CONTRACTS OUTLINE
DISCLAIMER--IS THERE A REASON NOT TO ENFORCE
1. Meretricious (sex) Courts however, may be able to separate this from other consideration
2. Belongs in the domestic sphere
3. Private, binding in honor or morals only
I. BASES OF PROMISSORY LIABILITY
Was it a gift, is it legally enforceable, or is there another reason to enforce it?
A.. DIFFERENTIATION FROM A GIFT- A GIFT IS NOT AN ENFORCEABLE PROMISE
1. NOTE: Gifts are not enforceable because there is not consideration. Even conditional gifts are not enforceable, because there was no consideration, no mutuality.
Ex. Kirksey v. Kirksey If you move, I will support you. Not bargained for, no benefit to promisor Gratuitous promise, not contract.
2. Exception: Courts may be able to create consideration, such as confidentiality, desire for recognition, in order to 'make' a contract.
Allegheny College-Woman promised money to school and then renegged. Court created consideration in her desire to be remembered and schools effort to name fund after her.
3. Exception: When court can find benefit to promisor, (that is, he is getting what he wanted) and/or detriment to promisee (even if he was only giving up something he wouldn't do anyway) they may be able to enforce gift.
Hamer v. Sidway Uncle promised nephew money if he refrained from smoking and drinking. He did, and then was able to collect on the promise.
4. Exception: If justified reliance, maybe claim under promissary estoppel
B. RELIANCE (DAMAGES WOULD BE WHAT P SPENT IN RELIANCE)
--Relied-upon donative promises: Promissary Estoppel
1. There was a promise of some kind.
2. Promisor reasonably expects reliance
3. Reliance induced by the promise
4. Enforcement is the only way to prevent injustice
a) availability of other remedies, b) how definite and substantial was the detriment, c) reasonableness of action or forbearance, d) forseeability of the action or reliance, e) possible injustice on the promisor
---Usually, Promissary Estoppel a losing argument.
a. Exception: For public policy reasons or otherwise, courts may enforce as quasi-contract when there is reliance.
Ricketts-Grandfather promised money to granddaughter so she wouldn't
have to work, she quit her job, and then he didn't want to pay. Court
found equitable estoppel in his representation which induced her reliance
and forced him to pay
C. RESTITUTION/UNJUST ENRICHMENT (DAMAGES=$OFBENEFIT CONFERRED)
--This is not a real contract, but courts can fictionally imply a promise to pay for goods or services rendered to prevent unjust enrichment, even though no such promise was ever made or intended. Courts may create consideration.
1. Conferral of a benefit that was not gratuitously intended
2. Appreciation of the benefit/measurable benefit
3. Acceptance and retention of the benefit
4. Unjust enrichment
Bailey-Horse kept at farm for several years without payment. Court said no, P was acting as a volunteer and was never asked to keep horse, so no restitution.
D. BARGAINED FOR CONTRACT
1. Entails a benefit incurred by one party and a detriment by the other. (Common)
2. 'Bargained for' refers to one promise inducing the other. The promises do not stand
alone.
II. BARGAINED FOR CONTRACT: CONSIDERATION
A. Consideration (Must be sufficient, not always adequate. Must be legal)
Is the enumerated consideration sufficient?
1. Doing something you don't have to do (give up smoking, give away something)
2. Forbearance to exercise legal right--sufficient consideration will be found if the promisor honestly believed he has a valid claim.(Thought he was father)
a. Release is consideration even if neither reasonably held or good faith
b. However, both should have some, even miniscule, belief in the suit's chances for success. (Science is not infalable, so there's always a try)
3. Novelty or value relates to time of agreement and not time of suit. Novelty not required in all cases involving disclosure of ideas. As long as it is believed to have value at time of sale, it suffices as good consideration.
4. If SO starkly inadequate by one party with superior bargaining power in exchange for heavy exploitative cost by other, may point to unconscionability, bad faith--which is not legally enforceable.
5. If there seems to be an inbalance in the exchange, there may be something else going on......Nominal Consideration or Recited Consideration
A. Will not make a donative promise enforceable
B. Could point to a threat, fraud, or other problems
Are both parties bound?
C. Illusory promises (if one party makes statement in form but not substance of a promise, b/c it does not limit their future options); no mutuality of obligation--both parties must be bound or neither party is bound.
