Introduction to Business Law
Introduction to Business Law
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Date Created: 02/03/15
BSL 212 Introduction to Business Law Class Notes I Alternative Dispute Resolution ADR A Settlement Parties come to some kind of compromise and it s over 1 Settlement Agreement contract B Mediation independent 3 039 party helps them come to a settlementresolution 1 Courtordered mediation 2 3 a Every court system federalstate every level cannot go to trial if you do not go to mediation first List of certified mediators parties pick mediator together Parties split the hourly fee Parties must show up with the authority to settle case Informal Most effective mediators are relatable to everyone g Very productive many cases settle in mediation Mediator s report file with the court and then trial date issued Sketch out settlement and walk away Twang C Arbitration difference with mediation arbitration is binding 1 Parties agree to have an independent 3 039 party resolve their dispute contractual agreement 2 You cannot sue 3 Arbitration clause in many internet agreements as do many employment contracts a In the event dispute arises it will be arbitrated by the rules of i Arbitration entities 0 AAA American Arbitration Association Arbitrator s award decision a Very difficult to appeal Many benefits over litigation a Quicker discovery process is abbreviated b Less discovery don t need to hand over everything i You just submit what you re going to use against opposing party Appeal process doesn t exist Ultimately cheaper less attorney s fees e Private huge benefit for businesses i Litigation is public anyone can view it ii Corporation s don t want to air their dirty laundry f Less adversarial i Much more of a cooperative process ii Easier to maintain a relationship after it s all over g Expertise i Typically certified in particular areas of expertise 10 ii Don t need to spend time nor money educating them h Easier to collect internationally this is huge i Most international business contracts have an arbitration clause 0 Most likely resolved by ICC International Chamber of Commerce ii Neutral forum not in courts of one of party s country iii Who enforces o In litigation you can issue a writ of execution or writ of garnishment to collect on the judgment if they have assets in the country or bank accounts respectively If they don t have either there is no enforceability o In arbitration there is enforceability because of NY Convention regarding enforceability of arbitration awards most countries have agreed to it Chapter 6 I Moral Philosophies Approaches to Ethical DecisionMaking I Side Notes 1 InvestorConsumer confidence is impacted by perceived ethical standpoints 2 Punitive damages not awarded to compensate plaintiff awarded to punish defendant and deter similar behavior in the future a Hinge only on how reprehensible defendant s conduct is b Faultintent of the actor c If they can defend themselves from ethical standpoint they can greatly protect themselves from punitive damages 3 Minimize or avoid government regulation a Exercise selfrestraint to avoid government prosecution and regulation b Acting ethically can be good for the bottom line II Ethical Fundamentalism 1 External source look for external source for guidance a Corporation s codes of conduct mission statement b Personal level religion religious texts c Downsides corporate code robs you of independently making decisions but personal external sources taken too rigid won t get you anywhere in the business world either can be too rigid i Not good to blindly follow either corporate code or personal ethics 2 Something s are right some are wrong PERIOD absolute morality III Ethical Relativism 1 Right and wrong is relative to context and situation 2 No absolute morality 3 Differing circumstances times technological advances a If ethical or moral within that context than you are acting ethically 4 MultiNational Corporations not applying own ethics to other country but taking into account their ethics and then acting ethically accordingly 5 Drawbacks flipflop PR nightmare if other nation s ethical standards are different from US s can be too flexible slippery slope IV Teleology outcome based 1 In determining what s right or wrong you don t look to external source or relativity you look at the outcome 2 End justifies means 3 Egoism a Everything that matters is how it affects one s self 4 Utilitarianism a Costbenefit analysis assuming both are legal i All actions have costs look for the option that benefits outweighs costs the most ii Do not look at only impact on you look at all stakeholders objective b Strengths i In Identifying and Quantifying the cost and the benefit very efficient promotes action which most efficiently uses society s resources c Outcome based approach d Right thing is what brings greatest good for the greatest number greatest net benefit to society e Drawbacks i Ignores rights and justice ii Ignores that there are some things that no matter how great the benefit to society it s just wrong atomic bomb slavery iii