CONTRACTS AND SALES SHORT OUTLINE/CHECKLIST

CHECKLIST

I. Applicable Law

II. Formation of Contract

a. OFFER
b. TERMINATION OF OFFER
c. ACCEPTANCE
d. CONSIDERATION

III. Defenses to Formation

a. STATUTE OF FRAUDS
b. MISTAKE/AMBIGUITY
c. ILLEGALITY
d. INCAPACITY
e. UNCONSCIONABILITY
f. FRAUD/DURESS

IV. Terms
a. INTERPRETATION
b. MODIFICATION
c. PAROL EVIDENCE RULE

V. Third Parties Rights/Obligations

a. THIRD PARTY BENEFICIARIES
b. ASSIGNMENT/DELEGATION

VI. Performance
a. PERFORMANCE DUE (general rqmts)
b. CONDITIONS
c. DISCHARGE OF DUTY
i. IMPOSSIBILITY, IMPRACTICABILITY
ii. FRUSTRATION
iii. MODIFICATION
iv. MUTUAL RESCISSION
v. NOVATION
vi. ACCORD & SATISFACTION
d. BREACH – MATERIAL v. MINOR

VII. Remedies
a. DAMAGES
b. RESTITUTION
c. EQUITABLE RELIEF

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I. Applicable Law
A. UCC Sale of Goods: The UCC governs all contracts for the sale of goods. Goods are all things movable at
the time they are identified as the goods to be sold under the K.
i. Merchants: The UCC has special rules governing transactions involving merchants, which is
generally any person dealing in general business practices.
B. Mixed Goods/Services: If a K involves both goods and services, a court will determine which aspect is
dominant and apply the law governing that aspect to the whole K.
C. Common Law: The common law applies to all other contracts, including the sale of real estate, personal
services, intangibles and construction contracts.

II. Formation of Contract

MUTUAL ASSENT – Offer and acceptance

A. OFFER – An offer requires (1) a present intent to be bound, (2) definite and clear terms, and (3)
communication of those terms to an identifiable offeree
i. (1) Present Intent to be Bound (see via promise, undertaking, or commitment)
1. Communication must create a rsbl expectation in the offeree that the offeror is willing
to enter into a K. Determined by the language and the surrounding circumstances.
2. Advertisement is NOT an offer:
a. If the communication is broad, such as an advertisement, and to a large number
of people, it could be considered an invitation to make an offer rather than an
offer.
3. Contests are often unilateral contracts that require some performance from offeree
ii. (2) Definite and Clear Terms
1. The most important terms are typically the (1) identity of offeree, (2) subject matter of
K, (3) price. K’s for the sale of goods requires the quantity but need not include the
price.
2. Real estate transactions must identify the land and the price.
3. Missing Terms:
a. If terms are missing it does not prevent formation of the K – the court can
supply reasonable terms if the parties otherwise intended to have the K.
4. Requirements/Output Contracts:
a. A contract for the sale of goods can state the quantity of goods to be delivered
under the contract in terms of the buyer’s requirements or seller’s output.
These are valid.
iii. (3) Communication to Offeree
1. The offeree must have knowledge of the offer, and so the offer must be communicated
to the offeree.

