An offer can be revoked any time before acceptance
Direct revocation: communicated directly to offeree
Indirect: offeror engages in conduct that indicates he changed his mind and the offeree is aware of the conduct.
Exceptions to Revocation
Option K (NY a signed written offer to keep offer open is acceptable w/o consideration)
Forseeable reliance before acceptance
Starting to perform in a unilateral K (NY can revoke until completion of performance)
Firm offer (UCC)
Firm Offers under the UCC
In SOG, if a merchant promises in a signed writing to keep an offer open, the offer is irrevocable.
Three month max for irrevocability.
Types of Rejections of Offers
Acceptance varying offer (ok under UCC)
Battle of the Forms (Art 2)
Offeree’s adding or changing a term does not prevent acceptance, However…
Offeree’s term is included ONLY IF:
Both parties are merchants
Not a material change, and
No objection within a reasonable time.
Disclaimers are a material change!
If something is customary in the industry, it is not material.
Minor changes can be kept out by objection.
Death of a pary before acceptance
Terminates a revocable offer, but not an irrevocable offer, like an option
CL: simultaneous acceptance and breach
SOG (Art. 2): simultaneous acceptance and breachunless seller is sending the goods as an accommodation to buyer.
No acceptance and therefore no breach by seller!
Exceptions to Mailbox Rule
Offer provides otherwise
Irrevocable offer (Offeree does not need MBR to protect him against revocation as it is irrevocable!)
Offeror relies on overtaking rejection (acceptance is sent first, rejection arrives first!)
Rejection Sent first (Offeree doesn’t need MBR to protect him against revocation, he rejected the offer!)
If rejection mailed first, then acceptance… it is a race!
Defenses to Formation
Lack of capacity
Lack of consideration
Incapacitated Ds can disaffirm a contract except (NY):
Life insurance K by those 14.5 yrs and older
Educational loans by those 16 years or older
All Ks by 18 year olds.
Realty Ks related to the marital home, and
Ks involving artistic or athletic services.
CL and NY EXCEPTION: an incapacitated party is liable for necessaries (i.e. food, shelter, clothing, or medical care), but only on quasi-K basis.
Only obligated to pay reasonable value
A party threatening to breach an existing K, and no reasonable alternative is available to the non-breaching party.
If neither party knows or has reason to know: NO K!
If one party knows or has reason to know: K on innocent party’s terms
Mutual Mistake about a MATERIAL fact: EXCUSED
A mistake as to value is generally not material as the buyer could have the value appraised.
Unilateral Mistake: usually not effective defense
One party’s mistake is not a fatal flaw unless the other party knew or had reason to know about it
MBE: not consideration at all!
***NY: is consideration if it is expressly stated in a signed writing and can be proven.
CL: new consideration is required to modify a K. Performing a pre-existing duty is not enough.
If promise to pay extra is in writing:
MBE: won’t matter
NY: modification will be valid
Any extra work will make the promise enforceable
Pre-existing duty rule cannot be used as a defense by a third-party, only by a party to the original K.
SOG (Art. 2): consideration is not required to modify a K in good faith.
Partial Payment of a Debt
If disputed, partial payment is supported by consideration (giving up fight over it).
Laws favor settlement of disputed claims.
***NY: if agreement to forgive rest of debt is in a signed writing, you do not need consideration!
A written promise to pay a debt, collection of which is barred by SOL, is enforceable even without consideration.
Requirements for a writing under SOF
Year (NY: lifetime Ks are within SOF!)
Lease of goods (NY ONLY)($1k or more)
Easements, sales, leases of RP
Goods (over $500)
Misc. NY provisions: assignment of an insurance policy; a promise to pay a discharged debt; and an agreement to pay a finder’s fee or broker’s commission, except to any attorney, auctioneer or real estate agent.
Satisfactory Writing under SOFs
SOG (Art. 2): must contain a quantity term and be signed by the party to be charged with the breach of K.
Lease of Goods (Art. 2A) ***NY ONLY: must state it’s a lease; include the quantity, duration, and rental payments; and be signed by the D.
