纽约律考的合同法笔记

NEW YORK CONTRACTS(INCLUDING ARTICLE 2 SALES & ARTICLE 2A LEASES)1. APPLICABLE LAW2. CONTRACT FORMATION3. STATUTE OF FRAUDS (needs writing)4. CONTRACT TERMS5. PERFORMANCE6. EXCUSES FOR NON-PERFORMANCE7. REMEDIES8. THIRD-PARTY PROBLEMS (i.e. 3rd partybeneficiary; delegation of power; assignment)KEY ISSUE #1: APPLICABLE LAWA. The Multistate Bar Exam tests on 2 kinds of contract law: the common law of contracts(75% of the questions), & Article 2 of the Uniform Commercial Code (UCC) (25% of the questions). How do you know which applies?Article 2 applies to only to a sale of goods: "Goods" are moveable, personal property. NOT land; NOT services; NOT a loan; etc.The identity of the buyer and seller (corporation, merchant, etc.) is irrelevant. The value of the goods is also irrelevant for the applicability of Article 2 of the UCC.The common law applies to all other contracts.In case of mixed contracts (both goods and non-goods) me need to determine which component is the dominant and apply the body of law governing it.B. The New York part of the bar exam tests on 3 bodies of law: (1) the common law ofcontracts with New York variations; (2) Article 2 of the UCC for sales of goods; &(3) Article 2A of the UCC for leases of goods(this is not tested in the MBE since most ofthe states still haven't adopted it).KEY ISSUE #2: CONTRACT FORMATIONVOCABULARYA. Contract: A legally enforceable agreement. Not every agreement is a contract. First weneed to ascertain there is an agreement.An express contract is created by the parties' words, either oral OR written.An implied contract is created by the parties' conduct.B. Quasi-contract is an equitable remedy that applies whenever the application of contractlaw yields an unfair or inequitable result. Quasi-contract is not limited by contract rules, but is governed by equitable concepts. It protects against unjust enrichment.This is tested particularly in the NY part.In quasi contract the plaintiff can recover only the reasonable value of the benefitconferred on the other party, and NOT the contract price. Reasonable value is usuallylower than the contract price.C. Bilateral contract: An offer that can be accepted in ANY reasonable way.D. Unilateral contract: An offer that can be accepted ONLY by complete performance.All contracts are bilateral UNLESS the offer says it can be accepted only byperformance.FIRST STAGE OF AGREEMENT PROCESS: OFFERTo have an agreement we need:(1) An offer.(2) Absence of termination.(3) Acceptance of the offer.A. An offer is a manifestation of an intention to be bound, created by words or conduct.1. Context: Watch out for an advertisement: It's usually not an offer since there isno quantity term, only an invitation to deal.BUT if an ad specifies the quantity and who can accept then there is an offer.2. Content:a. Vague or ambiguous terms, like "fair/reasonable/appropriate" are not anoffer.b. "Requirements" or "output" contract: A contract where the quantity isdetermined by referring the buyer's requirements or seller's output.We'll see words such as "all/only/solely", signifying exclusivity. There isno need to include the word "requirements" or "output" expressly.In a requirements contract the buyer cannot take the seller by surprise.Any increase in the buyer's requirements has to be in-line with his priordemands.c. Open price term: Common law differs from Article 2 of the UCC: Underthe common law in order to transfer interest in land the contract MUSTdescribe the land and state the price, otherwise no contract exists.On the other hand, under Article 2 of the UCC a contract exists evenwithout stating the price term. Then if the parties cannot agree on the pricewhen it is time to perform, a reasonable price at that time will be suppliedby the court.Note however, that according to MPQ and NYT the court can supply aprice term for other types of agreements besides goods, e.g. services.SECOND STAGE OF AGREEMENT PROCESS: TERMINATION OF OFFER Effect: an offer cannot be accepted if it has been terminated (i.e., it is "dead").There are 4 ways to terminate an offer:A.Termination of an Offer by Lapse of Time: An offer expires on the date provided by thecontract, and if NO date is specified, then after a reasonable time.B.Termination of an offer by the Offeror's Revocation1. Revocation may be Direct OR Indirecta.Direct revocation: a statement by the offeror to the offeree indicatingunambiguously that the offeror has changed her mind.Offeror doesn't have to use the word "revoke", only make it clear.a.Indirect: conduct