What is the governing law?

UCC (Article 2) applies to contracts for sale of goods. Goods are all
things movable @ the time they are identified as the goods to be sold under
the K. UCC doesnt apply to the sale of real estate, services, or intangibles, or
to construction K.

Common Law applies to most Ks except for the sales of goods. Any K not
involving the sale of goods should be treated under CL contract principles.
o

For Ks involving both goods & services, the predominant purpose of

the K dictates. However, if divide payment b/w goods & services, apply
UCC to goods & CL to the remainder.

Is K Valid?
In order to form a valid K, there must be (1) offer, (2) acceptance, (3) consideration,
and (4) no valid defenses.

Offer: manifestation of present intent to K demonstrated by a promise,

undertaking, or commitment with definite & certain term; and communicated
to offeree.
Ads generally not offers, unless highly specific as to quantity & clearly
indicates who may accept. NC ad can be an offer if (1) terms are
certain & definite (must contain quantity) and (2) offeree is clearly
identified.
Offer (UCC): quantity must be certain or capable of being made certain, i.e.
requirements/output Ks
Termination of Offer: an offer cannot be accepted after its terminated.
Revocation: retraction of an offer by offeror by either direct
communication or indirectly if the offeree receives
(1) correct information
(2) from a reliable source
(3) of acts by offeror that would indicate to a reasonable person
that the offeror no longer wishes to make the offer.
Revocation is effective when received.
Offers can be revoked at the will of the offeror UNLESS it
irrevocable b/c:
o (1) option K where offeree gives consideration for
a promise by the offeror not to revoke; or
o (2) UCC merchant firm offer where a merchant
offers to buy or sell goods in a signed
writing, and
gives assurances that it will be held
open. Not revocable for lack of consideration
for time stated but NOT to exceed 90 days
unless supported by consideration
o (3) detrimental reliance occurs where

offeror reasonably expect offeree would rely

to her detriment on the offer, and
offeree does rely
offer will be irrevocable as an option K
for reasonable length of time.
NC promissory estoppel is ONLY a defense
argument for breach and not as a substitute
for consideration.
o (4) beginning performance (True Unilateral K
Offer)
K becomes irrevocable once performance
has begun
Offeror must give offeree reasonable
time to complete.
o Offeree not bound to complete
o Substantial prep. To perform
DOES NOT make irrevocable
BUT may constitute
detrimental reliance.
NC partial performance of unilateral K
does NOT make it irrevocable.
Offerees reliance is merely protected
allowing him to collect expenses
incurred through & value of efforts.
o (5) beginning performance (Bilateral K)
May be formed upon start of performance
by offeree thus once offeree begins
performance, K is complete and
revocation is impossible
Notification of start of performance
may be necessary.
Rejection by Offeree
Express rejection by offeree not to accept
Counteroffer made by offeree to offeror with different terms
Rejection/counteroffer to an option K does NOT terminate
the offer. Offeree can accept original offer w/n option
period UNLESS offeror detrimentally relied on offerees
rejection.
NC counteroffer is a rejection ONLY IF change to offer is
material
Termination by Operation of Law
Death or insanity of either party UNLESS it was an option K
supported by consideration
Destruction of the Ks subject matter, or
Illegality

