFAILED TO DO SO.

IF Y HAS NOT PAID 3 RD

PARTY; HE CAN SUE X FOR SPECIF PERFORMANCE TOMAKE HIM PAY.

DEFENSES:X HAS SAME DEFENSES AGAINST 3 RD PARTY AS HE HASAGAINST Y. (sued because of his own (X’s) conduct)

X MAY USE DEFENSES THAT Y HAS AGAINST 3 RD PARTY IF:For a DEBT CAN use Y’s defensesFor a Performance/ Duty CANNOT use Y’s defenses.

Note if claim ARISES out of ORIGINAL K X CAN USE Y’s defenses Note if claim ARISES out of a NEW contract between Y & 3 rd party

nd ’



SUE SUE

NOTE: SUE [CAN SUE BOTH UNLESS NOVATION (then only sue X)]

NOVATION [ELEMENTS: **SAD**

1. substitution2. discharge3. by agreement of all 3 people.

***3 RD PARTY CAN ONLY ENFORCE K AND SUE IF ASSUMPTION HAS OCCURED***

.

USE VESTING RULES ONLY IF CONTEACT IS SILENT Vesting rules are default rules. The vesting rules applies if the K is silent on vesting but if the K itself deals with vesting, then the K controls. Youhave to look at the K first before applying the vesting rules.

Example most insurance policies provide that rights never vest until you die. Under the first restatement, you could never change a beneficiary. The 2 nd Restatement changed that because if a man married a womanand then divorced her, he couldn’t get his second wife on his insurance policy because wife 1’s rights would bevested.

]• Note the reason the 2 nd restatement changed the categories is because some people were INTENDED

BENEFICARIES [donee and creditors] and did NOT fit into the creditor or donee categories but the 2 nd

restatement included everyone.• Always do 1 st restatement first (donee or creditor) and see if it works if NOT • Look to 2 nd restatement and see if it works

WAYS TO SEE IF THERE IS INTENDED BENEFICIARIES:• Are they named in the K (intended to infer benefit) THEN intended beneficiary• If performance is rendered directly to beneficiary THEN 3 rd party is the intended beneficiary• If beneficiary would be reasonable in relying upon the K, then she/ he is intended

beneficiary

Related Case [Seaver v Ransom]

30

Y

X

3RD PARTY BENE

3rd CAN SUE X [CREDITOR REL]3RD CAN SUE X [DONEE REL]

3RD PARTY CAN SUE Y [CREDITOR]3RD PARTY CAN NOT SUE Y [DONEE] GIFT. HOWEVER, IF Y TELLS 3 RD OFK AND 3 RD RELIES ON IT. 3 RD CAN SUE Y UNDER [PROMISORY ESTOPPEL]

TYPES OF RELATIONSHIP BETWEENY & 3RD PARTY: intended 3 rd party• Debt• Wife , fiancé, or child• Public contract cases• Promise runs directly to the beneficiary

even though not establish consideration



• cases where there is a pecuniary obligation (debt) running from the promisee to the beneficiary , a legal right founded upon some obligation of the promisee in the third party to adopt and claim the promise as made for hisbenefit

• K is made for the benefit of the wife, affianced wife, or child of a party to a K • Public contract cases where the municipality seeks to protect its inhabitants by covenants for their benefit • The promise runs directly to the beneficiary although he does not furnish the consideration

First Restatement §133 –Creditor, Donees, Incidental (Know for exam)• Creditor : if no purpose to make a gift appears from the terms of the promise in view of the accompanying

circumstances and performance of the promise will satisfy an actual or supposed or asserted duty of the promiseeto the beneficiary…

• Donees : intent to confer a gift or right of action• Incidental : Lose case

Second Restatement §302 – Intended and Incidental Beneficiaries (Know for exam)Intended: unless otherwise agreed

• Somebody the parties intended to benefit.• If the performance is to be rendered to them• If the beneficiary would reasonably rely upon the K

Defenses: [3 rd party beneficiary]]RIGHTS OF PARTIES]

• Are derivative of the K (rights come from the K so if there is a defect in K, her rights are no better than thedefect. Defect still exists.

• Rest. 309 (1) K o Defenses AT TIME K was formed (formation Defense)

POSSIBLE DEFENSES: Lack of mutual consent Lack of consideration

31



Misunderstanding Mistake DuressUndue influence

Illegality Incapacityunconscionability

o subsection (2) Defenses AFTER K was formed (post formation defenses) POSSIBLE DEFENSES:impossibility

frustration of purposenonoccurrence of a condition precedent occurrence of a condition subsequent material breach

Anticipatory repudiation Mutual recession (until vesting occurs until they die) once rights have vest the partiesloose capacity to mutually resend an agreement

o So think was there problems at time k was made or after (LOOK AT HIS LIST)

APPLIGATION TO MORTGAGES: (application of 3 rd party beneficiary law to mortgages.)

Purchaser often takes out new mortgage. But maybe purchaser may want to take over existing mortgage

• ASSUME MORTGAGE Purchaser Promise to assume the mortgage take over existing mortgage BUT homeowner is still liable

NOTE THIS AN EXAMPLE OF EXPRESSED ASSUMPTION – THIS IS ONE OF THE 2 WAYS AN ASSIGNMENT / DELEGATION BECOMES A 3 RD PARTY

BENEFICIARY. THE 2 ND WAY IS IF YOU HAVE A GERNERAL ASSUMPTION WHICH BOTH RIGHTS AND DUTIES ARE TRANSFERRED.

• Purchase “subject to” mortgage A mortgage “subject to” means that the homeowner assumes thedebt and the purchaser DOES NOT ASSUME any DEBT OR LIABILITY.

o V realizes that property has mortgage on it but V does not want to promise (NO PROMISE TO ASSUME). She is still going to make bank payment to the bank, and eventually she will own it (motive to make payments)

********************STEPS FOR TEST***********************

FIRST STEP IDENTIFY PARTIES

32



Father(Promisor)

Son (Promisee) MGM Motors (3 rd Party – Incidental)

MGM Motors is NOT Intended Beneficiary

ISSUE: WHAT IS THE PURPOSE IF THIS CONTRACT? [incidental or intended]

RULE INCIDENTAL BENECIARIES CAN NOT SUE PROMISOR

PROBLEM 167

PROMISOR IS ALWAYS THE DFMGM

PROMISE FATHERCAN SUE PAY $$ DELIVER CAR

FATHER SON [3 RD PARTY IS ALWAYS GOIING TO BE THE PLAINTIFF]

FATHER PAYS $20 K FOR A CAR TO, MGM PROMISES TO DELIVER CAR TO SON BUT FAILS TO DO

NOTE : ALLOW SON TO SUE WOULD SERVE THE PURPOSE OF THE CONTRACT

NOTE FATHER CAN SUE BECAUSE HE GACE MGM CONSIDERATIN (20k)