by the offeror unambiguously indicating a change ofmind that the offeree is aware of.Meaning two requirements: Both conduct and awareness of it by offeree.2. Revocation of an offer is only effective if it is received before acceptance.Note: The mailbox rule applies ONLY to acceptance - neither revocation norrejection.3. Generally, the offeror can revoke at any time before acceptance. However, thereare 4 situations where an offer cannot be revoked:a. Option: a promise to keep the offer open that's paid for (consideration).Hence the offeror bargained away his right to revoke for the duration of theoption.A rejection of the offer during the option period does NOT revoke theoption, UNLESS the offeror relied on the rejection. If so the offer is revokedfrom the date of reliance, and it is irrelevant when the offeree learned of it.b. Detrimental reliance that's reasonable & foreseeable: For example,when making a bid in an auction relying on sub-bids received from sub-contractors, the sub-bids become irrevocable offers since there isreasonable detrimental reliance foreseeable by the sub-contractor; butthere isn't a contract; hence bidder can reject but sub-contractor cannotrevoke.Preparation to perform can satisfy this exception (e.g. offer to unilateralcontract of painting fence, and offeree buys paint).c. Part performance of an offer to enter a unilateral contract: Partperformance is not acceptance, but it turns the offer into irrevocable.Mere preparation is not part performance, but it can be reasonable,foreseeable detrimental reliance (see above).d. Firm offer under Article 2 of the UCC: a signed, written promise by amerchant to keep an offer open. Here the writing serves as substitute forconsideration (i.e. the rationale is the same as an option).A "merchant" is a dealer of goods of that kind.A firm offer has a 3 month maximum limit. If the period specified in it isgreater than 3 months it will be scaled down. If no time period is specified,the firm offer will be open for a reasonable time not to exceed 3 months.Contrast with option: Needs consideration but there is no time limit.C.Termination of an Offer by the Offeree's Rejection1. A counteroffer operates as a rejection, but bargaining does NOT.A question ("will you accept less?") is bargaining.2. A conditional acceptance ("on the condition that/provided that/so long as/if")operates as a rejection and terminates an offer (no matter the condition).3. An acceptance containing additional or different terms operates as a rejectionunder the common law, BUT NOT under Article 2 of the UCC.a. Common law: Acceptance MUST mirror offer ("Mirror Image Rule").b. Article 2 of the UCC: Acceptance NEED NOT mirror offer (no "MirrorImage Rule").The rationale being the purpose to facilitate achieving a contract.Hence, under Article 2 of the UCC, additional terms do not preventagreement.HOWEVER, the offeree's additional terms rarely get into the contract!The offeree's additional terms become part of the contract ONLY if ("Battleof Forms"):(A) Both parties are merchants;(B) The term is NOT a "material" change. Note that disclaimer ofwarranty IS a material change and so is addition of arbitrationclause; AND(C) The offeror does not object within a reasonable time.D.Termination of an Offer by the Death of either party before acceptance UNLESS theoffer was irrevocable due to an option.The termination is automatic and doesn't require the awareness of the other party.THIRD STAGE OF AGREEMENT PROCESS: ACCEPTANCEA.Offer can (but usually does not) control the manner of acceptance.Typically an offer can be accepted by promising, performing or starting performanceUNLESS the offer states otherwise.If an offer is for a unilateral contract, then only by complete performance is the offeraccepted. If there is no complete performance there is no breach since there is no contract.B.Start of Performance as acceptance: It is acceptance only in a bilateral contract, not aunilateral.C.Improper Performance as Acceptance: Improper acceptance is treated as simultaneousacceptance and breach of contract.One exception under Article 2 of the UCC: Accommodation: If the seller sends insteadnonconforming goods but lets the buyer know why he is sending the wrong goods there's no acceptance and therefore no breach of contract. Instead there is a counteroffer whichthe buyer can either accept or reject.D.Silence as Acceptance: General rule: Silence or inaction is not acceptance. An offerorcannot single handedly bind an offeree by his silence (fear for being bound against