Problems of measurement quantifying is subjective who decides if it s a cost or a benefit turns objective approach into subjective analysis V Deontology DutiesRights based 1 There are certain rights we all have that should not be interfered with no matter what the benefit to society a Inalienable rights 2 Kant s theory a You are acting ethically if you are acting in a way that is possible for and you are willing for everyone else to act even if it impacts you Golden rule do unto other s as you would have done to you i Universalizability and reversibility ii OthenNise you are acting unethically b We all have the right to be treated as an end in and of itself not as a means to an end c Strengths i We usually do this anyway in judging behavior ii Idea of absolute morality there are some things that are just wrong d Drawbacks i Benefit to the business ii What if rights clash iii Ignores consequences and sometimes they are important and must be considered VI JusticeFairness 1 What matters is not consequences or net benefit to society or rights and duties to parties what matters is fairness 2 We all have a duty to act fairly burdens and benefits should be distributed fairly 3 Drawback what s fair a In capitalism the more contribute the more you get b In communism everything is split equally 4 quotVeil of ignorancequot how to decide what s fair a Idea that group of people behind a veil of ignorance would decide what is fair disregarding race intelligence gender b Provide a ladder and safety net i Opportunity of advancement ii Safety net for those who are incapable of caring for themselves VII Duty of Care 1 We all exercise a higher degree of care to those with whom we have a relationship should we a Family coworkers employees 2 Drawbacks if you rely solely on that then you d hire your brother or someone you have a relationship with instead of someone who is more qualified VIII Virtue Ethics 1 When you are deciding what to do you should act in a way that a virtuous person would 2 WWJD argument 3 Honesty integrity patience loyalty hardworking IX Best decision makers think about all of them no one alone is correct use them all as a checklist Chapter 9 Elements of a Contract must all be present and even then the contract may not be enforceable A Agreement 1 Offer offeror offeror makes offer 2 Acceptance offeree offeree acceptsrejects B Consideration what the offeror asks for in exchange for their promise 1 If offeror didn t ask for anything their agreement is not a contract C Legality 1 Agreement must be for a lawful purpose 2 Noncompetes not always enforced because of benefit to society D Capacity 1 Whether or not the parties have contractual capacity a Minor under age of 18 b Mentally incapacitated c Intoxicated Classification of Contracts A Bilateral 1 Promise for a promise 2 Created when offeror proposes to offeree If you promise to do A I promise to do B 3 Way you accept is making the promise B Unilateral 1 Promise for an act 2 If you paint my house by January 1 I will pay you 10000 3 Acceptance is when the house is painted by deadline C Express Contracts 1 Created by words D Implied Contracts 1 Created by actions over a period of time E Valid Contract has all of the elements and is totally enforceable F Unenforceable Contract has all the elements but is unenforceable for some other legal reason G Voidable Contract othenNise enforceable but one of the parties has the right if they choose to cancel it H Void agreement no legal obligations contract does not exist I Executory Contract 1 Contract that has not been fully performed J Executed Contract 1 Completed Alternative Theories of Recovery courts never look at this unless plaintiff lost on breach of contract A Quasi Contract Not a contract at all 1 Prevents quotunjust enrichmentquot 2 Party not contractually obligated to pay but it wouldn t be fair if they didn t 3 Elements a Plaintiff confers a benefit on defendant b Defendant knowingly accepts the benefit c Unfair for defendant not to pay d Defendant pays quotreasonable valuequot B Promissory Estoppel 1 Protects quotreasonable reliancequot 2 Elements a Promisor defendant made a promise b Promisor should have anticipated that promisee plaintiff would act in reliance c Promisee did take action in reliance and was reasonable for them to do so d Promisee will suffer detriment 3 Promisor must pay quotreliance damagesquot IV Sources of Contract Law depends on subject matter of contract A Common Law 1 Contracts for real estate and services B Article 2 of the UCC 1 Supercedes Common law for Contracts for Sale of Goods C Side note Hybrid contracts component of goods and component of non goods 1 Predominate Factor Test what is the primary purpose of the contract apply that body of law to the entire contract D CISG 1 Applies to international contracts for the Sale of Goods 2 TV tunes case 3 Applies if you have a contract between parties with places of business in two different countries which have adopted the CISG w the parties have not quotopted outquot parties can opt out from wanting it to automatically apply 4 It only