B. TERMINATION OF OFFER
i. Lapse of Time
1. An offer may be terminated by the failure to accept within the time specified in the
offer or, if no deadline was stated, within a reasonable period of time
ii. Revocation by Offeror
1. A revocation is a retraction of an offer by the offeror, either (1) directly communicated
to the offeree, or (2) indirectly through conduct showing the offeree of an unwillingness
to contract. A revocation is effective when received by the offeree.
2. Limitations on Revocation
a. Option K
i. An option K is one where the offeror promised to keep the offer open
and the offeree has given consideration to keep the offer open.
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b. Merchants’ Firm Offer
i. UCC – if (1) a merchant (2) offers to sell goods in a signed writing, and
(3) the writing gives assurances that it will be held open, then the offer
is irrevocable for the time stated, but if no time is stated, not longer
than three months. NO CONSIDERATION is needed.
c. Detrimental Reliance
i. An offer cannot be revoked if there is (1) reasonable reliance by the
offeree, (2) that was reasonably foreseeable by the offeror, and (3)
which the offeree relied on to his detriment.
d. Part Performance of a Unilateral Contract
i. The start of performance pursuant to an offer to enter into a unilateral
contract makes that offer irrevocable for a reasonable time to complete
performance. The offeree is not bound to complete performance.
ii. Mere preparation is NOT enough for part performance.
iii. Rejection by Offeree
1. An offeree rejects an offer by words or conduct, effective when received by the offeror.
2. Additional Terms:
a. Common law, pursuant to the Mirror Image Rule, if an offeree adds new terms
to the offer or makes acceptance condition, it is considered a rejection of the
offer and is a counteroffer.
i. Exception: an option K is not terminated by a counteroffer.
b. UCC (2-207), if the offeree adds new terms to the offer, is still treated as
acceptance, unless it is expressly conditioned on acceptance of the new terms.
The additional terms become part of the contract, unless:
i. (1) one party is NOT a merchant,
ii. (2) the offer is limited to its terms,
iii. (3) the additional terms are objected to by the offeror,
iv. (4) the additional terms materially alter the agreement.
1. Material if alters money, liability, or remedies (ex-arbitration)
iv. Termination by Operation of Law
1. Death/insanity of either party, destruction of the subject matter, or a supervening
illegality.

C. ACCEPTANCE
i. Acceptance is the manifestation of assent to the terms of the offer, by the person to whom the
offer was directed.
1. Common law – acceptance must mirror the offer.
2. UCC – Under 2-207, a definite and seasonable expression of acceptance that includes
additional or different terms is effective as acceptance, unless the accepted is expressly
made conditional on assent to the additional or different terms.
ii. Mode of Acceptance:
1. The offer can control the method of acceptance.
2. If the offer does not state the manner of acceptance, it is any reasonable manner.
iii. Methods of Acceptance
1. A unilateral K is not accepted until full performance, and notice must be given upon
completion of performance within a reasonable time.
a. Beginning performance may create an option so the K is irrevocable
2. A bilateral K, under the common law can be accepted by a promise to perform or the
beginning of performance.
a. Under the UCC, a bilateral K can be accepted by a promise to ship or the prompt
or current shipment of either conforming or nonconforming goods. If non-
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conforming goods are shipped, it is not acceptance if the seller seasonably
notifies the buyer that the goods are sent as an accommodation. If no
accommodation language, then there is a K, but a breach. If accommodation
language is present, there is no breach.
iv. When Acceptance is Effective – Mailbox Rule: (applies to both UCC & C/L Ks)
1. Acceptance is effective upon dispatch, unless:
a. The offer states that acceptance is not effective until received
b. Option K – only effective upon receipt
c. If offeree sends rejection and then acceptance, mailbox rule does not apply and
whichever arrives first is effective, regardless of if read
d. If offeree sends acceptance and then rejection, acceptance is effective unless
rejection arrives first and offeror detrimentally relies on it.

D. CONSIDERATION
i. Valid Consideration:
1. A contract must be supported by consideration, which is a (1) bargained-for exchange,
(2) which is considered a legal detriment or a legal benefit. Legal detriment is typically
defined as doing something a person is not legally obligated to do or refraining from
doing something he has a legal right to do. A promise is consideration.
2. Adequacy of the consideration is irrelevant.
ii. Invalid Consideration:
1. Past consideration is no consideration
2. A promise to perform a preexisting legal duty is not sufficient consideration
a. UCC has NO pre-existing legal duty rule.
b. Modernly, a modification is enforceable w/o consideration if it is fair and
equitable in view of unanticipated circumstances (even if was pre-existing duty)
i. (seems to be a popular MBE point)
3. ILLUSORY PROMISE is invalid – where promise allows one party to change their mind –
if only one party is bound to perform – the promise is illusory and will not be enforced.
iii. Promissory Estoppel as Substitute for Consideration:
1. Consideration is not necessary if a promisor is estopped from not performing. A
promise is enforceable to prevent injustice if:
a. (1) The promise should reasonably expect to induce action or forbearance
b. (2) and such action or forbearance is in fact induced.
2. Damages limited to either expectancy damages or reliance damages
3. NOTE - This is not a valid contract, just a method to enforce the promise