1. Requirements and output contracts (UCC) whereby party who determines quantity has limited his options; if he buys or sells at all, he must buy or sell to the other party.
a. Only way out to be objectively found--going out of business, famine, etc. Enforced when both parties intended to be bound.
b. Generally, no free way out for one party or another (if I want to, at my discretion, etc.
c. Should be needs, not desires
2. Implied promises (contract found in fact)
a. Look at Language, Parties, and Context
b.. Use one's reasonable or best efforts--exclusive basis) Booking agent, designer, etc. can be consideration. (Lucy v. Lady Duff)
c. Notice of cancellation/refund may be good consideration
3. Conditional Consideration is Ok
a. Can be good consideration if it is not just pretense to cover a gift. Ex. (I'll give you my guitar, if you become famous, I will get front row seats--spoken to a child prodigy)
b. Condition in promisor's control--imply best efforts to complete (i.e. if I get financing)
c. Condition must be reasonable, and/or standard practice, and parties must in good faith not impede condition from happening.
4. Good Faith/Satisfaction
a. Because of implied promise to act in good faith, not a free way out.
At any time, is one of the parties promising what they are already bound to do?
Past Consideration is no Consideration. (A promise to do what promisor is already legally bound to do is an unreal consideration.)
1. Pre-existing duty could be in law (Police to help)
2. Pre-existing duty in Contract
1. Exceptions to Pre-existing Duty Rule (creative consideration)
A. FORBEARANCE from going bankrupt (must be good faith, not duress)
B. FORBEARANCE from suing (valid claim surrendered)
C. THIRD PARTY
1. Duty between A and B, if C gets involved--new duty
D. MODIFICATION (before both parties have fully performed)
1. Restatement §89 and Angel v. Murray
-Unforseen, changed circumstances prior to completion & fair and equitable
-Must be voluntary, not coerced. Cannot exploit situation or recoup something you gave away. Both parties must agree.
-In common law, the easiest way to lend enforceability to the modification is to change some term, no matter how significant.
2. UCC agreement modifying a contract for the sale of goods is binding without consideration, but must meet general test of good faith. If over $500, must be in writing
-In the case of a K for the sale of goods under UCC, if the original K excludes modification or rescision except by a signed writing, then modification or rescission must be en writing HOWEVER, such modification if made orally can operate as a wavier.
E. RECISSION
1. A good alternative to arguing about modification. Parties tear up old K BEFORE or simultaneously to making new contract, for new consideration.
2. Parties need to do this while there is still something to be done on both sides.
3. If no duress and no express protest, is okay.
F. ACCORD AND SATISFACTION (One party has fully performed, and all that is waiting tis the other's perf. (Usually payment)
1. DEBTS: A naked promise to pay a lesser sum in satisfaction of a greater debt is not good consideration. HOWEVER<Any variation, including nominal consideration, would make it kosher. (i.e. earlier payment, different medium) Peppercorn theory.
-Debtor's agreement not to file for bankruptcy, however, would be good consideration (if not duress)
-Cashing a full-payment check may discharge debt if there was a bonafide dispute as to the amount owed.
G. MORAL CONSIDERATION--when promisor seeks to discharge a moral (but not legal) obligation by some past event. Traditionally, unenforceable
-Modern, is enforceable at least up to the value of the benefit conferred, but not gifts or expense. Must not be pre-existing duty-, i.e. saving someone's life in war, cop stops a crime, etc.
-material benefit is conferred which allows one to imply a request, together creating a moral obligation such that (with a subsequent offer to pay) is sufficient consideration which is enforced. (Webb v. McGowen)
a. Extreme benefit
b. Extreme circumstances--no time to consider, but he owuld have said yes
c. Did not intend to act gratuitously.
-Promise to pay for someone else is not enforceable when there is no direct benefit to the promisor (son dies, father offers to pay for care. Not enforceable)
III. OFFER AND ACCEPTANCE (MUTUAL ASSENT)
Did he make an offer?
*Restatement (§24) "An offer is the manifestation of willingness to enter into a bargain, so made as to justify another person in understanding that his assent to that bargain is invited and will conclude it"
1) What would a reasonable person take the words to mean?
2) Were the words actually understood to mean that? (Cannot seek an advantage
one not entitled to. Cannot rely on the objective intention if you know otherwise)
How do you know it is really an offer?