one'swill).E.When is an acceptance effective?1.Mailbox Rule: acceptance is effective when mailed (whether received or not).Policy: Protects the offeree, who can rely on a contract being formed once hemails an acceptance.Key facts: (1) people are in different places & (2) there are conflictingcommunications. We need to figure out which communication controls, i.e. whichcommunication became effective first. Remember that revocation becomeseffective only when received.2. Exceptions to the Mailbox Rule:a. If the offer provides otherwise. Meaning the mailbox rule is only a defaultrule.b. Irrevocable offer: The acceptance must be received within the option (orfirm offer) period. Rationale: Offeree is protected by option and does notneed the mailbox rule.c. Acceptance then rejection: The mailbox rule applies (i.e. acceptancecontrols), unless the rejection is BOTH received first AND relied uponby the offeror.d. Rejection then acceptance: Mailbox rule does NOT apply, there is a raceof sorts - whichever response arrives first is effective.DEFENSES AGAINST FORMATIONA. Defendant's Lack of Capacity to Contract:1. Categories: under 18 (minors/infants) (objective test only; don't care what otherparty thought); intoxicated; mentally incompetent.2. An incapacitated defendant has the right to disaffirm (avoid) the contract.The defense can only be raised by the incapacitated party, not the other party.3. An incapacitated party can impliedly reaffirm a contract by retaining the benefitof the contract without complaint after he gains capacity.Meaning:i. Defendant lacked capacity at the time of the agreement.ii. Defendant later gains capacity.iii. Defendant retained the benefit of the contract without complaint.4. An incapacitated party is liable for necessaries (food, shelter, clothing, or medicalcare), but only on a quasi-contract basis(meaning the other party can receiveonly reasonable value).B. Duress: Physical or economic.Economic duress requires:(1) Somebody threatens to breach an existing contract unless he gets a better deal.(2) The other guy makes a new agreement because he desperately needs the first deal.(3) There's no alternative source of supply.Merely taking advantage of circumstances is not duress.C. Misrepresentation: A material misrepresentation that induce the agreement, even ifhonest and innocent, is a fatal flaw (there is no need for fraudulent, wrongful or negligent misrepresentation).D. Mistake of Fact in existence at time of agreement:1. Mutual mistake of material existing fact. But a mistake as to market value is notconsidered material (since the party should appraise the subject of the contracthimself) (exception: where both parties subject themselves to outside appraisalwhich turns out to be mistaken).2. Unilateral mistake of material existing fact: Only if the other party WAS awareor should have been aware of the mistake.E. Lack of Consideration OR a Substitute for It1. Definition: "bargained-for legal detriment/benefit": Meaning the detriment has tobe bargained for.For example, in a sale transaction, the promise to buy and the promise to sale arethe consideration each party gave.Forbearance can also be a consideration, even if the party would not have donethe act out of its own volition (since the forbearance denies the legal right).2. "Past consideration" is NOT consideration at all, since one cannot bargain forsomething that had already been done.3. Adequacy (value) of consideration is irrelevant.4. "Pre-existing duty rule" applies to contract modifications: Consideration isrequired for modifying a contract. If all a party did was promise to do what it wasalready legally obligated to do then the modification is unenforceable.The other party promising to pay is a 3 party (not a party to the contractgiving rise to the pre-existing duty).iii. Contract for sale of goods: Under Article 2 of the UCC there is no pre-existing duty rule; we only need good faith. But in case of a modificationwe may have to comply with SoF.5. Partial payment as consideration for promise to forgive balance of debt:a. Debt is due AND undisputed: Partial payment is NOT consideration.But if the promise is in writing, then under NY Law the considerationrequirement is satisfied anyway.b. Debt IS disputed: Partial payment is consideration and the release isenforceable. The rationale is that the law favors settlement of disputedclaims.But note: A partial payment not in cash but goods or some other form is probablyan accord.6. Promise to pay debt barred by SoL: Is enforceable only if in writing. In