E. IMPLIED IN FACT CONTRACT

i. An implied in fact contract is a K formed by manifestations of assent other than oral or written
language.
1. (where a person knowingly accepts offered benefits via his conduct)
2. Manifestations of mutual assent are analyzed objectively
ii. Courts will often find acceptance where an offeree silently accepts offered benefits
1. Look for party knowingly receiving a benefit they know they have no right to

III. Defenses to Formation

A. Statute of Frauds
i. The statute of frauds requires certain contracts to be in writing and signed by the party against
whom enforcement is sought. The contracts subject to the statute of frauds are (MY LEGS):
1. (1) marriage,
2. (2) contracts that cannot be performed within one YEAR from date of agreement
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3. (3) land (except leases for a year or less),
4. (4) executor promise to pay debts,
5. (5) goods of $500, and
6. (6) suretyship guarantees.
ii. Sufficient Writing?
1. Under the common law, there can be multiple writings, as long as the writings reflect
the material terms (price, quantity, etc)
iii. Exceptions
1. Performance
a. Service Ks - Full performance by either party
b. Real Estate Ks - Part performance satisfies SoF in transfers of real estate if any
two of the three following conditions are met (1) Improvements to the land
(2) Payment (3) Possession
i. Rationale behind doctrine is that conduct that unequivocally indicates
that the parties have K’d for the sale of land will remove it from SoF
1. If pmts are as consistent with there being a landlord-tenant
relationship as there being an oral K, exception may not apply
c. Goods Ks-Part performance satisfies SoF only to extent of the part performance
i. Any goods received and accepted/paid for – but only to those goods
1. (exception for accepted goods, but not undelivered goods)
ii. Admission in pleadings or court
iii. Specially manufactured - SoF satisfied when seller makes "substantial
beginning"
2. Main purpose exception in surety Ks - if the main purpose of the obligation guaranteed
was to benefit the grantor, then the K is taken out of the statute of frauds
3. Merchant's Confirmatory Memo - Under the UCC, after an oral promise is made
between merchants, if one merchant sends to the other a written confirmation
sufficient under the SOF to bind the sender, it will bind the recipient if (1) he has reason
to know if its contents and (2) does not object within 10 days.
4. Promissory estoppel - Estoppel may be applied if it would be inequitable to allow the
SoF to defeat a meritorious claim. Δ must make a false statement that induced Π to
change position in reliance on an oral agreement
B. Mistake (no mutual assent)
i. Mutual Mistake:
1. Defense to void a K if (1) mutual, (2) as to existing facts, (3) which were a basic
assumption on which the K was made, (4) has a material effect on the agreement, and
(5) the party seeking avoidance did not bear the risk.
ii. Unilateral Mistake:
1. Does not make the K voidable unless the non-mistaken party knew or should have
known of the mistake.
iii. Ambiguous Contract Language
1. If a term has at least two possible meanings, then
a. (1) if neither party is aware of the ambiguity, then NO contract unless both
parties intended the same meaning.
b. (2) If both parties aware of the ambiguity, then NO contract unless both parties
intended the same meaning.
c. (3) If only one party is aware – contract based on the what the ignorant party
reasonably believed to be the meaning.
C. Illegality – If the contract or the subject matter is illegal, the contract is void.
D. Incapacity – Infants (under 18 – can dissafirm at any time before turning 18 and can affirm upon turning
18; but will be bound to pay rsbl value of necessities); mentally incompetent, and intoxicated persons.
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E. Unconscionability – unfairness in the contract – both substantive (harsh or unduly one-sided terms),
and procedural (inequitable bargaining powers and hidden terms).
F. Duress – physical or economic threats
G. Misrepresentation – one party induces another to enter into a K by a misrepresentation of material fact,
and the other party justifiably relies on the misrepresentation – it is voidable by the innocent party.