A. Offeree's belief/Context
1. Transactional contest (before, not after)
Lucy v. Zemer-Guy sues to get the farm under contract. He and other guy made the contract in a bar, and the other guy didn't realize he was serious until it was too late. However, figures and signatures were done like a true offer.
2. Prior course of dealings
Embry-Worker asks about an extension on his contract and is told to get out and work. Court implies the contract in fact, because of their prior course of dealings and would be reasonable for P to think he had an agreement.
B. Language used
1. What words? (Offer, acceptance, obligation)
2. Grammar of expression (Can commitment be construed?)
3. Not an offer--invitation, quotation, etc.
Southworth-guy did not intend it to be exclusive offer, but did not state that. Court found it an offer separate from the prior negotiations.
C. Number of addresses
1. If offer habors unexpressed intent to offer it to more than one party, it does not matter--just manifest. (Southworth)
D. Definiteness
1. Offeror is master of the offer-Courts will read the offer against the party who drafted it Any ambiguity or uncertainity of expression or contextual meaning will be resolved against the drafter, for they had the first opportunity to clarify.
2. Court will fill in gaps (UCC gap fillers) of price/time, if there is a standard by which to measure and make certain.
1. When objective evidence points to a contract, the D can try to rebut the presumption with the context, but may not be successful. Subsequent conduct is ONLY relevant to show state of mind when making contract, and belief that there was one
2. OFFER is a firm expression of intent to contract on certain terms: It is firm, fixed, and final--signifies end of negotiations. Offer creates power of acceptance, and is binding only upon acceptance.
3. The presumption is that ADVERTISEMENTS are not offers.
A. Ads are too indefinite and general.
B. Multiple acceptance problem
C. Ads may be informational
Lefkowitz--Guy goes to claim cheap mink stole. Court stretches common law rule in order to achieve outcome, teach advertiser a lesson, and protect consumer. Also, there was no multiple acceptance problem because he was first in line.
4. Agreements to agree, invitations, etc. are not offers
Can the offer be revoked?
1. Generally, the offeror is the master of the offer. He can revoke any time before the acceptance even
if the terms say otherwise. (Rule stated in Dickerson v. Dodd)
2. If the offer contains an option, then offeror is prevented from revoking for a set period of time.
(OPTIONS keep the offer open. Generally, option must be supported by consideration.)
A. Restatement Section 87: An offer is binding as an option contract if it is in writing and signed by the offeror, recites a purported consideration for the making of the offer, and proposes an exchange on fair terms within a reasonable time.
1. Recital of consideration may not be enough.
i. Party must intend to bargain
2. Consideration does not need to be adequate, but must show benefit/detriment.
i. Option must be 'bargained for.' The consideration must relate to the offer, and not be independent
B. Exception: U.C.C. "Firm Offers" between merchants irrevocable for the period of time stated (or reasonable time) without consideration. Must be in writing
C. See generally, rules for consideration
3. If there is justified reliance on the offer, then it may be unjust to allow offeror to revoke
A. See Drennan (equitable estoppel in the case of a subcontractor who must keep open his offer
until after general contractor knows if he got the deal)
4. If promise is for performance (unilateral) then offeror may not revoke once the performance begins.
5. Revocation of offer should be at the earliest possible time, before offeree can accept. Once
communicated, then effective
Was the offer destroyed before it was accepted?
A. Destruction of offer
1. If offeror revokes--any time up to acceptance okay.
a. General offer (i.e. reward) is revocable in the same manner as the offer put out
2. If oferee rejects..effective upon receipt.
3. If offeree counter-offers, or accepts on different terms (would be new offfer)
A. Conditional acceptance not acceptance but request for Information does not destroy offer.
B. Option Contract--counteroffer does not destroy offer;
Consideration for the option contract gives offeree time to negotiate
C. UCC allows non-conforming acceptance
4. If offeror dies at any time before accepted
a. Exception-if option was created, unless the death destroyed the subject matter or service itself.
5. If unreasonable period of time, unless otherwise specified.
6. If offeree gets info on revocation from third reliable source.
a. (Dickerson)-Guy accepts land offer in writing after hearing it was sold to someone else. There was no consideration for option contract, so offer was open for anyone. Parties were not bound, so no deal.
7. Destruction of the subject matter, or subject matter became illegal before acceptance terminates the offer.
How can the offer be accepted?
