Master of Laws (LLM) Contracts and Commercial Law (Common Law and UCC Article 2) Syllabus

What are the two types of contractual incapacity that allow voiding a contract?

Infancy (minors under 18) and mental incapacity/intoxication. Such contracts are voidable at the option of the incapacitated party, who may disaffirm; minors remain liable for necessaries.

Distinguish mutual mistake from unilateral mistake and their effects on a contract.

Mutual mistake (both parties wrong about a basic assumption with material effect, risk not allocated) makes the contract voidable by the adversely affected party. Unilateral mistake generally does not unless the other party knew or should have known of the mistake, or enforcement would be unconscionable.

What are the elements of duress that make a contract voidable?

An improper threat that leaves the victim no reasonable alternative but to assent. Economic duress (wrongful threat depriving a party of meaningful choice) can qualify.

What are the two components of unconscionability?

Procedural unconscionability (unfair bargaining process, e.g., hidden terms, gross disparity in bargaining power) and substantive unconscionability (unduly harsh/oppressive terms). Assessed as of the time of contracting; remedy may be refusal to enforce or striking the offending clause.

What is undue influence?

Unfair persuasion of a party who is under the domination of the persuader or who, by relationship, is justified in assuming the persuader will not act inconsistently with their welfare. Renders the contract voidable.

State the parol evidence rule.

When parties express their agreement in a writing intended as the final integration, prior or contemporaneous oral agreements and prior writings that contradict (or, if fully integrated, supplement) the writing are inadmissible to vary its terms.

Distinguish a partial integration from a complete (total) integration.

A partial integration is final as to the terms stated but not complete; consistent additional terms may be admitted. A complete integration is the full and exclusive statement; no additional terms (even consistent) may be added.

Name situations where parol evidence is admissible despite an integrated writing.

To show: formation defects (fraud, duress, mistake, illegality, lack of consideration), a condition precedent to effectiveness, the meaning of ambiguous terms, a collateral agreement, or a subsequent modification.

How does the UCC treat course of dealing, usage of trade, and course of performance relative to the parol evidence rule?

Under UCC 2-202, even a final/complete writing may be explained or supplemented by course of performance, course of dealing, and usage of trade (they are not barred), but not by contradictory prior agreements.

What is a condition precedent?

An event that must occur before a party's duty to perform becomes absolute (e.g., 'this offer is contingent on financing approval'). Until it occurs, there is no duty to perform.

Distinguish a condition subsequent from a condition precedent.

A condition precedent must occur before the duty to perform arises. A condition subsequent is an event whose occurrence cuts off (discharges) an already existing duty to perform.

What are concurrent conditions?

Mutually dependent conditions to be performed at the same time, where each party's performance is conditioned on the other's tender (e.g., payment and delivery in a simultaneous exchange).

How may a condition be excused?

By waiver, estoppel, the obligor's wrongful prevention or hindrance of the condition, voluntary disablement, or to avoid forfeiture where the condition is immaterial and forfeiture would be disproportionate.

What is the implied duty of good faith and fair dealing?

Every contract imposes on each party a duty of good faith and fair dealing in its performance and enforcement, prohibiting conduct that destroys the other party's right to receive the benefits of the agreement.

What are 'requirements' and 'output' contracts, and what limits them under the UCC?

A requirements contract obligates a buyer to buy all it needs from the seller; an output contract obligates a seller to sell all it produces to the buyer. UCC 2-306 implies good faith and bars quantities unreasonably disproportionate to stated estimates or prior demand.

What is the implied warranty of merchantability and who is bound by it?

Implied in every sale by a merchant who deals in goods of that kind (UCC 2-314): goods must be fit for their ordinary purpose, of fair average quality, adequately packaged, and conform to label representations.

What is the implied warranty of fitness for a particular purpose?

Under UCC 2-315: when the seller (need not be a merchant) has reason to know the buyer's particular purpose and that the buyer relies on the seller's skill/judgment to select suitable goods, the goods are warranted fit for that purpose.

How are express warranties created under the UCC?

Under UCC 2-313, by any affirmation of fact or promise relating to the goods, any description of the goods, or any sample/model that becomes part of the basis of the bargain. Mere opinion or 'puffing' does not create a warranty.

How may implied warranties be disclaimed under the UCC?