IV. Terms
A. Interpretation of Terms:
i. The court will use the plain “ordinary” meaning of terms.
ii. Courts will also look to the custom and usage in the industry, as well as the course of dealing
between the parties to determine meaning of terms.
iii. UCC: 2-207 Battle of the Forms – see above to determine which terms are part of the
agreement.
B. Modification of Terms:
i. Under the common law – new consideration is required to modify.
1. Provisions requiring written modifications and prohibiting oral modifications are NOT
effective – parties may always orally modify.
2. Modernly, a modification is enforceable w/o consideration if it is fair and equitable in
view of the unanticipated circumstances
ii. Under the UCC – no consideration is necessary to modify, so long as the modifications are made
in good faith.
1. Provisions requiring that modifications be in writing are allowed.
iii. Any modification may need to satisfy the statute of frauds if as an original agreement it would
need to satisfy the statute of frauds.
C. PAROL EVIDENCE:
i. Where the parties to a K express their agreement in a writing and both parties intend that it
embody the final express of their bargain, then the writing is an integration, and any other
expressions, written or oral, made prior or contemporaneous with the writing, are inadmissible
to vary, modify, or contradict the terms of the writing under the parol evidence rule.
ii. If the writing is final and complete and includes all of the terms, it is considered a complete
integration and no additional terms may be admitted, whether contradictory or consistent.
iii. If the writing is final but not complete, it will be a partial integration, and no additional
inconsistent terms are admissible, but consistent additional terms are admissible.
iv. Exceptions: The parol evidence does not bar extrinsic evidence of
1. validity issues (indicating K was not valid)
a. Defects in formation
b. Conditions precedent to effectiveness (K would not exist unless condition occurred)
2. Interpretation of ambiguous terms (trade usage, course of dealings, course of performance, etc)
3. Collateral agreements and naturally omitted terms as long as (1) they do not conflict
with the writing, and (2) the parties would not ordinarily be expected to include the
terms in the writing.
4. Subsequent modifications
D. DELIVERY TERMS w/ SALE OF GOODS
i. FOB (City) - Seller obligated to get goods to location indicated (including pmt to get goods there)
ii. Shipment K - FOB followed by city where seller is
1. Default condition is that a K is a shipment K
2. Seller passes risk of loss to the buyer when seller delivers goods to a carrier
a. Must get goods to carrier, make rsbl arrangements for delivery, and notify buyer
iii. Destination K - FOB followed by any other city
1. Seller passes risk of loss to the buyer when the goods are delivered/tendered to the
actual buyer
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E. WARRANTIES
i. Express - Stmts of promise or fact; no promises or puffery
ii. Implied Warranty of Merchantability - any merchant
iii. Implied Warranty of Fitness for a Particular Purpose - merchant knows buyer has part. purpose