1. UNILATERAL CONTRACT ACCEPTED BY PERFORMANCE
A. Once performance has begun, offeror cannot revoke offer, and must give opportunity to offeree to finish.
1) Justified reliance as in part performance on a contract creates option
B. Offeree cannot assent to offer unless he knows of its existence.
Glover v. Jewish War Veterans- Guy gives information leading to arrest of murderer, without knowledge that there was reward. Not entitled to reward, because he hadn't heard of it until after he finished performance, so his performance would be past consideration.
C. Performance of the act only constitutes acceptance if there is intention to accept. However, offer does not have to be principal inducement to perform.
D. Usually, acceptance should be communicated by the means called for in the offer within a reasonable time.
2. SILENCE CAN CONSTITUTE ACCEPTANCE
1) Previous dealings which consistently recognize it as form of acceptance.
2) If parties agree to silence as being a form of acceptance, and offeree intends their silence to be acceptance.
3) Quasi-contract--when offeror take benefit of offered services with a reasonable opportunity to reject them, and reason to know they were offered non-gratuitously.
4) Mailbox rule--acceptance binding once posted
When does acceptance become effective?
1. ACCEPTANCE must be communicated
A. Mailbox rule--If offer mailed, acceptance becomes binding once put in the mail (receipt not necessary). By analogy, the Restatement says that when parties are dealing at a distance, acceptance is binding when it leaves the power of the promisee.
B. Under UCC, when beginning of performance is acceptance, offeror must be notified of performance within reasonable time.
C. Notice of intent to accept not required (Carbollic smoke ball) when it is the performance that the promisor asked for.
D. Offer is effective upon receipt, so that if time period is mentioned it starts when received, but the time doesn't give promisee exclusivity unless there was an option.
Is acceptance a clear and unequivocal acceptance of the terms?
A. The offer and acceptance must mirror each other. Traditionally, there must be a 'meeting of the minds' Acceptance must exactly reflect the offer, whereby any differentiation will destroy the agreement. Courts are loosening this requirement.
1. The court will look at manifest intent, not subjective intent. Inner desire and/or inner intention does not matter. (Words/behavior)
B. UCC, 2-204, Contract for sale of goods may be made in nay matter sufficient to show agreement. Do not have to show clear mirroring of offer and acceptance. Reasonable person would see the whole, including what was said and done, as a contract. Unlike in common law, manifestations after the agreement are more relevant to show intent.
1. UCC, acceptance does not have to mirror offer, but offeree must still do something that shows manifest intention to accept.
1) Can agree orally and then send written memo/confirmation
2) Exchange of non-identical writings that contain seasonal acceptance.
3) Conduct that recognizes contract (Shipping goods)
C. BATTLE OF THE FORMS: Under the UCC, a definite and seasonal expression of acceptance operates as such even when it states terms additional to or different from those offered or agreed upon, UNLESS acceptance is expressly conditional on assent to the new terms. If both merchants, the terms become part of the contract, unless:
A. Offer limited to exact terms
B. Additional terms materially alter the contract
C. Offeror notifies offeree within reasonable time that he objects.
D. Also under UCC §2-206, a shipment of non-conforming goods with notice that it is accommodation is a counteroffer. Without notice can be both acceptance and breach.
Other forms of Acceptance
10. AUCTIONS
A. Unless explicitly without reserve, seller can withdraw goods from auction any time before buyers acceptance.
B. Generally, bids are offers, and acceptance is effective when the hammer falls.
11. GENERAL CONTRACTORS/SUBCONTRACTORS
A. General contractor's reliance on SC's bid forces the offeror to hold offer open for reasonable and short period of time until after general contractor knows whether or not his own bid selected. (Drennan) Majority view--equitable
1. Equitable estoppel; reliance holds the offer open.
2. However, if GC seeks other bids or ties to get lower bid, then no reliance and SC can walk.
B. Just using the SC bid for the general bid does not constitute binding acceptance--acceptance must be communicated. (Baird)
1. Can be written in to the SC bid (conditional on gen'l contract win)
2. Can be construed as binding if statute does not allow substitutions.
Is there any reason not to enforce the contract?