applies to commercial transaction big difference to UCC 5 UK and Iran have not adopted the CISG Chapter 10 Mutual Assent I The offer offeror A Elements 1 Offeror objectively intended to enter the contract a Subjective intent is irrelevant 2 Definite or reasonably certain as to quotMaterial Termsquot a Can you identify the parties b Did they adequately describe the subject matter c Consideration d Specific quantity is necessary under UCC e If one is missing it is usually not a contract unless parties act like they are in a contract and court will fill in missing term under UCC gapfillers 3 Communication a Must intentionally be communicated by offeror to offeree B Specific Offer Rules 1 Advertisements are not offers general rule a Simply providing information to public about product and prices b Exception if the offer or ad is highly specific regarding nature and number of goods or services being offered AND what offeree must do to accept 2 Auctions are invitations to make offers general rule a Exception If the auction is being held quotwithout reserve the general presumption is that the auctioneer reserves the right to withdraw the good prior to acceptance 3 Rewards are offers to enter unilateral contracts C DurationTermination of Offers 1 If an offer has terminated it cannot no longer be accepted 2 Expiration can expire and will expire at some point a Terms of the offer quotofferor is the master of their o e b quotReasonable Timequot 3 Revocation cancellation a Offeror can take back their offer at any time prior to its acceptance even if they said they were going to keep the offer open b Effective when received when offeree learns of it i Exception for offers to the general public revocation must be published in the same forum and manner as the offer c Exceptions to General Revocation Rule i Option contract situation where offeree pays offeror to keep the offer open creates a mini contract ii Firm offer for the sale of goods under the UCC domestic contract for sale of goods If three elements are present the offer cannot be revoked 1 Offeror is a merchant regularly deals in subject of the offer 2 Writtensigned by offeror 3 It states it will be held open maximum period of irrevocability is 3 months 4 If all 3 present it is irrevocable for the time stated iii Under CISG offeror cannot revoke offer if they 1 Offer indicated it would be held open doesn t have to be held in writing 2 Offeree acted in reasonable reliance on offer being held open iv Involves an offer to enter a unilateral contract 1 Once offeree begins performance the offer is irrevocable for a reasonable amount of time it would typically take to complete the performance 2 Must allow offeree the opportunity to complete performance v Promissory Estoppel 1 Promissor makes a promise to keep o eropen 2 Promisee acts in reasonable reliance 3 Promisee would suffer detriment if offer was not left open 4 Rejection automatically terminates offer 5 Counteroffer a Terminates initial offer treated as a rejection 6 Death or incapacity of either offeror or offeree 7 Destruction of subject matter of the contract through no fault of either party 8 Subsequent illegality II Valid Acceptance A Elements 1 Evidence that offeree objectively intends to be bound AND 2 Acceptance must be quoton the termsquot of the offer a Common Law quotMirror Image Rulequot i To be valid an acceptance must mirror the offer on every material term b UCC quotBattle of the Formsquot much easier for a court to conclude there is a valid binding contract than it is under common law i Is there a contract First question must ask in this order 1 Rule a definite and timely expression of acceptance creates a binding contract even if it adds a terms or changes terms unless the acceptance is expressly conditioned on offeror agreeing to the additions or changes ii What are the terms 1 Are the additions included Are any changes included 2 In almost every situation except one the terms of the contract are the terms of the offer 3 Unless both parties are merchants the terms of the contract are the terms of the offer 4 If both parties are merchants a Changed terms are NOT automatically included b Additional terms are automatically included UNLESS i Offeror objects to addition within a reasonable amount of time ii Or original offer limited acceptance to its terms c CISG quotBattle of the Formsquot much more like the Mirror Image rule than UCC i Definite and timely expression of acceptance creates a binding contract even if it addschanges terms unless 1 Acceptance is expressly conditioned on offeror agreeing to the added andor changed terms 2 Or offeror objects 3 Or original offer limited acceptance 4 Or the addedchanged terms isare material defined very broadly to include terms regarding settlement of disputes payment notice of defects ii Difference easier under UCC than CISG because 3 and 4 impact whether there is a contract or not 3 Communication a Method i quotOfferor is the master of their offerquot they can put a term in the offer that says this offer must be accepted via whatever ii Or Reasonable method