V. Third Parties Rights/Obligations

A. THIRD PARTY BENEFICIARIES
i. Terminology
1. Promisee – Original party with right to receive a performance
2. Promisor – the party who promises to render a performance to a third party
3. Third-party beneficiary – Intended v Incidental (very important)
ii. Intended or Incidental
1. Only intended beneficiaries can sue under a contract. An intended beneficiary is
typically
a. (1) identified in the K,
b. (2) receives performance directly from the promisor, or
c. (3) has some relationship with the promisee to indicate intent to benefit.
iii. Creditor or Donee
1. A creditor beneficiary is owed a debt by the promisee, a donee beneficiary is a person to
whom the promisee intends to benefit gratuitously.
iv. Have the Rights Vested?
1. A third party beneficiary can only sue once the rights have vested, which occurs when
a. (1) he manifests assent to a promise,
b. (2) sues to enforce the promise, or
c. (3) materially changes position in justifiable reliance on the promise.
v. Who Can Sue Whom?
1. 3BP v. Promisor:
a. Beneficiary can always sue the promisor. Promisor can raise any defenses
against the beneficiary that he could have raised against the promisee.
2. 3BP v. Promisee:
a. Only a creditor beneficiary can sue the promisee, but if sues both promisor and
promisee, only entitled to one satisfaction.
b. Donee beneficiary cannot sue promisee unless detrimental reliance exists.
3. Promisee v. Promisor:
a. Can sue in both law and equity for specific performance if promisor is not
performing or the third person.
B. ASSIGNMENT OF RIGHTS
i. An assignment is the transfer of rights under a contract to another person.
1. Generally, all Ks are assignable and delegable except unique personal service Ks and
long term requirement Ks
2. NOTE - assignments are not technically modifications of the K
3. "substitution", with all parties consent, means novation has occurred
ii. Assignable Rights
1. All contractual rights may be assigned unless:
a. (1) the assignment would substantially change the obligor’s duty or risk.
b. (2) an assignment is for future rights to arise from future contracts
c. (3) the assignment is prohibit by law or by contract
iii. Revocable or Irrevocable
1. Assignments for value – IE: done for consideration or taken as security of a preexisting
debt – cannot be revoked.
2. Gratuitous assignments are generally revocable unless there's evidence of reliance
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iv. Who can Sue Whom?
1. The assignee can sue the obligor, but obligor can raise any defenses that the assignor
might have against the assignee
a. Exception - SoL is a personal defense so obligor cannot assert it
2. The assignee can sue the assignor if the assignment is irrevocable. The assignor is if the
obligor is unable to perform.
v. Multiple Assignments
1. Irrevocable Assignment – if the first assignment is irrevocable, the first assignment
prevails unless
a. (1) the second assignor pays value,
b. (2) has no notice of first assignment, and
c. (3) is the first to obtain payment, judgment, novation or ownership
2. Revocable Assignment - if the first assignment is revocable, a subsequent assignment
revokes the first assignment, unless the first assignee received ownership or
detrimentally relied on the assignment.
C. DELEGATION OF DUTIES
i. A delegation of duties is the transfer of duties created in one contract to a third party by
another contract.
ii. Delegable Duties
1. Generally, all duties may be delegated unless:
a. (1) the duties involve personal judgment or skill
b. (2) delegation would change the obligee’s expectancy
c. (3) a special trust was reposed in the delegator, or
d. (4) the contract restricts delegation
iii. Who Can Sue Whom
1. The delegator always remains liable under the contract, thus the obligee can sue the
delegator, unless a novation occurs. (look for all parties agreeing to a "substitution")
2. The obligee can only sue the delegate if there has been an assumption.

