Contracts Outline
© 1999 Jeffrey T. Ferriell

This outline is designed as a general guide to the major topics covered in Prof. Ferriell's first-year course in Contracts at Capital University Law School.  For a full understanding of these topics, comprehension of significant additional reading is necessary.

  1. Remedies
    1. Expectation Money Damage Remedies: Placing Innocent Party in Financial Position Equivalent to Performance: Standard Formulas
      1. Goods
        1. Seller as Innocent Party
          1. Contract Price minus Resale Price or Market Value 2-706 or 2-708(1)
          2. Lost Profits 2-708(2)
          3. Action for Price if Buyer Accepts Goods 2-709
          4. Incidental Damages
          5. Less Expenses Saved
        2. Buyer as Innocent Party
          1. Seller Fails to Deliver or Buyer Rejects Goods Due to Non-Conformity
            1. Cost of Cover or Market Value Minus unpaid Contract Price 2-712 or 2-713
            2. Incidentals + Consequentials 2-715
            3. Less Expenses Saved
          2. Breach of Warranty for Goods Accepted by Buyer
            1. Difference Value or Cost to Repair 2-714
            2. Incidental Damages 2-715(1)
            3. Consequential Damages 2-715(2)
          3. Seller Fails to Deliver and Cover not Possible - Specific Performance 2-716
      2. Services
        1. Provider as Innocent Party
          1. Profit plus Expenses Incurred
          2. Contract Price minus Expenses Saved
        2. Recipient as Innocent Party
          1. Difference in Value or Cost to Perform
          2. Consequential Loss
      3. Real Estate
    2. Limits on Expectation Damages
      1. Mitigation
      2. Forseeability
      3. Speculative Damage or Valuation of Damage
    3. Reliance Alternative to Expectation: Restoring Innocent Party to Pre-K Status Quo
      1. Essential and Incidental Expenses incurred in connection with the Contract
      2. Mitigation of Expenses which can be Salvaged
      3. Forseeability of Expense
      4. Value of Expectation as Limit
    4. Restitution Alternative to Expectation: Prevent Unjust Enrichment
      1. Where There is No Contract
      2. Rescission of Contract
    5. Equitable Remedies as Alternatives to Money Damage Substitutes for Performance: Specific Performance & Injunctions
      1. Damages Inadequate - Unique Performance or Substitute not otherwise available
      2. Balance of Equities: Measure impact on the Parties
      3. Real Estate - Traditionally Considered Unique
      4. Goods - Only if Cover Unavailable
      5. Services - Difficulty of Enforcement
  2. Enforceability of Promises
    1. Effect of the Seal
    2. Consideration: Bargained For Exchange
      1. Bargained for Detriment or Benefit: Mutual Conventioinal Inducement
      2. Inadequacy Generally Irrelevant 
      3. Nominal Consideration
      4. Sham Consideration not Consideration
      5. Past Consideration & Restitutionary Obligations absent Consideration
      6. Illusory Promises 
        1. Discretion exercised in good faith
        2. Implied Promises
        3. Requirements & Output Contracts: 2-316
    3. Reliance on a Promise: Forseeable Detrimental Reliance
      1. Bargain Element Lacking where Promisor did not bargain for detriment
      2. Forseeability of detriment makes promise enforceable to the extent necessary to protect reliance interest
  3. Formation of Agreements
    1. Objective Manifestations of Intent Control
    2. Indefinite Terms & UCC Gap Fillers
      1. Contract with Indefinite Terms OK, provided parties intended to be bound and there is an adequate basis for providing an appropriate remedy
      2. Absence of Terms may indicate lack of intent to be bound.
    3. Misunderstandings Prevent Contract Formation
      1. Restitution of Benefits Conferred
      2. No misunderstanding if one party has reason to know of the intent of the other
    4. Termination of Offers
      1. Death or incapacity of Offeror
      2. Rejection (including counter-offer)
      3. Revocation
    5. Irrevocability of Offers: Option Contracts
      1. Consideration to support promise to keep offer open
      2. Reliance on promise to keep offer open
      3. UCC 2-205 Firm Offer Rules
    6. Acceptance of Offers
      1. Counter-Offers & 2-207
      2. Method of Acceptance
        1. Method Specified by Offeror as Condition or Suggestion
        2. Silence as Acceptance - Normally Ambiguous
        3. Time of Acceptance
    7. Statute of Frauds
      1. Types of Contracts Covered
      2. Signed Writing by Party against whom enforcement is sought
      3. Substitutes for a Signed Writing
        1. Part Performance
        2. UCC: Confirmatory Memo Received & Not objected to, Between Merchants
        3. UCC: Goods Accepted or Paid For
        4. UCC: Admission in Pleadings or Otherwise
        5. UCC: Special Manufacture & Not suitable for sale to others in the ordinary course
    8. Consequences of a Writing: Parol Evidence Rule
      1. Prior or Contemporaneous Promises Excluded
      2. Integration of Written Agreement
        1. Partial Integration or Full Integration
        2. Method of Determining Integration:
          1. Four Corners of the Writing
          2. Surrounding Circumstances
      3. Consistency of Additional Terms: Direct Contradiction or Absence of Reasonable Harmony
      4. Exceptions to the Rule:
        1. Collateral Agreement
        2. Fraud
        3. Reformation due to Mutual Mistake,
        4. Condition Formation
        5. Ambiguity
      5. UCC 2-202
        1. Explained or Supplemented w/ evidence of Consistent Additional Terms unless Writing Fully Integrated
        2. Usage of Trade, Course of Performance, Course of Dealing
  4. Policing the Bargain
    1. Standardized Agreements