Merchantability is disclaimed by mentioning 'merchantability' (oral or written; if written, conspicuous). Fitness must be disclaimed in a conspicuous writing. Both can be disclaimed by 'as is,' 'with all faults,' or by the buyer's examination of the goods.

What is the 'perfect tender rule' under the UCC?

Under UCC 2-601, in a single-delivery sale of goods, if the goods or tender fail in any respect to conform to the contract, the buyer may reject all, accept all, or accept any commercial units and reject the rest (subject to the seller's right to cure).

What is the seller's right to cure under the UCC?

If the time for performance has not expired, a seller who made a nonconforming tender may notify the buyer and cure within the contract time. After the time expires, the seller may have additional reasonable time to cure if it reasonably believed the tender would be acceptable.

What is the common law performance standard of 'substantial performance'?

Under common law (not UCC's perfect tender), a party who substantially performs (renders performance that does not fall short of the bargain in a material way) may enforce the contract, subject to offset for damages caused by the minor deviations.

How do you distinguish a material breach from a minor breach, and why does it matter?

A material breach deprives the non-breaching party of the substantial benefit of the bargain, excusing their counter-performance and allowing suit for total breach. A minor breach allows damages but the non-breaching party must still perform.

List factors used to determine whether a breach is material.

Restatement factors: extent the injured party is deprived of expected benefit, adequacy of compensation by damages, extent of forfeiture by the breaching party, likelihood of cure, and good faith of the breaching party.

What is anticipatory repudiation and what options does the non-repudiating party have?

An unequivocal statement or act, before performance is due, that a party will not perform. The non-repudiating party may: sue immediately, suspend performance and await performance, treat the contract as discharged, or urge retraction. (Not available if the repudiating party owes only money and other party has fully performed.)

When and how may a repudiating party retract an anticipatory repudiation?

A repudiation may be retracted until the other party has materially changed position in reliance, indicated the repudiation is final, or sued. Retraction reinstates the repudiating party's rights and duties.

What is the right to demand adequate assurance of performance (UCC 2-609)?

When reasonable grounds for insecurity arise, a party may demand in writing adequate assurance of due performance and may suspend its own performance until received. Failure to provide assurance within a reasonable time (max 30 days) is treated as a repudiation.

What are the elements of discharge by impossibility?

Performance becomes objectively impossible (no one could perform) due to an event whose non-occurrence was a basic assumption of the contract, the party did not assume the risk, and was not at fault. Examples: death of an essential person, destruction of subject matter, supervening illegality.

What is impracticability and how does it differ from impossibility?

Impracticability discharges duty when performance becomes extremely and unreasonably difficult/expensive due to an unforeseen event whose non-occurrence was a basic assumption and risk was not assumed. Unlike impossibility, performance is still physically possible but commercially senseless; mere increased cost usually is not enough.

What is frustration of purpose?

A party's principal purpose is substantially frustrated by a supervening event whose non-occurrence was a basic assumption, without that party's fault. Performance is still possible, but it has lost its value to that party (e.g., renting a room to view a parade that is cancelled).

In a goods contract with no agreement and no breach, when does risk of loss pass from a merchant seller to the buyer?

Under UCC 2-509, with a merchant seller, risk of loss passes to the buyer upon the buyer's receipt of the goods. (With a non-merchant seller, it passes on tender of delivery.)

How does risk of loss pass in shipment vs. destination contracts?

In a shipment contract (e.g., FOB seller's city), risk passes to the buyer when conforming goods are delivered to the carrier. In a destination contract (e.g., FOB buyer's city), risk passes when the goods are tendered at the destination.

How does a breaching party affect risk of loss under the UCC?

If goods are nonconforming so as to give a right of rejection, risk of loss remains on the seller until cure or acceptance. A buyer's breach may shift risk to the buyer for a commercially reasonable time for any deficiency in the seller's insurance coverage.

When is a buyer deemed to have 'accepted' goods under the UCC, and what is the effect?

Acceptance occurs when the buyer, after a reasonable opportunity to inspect, signifies the goods conform or will keep them despite nonconformity, or fails to make an effective rejection, or does any act inconsistent with the seller's ownership. Acceptance precludes rejection and shifts to the buyer the burden of proving breach; revocation may still be possible.

What is the standard measure of expectation (benefit-of-the-bargain) damages?