Acceptance: manifestation of assent to the terms of an offer by any

reasonable manner & by any medium reasonable under the circumstances,
unless otherwise provided in the offer.
Acceptance must mirror the offers terms.
Only person to whom offer is addressed can accept.
Offeree must know of offer to accept, regardless of whether its a
bilateral or unilateral K.
Accept Unilateral Offer: not accepted until full performance
is completed.
Acceptance Bilateral Offer: accepted by either a promise to
perform or by beginning of performance. Silence can also be an
acceptance if by prior dealings or trade practices, it would be
commercially reasonable for the offeror to consider silence as
acceptance.
Acceptance through Mail (Mail Box Rule): acceptance by
mail is effective upon dispatch, provided mail is properly
addressed & stamped unless:
1. offer stipulates acceptance not effective until received;
or
2. option K involved (acceptance under option ONLY
effective on receipt); or
3. offeree send rejection & then sends acceptance (first
to arrive is effective); or
4. offeree send acceptance & then a rejection,
acceptance is effective unless rejection arrives first
& offeror detrimentally relied on rejection.
Consideration: must be bargained for exchange b/w parties and must
constitute a benefit to the promisor OR detriment to promisee.
Pre-existing Legal Duty: a promise to perform a pre-existing legal
duty is NOT valid consideration, UNLESS
(1) its a new written promise to fulfill a debt obligation;
(2) promise is to ratify a voidable obligation (e.g. promise to
ratify minors K);
(3) pre-existing duty owed to 3rd party and not promisor;
(4) theres an honest dispute as to the duty; or
(5) unforeseen circumstances sufficient to discharge a party
(e.g. impracticability), or under modern view, if the modification
is fair & equitable in view of circumstances not
anticipated when K was formed.
Also, a good faith agreement to modify a K subject to UCC
needs no consideration to be binding.
Consideration Substitutes
Promissory Estoppel (see above Reliance)

NO Defense Exist (K Defenses)

Misrepresentation
Fraudulent Misrep.: if party induces another to K by using
fraudulent misrep., the K is voidable by innocent party IF she
justifiably relied on fraudulent misrep.
Illegality: if the consideration or subject matter of K is illegal, the K is void.
Lack of Capacity: persons under 18 generally lack capacity to K. however,
K promises of an adult made to a child are binding on the adult.
A minor may disaffirm or affirm K any time before/shortly after
reaching 18.
If disaffirm, must return everything received under K that still
remains at time of disaffirm.
MAY disaffirm necessary items (food, shelter, clothing, and
medical care) but will be liable in restitution for value
benefitted.
If affirm (expressly or by conduct, i.e. failing to disaffirm w/n
reasonable time after 18th B-Day), he is bound by his K.
Duress & Undue Influence: K induced by duress or undue influence are
voidable and may be rescinded as long as not affirmed. E.g. sign the K or I
break your leg.
Taking advantage of anothers economic needs is NOT duress.
However, w/h something someone wants or needs is economic
duress if:
(1) party threatens to commit a wrongful act that
seriously threaten other party property or finances; and
(2) there are no adequate means available to prevent
threatened loss.
Undue Influence
(1) Undue susceptibility to pressure by one party, and
(2) Excessive pressure by other party
Undue influence often arise when dominant party is in a
confidential or caregiver relationship w/ influenced party.
Statute of Frauds: requires that certain Ks be evidenced by a
writing signed by the party sought to be bound. It does NOT
have to be a formal written K.
Land sale Ks MUST contain description of land and price
Employment Ks MUST state length of employment
UCC some signed writing indicating K was formed and specific
quantity term.
NC leases more than 3 years, covenants not to compete,
and promises to make commercial loans <50K must be in
writing.
o K that CANNOT be performed w/n 1 yr DO NOT
need to be in writing.
Performance MAY satisfy SoF:
UCC delivery of goods satisfies SoF

Real Estate: part performance by buyer satisfies if buyer

has
(1) full or part perform, and/or
(2) possession of property, and/or
(3) improvements to property.
o Must have 2 out of 3

Breach: occurs when a party fails to perform under the K. the non-breaching party
who sues must show that he is willing & able to perform but-for the breaching
partys failure to perform.

Material Breach: occurs if the oblige does not receive the substantial
benefit of her bargain.
Determining when a material or minor breach occurs, courts looks at:
The amount of benefit received by non-breaching party;
Adequacy of compensation for damages to injured party;
Extent of part performance by breaching party;
Hardship to breaching party;
Negligent or willful behavior of breaching party;
Likelihood breaching party will perform.
Non-Breaching party can treat the breach
At an end and
Can sue immediately
Minor Breach: occurs if the obligee gains a substantial benefit of her
bargain despite the obligors defective performance. Nonbreaching party
may set-off for damages but MUST perform.
Promissory Estoppel: may apply if there is a lack of consideration. A
promise may be enforceable if necessary to prevent injustice if:
The promisor should reasonably expect to induce action or
forbearance; and
such action or forbearance is in fact induced.