RULE: PROMISOR IS ALWAYS DF BEING SUED BY 3 RD PARTY (PL)

RULE INTENDED 3 RD PARTY CAN SUE PROMISOR

RULE PROMISEE CAN SUE PROMISOR

Lawrence v FoxHolly loaned Fox $300 and Fox said he would pay a debt that Holly owed to Lawrence. (Third person is Lawrence)

Fox (D – Promisor)

PRIVITY SUES [PIVITY OF K IN NOT NEEDED]OF K

Holly(Promisee) Lawrence (P – CREDITOR BENEFICIARY)

CREDITOR RELATIONSHIP

FOX DOES NOT PAY. LAWERENCE SUES FOX FOR THE MONEY

CAN A PARTY ENFORCE A CONTRACT WHEN HE OR SHE IS NOT IN PRIVITY

RULE DO NOT NEED PRIVITY BEWTEEN 3 RD PARTY AND PROMISOR FOR 3 RD PARTY TO BE ABLETO SUE PROMISOR

KNOW (ISSUES)1. WHAT THE PROMISE IS 2. WHO PROMISE IS GOING TO BE PERFORMED FOR3. AND WHAT THE RELATIONSHIP BETWEEN PROMISEE AND 3 RD PARTY

PROBLEM 168

RES II 280 [NOVATION]

34



ELEMENTS [SAD]Substitute k Agreement by all partiesDischarge of one of the parties in original K

F can sue if novaton

H L RULE CREDITOR RELATIONSHIP: L CAN SUE F OR H (HAS A CHOICE)CAN SUE BOTH OF THEM BUT CAN NOT COLLECT TWICE

RULE L CAN ONLY SUE F IF THERE IS A NOVATION. Note if L sues H; H can sue F.

NOTE really it is L who has to agree last. Because I am sure H and K will agree to the novation.**there is no good REASON for L to agree with a NOVATION**

PROBLEM 169

GEORGE

MARTHA FINANCE CO

CREDITOR RELATIONSHIP FINANCE CO. CAN NOT FIND GEORGE

CAN FINANCE COMPANY SUE MARTHA? YES

NOVATION:FINANCE CO IS NOT GOING TO GIVE NOVATION OUT OF GOODNESS OF THEIR HEART.HOWEVER, IF MARTHA IMMEDIATELY AFTER DIVORCE AND MARTHA OFFERED SUM TO FINANCECOMPANY, THEY MAY GIVE HER A NOVATION.

PROBLEM 170

PODIUM (MAKES PROMISE TO CHUCK) types of relationships under restatement 1.RES 1 CREDITOR RELATIONSHIP

(DEBT OR DUTY)

DONEE RELATIONSHIP(GIFT)

CHUCK LAW SCHOOL INCIDENTAL(TO GIVE SPEACK

CREDITOR RELATION (PERFORM A SPEECH) DUTY TO PERFORM..

CAN LAW SCHOOL SUE CHUCK NO NOVATION?

ANSWER CAN SUE PODIUM AND PODIUM

RULE YOU CAN AGREE TO A SUBSTITUTION WITHOUT AGREEING WITH A NOVATION.

Seaver v Ransom

35



First Restatement §133 –Creditor, Donees, Incidental (Know for exam)Creditor : if no purpose to make a gift appears from the terms of the promise in view of the accompanying circumstancesand performance of the promise will satisfy an actual or supposed or asserted duty of the promisee to the beneficiary…Donees : intent to confer a gift or right of actionIncidental : Lose case (NO DUTY, DEBT, OR GIFT)

LOOK AT THIS FIRST IF NOT WORK LOOK AT RES. 2. IF WORKS UNDER 1 ST REST. THEN NOT BEAT AHORSE

Second Restatement §302 – Intended and Incidental Beneficiaries (Know for exam)Intended: unless otherwise agreed

• Somebody the parties intended to benefit.• If the performance is to be rendered directly to them• If the beneficiary would reasonable in relying upon the K

2ND RESTATEMENT 302INTENDED (GUILDLINES TO DETERMINE IF INTENDED BENEFICIARY)

• Somebody the parties intended to benefit.• If the performance is to be rendered directly to them• If the beneficiary would reasonable in relying upon the K

INCIDENTAL BENEFICIARIES

To practice mapping out 3 rd party beneficiary DO PROBLEM 173.Note share holder can sue corporation. The share holders are the 3 rd party beneficiaryNote beneficiary of estate plans can sue lawyers (majority).

MOCKE RULE the benefit to the public is incidental and the government is immuned.

DEFENSE

“know list” LOOK PREVIOUS PAGES

Restatement 309Rule 3rd party beneficiary rights are derivative out of which they flow. K between wife and judge designed to benefitniece. Her rights derive from the K. Her right are no better than the K rights. For example the K can have a defect. RULE THE 3 RD PARTY HAS THE SAME RIGHTS AS THE PROMISEE

MUTUAL RECESSION DEFENSE on list JUDGE AND WIFE STILL ALIVE THEY AVE A RIGHT TO MUTUALLY RECEND THE K.

(WIFE OFFERING RECISSION TO JUDFE AND THE JUDFE ACCEPTS. BOTH GAVE UP THEIRTIGHTS WHICH IS CONSIDERATION, SO THE NIECE IS OUT OF LUCK) UNLESS THE NIECE’S

RIGHTS HAD ALREADY VESTED.

37



VESTING YOU TALK ABOUT VESTING IF THERE IS MODIFICATION OF K OR RECESSION OF K.

• Vesting is NOT PREREQUISET TO FILE A LAW SUIT• VESTING ONLY applies where promissee or promisor attempt to resend or change the K (ONLY HERE

TALK ABOUT IT). Aka FREEZING once vesting occurs the writes of 3 rd party is frozen.• UNTIL vesting occurs there can be a change or resend of K.

NOTE ANY ATTEMPT TO CHANGE K TO DETRIMENT OF 3 RD PARTY AFTER VESTING HAS OCCURRED ISTREATED LIKE A MATERIAL BREACH.

NOTE THE BENEFICIARIES RIGHTS ARE VESTING

Note basically figuring out when someone actually becomes a 3 rd party beneficiary. AFTER vesting there wouldbe a breach

REST 1 DONEE AUTOMATICCREDITOR REQUIRES RELIANCE

REST 2 INTENDED

1. RELIANCE, OR 2. BRING A LAW SUIT TO ENFORCE 3 RD PARTY RIGHTS, OR 3. TO EXPRESSED ASSENT TO THE K “YOU GUYS MADE CONTRACT TO MY BENEFIT AND I

AGREE TO ACCEPT”**FOLLOW THE ABOVE VESTING RULES IF THE CONTRACT IS SILENT ABOUT VESTING. IFCONTRACT EXPRESSLY STATES VESTING THEN DO NOT USE THE ABOVE RULES**EX. most insurance policies say rights never vest because you may want to change beneficiary from wife 1to wife 2.