b When is the acceptance deemed effective i quotOfferor is the master of their offerquot 1 They can stipulate whether offer is accepted when it is sent or received should always be included ii If the offeror does not stipulate then the Mailbox Rule applies UCC and Common Law 1 Timely acceptance properly dispatched via stipulated method if there was one or reasonable method if there wasn t is effective upon dispatch a Even if offeror never receives it or the offeror is unaware of it iii CISG acceptance is effective upon receipt c Silence is not an acceptance unless i Offeree imposes duty to respond on themselves ii If course of conduct or prior dealing that silence will amount to an acceptance than the court will treat it as such Chapter 11 Conduct Invalidating Assent I Duress wrongful coercion A Physical Duress not going to focus on 1 Results in void agreement not voidable contract B BusinessSocialEconomic Duress Renders a contract voidable 1 Improper threat nonviolent because violence is physical duress a Threat to commit a crime or a tort b Threat to breach a contract c Threat to report a crime 2 AND no reasonable alternative II Undue Influence wrongful persuasion A Relationship between parties is there a potential for abuse 1 Fiduciary a Fiduciary has certain duties to act in best interest of other party b Other party places higher degree of trust in fiduciary c These relationships are recognized by law 2 Dependence a Rely on other party daily for many things 3 AND stronger party used the relationship to unfairly persuade the submissive party a Did party get outside advice b Where was contract entered into c Did dominant party benefit from contract III Misrepresentation a representation about a fact that isn t true A Innocent vs Fraud irrelevant for purposes of canceling contract 1 Innocent a misrepresentation by someone who believes in good faith that what they are saying is true a Cancel contract and get money back but not recover damages 2 Fraud made knowingly and with the intent to deceive a Can only recover damages if fraudulent B Elements 1 Untrue assertion of fact Past or existing fact predictions don t count as fact a Affirmative untrue statement b OR Concealment actively prevent other party from discovering fact c OR Nondisclosure counts IF i Fiduciary relationship ii OR If necessary to correct a halftruth iii OR If failure to disclose is likely to cause serious death or injury iv OR hidden defects that materially effect value usually in context of real estate 2 AND Fact is material a Would be important to any reasonable person b OR person making assertion knew it would be important to the other party 3 AND actual and reasonable reliance on the fact a Was reliance reasonable IV Mistake A Mutual exists even when there has been no misrep 1 Mistake was about a basic assumption on which the contract was made something central to the contract a Identity b Qualities c Quantities d Existence 2 AND mistake has a material effect on the agreed upon exchange 3 AND party seeking to cancel did not bear the risk of the mistake by either a Contractually agree to bear the risk if you agree to buy something explicitly in the contract quotas isquot b OR if you enter into contract with quotconscious awarenessquot you might be mistaken B Unilateral 1 Mistake was about a basic assumption on which the contract was made 2 AND mistake has a material effect on the agreed upon exchange 3 AND party seeking to cancel did not bear the risk of the mistake by either a Contractually agree to bear the risk if you agree to buy something explicitly in the contract quotas isquot b OR if you enter into contract with quotconscious awarenessquot you might be mistaken 4 AND a Nonmistaken party knew caused or had reason to know of the mistake b OR unreasonably harsh for mistaken party to enforce the contract Chapter 12 Consideration I Consideration Something legally sufficient which was bargained for and given in exchange for a promise A Legal sufficiency 1 Promisee doespromises to do something they had no prior duty to do 2 OR forebearance promissor asks promisee to refrain frompromise not to do something they had the right to do B Courts don t care about adequacy of consideration C Illusory promises are not consideration 1 Unlimited right to cancel a contract renders promises illusory a Requirement of notice or payment or limitation circumstancestime save promises from being illusory 2 Promise is not necessarily illusory even though it may be somewhat uncertain or not absolute a Output contracts and requirements contracts are enforceable i Output one party agrees to sell all of their output of a particular product to the other party ii Requirements one party agrees to buy all of the product they need from the other party iii Parties must continue to producepurchase a quantity that is not unreasonably disproportionate than any estimate or prior outputor needs a Include in contract ties to market to protect from above situation and limited cancellation clause both key in contract drafting b Conditional contracts are enforceable i Duty