      1. Adhesion Contracts Normally enforceable
      2. Gross Disparity in Bargaining Power - Monopoly Power
      3. Reasonable Understanding or Expectation
      4. Conspicuous Terms
    2. Competency:
      1. Timely Disaffirmance
      2. Full Restitution for Necessaries
      3. Age - Lack of Majority
        1. Full Restitution/Restitution of Benefits Remaining
          1. Full Restitution for Necessaries
        2. Misrepresentation of Majority
      4. Mental Incapacity
        1. Volitional or Cognitive Test
        2. Restitution of Benefits Received
        3. Necessaries
        4. Void after Adjudication of Incompetence
      5. Duress
      6. Undue Influence
      7. Fraud
      8. Constructive Fraud: Fiduciary or Confidential Relationship
      9.  
    3. Modifications of Agreements
      1. Consideration & Pre-Existing Duty
        1. Rescission of Original Contract
        2. Peppercorn Consideration
        3. Unanticipated Circumstances
      2. UCC 2-209
        1. No Consideration Needed
        2. Requirement of Good Faith Good Faith
      3. Economic Duress
      4. Accord & Satisfaction
        1. Unliquidated Debt
        2. Bona Fide Dispute
        3. Payment in Full Checks & UCC 3-311
      5. Contractual Provisions Requiring Modifications in Writing
      6. Waiver & Estoppel
    4. Mistake
      1. Mutual Mistake affecting basic assumption of the contract where risk of mistake not assumed by party seeking to avoid the contract
      2. Relief for Unilateral Mistake0
    5. Misrepresentations: Warranty & Fraud
      1. Express Warranties: Promises or Affirmations of Fact
      2. UCC Express Warranties: 2-313
        1. Promises
        2. Affirmations of Fact
        3. Descriptions
        4. Samples & Models
    6. Implied Warranties
      1. UCC - Merchantability: 2-314
      2. UCC - Fitness for Buyer's Particular Purpose: 2-315
      3. Real Estate - Habitability
    7. Impossibility & Impracticability; Frustration of Purpose
    8. Unconscionability
      1. Oppression and Unfair Surprise
      2. Disparate Bargaining Power & Unreasonably One-Sided Terms
      3. Procedural and Substantive Unconscionability
  5. Performance
    1. Express Conditions
      1. Promise or Condition: Preference for Promise rather than Condition where language Not Clear
        1. Language of Condition: "If"; "subject to"; "on condition"; "provided that"
        2. Language of Promise: "Promise"; "Will"
      2. Conditions Precedent, Concurrent, Subsequent
        1. Condition Precedent (Condition) - Occurrence, not certain to occur, which must occur, unless excused, before a performance becomes due
        2. Concurrent conditions -- Conditions on both parties Performance, which must occur simultaneously, before either party's duty to perform comes due:
          1. usually constructive conditions derived from mutual promises
        3. Condition Subsequent -- Discharges Previously matured duty to Perform
      3. Non-Occurrence or "Failure" of a Condition to Occur
        1. Obligor may Suspend Performance
        2. Discharge of Duty
    2. Particular Types of Conditions
      1. Conditions of Satisfaction
        1. Good Faith/Reasonableness
        2. Restitution for Value of Benefit Conferred
      2. Payment from Particular Fund
      3. Notice - Typically in Insurance Policies
    3. Constructive Conditions
      1. Substantial Performance of Promise as Constructive Condition
      2. Dependent or Independent Promises
      3. Order of Performance
        1. Real Estate - Concurrent Conditions Requiring Simultaneous Performance, unless circumstances indicate otherwise
          1. Aggrieved Party must normally tender performance or lose action for breach
          2. Excuse of Tender
            1. Return Performance Impossible
            2. Return Performance Repudiated;
            3. Tender Waived
            4. Aggrieved party must remain ready willing and able to perform
        2. Goods - Concurrent Conditions Requiring Simultaneous Performance
        3. Services - Substantial Performance of Service a Condition Precedent to Obligation to Pay
    4. Excuse of Conditions
      1. Impossibility or Impracticability
        1. Risk of Impossibility not Assumed
        2. Condition not Material
        3. to Avoid Disproportionate Forfeiture/Unjust Enrichment
      2. Prevention - Condition excused where party prevents its occurrence
      3. Waiver - Intentional Relinquishment of a Known Right
        1. True waiver requires assent by waiving party
        2. Retraction and reinstatement of condition before time for occurrence of condition & before reliance on waiver
      4. Estoppel Due to Reliance
      5. Election
        1. Waiver after time for condition to occur has past
        2. where Condition Not Material (e.g., Insurance Co. election to pay despite failure of insured to give timely notice)
      6. Retraction of Waiver
      7. Breach
        1. Prevention
        2. Repudiation of a Duty
    5. Substantial Performance
      1. Goods - Perfect Tender Rule of UCC 2-601
        1. Mitigating Rules
          1. Opportunity to Cure of 2-508 (Bartus v Riccardi); but shaken faith may not be cured
          2. Interpretation of Contract (Beck & Pauli Lithographing)
          3. Revocation of Acceptance for Substantially Impairing Defect
      2. Services - Substantial Performance (Plant v. Jacobs; Jacobs & Young v. Kent)
        1. Essential Purpose of the Contract Satisfied
        2. Damages for Defects (Difference Value or Cost of Performance
        3. Restitution by breaching party, for Value of Benefit Conferred absent substantial performance
          1. some courts assert that Wilful Breach prohibits restitution
    6. Divisibility -- Substantial Performance of Divisible Portion of Contract;