RULE A 3 RD PARTY BENEFICIARY CONTRACT MAY EXIST EVEN IF BENEFICIARY IS NOT NAMED, NOT

IDENTIFYABLE, OR NOT YET IN EXISTANCE, SO LONG AS THE BENEFICIARY IS IDENTIFYABLE OR IN EXTENSE WHEN THE TIME FOR PERFORMANCE ARRIVES.

38



FOR TEST [assignment / 3 rd party]On the exam, talk about transfer because it’s going to be both assignment and delegation.

“I assign” or “I transfer” the K…triggers transfer

Assignment: only talking about rightsDelegation: only talking about duty

When prof talks about rights and duties, then discuss transfer. When you say assign the K, that means you aretalking about transfer, which means you have to break it down to both assignment and delegation

Right of Payment never materially changes the assignment or the K If the assignment is okay but the delegation isn’t proper, then there’s no transfer

On the exam, first talk about services or goodsFor services, use the Restatement which delegates assignment (317) delegation (318)For goods, use UCC’s version of assignment and delegation

Write the first issue for assignment then do the second analysis for delegation then talk about transfer.

3rd party beneficiary right v assignment and delegation3rd party beneficiary rights are created at the time of the K Assignment and delegation rights are created the K is made

Use assignor/assignee language

Look for anti-assignment clauses. Under the CL, they are enforceable. Under the UCC, there are not enforceable

You can have partial assignments.Assigning 50% of something to person X.

Modification of assignment 9-405Modification requires

1) made in good faith2) with reasonable commercial standards

Delegation of duty: Restatement 318Implied delegation:(1)there must be a repudiation(2) obligee must be silence as to the repudiation(3) fails to protest the new party’s performance

Recoupment v Set-off Ex: an undergrad went to chase bank and got loan #1 for undergrad loans. Loan #2 is from Fanny Mae for lawschool loans. If Fanny Mae goes out of business, they assign the rights of payment to Chase Bank. In undergrad,Chase charged a higher interest rate than stated. If you have a claim against Chase Bank and when Fanny Maeassigned the rights of payment to Chase, your defense is that Chase charged too high an interest rate. This defense is

called Set-off. It is separate from the K that is being assigned. You are trying to off set an amount of money.

If both lenders are Fanny Mae. In your under grad, you take out a large loan. In law school you don’t need a lot of money and you get a small loan but its on the same K. Fanny Mae now says we’re going to default on the secondloan and your defense would be Recoupment. If its related to the same K, the defense of recoupment can be setforth.

Set-off: In order to assert the defense of set-off, you must assert the defense before notification of suit against you.- You have to use the defense before Chase sues you for not paying the loan

39



*****************PORAL EVIDENCE RULE******************** DEFINITION: Generally assumed to include evidence of ORAL OR WRITTEN agreements or Negotiations that are PRIOR to OR CONTEMPORANEOUS (around same time as K signing) WITH a writing INTENDED to be theCOMPLETE OR PARTIAL INTEGRATION of the parties’ final judgment

Integration means final agreement [DOES NOT MEAN COMPLETE]

**PORAL EVIDENCE CANNOT BE USED TO PROVE TERMS ADDITIONAL TO OR INCONSISTENT WITH AN INTEGRATED CONTRACT**

NOTE PORAL EVIDENCE RULE DOES NOT APPLY TO SUBSEQUENT MODIFICATION.

WHEN DO YOU TALK ABOUT PORAL EVIDENCE RULE:The way to spot a parole evidence rule (PER) question is when you have prior oral negotiations and then a written contract that does not contain all that the parties talked about. Another way of

spotting a PER issue is a contemporaneous agreement with the signing of the contract. Such as if the parties are signing the contract and they are like lets add this in there but never right it down.

Look for prior agreements that are not contained in the contract.

How to use the Parol Evidence Rule1. You want to introduce the evidence2. The opposite side is going to try to exclude it under the parol evidence rule3. Then you say yes, but there’s XYZ exception to the parol evidence rule

EXCEPTIONS TO PORAL EVIDENCE RULE [9 TYPES]

(1) TO PROVE AN AGREEMENT SUPPORTED BY SEPARATE CONSIDERATION. [ICE HOUSE CASE]

Note If the oral promise had separate consideration it would be a separate K to begin with. Thus, now there is 2 separate Ks with their own consideration. Poral evidence DOES NOT APPLY. [Example: I will give you $100 extra to remove ice house.]

(2) TO PROVE A COLLATERAL AGREEMENT [ICE HOUSE CASE] [LIST 3 ELEMENTS]

Definition [COLLATERAL] distinct, separate, independent

3 ELEMENTS [EXCEPTIONS] WHERE ORAL AGREEMENT WOULD CHANGE WRITTEN K:

(1) THE TWO KS ARE DIFFERENT the agreement must in form a collateral one. Be acollateral (independent of collateral agreement). THE 2 ND K IS A COLLATERALAGREEMENT. &

(2) It must not contradict express or implied provision of the writing. CANNOTCONTRADICT THE ORIGINAL AGREEMENT (inconsistent v. additional term). &

(3) It must be one that parties would not ordinarily be expected to embody in the writing. IFWE BELIEVE THIS PROMISE WAS MADE WOULD IT BE A PROMISE THAT THEPARTIES WOULD AGREE TO IN THE ORIGINAL K OR NOT. (why is it not in here). If you can explain why it is not in the original K then it would satisfy 3 rd element)

40



Note [you need all there elements for the exception]

(3) TO PROVE TERMS ADDITIONAL TO (BUT NOT INCONSISTANT WITH) A PARTIAL INTEGRATION [LAURIA BROS CASE] [WILLISTON AND

CORBIN VIEWS] Partial Integration Rule:

IF CONTRACT IS NOT COMPLETED (COMPETE INTEGRATION), YOU CAN ADD EXTRINSIC EVIDENCE THAT IS OUTSIDE OF K BUT IT

NEEDS TO NOT CONDRIDICT THE EXISTING CONTRACT

CLUES TO LOOK FOR:• IF MERGER CLAUSE CAN NOT INTEGRATE •

ABSENCE OF MERGER CLAUSE (SOPHISCATED PARTIES), CAN NOT INTEGRATE • IF CONTACT IS COMPLETE YOU CAN NOT INTEGRATE

EXTRINSIC EVIDENCE EVEIDENCE OUTSIDE OF PARTIES AGREEMENT.

***NOTE LOOK TO SEE IF JURISDICTION FOLLOW WILLISTON ORCORBIN***

Williston v. Corbin THEORIES [These 2 views are ways judges evaluate whether the 2 nd contracts should be admissible for the jury to hear.]