of quotGood Faithquot ii quotBest Efforts D PreExisting Dutiesobligations 1 Contract modification a Common Law a contract modification must be supported by new consideration to be enforceable i Exception Unforeseeableextraordinary circumstances 1 Expected weather market changes not unforeseeable b UCC No new consideration is required for modification i Exception quotBad Faithquot if party was seeking to get the modification in bad faith unfairly c CISG no new consideration is required 2 Debt Settlement Agreements DSA aka Accord and Satisfaction a Undisputed debt a debt which there is no doubt about what is owed when it is owed whether it is owed i DSA of an undisputed debt must be supported by new consideration to be enforceable b Disputed debt DSA is always enforceable E Bargained for and given in exchange component 1 Past consideration not consideration a Something that occurs BEFORE a promise is made F Exceptions to consideration requirement 1 UCC Firm offer 2 UCC and CISG Contract modification 3 Charitable subscription make a pledge to a legitimate charity or institution that pledge is enforceable even though you do not get anything in exchange 4 Promissory Estoppel some relief if elements of Promissory Estoppel are present Chapter 13 brief pg 268 due next Tuesday 1011 I Agreements that violate statutes A Specifically declared unenforceable by statute 1 Usury statutes money lending for example sometimes courts will carve out illegal part a These are statutes that set a limit on the amount of interest that can be charged for a loan B Violate Public Policy behind a statute 1 Are agreements with unlicensed parties enforceable a Regulatory licensing law No i Purpose must be to protect the public ii Requirements are substantive so that only competent and qualified people get the license b Revenueraising licensing law Yes i Primary purpose of raising money for the government ii Requirements are procedural as opposed to substantive a Fishing license b Occupational license c Notary II Agreements that violate public policy articulated by the courts A Agreements not to compete read the payroll case in chapter 13 1 Enforceable if a Must be designed to protect a legitimate property interest i Must be legitimate insulary to another contractual relationship 1 Is it part of a lease An employment contract A partnership A franchise IF no then there is no enforceability of a noncompete b AND Restrictions must be reasonable in area scope and time c AND No undue hardship B Exculpatory Agreements attempts to relieve a party s tort liability 1 Examples Any highrisk activity sports leagues parking lots field trips medical services joins a gym Cannot relieve liability for reckless or intentional conduct Cannot relieve liability of a party providing an quotessential public service Cannot relieve liability imposed by statute Must be knowingly and voluntarily entered into C Unconscionable agreements is it so unfair that it quotshocks the consciencequot 1 Procedural unconsionability a Bargaining power Important terms in fine print Highpressure sales tactics How much choice did the party have All things courts will evaluate 2 AND Substantive unconsionability a Are the terms themselves harsh This is what counts 99 F Chapter 14 Contractual Capacity I Minors Contracts A Right to Disaffirm 1 Throughout their minority and quotreasonable timequot after 2 Explicitly or Implicitly whichever provides an intention to disaffirm B Ratification 1 Can only happen after 18 2 Explicitly implicitly waiting too long a Implicitly 9 when you turn 18 you act like you intend to be bound C Duties Upon Disaffirm future obligations are cancelled 1 Adult s Duty put minor in position they were prior to contract 2 Minor s Duty does not have to pay for the benefit they received puts all risk and burden on adult and control on minor a Traditional Rule return consideration in current condition i Exception if the subject matter qualifies as a necessary minor must pay the quotreasonable valuequot of the necessaries received 1 Essential for the minor s existence and welfare 2 AND minor s guardian is unableunwilling to provide it b Modern Rule must pay for usedepreciation D Effect of Misrepresentation of Age 1 Traditional Rule No effect 2 Modern Rule IF minor is a believable 18 year old and contract is fair minor cannot cancel II Mental Incapacity A Declared mentally incompetent by a court 2 any subsequent contracts are void B Unable to Understand Nature and Effect of Transaction Voidable contract 1 Right to disaffirm incapacitated person or guardian can choose to disaffirm either implicitly or explicitly a Anytime during incapacity or for quotreasonable timequot aftenNards 2 Ratification if party ratified than no right to disaffirm a If they waited too long or acted explicitly or implicitly C Duties upon disaffirmance 1 Capacitated party put incapacitated party in position they were prior to contract 2 Incapacitated party a Capacitated party knewhad reason to know incapacitated party returns consideration in current condition b Capacitated party did knowhave reason