VI. Performance
A. Performance Due:
i. Common Law
1. Under the common law, a party must substantially perform all that is called for under
the K.
ii. UCC
1. A contract for the same of goods requires perfect tender. The delivery and condition of
the goods must be exactly as promised in the contract.
2. Seller’s Duties – Seller must put and hold conforming goods at the buyer’s disposition
for a time that the buyer can take possession and give buyer notice.
a. Shipment K – seller must put goods into hands of carrier, notify buyer.
b. Destination K – Seller must put and hold conforming goods at destination.
3. Buyer’s Duties – buyer must pay for the goods at the time of the tender of delivery, and
if by carrier, upon receiving the goods (in shipment K – when goods reach carrier, and in
destination K – when goods reach destination).
a. Buyer has right to inspect before paying.
b. Buyer can only reject an installment contract if (1) there is a substantial
impairment as to the entire contract, and (2) it cannot be cured.
c. Buyer cannot reject goods after accepting the goods. However, a buyer may
revoke acceptance if (1) the nonconformity substantially impairs the value of
the goods, (2) difficulty in determining non-conformity or seller’s assurance of
satisfaction, and (3) within reasonable time after discovery of non-conformance.
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B. Conditions:
i. Types of Conditions
1. Express/Constructive Condition
a. An express statement in a contract that (1) the party does not have a duty to
perform unless some event occurs or fails to occur, or (2) if some event occurs
or fails to occur, performance is suspended or terminated.
b. A constructive (implied) condition is the duty of one party to render
performance upon the other party rendering performance.
2. Condition Precedent
a. Condition precedent to performance - A condition that must occur before an
absolute duty of immediate performance arises in the other party.
b. Condition precedent to effectiveness - A condition that must occur before a K
becomes effective, thereby preventing there from even being a contract.
3. Condition Concurrent
a. Conditions that occur together, and that the parties are bound to perform at
the same time.
4. Condition Subsequent
a. A condition in which the occurrence cuts off an already existing absolute duty of
performance.
ii. Satisfaction of Condition
1. An express condition is satisfied by literal compliance with the condition.
2. Personal satisfaction as a condition requires good faith.
3. A constructive condition is satisfied by substantial performance.
iii. Excuse of Conditions
1. WAIVER/Estoppel
a. Steps:
i. Party having the benefit of the condition indicates by words or conduct
that she will not insist upon it.
1. If waived before condition happens, and the person affected
detrimentally relies on it, a court will hold this to be a binding
estoppel waiver
2. The promise to waive the condition may be retracted at any
time before the other party has detrimentally changed his
position.
Estoppel = a statement by the person protected by the express condition
BEFORE the conditioning event was to occur and requires reliance.
Waiver = a statement by the person protected by the express condition AFTER
the conditioning event was to occur and does not require reliance.
2. ANTICIPATORY REPUDIATION
a. Occurs if a promisor, prior to the time set for performance, indicates that he will
not perform when the time comes. Only applies if the following are met:
i. (1) must be a bilateral contract with unperformed duties on both sides
ii. (2) must be an unequivocal statement of nonperformance
b. Effect of Repudiation: the non-repudiating party can
i. (1) treat as a total repudiation and sue immediately
ii. (2) suspend his own performance and wait to sue until the performance
date
iii. (3) treat the repudiation as an offer to rescind and treat the contract as
discharged; or
iv. (4) ignore the repudiation and urge performance

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c. Retraction of Repudiation
i. Repudiation may be retracted at any time before performance is due
unless (1) the non-repudiating party has indicated that repudiation is
final, or (2) has materially changed his position in reliance on the
repudiation.
3. PROSPECTIVE INABILITY TO PERFORM
a. Occurs when a party has a reasonable grounds to believe the other party will
not perform when performance is due. The innocent party may in writing
demand adequate assurances of performance and may suspend performance
for a reasonable time until receives adequate assurances that performance will
be forthcoming.
b. If the other party fails to respond, innocent party is excused from performance.

C. Discharge of Duties
i. Discharge by Events
1. Impossibility
a. Contractual duties will be discharged if (1) it has become objectively impossible
to perform them, (2) as long as the nonoccurrence of an unanticipated event
was a basic assumption on which the contract was made, and (3) the party
claiming impossibility did not assume the risk.
i. In Unique Personal Services Ks, if too sick to do the job you are excused
for that time & are not liable for damages unless K provides otherwise
b. The most common examples include:
i. (1) death or physical incapacity of a party necessary to effectuate the K
ii. (2) a supervening illegality
iii. (3) destruction of the subject matter of the contract
2. Impracticability
a. Contractual duties will be discharged where performance has become
impracticable. It is a subjective test where a party encounters:
i. (1) extreme and unreasonably difficulty or expense, and
ii. (2) nonoccurrence was a basic assumption of the parties.
iii. (3) the party claiming impracticability did not assume the risk
b. A mere increase in costs is usually insufficient to discharge a duty for
impracticability
3. Frustration of Purpose
a. Frustration of purpose discharges duties under a contract if the purpose of the
contract has become valueless by virtue of some supervening event not the
fault of the party seeking discharge. There must be:
i. (1) A supervening act or even leading to frustration
ii. (2) The parties did not reasonably foresee the event occurring
iii. (3) the purpose of contract has been completely or almost completely
destroyed, and
iv. (4) the purpose was realized by both parties at the time of contracting
ii. Discharge by Parties
1. Modification
a. Any modification of terms of an agreement discharges those terms that were
the subject of the modification. It does NOT discharge the whole contract.
2. Rescission
a. A contract may be discharged by an express agreement either orally or in
writing between the parties to rescind based on a meeting of the minds. The