    8. Anticipatory Repudiation (Breach) & Prospective Inability to Perform
      1. Anticipatory Repudiation is a definite and unequivocal manifestation of unwillingness or inability to perform a material executory portion of a contract in which both parties have material obligations remaining to be performed
        1. must be definite and unequivocal
        2. repudiated duty must be material
        3. material bilateral duties remaining to be performed by both parties (no anticipatory repudiation of unilateral contract, or of a bilateral contract where one party's obligations already substantially performed)
      2. Effect of Anticipatory Repudiation
        1. Aggrieved Party may bring an immediate action for breach, or wait for repudiating party to perform
        2. Aggrieved Party is discharged from further performance of its own remaining obligations and may declare contract terminated
      3. Prospective Inability to Perform falling short of Repudiation
        1. Traditional Common law gave aggrieved party no recourse
        2. UCC permits aggrieved party to made demand for reasonable assurances of performance.
          1. Reasonable Grounds for Insecurity by Aggrieved Party
          2. Written Demand for Assurance of Performance
          3. Suspend Performance while awaiting Assurance
          4. Failure to Provide Adequate Assurance may be treated as a Repudiation


  6. Third Parties
    1. Third Party Beneficiaries
      1. Types of Beneficiaries
        1. Creditor Beneficiaries - Promisee owes money obligation to Third Party. Has rights on the contract
        2. Donee Beneficiary (Intended Beneficiary). Circumstances indicate intent of promisee to benefit Third Party. Has rights on the contract.
        3. Modern Terminolgy (Restatement 2d § 302) refers to "Intended" Beneficiaries
        4. Incidental Beneficiary. Circumstances indicate no intent to benefit Third Party. Has no rights under the Contract.
        5.   
      2. Modification of Beneficiaries Rights by Promisor and Promisee - Permitted until Third Party's Rights have vested.
        1. Vesting may occur in one of three ways, depending on type of Beneficiary and Jurisdiction
          1. Creation of the Contract
          2. Beneficiary's Knowledge and Acceptance of the contract
          3. Beneficiary's Reliance on the Contract
        2. Type of Beneficiary affects Vesting
          1. Creditor - Knowledge of the Contract
          2. Other Intended Beneficiary - Reliance on the Contract
          3. Restatement 2d § 311 vests rights of Intended Beneficiaries when beneficiary materially changes his position in justifiable reliance; brings suit; or manifests assent at the request of the promisor or promsiee
      3. Defenses in Action by Third Party
        1. Promisor may assert defenses arising from contact with the Promisee
        2. May not assert defenses arising from contract between Promisee and Third Party, but may
    2. Assignments to Third Parties
      1. Assignment of Contract = Rights and Duties
      2. Assignability
        1. Impairment of Receiving Return Obligation
        2. Non-Delegability of "Personal" Duties
        3. Anti-Assignment Clauses unenforceable if purport to prevent assignment of payment rights
      3. Assignee's Freedom from Defenses
        1. Assignee subject to same transactionial defenses as assignor
        2. Assignee subject to defenses based on other transactions only if defense accrued before notice of assignment to obligor
        3. Holder in Due Course Doctrine and Waiver of Defense Clauses may insulate Assignee from Obligor's Defenses
          1. FTC Holder in Due Course Rule prevents HDC status in Consumer Transactions
          2. Close-Connectedness Doctrine impairs HDC Status

bluedot.gif (255 bytes) Return to Prof. Ferriell's Home Page
bluedot.gif (255 bytes)   Return to Contracts Page
bluedot.gif (255 bytes)   Return to Law School Home Page

Page Maintained by Jeff Ferriell; Last updated on 04/27/99