to know must pay for usedepreciation III Intoxication A Unable to understand nature and effect of transaction B AND other party knew or had reason to know C AND must be able to put other party in the position they were in prior to contract Chapter 15 Contracts in Writing I Statute of Frauds A Contracts that are covered by the statute of frauds Contract itself don t have to be in writing but evidence in writing must exist 1 Collateral contracts one party agrees to pay a debt that a second party owes a third party IF the second party doesn t pay 1St party s promise is to third party a Guarantor 9 debtor 9 creditor guarantor is only responsible if debtor fails to pay cosigner agrees to pay regardless b Exception Main Purpose Rule if the main purpose of the guarantor s promise was to benefit themselves their agreement does not have to be evidenced in writing Contracts to buy or sell real estate a Excep ons i Full performance by the seller ii OR buyer s fullpartial performance and action in clear reliance a Made substantial improvements b OR took possession Marriage Provision covers Prenuptial agreements Agreements that cannot be fully performed within one year of formation courts try to limit the number of contracts to which this applies by doing the following a Possibility Test if at all possible that it could have been performed within a year even if highly unlikely the contract is not covered i Contracts for an indefinite period of time are typically not covered by statute of frauds b Computation of Time i Compare Date of Formation to Date of Completion ii If more than a year it is covered by statute of frauds and must be evidenced in writing iii If stated period of time in contract is more than a year it is automatically covered 5 Contracts for the Sale of Goods gt 500 are covered B Compliance with Statute of Fraud 1 Writing Requirements agreement does not have to be in writing but there must be evidence in writing as long as they include Side note Doesn t matter when it is prepared can be after agreement made a Written memorandum any form email handwritten le eo i MUST indicate agreement was made explicitly or implicitly ii AND must contain the quotmaterial terms of the agreement 1 Material terms can you discern identity of parties identity of subject matter consideration quantity UCC MUST iii AND must be signed by the party against whom agreement is being enforced the ones who are being sued must have signed it b Combination of Documents i Allowed if the documents clearly relate to each other and the same deal c CISG has no statute of fraudwriting requirement can be totally verbal no evidence in writing 2 Additional ways to satisfy statute of frauds under UCC a Confirmatory memorandum between merchants someone who regularly buys and sells the goods in contract i BOTH parties must be merchants ii Within a reasonable time after verbal agreement iii Holds merchants to a higher standard iv A reasonable time after verbal agreement 1 merchant sends a quotconfirmatory memoquot to the other who does not object within 10 days of receipt 2 verbal contract enforceable against recipient 1 Verbal agreement must be proved and then this applies b Specially manufactured goods goods that are made for a specific buyer and are not suitable for anyone else i Enforceable once seller has made a substantial beginning ll Parol Evidence Rule relates to whether or not the agreement is in writing A Parol Evidence prior or contemporaneous statements not contained in a written contract B Parol Evidence Rule not admissible to add to alter or contradict the terms of a written contract that qualifies as an integration 1 Integration is a contract that is intended as a fullfinal statement 2 Can be evidenced by a Mergerintegration clause clause that says this is it no more negotiations or conversations b OR highly detailed does it appear to be a full and final statement C Exceptions to Parol Evidence Rule 1 No integration 2 Subsequent Statements 3 Ambiguity open to more than one reasonable interpretation court looks at everything and decides 4 Attempting to introduce Parol Evidence to establish a defense to the contract not adding altering or contradicting 1 Like showing duress or misrep and using Parol evidence as defense Chapter 16 Third Parties I Transfer of Contractual Rights and Duties A Assignment transfer of contractual rights 1 Terms a Obligor party who owes a duty under a contract b Obligee the party to whom the duty is owed they have the right to the obligor s performance 0 Assignor obligee turns into assignor when they transfer their right to a 3 039 party d Assignee third party to who the right is transferred 2 All rights can be assigned General Rule a Excep ons i If the effects of transfer materially increases duties risks burdens of obligor then the assignment is unenforceable ii OR quotPersonal contract based on a personal relationship or a unique skilltraitcharacteristic of obligee 1 Employment contracts can be assigned as long as they are not based on a personal relationship iii OR if there is an explicitspecific antiassignment