IV. DEFENSES
. 1. INDEFITENESS
A. If confirmation tries to alter the terms, then they will only be incorporated if they do not materially alter the agreement. If new terms alter, then counteroffer (Leonard Pevar Co.v. Evans)
B. Indefiniteness can render agreements non-enforceable, but courts may fill in terms when they can be rendered certain by external criterion.
1. Prior dealings, trade practice, or market value
2. UCC and good faith
3. Intent of parties
2. MISTAKE
A. Mutual Mistake: General rule is that where parties enter into a contract under a mutual mistake as to a basic assumption of fact, and the mistake has a material effect on the agreed exchange, the contract is voidable by the adversely affected party.
-Beachcomber v. Booskett-Coindealer sold coin, later learned it was counterfeit. No risk assumed in deal, P can return for price he paid. (Recission allowed)
Lenawee County v. Messerly-Land sold, and then condemmed. Parties mistaken as to the income producing capacity of he property, but sold 'as is' so risk assumed. No Recission.
(Mistake is not the quality of the thing, but goes to its substance.)
1) Does the K allocate the risk (if so, no mistake)
2) Is it basic/fundamental to the agreement (if so, then could be)
3) Does it affect performance in a way that makes enforcement unjust?
B. Unilateral mistake--(Restatement) even if it goes to the substance of the agreement, will only be voidable if 1) radically unfair on mistaken party and if 2) reformation/recission would not be unfair hardship to the other party. Further, the K itself hasn't allocated the risk. Harder to justify than in mutual mistake.
A. If nonmistaken party/offeree knew, or should have known about mistake (obvious difference from market price), then he cannot take advantage of the deal that is too good to be true. If mistake was in transmission, then court will reform B. If nonmistaken party did NOT know know nor had reason to know of the error, then there is binding K on the terms proposed.
i. Also for mistakes in transmission, in which mistake-laden intermediary's terms are binding (Peerless). However, in this case, the transmittor who made the error may be liable to offeror
3. FRAUD/MISREPRESENTATION
A. No duty to disclose if not asked, but cannot lie affirmatively or neglect the whole truth. (Arthur Murray case)
B. Disclosure is necessary to prevent a previous assertion from being misrepresentation, fraudulent, or material. Disclosure necessary to correct a mistake as to a basic assumption or the contents or effect of a writing, or because of relationship of trust and confidence.
C. Basically, when one party knows or misleads the other party to believe something that he knows the other will not discover the fact prior to signing, and the fact is material.
D. Goes deeper than just one's party's silence (are they trying to hide something?)
E. For fraud -->damages
F. Good faith misrepresentation-->creates power to rescind (voidable) not damages
4. DURESS
A. Improper threat of harm to person, property, or economic interests
B. Threat must be sufficient to justify yielding to it; reasonable person would
C. Threat must induce the persons asscent to terms or K; would not have done so otherwise
D. A threat to breach is normally not duress (one is free to do so) unless goods cannot be gotten from another source in time, damages would be inadequate, bad faith threat (radar sets in war--lives would be lost if they don't comply with modification)
5. UNCONSCIONABILITY
A. Absence of meaningful choice on the part of one of the parties, together with terms which are unconscionably favorable to the other.
B. Test in Williams v. Walker Thomas: Look to procedural aspects (deception, process, hidden) AND substance of agreement (oppressive clause, result) AND character of the parties (one manifestly weaker)
C. Adhesion contracts, standard form K's often have element of superior bargaining power, so any harsh terms should be explained or obvious.
-Zamtha v. Dairy Mart-termination of franchise agreement okay, because the guy understood it, it was common practice, and notice given. Further, no oppression would result.
6. UNDUE INFLUENCE
A. High pressure that works on mental, moral, or emotional weekness to such an extent that it approaches boundaries of coercion. Ordinarily limited to situations where there is relationship of trust or confidence. (Often marked by absence of 3rd party advisors, or advice not to seek attorney)
B. Court may step in to protect the weaker party.
7. ILLEGALITY
A. If possible, court may separate legal stuff from illegal provision.
B. Under age of majority, not held to K, but can hold others to K
III. PERFORMANCE AND BREECH
I. PAROL EVIDENCE (Extrinsic evidence of negotiations that occurred before or while agreement was being reduced to its final written form) Subject to the Statute of Frauds, extrinsic evidence can take the form of an oral understanding or a writing)
1. Statute of Frauds- Generally, oral contracts are okay; except those that fall under the Statute of Frauds.
-Real Estate, Lease for more than one year
-Contracts which by their terms cannot be performed within one year from the time they are made
-Sale of goods for $500 or more.