thiscase writing is substitute for consideration both under common law and NY law.7. Promissory estoppel as a substitute for consideration:Requires a promise ANDforeseeable, detrimental reliance on the promise.F. Illegality at time of agreement: Distinguish illegal subject matter from illegal purpose:The former makes the agreement completely unenforceable. In the latter only the partywith the illegal purpose cannot enforce the contract against the other party if the otherparty wasn't aware of the illegal purpose (but the other direction is okay).G. Public Policy1. Covenants not to compete: Need to test reasonableness of limitation's scope asto two aspects: Time and geography (balancing freedom of contract withrestraint of trade).In an employment related covenant not to compete we need IN ADDITION toassess whether there is a reasonable business need for the protection.2. Exculpatory clause: A clause eliminating contract liability. Contract law saysyou can contract away liability for negligence in appropriate contracts, but youcannot contract away liability for intentional torts and gross negligence.H. Unconscionability (look for oppressive terms or unfair surprise at time of agreement).The key is the time of the agreement and not afterwards. Look for substantiveunconscionability (the terms themselves are unfair) and for procedural unconscionability (because of the fine print or legalese).KEY ISSUE #3: STATUTE OF FRAUDSA. Contracts "within the Statute of Frauds" (means that the Statute of Frauds applies) requirewriting. Most contracts do NOT require writing. Technically this is a defense againstformation of contract.1. Transfer of an interest in real estate of more than one year's duration: Notethat transfer of title is transfer of interest in real estate forever, hence it is withinthe SoF, since by implication it is for more than one year."Interest" includes ownership, possession, easement, etc.2. Service contract incapable of being fully performed within a year from thedate of the agreement (NOT when performance is supposed to begin): We mustignore what actually happened and look at what might have happened under theterms of the contract.Whenever giving a specific task there is no SoF problem, since theoretically anytask can be performed in one year (e.g. by hiring more men, using heavymachinery, etc.).Life time contracts do NOT fall within the SoF since the party might die withinthe year.3. Sale of goods for $500 or more: The only dollar amount requirement in Article 2of the UCC is for its SoF to apply. The contract price has to be $500 or more.4. Lease of goods where lease payments total $1,000 or moreRemember to calculate the lease payments for the year.5. Promise to "answer for" the debt of another: Limited to guarantees; and only ifthe Main Purpose exception does not apply.Main Purpose exception: Where the purpose of the debt is to benefit theguarantor the SoF does not apply (less chances of fraud).6. Promise by an estate representative to use her own funds to pay estate expenses7. Promise in consideration of marriage: Meaning pre-nuptials and post-nuptials;but NOT promise to marry.B. Application of the SoF to contract modifications: The key is whether the contract asmodified falls within the SoF; if it does, then a writing is required for the modification."Modification must be written" clause: Under the common law such a clause is NOTenforceable. But under Article 2 of the UCC such a clause IS enforceable.C. Satisfying the SoF with a writing:1. Sale of goods: writing must contain a quantity term AND be signed by theparty asserting a Statute of Frauds defense (the defendant).Sale of goods between merchants: Again there need be a quantity term in writing,and signing by defendant; BUT signing by the party requesting enforcement issatisfactory if the following conditions are met:(i) Both parties must be merchants.(ii) The writing must confirm a prior agreement AND contain a quantityterm.