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agreement is itself a binding K supported by consideration – giving up each
other’s rights – both parties must have the duty to perform.
b. Where only one party is required to perform, rescission is invalid. If offeree has
performed, rescission must be supported by new consideration, promissory
estoppel, or the offeree manifests a gift.
3. Novation
a. A novation occurs when a new contract substitutes a new party to receive
benefits and assume duties that belonged to an original party. A novation
discharges the old contract. There must be;
i. (1) a previously valid contract
ii. (2) an agreement among all parties to the new contract
iii. (3) immediate extinguishment of contractual duties between the
original contracting parties, and
iv. (4) a valid and enforceable new contract.
4. Accord & Satisfaction
a. An accord is a new agreement that arises out of some good faith dispute
between parties who are already under contract– it must be supported by
consideration. An accord alone does not discharge prior contractual duties – it
suspends them until satisfaction.
i. Example – Check for lesser amount saying “paid in full”
ii. Partial payment of original debt - Offer to pay a smaller amount than
the existing obligation will qualify for A&S if there is a "bona fide
dispute" as to the claim OR there is at least slight alteration in the
debtor's consideration
b. Satisfaction is the performance of the accord agreement, which discharges both
the prior contract and the accord contract.
D. Breach
i. Material Breach
1. A breach is material if the non-breaching party does not receive a substantial benefit of
the bargain. Material breaches excuse performance, the entire contract is discharged
and the non-breaching party may sue for breach of the entire contract.
2. Material breach = less than half performance.
ii. Minor Breach
1. A breach is minor if the non-breaching party does receive a substantial benefit, and he
still must perform but may get damages as a set-off.
iii. Courts generally consider the following factors in determining the materiality of a breach:
1. (1) the extent to which the nonbreaching party will receive the benefit he expected;
2. (2) the extent to which the nonbreaching party can be compensated in damages;
3. (3) the hardship to the breaching party if the contract is terminated;
4. (4) the extent to which the breach was negligent or willful;
5. (5) the extent to which the breaching party has performed and the likelihood of full
performance.

VII. Remedies
A. DAMAGES
i. Compensatory Damages
1. The goal of damages for breach of contract is to protect a party’s expectancy interest –
to put the nonbreaching party in a position she would have been had the contract
been fully performed. This is known as “benefit of the bargain” damages.
2. Measure of Damages