A. The general rule is that when the K is fully integrated, parol evidence/extrinsic evidence is not allowed in to vary, add to, or contradict the writing.
Is the K is fully integrated?
1. What did the parties intend?
2. Would reasonable people entering into this contract have put everything in writing, or might they have a side agreement?
a. "Face of the instrument" test. Strict test to determine whether the K appears complete. (Williston) If there is merger clause, nothing else would be let in.
-ex. Mitchell v. Lath (destruction of ice house) Written K listed detailed reciprocal agreements so closely related. Court said that such an agreement would have been included if the parties intended.
b. "Any relevant evidence" Courts have become more flexible to test what the parties actually intended--contradictory terms especially not let in. (Corbin)
-Also, parol evidence can be let in for the judge to determine whether the K was integrated or not before allowing jury to hear content of parol evidence.
ex. Luther Williams v. Johnson (improvements on home only if the guy
could get his own financing) Guy signed contract but told contractor that
it would depend on approval of their financing by the bank) Evidence of
this parol condition let in to see if K was integrated or not. Then, jury to
determine if negotiation had actually taken place, making the contract not
binding until financing obtained.
What if there is an integration clause?
a. Commercial Sales-Integration clause may be rebutted bu the courts will look to the intention of the parties: length and nature of the contract and length and nature of negotiations preceding execution. Not absolutely persuasive between merchants, but highly conclusive.
b. Consumer Sales-Integration clause may be a way of tricking consumer out of the
lower price negotiated orally. Also, without notice, use by seller may be
unconscionable if he is trying to hide something. Courts will look to intent of
parties, but often give the benefit of the doubt to the consumer.
Even if writing is determined to be integration, aren't there exceptions?
a. Separateness
1. If there is separate consideration
2. If the parol evidence contains naturally omitted terms (unless contradictory) or collateral terms.
(Williston) would reasonable person naturally have omitted the term in question and rather make it a separate agreement?
(Corbin) Under the individual circumstances of the case, would parties naturally separate?
a. ex. Masterson v. Sine collateral agreement that the option to re-buy was not assignable was not included in formal deed. Court allowed in evidence offered to show it was agreed that the property should stay in the family.
3. When partially integrated, parol evidence can be allowed in on subjects not covered by integration
4. Collateral Agreement-related to main agreement, but there is separate consideration.
b. Formation
1. To show lack of consideration, fraud, duress, or mistake
2. Can show a condition precedent to the writing becoming a K, but cannot add a condition, ie. Luther Williams (financing)
3. Modification: Later oral agreement that modifies a previously existing
contract. See rules for Modifications.
Are terms susceptible to any other meanings?
c. Interpretation--What is the meaning of the word/term used?
1. General rule: Where the interpretation of an expression is an issue, the expression should be given an objective interpretation, that is what a reasonable person standing in the addressee's shoes would put upon it.
a. When parties attach their own different subjective meanings, if both equally reasonable, no contract is formed. However, if one meaning more reasonable the interpretation will be based on the more reasonable meaning.
-ex. Frigaliment (chicken case) Both parties attached meaning to the term, 'chicken,' but what the seller sent matched up with the contract term and he was doing subjectively what he thought fulfilled the K in lieu of other understanding.
2. Test of admissibility of extrinsic evidence to show that there may be more than one meaning:
a. Traditional, when it K appears to the court as plain and unambiguous on its face (strict) extrinsic evidence NOT admissible
b. Modern--when offered evidence is relevant to prove a meaning to which the language of the instrument is reasonably susceptible it is allowed. (Traynor)
i. First, Evidence to show term is reasonably susceptible to second meaning.
i. Second, Evidence of the meaning of that word.