(iii) There must be no response.The failure to respond ensures there was no fraud.3. All other prongs of the SoF (i.e. common law): Writing must contain all materialterms ("who" & "what") & be signed by party asserting a SoF defense (thedefendant).Hence the SoF can be a one-way street: The non-signing party can use the writingagainst the signing party but not the other way around.D. Satisfying the SoF without a Writing (i.e. exceptions to the SoF):1. Full performance of service contracts (and only full performance; partperformance is insufficient).2. Part performance in contracts for the transfer of an interest in real estate: Butonly if any 2 of the following 3 exist:i. Partial payment.Ii. Buyer's improvements of the real estate.iii. Buyer's possession of the real estate.3. Sale of goods:a. Part performance BUT only in respect to goods delivered by seller ORpaid for by buyer.b. Judicial admission in a pleading, in testimony or in response todiscovery.c. An unenforceable modification due to the SoF is treated as a waiver ofenforcing the unmodified terms. The waiver can be retracted with areasonable notice given before the other party changes position in relianceon the waiver.d. If the goods are custom made and not suitable for sale to others in theordinary course of seller's business, AND before buyer repudiates ANDseller made substantial beginning of manufacturing or commitments fortheir procurement (NYT 91).E. Written authority to sign agreement for another - "Equal dignities rule": Where the SoFrequires signing, giving an agent authority to sign on behalf of a party requires writing as well.KEY ISSUE #4: TERMS OF THE CONTRACTA. Words of the Parties:1. Effect of a writing: The Parol Evidence Rule keeps out evidence of what theparties said & wrote before they reduced the terms of their agreement to writing.A later written version is more reliable than anything that came before it. Hence aparty cannot sue for reformation based on parol evidence.2. Comparison of Statute of Frauds and the Parol Evidence Rulea. A parol evidence rule problem requires a writing.b. A SoF problem involves an oral agreement.3. Exceptions to the parol evidence rule:a. To correct a clerical error (e.g., a typo, transposing numbers, etc.).b. To establish a defense to the enforceability of an agreement: E.g., toshow misrepresentation.c. To explain the written contract (interpretation of a term, not contradiction)d. To supplement a "partially-integrated" writing: A final statement of theterms included, but not a complete statement of all terms agreed to.But note that a merger clause ("the contract is limited to the terms set forthherein") is treated as proof that the writing is complete on its face, andhence excludes supplement.e. To prove a condition precedent (CMR).f. To show the true consideration.g. To reform a written contract that didn't reflect the basic understanding ofthe parties.h. Collateral agreements.4. Changing an agreement after it has been reduced to writing (modification) isNOT subject to the parol evidence rule (which looks backwards not forwards).But the modification needs to comply with the modification rules (consideration,SoF, etc.).B. Conduct of the PartiesThese are, in order of hierarchy (most important to least important):1. Course of performance: What the parties have done under this contract: This isthe best evidence of what the parties meant.2. Course of dealing: What the parties have done under their earlier contracts.3. Usage of trade: What others in the trade do under similar contracts.C. Seller's Warranties of Quality in a Sale of Goods under Article 2 of the UCC:1. Express warranties: Include fact, promise or description, but NOT opinion: It isnot necessary to use the words "I warrant".Note that a sample or model constitutes express warrant and not implied warrant.2. Implied warranty of merchantability:a. Definition: Goods are fit for their ordinary purposeb. Key: Seller must be a merchant who deals on a regular basis in goods ofthe kind: Note, this is the only place in Article 2 of the UCC where aspecial type of merchant is necessary.3. Implied warranty of fitness for a particular purpose:a.Definition: The goods are fit for the buyer's special purposeb. Key: 3 requirements:(i) Buyer has special purpose;(ii) Buyer is relying on seller;(iii) Seller knows it.Note the seller doesn't have to be a merchant at all for the warranty toapply.D. Seller's Warranties of Quality in a Lease of Goods under Article 2A (NY only):E. Limitations on Warranty Liability in Sales and Leases of Goods:1. Disclaimer of warranties (clause that eliminates warranties): An expresswarranty CANNOT be disclaimed; only implied warranties CAN BEdisclaimed ("as is", "with all of their faults"; has to be in conspicuous writing(large print or bold type); if disclaiming only the implied warranty ofmerchantability must include the word "merchantability").2. Limitation of remedies (doesn't eliminate warranty, just limits recovery):i. You can limit the buyer's remedies for both express and impliedwarranties.ii. The test for the validity of any limitation of remedies is whether it