“To determine either partial or complete integration”

NOTE 2 meanings of the word “inconsistent [narrow & broad]

Williston [conservative view] “Narrow view” Only Look at the Contract “4 Corners Test”

Note Broad View: the absence of reasonable harmony in terms of the language and respectiveobligations of the parties (reasonable harmony

Corbin [liberal view] “Broad view” Look at INTENT at time of K &at time of negotiations [look at surrounding circumstances]

Note Narrow View: to be inconsistent the term must contradict or negate a term of the writing (direct contact))

Note lets more evidence

§216 Consistent Additional Terms

41



(1) evidence of a consistent additional term is admissible to supplement an integrated agreement unless the court finds that the agreement was completely integrated (2) an agreement is not completely integrated if the writing omits a consistent additional termwhich is

a. agreed to for separate consideration or b. such a term as in the circumstances might naturally be omitted from the writing

Merger Clause: integration clause- Merger between the oral agreement and the written K - If integration is determined by intent of the parties, a statement by the parties of their intent in thewriting should go a long way toward establishing that intent and avoiding arguments about alleged collateral matters.

- Merges all of the negotiations that survived the process

If we have a Merger Clause, we DONT need Williston or Corbin b/c the K is a complete integration. If you sign any pre-printed K and there isn’t a merger clause, that suggests that the parties do not intend the K to be a complete integration.

The difference between the collateral agreement and partial integration is whether there is a merger clause. Thecollateral agreement clause applies to a completely integrated writing so the presence of a merger clause would not

foreclose application of the collateral agreement.

(4) TO ADD UCC “CONSTRUCTION TERMS”

IF THERE ARE CONSTRUCTION TERMS MISSING COURTS MAY ALLOW ADDING THE TERMS:

• The UCC requires the courts to look to the following matters as aids for construction of the contract

Usage of trade custom within any given industry

Course of Dealing Parties conduct in past contracts withone another Course of performance what the parties do while

performing this one contract

Hierarchy of terms [more weight given to top of the list] Express termCourse of PerformanceCourse of Dealing Usage of Dealing

Note more weight is given if specific terms are given rather than general terms

Note Separate negotiated or added terms are given more weight than standard (boiler plate) terms

Hierarchy of terms/ Order of Control: HandwrittenTyped

Preprinted

42



(5) TO PROVE A SUBSEQUENT MODIFICATION

[Parol evidence is does NOT apply because you are free to modify]

Subsequent modification: parties are allows free to modify the K. If they have modified it, the parol evidence rule is not implicated.

Parties often put into the K a NOM (No Oral Modification) clause. The parties agree not to modify theagreement except in a signed writing. The parties are trying to block the subsequent modification by

saying there’s NOM allowed.- The problem with NOM clauses is the courts won’t enforce them.- If the parties are free to modify their K, they are free to expressly or impliedly modifythe NOM clause.- The courts say if the parties enter into a subsequent oral modification, they impliedlyrevoke the NOM clause- NOM clauses are ineffective at common law. - Poral evidence bars only evidence of transactions that occurred prior to or contemporaneously with the wrighting

(6) TO PROVE A CONDITION PRECEDENT TO FORMATION [PYM V.CAMBELL]

[Condition precedent must be the formation of the K itself]

Related case: [Pym v. Cambell] • K was signed for convenience but no obligation UNTIL 2 nd Engineer

approved the invention• Parol evidence may be admitted to show that the parties to a written

agreement also orally agreed that no performance would be due UNTIL acertain condition was satisfied

Note if condition is just for a DUTY, you CANNOT use this exception.

43



(7) TO PROVE GOUNDS FOR AVOIDANCE:[How to avoid or resend the K] Misunderstanding / mistake in formation vs. Conscious ignorance/ mistake in expression

Rest. §213 Effect of integrated agreement on prior agreements (Parol Evidence Rule)(1) a binding (partially) integrated agreement discharges prior agreements to theextent that it is inconsistent with them(2) a binding completely integrated agreement discharges prior agreements to theextent that they are within its scope

Note: A mistake is an unintentional act or omission arising from ignorance, surprise, or misplaced

confidence. The mistake must be material, or in other words, so substantial and fundamental as todefeat the object of the parties. A unilateral mistake is not normally grounds for relief for themistaken party, whereas a mutual mistake is a mutual mistake occurs when both parties, at the timeof contracting, share a misconception about a basic assumption or vital fact upon which they based their bargain.

MISUNDERSTANDING: No consensus ad idem : Meeting of the minds, no consensus about the thingThere is no consensus ad idem and therefore no binding K. D wins. [THE MINDSOF BOTH PARTIES DO NOT MEET THUS NO CONTRACT]

Void: No K Voidable: the parties have to go to court

Rest. §20 Effect of Misunderstanding (1) there is no manifestation of mutual assent to an exchange if the parties attach materially different meanings to their manifestations and

a. neither party knows or hasreason to know the meaning attached by the other

MISTAKEN INFORMATION:When making K; belief is NOT in accordance with existing fact (belief that isnot correct based on facts. [cow case]

There never is a K because there is NO ASSENT

44



MUTUAL MISTAKE: [if mutual mistake you can make recession (void) of contract] [BOTH PARTIES THINK THEY ARE CORRECT IN THE SAME BELIEF ABOUT SOMETHING]

ELEMENTS: (mutual mistake)1. MISTAKE: ( Rest. II a belief not in accordance with existing facts)NOT ignorance.

Mistake is a state of mind. I thought about it and this is what I believe. A State of present fact Fact not a mistake of law

2. MUTUAL: (shared or common belief)3. SUBSTANTIAL MISTAKE: (material goes to the substance of the K) Mistake has to be “Basic” to the transaction:

“root of the matter” • Not enough that themistake is material, it must go to the substance of the K • Material mistake is not enough• Identity OR quality of the subject matter (thing they are buying)

Note value is not a fact; it is in the eye of the beholder (opinion)

Note “Basic” difference between a cow and an Ox .

NoteMistake is a state of mind, in the present senseMutual mistake is a shared or common belief To have relief in the law, your belief has to be mutual and not inaccordance with the law. You will lose a case if you enter into a K not knowing the law.

UNILATERAL MISTAKE: [AT TIME OF K] No Relief for Unilateral Mistake; Except if X makes a mistake and Y knows of themistake and buys anyways.

Example miscalculate the bid “mistaken bidder”

4 ELEMENTS:1) The mistake is of such consequence that enforcement would beunconscionable2) The mistake must relate to the substance of the consideration [did mistakecause him to rely on you]

45



3) The mistake must have occurred regardless of the exercise of reasonablecare

Example: Clerical mistakes are human error which can occur despitereasonable care. This court lets Barber retract their bid because it wasbased on clerical error.

4) It must be possible to place the other party in status quo

Note Prompt notification must occur before the other party relied on it or the other bids have expired.

CONSCIOUS IGNORANCE: [NO RELIEF]

The rule for conscious ignorance is the assumption of risk. Both parties assume therisk that the compartment could be empty or full. If the estate was unwilling to runthat risk, they should have opened the secret compartment before they sold it.