clause under a contract governed by Common Law 1 If the contract explicitly says they cannot be transferred they cannot be 2 Doesn t count under UCC contracts iv OR Prohibited by law 1 Example you cannot by law assign your right to future wages 3 Rights of Assignee quotSteps into Shoes of Assignor a Must know if the original contract is enforceablevalid because if it s not she can t do anything about it 4 Assignor s Liability to Assignee a Implied Warranty if the assignment is supported by consideration the assignor implicitly guarantees the underlying contract is enforceable b OR Express Warranty if obligor doesn t pay for any reason assignor will pay 5 Importance of notifying obligor a If obligor performs contract before receiving notice they have no liability to assignee b If obligor performs contract after notice they are still liable to assignee 6 Successive assignments when assignor assigns same right to multiple assignees in succession a Majority Rule aka American Rule quotfirst in time first in right b Minority Rule only some states quotfirst to give notice is entitled to obligor s duty B Delegation Transfer of contractual duties 1 Terms a Delegator party who owes duty delegates duties to 3quot party original obligor b Delegatee 3 039 party who is transferred the duty 2 All duties can be assigned a Excep ons i AntiDelegation OR antitransfer clause doesn t prohibit transfer of rights but does prohibit transfer of duties under UCC and Common Law ii OR it s a personal contract does the obligee have a quotsubstantial interest in having original obligor perform 1 Is it based on something unique about particular obligor 3 Effect of delegation a Delgatee s liability arises upon quotassumption of duties b Delgator s liability remains liable until delgatee performs unless obligee agrees to a novation i Even if you delegate a duty and the delegatee agrees if the delegatee doesn t pay you can still be sued unless there is a novation ii Novation you are released I will only look to delegatee II Third Party Beneficiaries A Incidental 3 039 party beneficiaries have no rights under a contract B Intended 3 039 party beneficiaries do have rights under a contract 1 Parties entered into the contract specifically promisee with the specific intent of benefiting the third party 2 Subject to promisor s defenses 3 Rights against Promisee a Creditor 3rd party beneficiary provided consideration to promisee in exchange for promisee entering contract to benefit them then yes they have recourse against promisee b Donee 3rd party beneficiary if it is a gift no consideration provided then no recourse against promisee Chapter 17 I Unconditional vs Conditional Duties A Unconditional duties are absolute not dependent on time B Conditional duties 1 Condition precedent A future event the occurrence of which gives rise to a duty to perform a Express Condition Precedent of personal satisfaction i Subjective test all that matters is am I actually satisfied or not i Personal taste comfort aesthetics things that are not susceptible to objective criteria ii Objective test would a reasonable person be satisfied i Mechanical fitness suitability for a particular purpose 2 Concurrent conditions 3 Condition subsequent A future event the occurrence of which discharges a duty to perform 4 Expressed or implied II Discharge of Contractual Duties A By performance or tender of performance tendering showing up able ready and wiling to perform when performance is due if other party rejects you are discharged B By agreement parties can always agree to discharge all or some of duties must be in writing 1 Mutual Recission this agreement hereby cancels and discharges all duties under this contract both parties sign 2 Substituted Contract is a contract that explicitly cancels and takes the place of a prior contract a Brand new contract b Cannot sue to enforce original contract anymore 3 Novation explicit agreement that releases a party delegator a Want to get this in writing just like 1 and 2 4 Debt Settlement agreement Accord and Satisfaction cannot sue for original debt after settlement is reached a Satisfaction if they don t pay agreed upon amount then they still owe original debt not discharged C By operation of law 1 Impossibility our duty is automatically discharged because it is now impossible to perform i Objective impossibility will discharge you 1 Yes it s impossible for particular party to perform but is it impossible for anyone to perform that s what makes it objective ii Subjective impossibility will not discharge you b Death or incapacity of promisor under personal service contract c Subsequentillegality d Destruction of the subject matter of the contract under the Common Law e Commercial impracticability i Unforeseeableextraordinary event ii AND performance is rendered extremely harshdifficult f CISG quotImpediments Beyond Control 2 Statute of Limitations after a time passes you can t sue 3 Bankruptcy D By other party s material breach 1 Nonmaterial breach does NOT discharge the other party s duties a quotSubstantial Performance under the