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a. A nonbreaching party’s measure of damages includes sufficient monetary award
for the party to buy substitute performance (expectation damages), PLUS
consequential and incidental damages LESS any money saved by the breaching
party’s breach.
b. Consequential Damages = losses naturally resulting from the breach that are
reasonably foreseeable (only avail to buyer in goods contract)
i. Losses over and above standard expectation damages
c. Incidental Damages = expenses reasonably incurred by the buyer incident to
seller's breach
i. Buyer: inspect, receive, transport, store goods rightfully rejected, etc
ii. Seller: storing, shipping, reselling goods, etc
d. CERTAINTY – the plaintiff must prove that the damages are reasonably certain
and are not speculative in nature.
3. Reliance alternative:
a. Where the expectation damages are too difficult to determine or are
speculative in nature, a party may recover reliance damages – which are
damages to put the party in the position she would have been had the contract
never been formed.
b. This is measured by the cost of plaintiff’s performance.
ii. Liquidated Damages
1. The parties to a contract may stipulate what damages are to be paid in the event of a
breach. These damages must be reasonable in view of the actual or anticipated harm
caused by the breach. Two requirements:
a. (1) Damages for contractual breach must have been difficult to estimate or
ascertain at the time the contract was formed; and
b. (2) Amount agreed upon must have been a reasonable forecast of
compensatory damages in the case of a breach. If it is unreasonable, it will be
an unenforceable penalty.
iii. Duty to Mitigate
1. The non-breaching party must take reasonable efforts to cut her losses. Failure to do so
will lessen the non-breaching party’s damages by the amount that could have been
avoided by mitigation.
iv. Punitive Damages
1. Punitive damages are not available in contract cases (but can get under tort of fraud)
v. Contracts for the Sale of Goods
1. Buyer’s damages for seller’s breach = difference between K price and market price or
cover price, plus incidental and consequential damages less expenses saved.
a. Cover must be commercially reasonable and be done with good faith - can't
decide to buy higher quality if identical goods are available w/ plenty of time
2. Seller’s damages for buyer’s breach = difference between K price and market price or
resale price, + incidental damages less expenses saved (no consequential)
a. Lost volume seller - If seller has access to unlimited numbers (virtually) to the
good, it can recover for lost profits + incidental damages
i. (regardless of ability to cover b/c could have done both sales…)

B. RESTITUTION
i. Restitution is not part of contract law, but is instead a distinct concept based on preventing
unjust enrichment when one has conferred a benefit on another without gratuitous intent and it
would be unjust to allow the other party to retain the benefit without compensating Π.
Restitution is available when a contract exists and has been breached or under a quasi contract
when a contract is unenforceable or in some cases where there was never a contract.
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ii. Modernly, both the nonbreaching party and the breaching party can sue for restitution
1. Breaching party's recovery is limited to the K price less damages incurred from breach
iii. Measure of damages for restitution is the value of benefit conferred to defendant
1. If Π has already performed, restitution is unavailable and Π is limited to damages.
2. If Π has not performed, he may cancel the K and sue for restitution
iv. If there is no contract between the parties, the plaintiff can recover if:
1. (1) Π conferred a benefit on the Δ with reasonable expectation of compensation,
2. (2) Δ knew or had reason to know of Π's expectation of compensation, and
3. (3) Δ would be unjustly enriched if allowed to retain the benefit w/o compensating Π
v. Advance payments/Deposits in Goods Ks (absent a liquidated damages clause)
1. If buyer pays in advance then breaches, he can recover some of the pmt unless the
seller can prove greater damages. If seller cannot prove greater damages, seller is
entitled to keep 20% of the purchase price or $500, whichever is less

C. EQUITABLE RELIEF
i. Specific Performance
1. A party may seek specific performance only if the legal remedy is inadequate. Specific
performance is where the court orders the parties to perform under an otherwise valid
agreement. It requires the following elements to be satisfied:
a. (1) a valid contract (with clear terms)
b. (2) inadequate remedy at law
c. (3) plaintiff must be ready and willing to perform his obligations
d. (4) defendant must be able to perform
e. (5) feasible enforcement – court must be able to enforce the order
f. (6) it is not a contract for personal services
2. Defenses:
a. Laches – unreasonably delay which prejudices the defendant.
b. Unclean Hands
c. Hardship
d. Mistake/Misrepresentation
e. Bona Fide Purchaser for value
ii. Rescission
1. Rescission is a remedy whereby the original contract is considered voidable and is
cancelled. The grounds for rescission must occur before or at the time the contract was
entered into. Furthermore, there must be no equitable defenses preventing rescission.
a. Grounds for rescission include: Mistake, fraud (misrepresentation), duress,
undue influence, illegality, lack of capacity, failure of consideration.
iii. Reformation
1. Reformation is a remedy whereby the writing setting forth the agreement between the
parties is changed by the court so that it conforms with the original intent of the parties.
a. Grounds: Usually based on mistake or misrepresentation.

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