Any other K: must contain all material terms (who/what), and be signed by D.
SOF can be a one-way street! (Look to who signed!)
Exceptions to SOF
Leases of one year or less
“Part Performance” Exception: requires two of three: buyer is in possession of the property or buyer made some payment or buyer made improvements to the property.
One-Year Prong: Full Performance Exception
If K is fully performed, SOF not needed.
Part performance will not allow recovery on K, but potential quasi-K recovery.
Sale of Goods for $500 or more (Art. 2)
Goods accepted or paid for by buyer (applies only to the goods accepted/paid for, NOT the whole K!)
If payment cannot be apportioned, entire K will fall under SOF!
Custom-Made Goods: if seller has made a substantial start and they are not suitable for sale in the ordinary course of seller’s business.
Judicial Admission (i.e. in depo, or testimony)
Merchant’s Confirmatory Memo: One party can use its own signed writing to satisfy the SOF against the other party if:
Both parties are merchants
The writing claims a prior oral agreement
The writing is signed and has a quantity, and
There is no written objection within 10 days.
Suretyship: “Main Purpose” Exception (benefitting himself instead of someone else)
MBE: No writing required
NY: no “main purpose” exception
Parol Evidence Rule
Keeps out evidence of a prior or contemporaneous agreement (either oral or written) that contradicts a later writing.
Exceptions to PER
To correct a clerical error (i.e. a typo)
To establish a defense against formation
To interpret a vague or ambiguous term
To supplement a partially-integrated writing (a final statement of the terms included, but not a complete statement of all the terms that the parties agreed to)
Implied Warranty of Merchantibility
Goods are fit for ordinary purpose
MUST be a merchant that deals in the goods of the kind (“dealer”)
Implied Warranty of Fitness for a Particular Purpose
Goods are fit for buyer’s particular purpose
Must be a special purpose and buyer relies on seller to pick out suitable goods, and seller known it.
Seller need not be a merchant!!!
Statements of fact, promises, descriptions of goods, and use of a sample or model
Limitations in SOG (UCC 2) and Lease of Goods (2A)
Disclaimer: a seller can disclaim implied, but not express warranties
If a seller states, “as is”, “with all faults”, or uses the term “merchantability” in conspicuous writing, can disclaim implied warranties!
Limitation on buyer’s remedies: seller can limit for breach of express/implied warranties if the limitation is not unconscionable.
Limitation on remedies for personal injuries in sale of consumer goods is presumptively unconscionable.
If a limited remedy “fails of its essential purpose” the remedy provisions of Art. 2 apply.
Heirarchy on Langauge for ROL
Breaching party bears ROL
Delivery by common carrier
Shipment K: seller gets goods to a common carrier, makes delivery arrangements, and notifies buyer.
Destination K: seller must get the goods to a specific destination.
NOTE: FOB specifies where ROL takes place.
If seller is a merchant: sellers bears ROL until buyer takes possession of goods
If seller is not a merchant: Seller bears ROL until “tender” (makes goods available)
Risk of Loss under UCC-2A
RULE: Risk of loss is on the lessor (person who leases it out).
EXCEPTION: Financial lease, risk of loss is on lessee.
Perfect Tender Rule (UCC)
If tender is not perfect, buyer may reject the goods, but does not have to.
Option to Cure (UCC)
A seller who fails to make perfect tender may have an option to cure. It usually depends on whether the time for performance has expired.
Time not expired: option to cure exists
Time has expired: no option to cure
EXCEPTION: non-conforming goods are typically accepted based on prior course of dealing.
Buyer cannot reject goods that have been accepted, EXCEPT
If there exists a substantial impairment and it is difficult to discover (latent defect).
Consequences of Rejection/Revocation
Return: buyer can return at seller’s expense
Refund: buyer gets back any money paid
Damages: buyer gets for breach of K.
Failure to Give Adequate Assurances (Art 2)
Party with reasonable grounds for being insecure about the other party’s peformance may request in writing adequate assurance that the other party will perform in accordance with the K. If no adequate assurance given, can treat as AR.