Damages that put the non-breaching party in the position they would have occupied had the contract been fully performed. Generally: loss in value of the other party's performance + other (consequential and incidental) losses − costs/loss avoided.

What is the buyer's measure of damages for a seller's failure to deliver goods?

Either cover damages (cost of replacement goods bought in good faith − contract price) or market damages (market price at the time the buyer learned of the breach − contract price), plus incidental and consequential damages, minus expenses saved.

What are reliance damages and when are they used?

Damages reimbursing expenses the plaintiff incurred in reliance on the contract, restoring them to their pre-contract position. Used when expectation damages are too speculative to prove (e.g., in promissory estoppel).

What are restitution damages and what principle do they prevent?

Damages measured by the benefit conferred on the defendant (value of plaintiff's performance), restoring that benefit to prevent unjust enrichment. Available even to a breaching party for benefits conferred beyond the non-breacher's damages.

What are the requirements to recover consequential damages (Hadley v. Baxendale rule)?

Consequential damages are recoverable only if they were a foreseeable result of the breach at the time of contracting—arising naturally from the breach or from special circumstances the breaching party had reason to know. They must also be reasonably certain and unavoidable (mitigation).

What is the duty to mitigate damages?

A non-breaching party cannot recover damages it could have avoided through reasonable efforts. Failure to make reasonable efforts to limit losses reduces recoverable damages (it is not an affirmative duty but a limitation on recovery).

What makes a liquidated damages clause enforceable rather than an unenforceable penalty?

Damages must have been difficult to estimate at the time of contracting, and the stipulated amount must be a reasonable forecast of probable harm. If it operates as a penalty (grossly excessive), it is void.

When is specific performance available as a remedy?

When the legal remedy (damages) is inadequate—typically for unique goods or land (land is always considered unique)—the contract terms are definite, mutuality of remedy exists, and enforcement is feasible. Not available for personal service contracts (courts won't compel and it raises involuntary servitude concerns).

What is rescission and on what grounds is it granted?

An equitable remedy that cancels (unwinds) the contract and restores the parties to their pre-contract positions. Grounds include mutual mistake, misrepresentation/fraud, duress, undue influence, or failure of consideration.

What is reformation as an equitable remedy?

A court rewrites the written contract to reflect the parties' actual agreement when, due to mutual mistake or fraud, the writing fails to express their true intent.

Distinguish an intended third-party beneficiary from an incidental beneficiary.

An intended beneficiary is one the contracting parties intended to benefit (named or identifiable) and who can enforce the contract. An incidental beneficiary benefits only indirectly and has no enforceable rights.

Distinguish a creditor beneficiary from a donee beneficiary.

A creditor beneficiary is owed a prior obligation by the promisee, satisfied by the promisor's performance. A donee beneficiary receives the performance as a gift from the promisee. Both are intended beneficiaries who can sue the promisor.

When do a third-party beneficiary's rights 'vest,' and why does it matter?

Rights vest when the beneficiary (1) manifests assent to the promise, (2) sues to enforce it, or (3) materially/justifiably relies on it. After vesting, the original parties cannot modify or rescind the contract without the beneficiary's consent.

What is an assignment of rights, and what rights are not assignable?

An assignment is a transfer of one's rights (benefits) under a contract to a third party (assignee). Rights are not assignable if they materially increase the obligor's duty/risk, are personal in nature, or are barred by contract or law.

What is the effect of an assignment on the assignor and obligor?

The assignee can enforce the right directly against the obligor and takes subject to any defenses the obligor had against the assignor. A valid assignment extinguishes the assignor's right; if for consideration, it is irrevocable.

What is delegation of duties, and which duties are non-delegable?

Delegation transfers performance of a duty to a third party (delegatee). Duties are non-delegable when performance is personal (relies on special skill/judgment), the contract prohibits delegation, or delegation would materially alter the obligee's expectations.

After a valid delegation, who remains liable for performance?

The delegating party (delegator) remains liable; delegation does not relieve them unless there is a novation. If the delegatee assumes the duty for consideration, the obligee may enforce against both the delegator and the assuming delegatee.

What is a novation and how does it differ from a delegation/assignment?

A novation is a new contract substituting a new party for an original party, with the consent of all parties, that releases the original obligor from liability. Unlike a mere delegation, a novation discharges the original party.