“I DON’T KNOW! & I KNOW I DON’T KNOW”

“BUYER BEWARE” “SELLER BEWARE”

NOTE PARTY WHO IS IGNORANT ASSUMES THE ERROR

Definition [ignorant] absent belief.

NOTE if BOTH PARTIES are IGNORANTE, then there is NO MISTAKE

NOTE LOOK AT THE FACTS AT THE TIME OF SALE

MISTAKE IN EXPRESSION:

When there has been a mistake in expression, the parties have reached an agreement butwrote it down wrong, so they are asking the Ct to reform the K - rewrite the K to conform thewriting to the parties actual agreement. For example - buyer and seller agree to buy/sell 100 acres for $100,000 . The K mistakenlysays $1,000 . By chance neither party caught the mistake in the writing, so they are asking thecourt to reform their mistake in expression .

46



STATE OF MIND CHART CONTRACT RESULT

Misunderstanding No K

Mistake in formation Rescission

Mutual mistake No Relief

Unilateral mistake

Generally

If other party (1) knew of or (2) caused themistake, or (3) facts fit “mistaken bidder”

profile

No Relief

Rescission

Mistake in Expression Reformation

Conscious Ignorance No Relief

RELIEF FOR TYPES OF MISTAKES: RECESSION V. REFORMATION

Note Reformation: is used when rescission would be overkill.

47



(8) TO PROVE GROUNDS FOR REFORMATION

Reformation: if the parties reached an agreement and wrote it down wrong the court canreform the K to conform the writing to the party’s actual agreement.

Ex: the parties agree on a quantity of 100 and the K says 10 and both parties sign the K, the 100 is the parol evidence which contradicts the writing.

If you believe in the parol evidence rule, there’s no reformation. On the other hand, if youbelieve in reformation, you have to make an exception to the parol evidence rule. The courts

prefer reformation.

Note Reformation: is used when rescission would be overkill

BURDEN IS HIGHER THAN RECESSION: [court is protecting itself from fraud] The burden of proving a reformation suit, which is on the party seeking reformation ishigher than that in an ordinary civil lawsuit. A written agreement is presumed to express theintention of the parties and will not be reformed unless the evidence of mutual mistake or other ground for reformation is strong, clear, and convincing.

Reformation is available but its availability is protected by a higher burden of proof.

BURDEN IS CLEAR AND CONVENCING EVIDENCE

(9) TO RESOLVE (OR CREATE) AN AMBIGUITY [WILLISTON ANDCORBIN]

Extrinsic means outside of agreement Want to know if contract is ambiguous then can introduce poral evidence to identify.2 views :

• Williston look at contract itself. And K would be complete and ambiguousexception NOT apply.

• Corbin provision admission approach let evidence in to determine if there isambiguity.

Note Finding integration clause DOES NOT prevent ABIGUITY EXCEPTION Note Use Parol Evidence ONLY when writing is INCOMPLETE OR AMBIGUOUS

*add more from Sharon’s notes week 9

48



CONTINUED (7) EXCEPTION TO PAROL EVIDENCE.TO PROVE GOUNDS FOR AVOIDANCE:

What are the benefits to permit a bidder to reform?

The law doesn’t want to favor a mistaken bidder with any remedy besides rescission. It’sunfair to the other bidders who didn’t make a mistake. To allow one mistaken bidder toreform would allow others to change their bid. The rule is get your bid in on time and be

prepared to back it up. Rescission means take your bid and go home.

Fraud (4 types) aka deceit aka false pretences. Fraud is also is a tort. “get out of your K fraud”

(1) Intentional misrepresentation :

Elements of Misrepresentation of Fact(1) A representation of fact(2) Misrepresentation, not merely of opinion or prediction, or expectation, or puffery

If you go to an expert, their opinions are treated as fact. A statement of a party having superior knowledge may be regarded as a statement of fact although it would be considered as opinion if the parties were dealing on equal terms

Example [Vokes case] the dance instructor was considered to be an expert and should have told the lady to stop taking dance lessons because there is no way she was good enough. But he lied to her to get more money $$ from her.

(2) Innocent misrepresentation:

Cousineau v Walker Gravel and highway frontage case. There wasn’t as much gravel as stated in the listing and there wasn’t as much highway frontage. P wants rescission and restitution

49



DAMAGES FOR MISREPRESENTATION:3 questions to determine whether PL is entitled to rescission and restitution of the amount paidfor the property on the basis of the misrepresentations.

1. Whether P relied on the statements2. whether the statements were material to the transaction3. if P relied on the statements and they were material, it must be determined whether hisreliance was justified

A material fact is one to which a reasonable person might be expected to attach importance in

making his choice of action .- Material is something that matters- Something that isn’t a deal breaker but something that a reasonable person wouldattach importance to in deciding whether to buy or not

Elements of Fraud/misrepresentation1) You need a misrepresentation of fact or concealment of fact2) It must be either material or intentional

a. If it’s intentional lie then it doesn’t have to be materialb. If you aren’t lying but passing misinformation then it better be material

3) Was there reliance?4) Was it justified?

Note What is the duty of a buyer to check representations of a seller?The buyer may rely on what the seller says. The buyer doesn’t have to double check unless

your reliance is irrational or preposterous .

Note If its not in the K but its in the listing agreement, that’s parol evidence. The listing was parol evidence because P can show that the gravel and highway frontage were supposed to be in the K.

Note You can always use parol evidence to show mutual mistake, fraud, avoidance,

reformation…

P won’t get all his money back because he damaged the property and got money for the gravelthat was on the land. If P wants to get rescission, he must give D back exactly what he got. SinceP stripped the land, he has to put D back in the same place as he was in, restitution.

50



Know how to calculate restitution and damages

Deductions on the K ($99,000 – value of gravel – repair of value – rental value)

1) missing gravela. restitution

2) damage to a buildinga. either P has to fix the building or eat the cost of fixing the building

3) rental valuea. you have to pay rent to occupy land so if P gets to occupy the land free, he is beingunjustly enriched. The law measures the temporary value of property by its rentalvalue.

Market value measures the permanent takingRental value measures the temporary taking

(3) Concealment:Concealment of fraud if done with intent to deceiveWhen is mere non-disclosure silent fraud?

RULE One party has made assertion and later finds out it is false, you haveduty to go back and fix your mistake

Note Concealment can be fraud; affirmative concealment = misrepresentation of fact.** Silence can count as a misrepresentation**

(4) Silent fraud: [RES 161]

Silent fraud failure to correct the statement which you believe was true when you made it butfound out it was wrong. You have a duty to correct the misstatement.

Ex: Elvis stamp: when the stamp came out, prof said it was 4 cents but it was actually 29cents. Prof corrects his misstatement.