Remedies for Breach

Nonmonetary Remedies
Specific Performance: is available if the legal remedy is inadequate
and is always available for land Ks and for goods that are rare or
unique at the time performance is due.
Not available for breach of services, even if services are
unique.
Nonmonetary Remedies UCC
Buyer Remedies
Cancellation: if buyer rightfully rejects goods b/c not conform,
one option is to cancel K.
Replevy Identified Goods: if buyer made part payment of
identified goods under K and seller has not delivered goods,
buyer may replevy goods from seller

If seller becomes insolvent w/n 10 days after receiving

buyer 1st payment; or
Goods were purchased for personal, family, or household
purpose; or
if after reasonable effort, buyer unable to secure
adequate substitute goods (i.e. cover).
Specific Performance: where the goods are unique or in other
proper circumstances where goods not yet identified.
Seller Remedies
Withhold Goods: if buyer fails to make 1st payment due
on/before delivery or may w/h good sold on credit and before
goods are delivered if seller discover buyer insolvent.
Recover Goods: if buyer received goods on credit while
insolvent, seller may reclaim goods upon demand made w/n 10
days after buyers receipt of goods.
10 day limit does not apply if misrepresentation of
solvency made in writing to seller w/n 3 months before
delivery.
Right to Demand Assurances: if reasonable grounds for
insecurity exist w/ respect to partys performance, may demand
adequate assurances in writing that performance will be forth
coming at proper time.
until he receives such assurances, party may suspend his
own performance.
If not given w/n reasonable time (30 days) he may treat K
as repudiated.
Monetary Damages: K damages generally involve compensatory
damages, which aim to put non-breaching party in place he would have
been had breach not occurred.
Expectation Damages: standard measure of damages, i.e. sufficient
damages for her to buy a substitute performance.
Reliance Damages: given if expectation damages are too
speculative. Reliance Dmg. award P the cost of her performance, i.e.
designed to put P in position would have been in had K never been
formed.
Consequential Damages: special damages arise b/c of
nonbreaching party particular circumstances and often consist of lost
profits. Only recovered if:
@ time of K, reasonable person would have foreseen the
damages as a probable result of breach;
Damages could not have been avoided through reasonable
efforts; and
Damages can be proved w/ reasonable certainty
Only buyer can recover for K of sale of goods.
Incidental Damages: Sale of Goods: include expenses reasonably
incurred by buyer in inspection, receipt, transportation, care, and

custody of goods rightfully rejected and other expense reasonably

incident to sellers breach, and
by seller in storing, shipping, returning, and reselling the goods
as a result of buyers breach.
Punitive Damages: generally not awarded in K cases
Nominal Damages: may be awarded when breach is shown but no
actual loss is proven.
Liquidated Damages: must be in an amount that is reasonable in
view of actual or anticipated harm caused by breach. To be enforceable
damages must:
have been difficult to estimate or ascertain @ time K was
formed; and
amount agreed upon must have been a reasonable forecast of
compensation damages in case of breach
Monetary Damages UCC
Breach by Seller & Buyer Keeps Goods: damages = FMV of
perfectly tendered goods FMV of goods actually delivered
Breach by Seller & Seller Keeps or Buyer Returns: damages =
whichever is higher; (a) FMV of goods @ time of breach K price, or (b)
Buyers cost of covering K price
Breach by Buyer & Buyer Keeps: damages = K price
Breach by Buyer & Seller Has Goods: damages= either (a) K price
market price @ time of delivery; or (b) K price resale price =
provable lost profits (Lost profits seller)
Incidental & consequential damages may be available too.