Common law is a non material breach b Failure to perform on time is nonmaterial breach UNLESS i Time is of the essence 1 Explicitly or implicitly ii OR delay is unreasonable 2 Material breach does discharge other party s duties a Failure to substantially perform under Common Law discharges other party s duties b Failure to perform on time if I ii OR c Any substantive defect under the UCC quotperfect tender rule i Only situation where UCC is more rigid than common law designed to encourage perfect performance of seller ii Any defect other than timeliness iii Buyer can choose to walk away d Substantial interference with or prevention of a party s performance will discharge the duty e Anticipatory Repudiation one party informs the other party ahead of time that they are not going to perform the contract Chapter 18 Remedies Assume Plaintiff wins in this chapter Goal compensation for economic loss I Monetary Damages Legal Remedies A Compensatory Damages 1 Loss of Value Difference between the contract price and the market price or value 2 Incidental damages caused by the breach and arise out of it cost incurred in attaining substitute performance 3 Consequential damages caused by breach but arise from circumstances outside of the contract like loss profit on subsequent sale a Must be foreseeable only if breaching party knew or had reason to know that if they breached you d suffer these special damages b Example middle man c Can be limited by contract example FedEx B Reliance Damages in reliance on a contract you spend money on something relevant to contract C Nominal Damages purely symbolic D Punitive Damages intended to punish usually won t see this in breach of contract because there is no moral issue unless there is fraud or duress E Limitations on the award of monetary damages 1 Must be foreseeable 2 Must be proven with reasonable certainty 3 Duty to mitigate their losses lessen or avoid their losses a Nonbreacher required to take affirmative steps to mitigate losses F Liquidated damages if party breaches 1 Amount must be reasonably related to what actual losses might have been II Equitable Remedies A Specific performance Court orders the party to perform their duties under the contract 1 Can only get it when the breacher cannot pay to compensate 2 Subject matter must be unique Only when contractperformance is something unique a Real estate every piece of real estate is presumed unique to a court b Goods are presumed not unique must be proven unique c Personal services no matter what not unique B Injunction suing seeking to enjoin defendant from performing C Reformation court may reform or rewrite contract and enforce it to the extent that it is reasonable Quiz chapter 17 one question on conditions not discharge amp one question on chapter 18 Chapter 21 Title and Risk of Loss UCC I Passage of title and Risk of Loss A Dictated by parties contract 1 Stipulation in contract if contract says it the court will give effect 2 If there is no explicit stipulation court has to figure out a Is it a shipment contract If it is title and risk of loss pass when the goods are delivered to the carrier i Does contract say quotshipment contract If it does then it will be treated as such ii If party uses technical shipping term 1 UCC ONLY even if they use technical term like quotFree on Board and is followed by seller s location it is a shorthand way of indicating party s intentions it is shipment contract b Is it a destination contract If it is title and risk of loss pass when the goods are delivered to the buyer i If it says destination contract it is going to be treated as such ii Or if they use FOB followed by buyer s location c Buyer will pick up the Goods i Title 1 When document of title is transferred 2 Or When seller s completes their responsibilities ii Risk of Loss 1 Merchant seller 2 when buyer picks up goods 2 Nonmerchant seller 2 when seller tenders delivery III Power to transfer title A Types of title what happens when someone buys goods from someone who didn t own them question is what does buyer get 1 Good Title absolute ownership 2 Voidable Title not only do you possess but you have some rights to the goods but there is someone out there who can successfully challenge your right to possession l Lack of capacity sold by a minor duress unduein uence ii Lending of goods iii Bounced check 3 Void title no ownership at all you may possess the goods but you have no claim of ownership or rights to those goods i Stolen goods B Buyer gets no better title than what seller had general rule if seller had void title buyer gets void title 1 Excep ons a Seller with Voidable title can pass good title to a quotgood faith purchaser for value didn t know nor did he have any reason to know i Must be purchaser gifts don t count they must be turned over ii Must be at market price if it s a significant discount you have reason to suspect b Entrustment rue i If owner entrusts possession of goods to a merchant the merchant can pass quotgood titlequot to a quotgood faith purchaser for valuequot ii If it s shady not a good faith purchaser