isunconscionable (shocks the conscience of the court).iii. Unconscionability is measured at the time of the contract, not of themishap.It is presumed to be unconscionable to limit recovery for personal injury in atransaction involving consumer goods.F. Seller's Delivery Obligation in a sale or lease of goods involving a common carrier(e.g., UPS, Fed Ex, American Airlines, Red Ball Freight):1. Shipment contract: The requirements:i. Seller must get the goods to a common carrier.ii. Seller must make reasonable delivery arrangements.iii. Seller must notify buyer.Then the seller satisfies his duties under the contract, even though the buyer hasn'treceived the goods yet.2. Destination contract: Seller must get the goods to where buyer is located.FOB means Free On Board, i.e. where delivery takes place. When the contract is FOB ina city other than the seller's, that means destination contract.3. Delay: If there is a delay in delivery due to occurrence of a contingency whosenonoccurrence was a basic assumption on which the contract was made ANDseller seasonably gives buyer notice, then the delay will not be a breach. Buyercan contest and claim the delay is material and therefore a breach allowing fortermination of the contract.G. Risk of Loss in Sales of Goods:1.When goods are damaged before the buyer gets the goods, and neither the buyernor the seller is to blame, who bears the risk of loss? The consequences aresignificant:a. If the seller bears the risk of loss the seller must provide new goods to thebuyer for no additional cost, or is liable for breach of contract.b. If the buyer bears the risk, the buyer must still pay the contract price.2. The following hierarchy determines who bears the risk of loss:a. Agreement of the parties controls.b. Breach: The breaching party is liable for any uninsured loss; even if theloss is totally unrelated to the breach.c. Delivery by common carrier: The risk shifts to the buyer when the sellerhas completed his delivery obligations.d. If no common carrier (e.g., buyer to pick up or seller to deliver), theanswer depends on WHETHER the seller is a merchant(doesn't matterwhether the buyer is a merchant or not):i. If the seller IS a merchant, he bears the risk of loss until the buyertakes physical possession of the goods.Rationale: Seller is in better position to insure against the risk of loss.ii. If the seller is NOT a merchant, the seller bears the risk of lossuntil seller"tenders" the goods; i.e., makes the goods availableby notifying the buyer where the good are and how to pick them up.H. Risk of Loss in Leases of Goods (Article 2A):KEY ISSUE #5: PERFORMANCE OF THE CONTRACTA. Performance of Contracts for the Sale of Goods1. Perfect tender rule: the standard by which a seller's performance is measured.Under the perfect tender rule, a seller must deliver perfect goods in the rightplace at the right time.If seller fails perfect tender, the buyer has the right to reject the non-conforminggoods (if both conforming and nonconforming goods are received, buyer canreject all of them).However, for rejection to be proper, buyer must within reasonable timeseasonably notify the seller of the rejection.2. Cure: a seller who fails to make perfect tender MAY have an option to cure. Itusually depends on whether the time for the seller's performance has expired. Ifnot - can cure until the time for performing is over.S eller has the option to cure within reasonable time, even after the time forperformance has expired, if it had reasonable grounds (e.g. based on pastdealings) to believe that the wrong goods would be acceptable by the buyer.3. Installment sales contract:a. Depends on the language of the contract, whether it requires ORauthorizes the seller to deliver the goods in separate installments. Not onwhat seller does actually.b. Perfect tender rule does NOT apply to an installment sales contract. Asubstantial impairment is required in order to reject the goods.Policy: assumes seller will cure in the course of ongoing performance.4. Acceptance of the goods (distinguish acceptance of an offer):a. When acceptance occurs: Not before buyer had an opportunity to inspectthe goods for perfect tender.If buyer actually inspects the goods the acceptance is express; if thebuyer retains the goods without objection after having a reasonableopportunity to inspect the acceptance is implied.b. Effect of acceptance:i. Once a buyer accepts goods (expressly or impliedly), it is too latefor the buyer to reject.ii. A buyer who accepts non-conforming goods can still get damages.。