Nondisclosure is silent fraud when1) nondisclosure is actionable if there’s a relationship in trust and confidencebetween the parties2) one party has made an assertion and later learns it is false3) Party A knows that Party B is laboring under a misconception that party A hasnot caused. (unilateral mistake + knowledge = relief)

51



4) disclosure is most called for when silence will allow a dangerous condition to goundiscovered

- Bomb in the backyard. The home owner has a duty to reveal to a buyer that there’s a bomb in the backyard.- If the buyer wants all the toilets in the house to flush, the buyer can go around the house and flush the toilets. You don’t have a duty to state that all the toilets

flush. ex: When you are asked you have to tell the truth. Your answer is anaffirmative representation. If you answer the wrong answer, then that’s

fraud

Duress Duress exists where:

1) one party involuntarily accepted the terms of another 2) circumstances permitted no other alternative AND3) such circumstances were the result of coercive acts of the other party

the assertion of duress must be proven by evidence that the duress resulted from D’s wrongful and oppressive conduct and not by the P’s necessity

Note Economic Duress uses a Reasonable Person standard to determine if Freewill wasovercome.

Elements of Duress:1) Wrongful act or threat

- Wrongful means criminal, tortious, immoral2) Leaving the other party no reasonable alternative

- Reasonable alternatives such as filing a lawsuit are not applicable in this case bc Pneeds cash now

- Bankruptcy is not a reasonable alternative

Tender Back requirementIf you want to rescind the release, you have to return the quid pro quo as a pre-requisite.Once you return the quid pro quo, you take your chances with winning the lawsuit.

Note You can’t get into court on a wrongful discharge suit unless you can tender back the consideration you received

Undue Influence

Confidential relationship:

Position of trust and confidence. [Majority] confidential relationship did exist at time the house K was done.

Confidential means confidence, not secret. There must be trust and confidence.

52



Burden of Proof: The court says it shifts the burden of proof. There’s a presumption of unfairness. Identification of either a fiduciary or confidential relationship carries with it a

presumption of undue influence. Dominate party has to come forward and show that therewas not undue relationship.

Example:The French’s have to show that the relationship was fair. One appraisal of P’s home was for 90,000 and another said it was for 35,000 but no documents were ever proven in court. The

D’s paid 40,000 and they have to show that this was fair. P didn’t want to charge any interest and she read how the government was billing at 1% so she made the interest at 1% with nodown payment.Constructive fraud aka undue influence the breach of duty by one in a confidencial orfiduciary relationship to another which induces justifiable reliance by the later to hisprejudice. The word constructive connotes (suggests) that a fiction is coming.

Special Relationships [do not need to memorize]

Account/client Attorney/client Bank/depositor Broker/customer Corp director/shareholders Employer/employeeExecutor/heirs Guardian/ward Insurer/insured

Parents/children PartnersDoctor/patient

Priest/parishioner Principal/agent Public officialsRealtors Siblings SpousesTeacher/student Tenants in common Trustee/beneficiary

No confidential relationship Elements of undue influence without a confidential relationship (pg 558)

1. the use of excessive pressure to persuade one vulnerable to such pressure, pressureapplied by the dominant subject to a subservient subject 2. Undue susceptibility may consist of total weakness of the mind which leaves a personentirely without understanding or a lesser weakness which destroys the capacity of a

person to make a K even though he is not totally incapacitated.3. excessive strength by the other party

Undue influence ELEMENTS

Pressure applied by Dominant party to the subservient partyUse Excessive pressureExcessive strengthUnusual vulnerability

Note You are most vulnerable at your own house.

53



Overpersauasion [ELEMENTS]:

1. Discussion of the transaction

2. Consummation of the transaction in an unusual place

3. Insistent demand that the business be finished at once

4. Extreme emphasis on untoward consequences of delay

5. The use of multiple persuaders by the dominant side against a singe servient party

6. Absence of third-party advisers to the servient party

7. Statements that there is no time to consult financial advisers or attorneys

Illegality: [6 types]

What constitutes illegalityif the consideration or object of the contract is illegal

Some K’s are illegal because they are expressly prohibited by statute (i.e. gamblingcontracts, etc)Other K’s violate public policy (contracts to defraud or injure third parties).Non-competition agreementsUsed in sale of business and employment K’s

(1) Violation of law:If a proposed K is legal at the time an offer is made but becomes illegal before acceptance of the offer, the intervening illegality terminates the offer, the intervening illegality terminatesthe offer as a matter of law. If a K is made, and is legal when made, but becomes illegalthereafter, the K is discharged.

Note If you have a contract that is illegal, you can not sue the person for the breach of that contract. Example: Contract to kill your wife.

Law will not enforce this contract nor will it grant constitution.

(2) Cohabitation

CL Marriage: living together and holding yourself out as your husband/wife. Living together and introducing people as your husband or wife and changing

your name is considered CL marriage.

Putative Spouse Exception – one spouse is led to believe they were married I- In the putative spouse situation a concealment of material facts by one spouse may constituteactionable fraud and permit the defrauded spouse to recover a portion of the propertyaccumulated during the period of cohabitation

(3) Lack of a license [RES 181]

54



You need a license to do certain things in the U.S. (be a lawyer, doctor, drive a car). If youdo not have a license it is illegal:1). LICENSE FOR PROTECTION OF PUBLIC - If the purpose of the licensing requirement is to protect the public from unqualified person( i.e. to assure that licenseholders have certain minimum qualifications), a K negotiated by an unlicensed personrelation to the business is usually held illegal, and the unlicensed person will be denied

recovery.2). LICENSE FOR FISCAL REGULATION OR TAXATION- if a licensing requirement isimposed primarily for purposes of fiscal regulation or taxation, rather than to protect the

public from unqualified persons, K’s entered into by the unlicensed person are usually held enforceable notwithstanding the lack of a license.

(4) Non-compete clauses

1.) Sale of Business – If the seller of an existing business sells the buyer the “goodwill” of

the business (its value over and above its tangible assets; i.e, it reputation with itscustomers) the seller frequently also expressly contracts not to set up a competingbusiness in the immediate locale for a set period of time.2). Employment contracts. When beginning a new job, the employee often must sign a K containing a covenant not to compete with the employer on termination of theemployment.

ANCILLIARY TO SALE OF BUSINESS OR EMPLOYMENT? If sale of business? Can be blue penciled (edited) if unreasonable / too

braod. Can be blue penciled down so that they can be enforced If Employment? courts can not blue pencil. (

BLUE PENCIL Judicial editing (reformation) so why call it BLUE PENCILING? Because of newspaper editorial work. Editors use blue pencils because the shade of bluedoes not reproduce in a photo machine

Note lawyers can not be held to non-competition agreementsClauses are not enforceable.

What is reasonable?Time A limitation within 2 or 5 years might be reasonable.Geographical aspect NEEDS TO BE REASONABLE IN TIME AND SPACE .

(5) Incapacity

Minors

Benefit rule (minority view ) [minor liable even if not for necessity]

55



The minor must pay for legal services furnished him in a guardianship matter, and his liability was the reasonable value of such services that were of benefit to him and not the amount he had agreed to pay or that had been charged

Majority View [should get money back]: Minor can disaffirm and if he’s damages it,he doesn’t have to pay for the benefit received. All the minor has to say is I’m aminor and I want a refund.