Allowed so long as each party has “some” performance remaining.
Modification of a K
An agreement to replace an existing K with a new one---takes place immediately.
Accord and Satisfaction
An accord is an agreement to accept performance in future satisfaction of an existing duty; satisfaction is performance of the accord. The existing duty is extinguished only when the accord is satisfied.
Impractibility due to price increase
MBE: an increase almost never excuses the seller
NY: court will look at absolute amount of increase as well as percentage increase.
Exceptions to prohibition on rights to reclaim goods under UCC
If buyer was insolvent when it received the goods and seller makes a demand within 10 days after buyer received the goods.
Seller can reclaim goods at any time if buyer misrepresented its solvency in writing within three months before delivery.
Upheld if damages were difficult to estimate and are a reasonable forecast of probable damages (cannot be a penalty!)
***NY Distinction: in a real estate K a seller may keep down-payment regardless of the amount!
Lump sums are usually not valid
If damages were not reasonably forecast, but turn out to be reasonable in light of actual damages:
CL: not reasonable and therefore not enforceable
Art. 2: as long as reasonable at either time will be enforceable.
Expectation Damages under UCC
Buyer’s Damages (3 options):
Cover Damages: Cover Price – Contract Price if buyer covers in good faith
Market Damages: FMV – K Price if buyer doesn’t cover in good faith or doesn’t cover at all
NOTE: there is no requirement to cover under Art. 2.
Loss in Value: Value as Promised – Value Delivered if buyer keeps non-conforming goods
Seller’s Damages (4):
Resale Damages: K Price – Resale Price (if seller resells in good faith)
Market Damages: K Price – FMV (if seller does not resell in good faith or not at all)
NOTE: no obligation to resell under Art. 2
Lost Profit: if seller is a lost volume dealer
Look for unlimited supply!
Contract Price: if seller can’t resell the goods (Usually custom-made items)
An owner who entrusts goods to a merchant who deals in goods of the kinds (i.e. a dealer) has no rights against a bona fide purchaser. But can still sue for conversion.
When vesting occurs
Knowledge and reliance will vest rights.
TPB K Liability
Promisor Liable to TPB
Intended beneficiary can sue breaching promisor even though there is not privity of K.
If promisee would have have any rights to recover (due to their own material breach, perhaps), the TPB can’t recover from promisor either.
Promisee Liable to Creditor Beneficiary
Promisor Liable to Promisee
The same as in any other K.
If there exists a donee beneficiary, promisee will not have suffered much damage.
NY Gift "Assignments"
Gift assignment is irrevocable if it is in a signed writing. (MBE will be revocable)
Restrictive Covenant in sale of company:
Necessary for protection of the purchaser
is reasonable in time (NY typcically up to 10 years), distance and extent, AND
represents part of a bargained-for exchange.
Specific Performance for a breach of a covenant not to compete:
Legal remedy inadequate
Decree is enforceable
Mutuality of remedy is present, AND
no defenses are available
Reasonableness of Covenants not to Compete
Reasonably necessary to protect employer
Duration is reasonable
Scope of geographic ambit is reasonable
No unreasonable burden on one of the parties
General public will not be harmed
Way to disclaim implied warranties:
By a conspicuous writing included in the K stating the product is take "as is", "with faults" or any other plain language indicating to the buyer that the seller was disclaiming his warranties
By inspection or refusing to inspect prior to the making of the K
By course of dealing, course of performance, or usage of trade
Note: diclaimer of warrant of merchantibility must include the word
Effect is to create privity of K between the obligor and the assignee while extinguishing priviy between the obligor and the assignor. Assignments given in exchange for consideration are irrevocable.
Specifically Manufactured Goods Exception to SOF
Not suitable for sale to others in the ordinary course of the seller's business
Seller, before notice of repudiation, has made a substantial beginning in the manufacture or commitments for procurement.
NY Delay in Delivery (UCC)
So long as seller complies with statutory notice provision, it is not a breach of duty if performance "has been made impracticable by the occurence of a contingency the noncurrence of which was a basic assumption on which the contract was made"