How long does minor have to disaffirm? Reasonable time beyond 18 unless ratify the transaction (ex. continue to make payment and terminating the power to disaffirm)

[minors that lie] Majority would get money back Minority not get money back and pay balance But here he lied, but it does not matter. Kids lye and merchant should have knownthat.

RULE Emancipated minor can not disaffirm (emancipated is minor that ismarried; minor is on active duty; or if minor petitions in court to be emancipated

RULE Even with necessaries; minor does not have to pay K price. ONLY HAS TO PAY QM.

RULE Minor’s can disaffirm and merchants can not. It is not both sided.

Mental infirmity

LAW: IF YOU ARE MENTALLY ILL DECLARED BY JUDICIAL PROCEEDING,THE K IS ABSOLUTELY VOID. IF COURT HAS NOT DELCARED MENTALLY

ILL THEN K IS NOT MERELY VOIDABLE.

LAW:• If Mentally ill person has Guardian has been appoint, then the K isabsolutely void • If someone just wandering around & is mentally ill, then K is voidablewhich means they have to go to court to get the K void

(6) Intoxication

Buyer was intoxicated. Rule Is the person so intoxicated as to be unable to comprehend the nature and consequences of signing the K. Beyond just be tipsy. REALLY DRUNK.

How long would person have to disaffirm the contract based on K? (Can he wait acouple of week?) No. He would have to do it fairly quickly once he is sober becausecourts don’t like drunks as opposed to mentally incompetent. AS SOON AS YOU

SOBER UP YOU NEED TO TAKE STEP TO MAKE RECESSION.

What if you accidentally destroyed the painting:

56



When you rescind you have to be able to restore the painting in the way the painting originally was before you destroyed it.

Unconscionability: [safety valve]

Unconscionability Something that is shocking to the conscious of the judge. Keep in mind that all judges are different and get shocked differently. That is why Unconscionability is the wild card.

If nothing else works then try this.

UCC 2-302 same as RES I sec 208

1) if the court as a matter of law finds the K or any clause of the K to have been unconscionable at the time it was made the court may refuse to enforce K, or it may enforce the remainder of K without unconscionable clause or it may so limit the application of any unconscionable clause as toavoid unconscionable result.2). What is claimed or appears to the court that the contract or any clause thereof may beunconscionable the parties shall be afforded a reasonable opportunity to present evidence as to its

commercial setting, purpose and effect to aid the court in making the determination . Note (if using UCC was not fair the UCC allows safety valve to stop the unfairness byallowing Unconscionability)

UCC2-302 RULE this is an issue for the Judge. Will not get jury trial. Too much power if given to jury. (UCC does not define Unconscionability). They do not want to define it because theywant it to be open ended.)

RULE can choose to not enforce contract (if Unconscionability) or choose to enforce theremainder of K without the Unconscionability. (Judge can reform K)

RULE judge can not award damages. Can not sue someone for Unconscionability. If isONLY a defense.

RULE Unconscionability has to exist at the time the K was made. Future events don’t qualify.

2 TYPES:• Procedural process by which k was formed; see if it is fair.

o [process] o Ex. education level , bargaining level

•

Substantive looks actual terms of the contract to determine whether termsof K are fair.o [substance] o Ex. clauseso Most of this category relates to excessive price, or limitation onremedies (like no warranty or indemnification clause)

MAJORITY RULE have to have some of Procedural and substantive. Minority don’t need both.

57



NOTE Door to door salesmen: cooling off legislation to allow buyers to get out of sales that took place in the home. 3 business days from when they give you written notice of your 3 day notice rights.You do not have to send item back, they have to pick it up and if they don’t you can keep it.

[COOLING OFF PERIOD] Exceptions: real estate, life insurance, agricultural sales/equipment because they lobbyists.

Note you can not get restitution when dealing with an Unconscionable K. You just don’t have to pay anymore.

Indemnification clause keep from collect money based on liability. The assistant that has not signed any clause will sue AMACO for negligence. So the AMACO hasto pay Assistant AMACO can get damages from Weaver.

Exculpatory clause prevented DF (amco); EXCUSED from getting sued. I excuse you in advance from any bad stuff you do.

[There is nothing illegal about exculpatory clauses. (if you check your coat and see the sign). If located where person turning over coat would see it.Turning over coat is K of Bailment. There is NO Unconscionability here]

Substantive Unconscionability: will be excess price of limited remedy. Weaver held liable for anything oil company can be sued for and must indemnify them

Impossibility (impracticability): (2 scenarios)

Definition performance becomes impossible when the thing that isessential to the K is destroyed or when person essential to K dies or becomes unavailable because of unexpected/ unforeseen event (OCCURES

AFTER K IS MADE)

(1) Further performance excused • General rule impossibility is usually not an excuse. [in a positive K to do

something / build something] [if you are doing a thing, it is not excused] • ELEMENTS: (exception) “you none performance is excuses” • IF NOT FORESEEABLE WHEN MAKING K • NOT THE FAULT THE PARTY (without fault)

NOTE if pre-existing impossibility is an excuse. Building is already existing & you are just painting it.

NOTE:• a contract to rent something (not to do the thing) predicated upon the continued existence of thething.• (example) EXCUSED IF: CL unforeseen; death, serious injury, distruction of building. (can put clauses in K that is not one of these if you want an event to allow an excuse)

58



Force majeure clause – Major force “the act of God” it is not limited to God- a clause whichidentifies those conditions which the parties agree is an excusing event/ -Major Force – excuse performance by naming events that will justify (assign risks that arebeyond there control Acts of God “The act of God” it is not limited to God – a clausewhich identifies those condition which the parties agree is an excusing event.

3 source of Impossibility – This excuses the K 1). Death of a specific person2). Destruction of Specific thing3). Prevention by Gov’t Regulation (“supervening illegality”)

RULE event (occurs) Before use mutual mistake. If event occurs after K impossibility

RULE FAILURE OF SOURCE OF SUPPLY IS NOT AN EXCUSING EVENT.UNLESS YOU CONTRACT FOR A SPECIFIC SUPPLY SOURCE

RULE (farmer ) Farmers who contract to sell crops on their own land are excused if anunforeseen event happens. Example: If the event was a rabbit and not an unforeseentornado the answer would be the opposite. Can not protect against tornado but can protect against rabbits

(2) Remedy of partial performance

in this situation above, where the contractor part performs and acalamity occurs, then the contractor can recover damages on a pro ratabasis, due to the fact that performance is measured the day before thecalamity (if the painter gets 50% done, then he recovers 50% of the K

price, recovery not in QM, but on a pro rata basis for the work completed).

(Not sure if the recovery of damages on the pro rata basisapplies to a K to do a thing)

Impossibility nothing wrong with K. can prorateFurther performance is excusedRemedy for partial performance

Impossibility applies further performance is excused but what do we do if one party has partly performed before the excusing event occurs? Problem 129(a) construction company’s K is not excusable even if the performance becomes more

burdensome

129(b) building was ¾ painted and the building burned. The K performance requires the continuedexistence of the building and the performance is excused. Because the building was painted ¾ of theway then we are going to measure the benefit prior to the event. Prior to the burning, the building

59



was painted ¾ of the way and the way to measure it is by pro-rating the K price. The builder get¾ of the K price. Quantum meruit requires another builder to come in and finish the work andthen the builder gets damages. pro-rating the K price just says you get the amount that youperformed on the K.

Pro-rating the K price

In all the cases we looked at there was something inherently wrong with the K itself. There was alwayssomething suspect with the K itself so we go to quantum meruit. For

Nothing wrong with K so we use K price for damages. Party’s own yardstick: Impossibility there isnothing wrong with the K so we are going to use the K price to measure the damages.

- similar to divisibility

Frustration of Purposeperformance of the K may be excused under the doctrine of

frustration where the purpose or value of the K has beendestroyed by a supervening event that was not reasonablyforeseeable AT THE TIME K was entered into.American rule restitution. We want to restore them to thestatus quo before they entered into the KEnglish rule [frustrated K act] gives the judges authority to

judge the K. Krell v Henry: D borrowed a unit to watch the king’s coronation but it never happenedIf it’s not impossibility then its frustration of purpose

The whole purpose of the K was to view the procession and the procession had been cancelled. Thecourt treats it as an excusing event but its not really impossibility.

The result is going to be an excuse for the performance. Therefore the landlord can not get the balancedo bc cancellation of the procession has frustrated the K and the D is to be excused from payment.

Even though the K never mentioned the procession, we look at parol evidence based on grounds of avoidance to show that the coronation. Frustration of purpose is grounds for avoidance which is aparol evidence excuse.

SOURCES of Frustration of Purpose are the same as Impossibility- The foundation of the K, the thing of the K is destroyed in impossibility and the purpose

had been frustrated in frustration of purpose.1). Death of a specific person2). Destruction of Specific thing3). Prevention by Gov’t Regulation (“supervening illegality”)

60



ELEMENTS: Calamity is unforeseen and faultity (GUY is being consciously ignorant) of theparty.

NOTE With impossibility when something is destroyed the K does not go on. BUT withfrustration of purpose the K can go forward except the purpose of renting the flate is frustratedwhere they do not want to go forward but they technically can.

Frustration of purpose: the parties could go on but what’s the point??(seller may get fucked if seller not get of hook with impossibility)*Impossibility favors the seller. The seller wants to get out of the K. IMPOSSIBLE FOR SELLERTO MAKE THE DRESS.*Frustration of purpose favors the buyer. The buyer wants to get out of the K. THERE IS NO

PURPOSE FOR THE DRESS EVEN THOUGH SELLER COULD STILL MAKE THE DRESS AND BUYER CAN STILL PAY FOR IT.

RULE frustration of purpose you rarely win based on this. It is best to settle

Problem 134: The price wasn’t inflated because of an event. The price is the same as any other dressthe maker would make. It doesn’t seem fair that the seller would have to bear the loss. Henry should

pay for the dress. If Eliza dies before the dress fitting, the seller would have to bear the risk because hedidn’t make the dress.

Problem 135: seller is trying to get out of the K for long term oil prices. this is an impossibility case.The oil is available and the planes will fly so should we let the seller off the hook for the inflated gas

prices? This was an unforeseen event not caused by either party. The purpose of a long term K is toshift the risk to the seller. If the seller didn’t want to bear the risk they should have put in a priceescalator or a for meijer clause which would cover the situation.

Fixed price K = ASSUMPTION OF RISK - Seller is liable (courts not sympathetic.

(IF KNOW KING MAY NOT SHOW UP FOR PARADE THAT IS ASSUMPTION OF PARTY BECAUSE THEY ARE BEING CONCIOUSLY IGNORANT.)Avoidance of the K SongYou’re just a kid, sid (Minor)They misrepresented, brentUnder duress, jess, they influence me

Make like you’re nuts (Insanity)They don’t discuss muchUnconscionabilityAnd impossibility

REVIEW

Satisfaction Clause: express condition (Hutton case)Objective (reasonable person) or subjective

Use an objective standard unless one of four exceptions apply1. impractical to use objective standard

61



2. language requires subjectivity3. taste, fancy, aesthetics, personal judgment4. 3 rd party referee

Tender - Manifestation of readiness, willingness, and ability to perform

- Constructive conditions of exchangeIf performances can be rendered simultaneously then its concurrent condition. If one performance takes time, that duty goes first.

Time is of the essence Clause- Construction K: time is not of the essence unless stated- Time is of the essence in a sale of goods- Express condition so there’s no room for substantial performance. You either perform on

the day due or the condition does not occur.- Carter v Sherburne

Misunderstanding: (Raffles – Peerless case)

(no meeting of the minds therefore a K was never formed)Mistake: (sherbourne case)Goes to the root of the matter, the essence of what was sold and wasgrounds for avoidance

MisrepresentationMisrepresentation of fact rather than opinion or puffery the exception is if the opinion is made bysomeone with superior knowledge their opinion is treated as fact.

Mental illness: people knew or should have known that he was mentally incompetent even if aguardian was not appointed.

IllegalityIf parties enter in to a K to hire a hit man, the K is void. If I pay the hit man in advance or he kills thewrong person, you can’t get your money back because of in parti delecto i.e. at fault so the court willnot aid either party.

The person who took the car to the repair shop and violate the law for failure to give an estimate theman can get his money back or performance.

Intoxication: a person has to be so drunk to not understand the consequences of your action. If youwere so intoxicated when you entered the K to not know what you were doing then you can get out of the K on two conditions (1) you try to rescind as soon as you sober up and (2) you have to be able toreturn the status quo. Example is buying a painting when you are drunk and you kick a whole in itwhile you are trying to return it means that you can not return the previous owner to the status quo.

Fraud/Misrepresentation: the element of justifiable reliance are two separate elements.Failure to check would be IRRATIONAL or PREPOSTEROUS . Relying on the seller would not beirrational or preposterous

Write on the exam about mistake:Elements of mistake

62



1. Mistake: erroneous belief of fact2. Mutual: shared or common3. Basic to the transaction: Go to the root of the matter, not value or collateral

character Mistake is ground for avoidance and avoidance is an exception to the parol evidence rule so mistakecan come in to show mistake or misrepresentation

Difference between unilateral mistake and misrepresentation: misrepresentation is a representation of fact with an intent to deceive.

Silent fraud: when the owner of a property has a duty to speak up about something regarding the property

Justified reliance requires a duty to check

k 2 outline road map

Documents