-ex. Gray Insurance contract was ambiguous and a reasonable expectation would be for defense of all claims (whether at fault or not) Standard form, adhesion contract in the commercial context--look to purpose, not specific word or small print exception
3. What is admitted, in what order (UCC and Restatement both have tests that are relatively consistent. Start with top of list)
a. Look first to Express language, consistent use of term (contract drafters should NOT be using a thesaurus!)
b. Course of performance--repeated business w/o objection
c. Course of dealing (series of earlier contracts/common basis)
d. Trade usage/technical meaning/dictionary
e. Against the drafter
2. WHAT ARE THE OBLIGATIONS IN THE CONTRACT? --PROMISES.
A. Did a party fail to perform a promise?
1. Was the nonperformance (breach of promise) excused by an event?
a. Impossibility
b. Impracticability
1. Performance of a contract will normally be excused when it has been made impossible/highly impracticable or illegal by the occurrence of an unforseen event whose nonoccurrence was a basic assumption on which the contract was made.
i. Drafting issue: With a fair clause if parties agree, if impracticability arises, then could go to an arbitrator or work it out fairly between them
2. Adversely affected party must not have assumed the risk that the contingency might occur. (Computer development took more time and money than they wanted to put in--Wegematic Corp. Court says not impracticable)
i. Financial loss generally does not excuse. (Freedom of Contract, can be in losing bargain. If breeched, then paying damages may be cheaper than completion)
ii. Market changes are forseible and assumed.
-ALCOA at the time of the oil embargo.
iii. When K contains a Force majeure clause, then only events that would excuse are those of the kind enumerated. (Without clause, other events that would seem to make perf. impracticable may excuse the non-performance)
iv. Personal inability to perform (injury blindness) an excuse when K not delegable and risk not assumed.
3. Party cannot create its own impracticability.
i. If source not exclusive, seller must make adequate arrangements. (Canadian Industrial Alcohol Co. V. Dunbar Molasses)
4. Impracticability excuses promises or promises that also operate as conditions, but not naked conditions.
c. Frustration
1. When purpose of the contract has been destroyed by an unforseen supervening event.
a. At the time of the contract, the event was not forseeible
b. The event totally or nearly destroys the value of the K.
B. How was the risk allocated?
-Did some event have to occur before performance was due?
1. Express Conditions
--If parties intended a condition (made it express) then court will interpret as such. Condition also a material breach of promise.
1. Excuse of condition is by agreement or conduct of the parties, even with no oral modification/anti-wavier clause
2. Usually time will be immaterial term, however, it can be material when party was prejudiced by the delay. Aetna Casualty and Surety Co. OR expressly stated or reasonable to assume (green beer)
3. If satisfaction of one of the parties is made an implied condition, then it must be honest and exercised in good faith, that which a reasonable person would be satisfied.
a. If 3rd party to be satisfied (ie water board) then strict literal compliance (doesn't matter if reasonable)
2. Implied Conditions
A. Constructive Conditions of Exchange (Conditions which are not agreed to by the parties, but are supplied as a matter of law by the courts to ensure fairness. One party's entire performance is constructive condition to the other party's performance.
1. Order of performance--Restatement (2nd) performances due simultaneously. If one perf takes longer the other, than that person goes first.
2. Note: (Substantial Performance) If one party substantially performs, the other's performance is not excused. That is, if there is only an immaterial breech of a promise (that does not operate as a condition) then the other party must pay/perform but can subtract damages.
B. Parties would have agreed upon it had they thought about it; or something reasonably necessary before something happens
1. Example: In Wal-Noon Corp v. Hill (roof case) court reads in that notice by lessee is required as a (implied) condition for lessor to pay for a new roof. It only makes sense, because the lease specified that the landlord would pay for repairs in the tenant did not cause the problem--thus, problem must be inspected first to determine.
2. Giving keys to broker necessary if you want them to try to sell your
house and you are out of town.
-What else was required of the promisor/promisee?
1. Good faith is an implied condition in EVERY CONTRACT whereas bad faith points to a breach
A. Bad faith: Evasion of the spirit of the bargain, lack of diligence/slacking off, willful rendering of imperfect performance, abuse of power to specify terms, interference with or failure to cooperate in the other party's performance.
1. Definition:
a.UCC: Honesty in fact (subjective)
b.UCC: observation of reasonable commercial standards of fair dealing in the trade. (objective)
2. Examples:
a. Nervous banker clause' Must be in good faith, not racial.
b. UCC Outputs/Requirements: If cost to produce, factory will want to produce more but cannot under the provision requiring good faith.
c. Employer must act in good faith. At will employment subject to 'for cause' only firing. (Seubert-must meet quota) Public policy: can fire for no reason, but can't fire for bad reason
d. Conditional on getting secure financing clause--must try to get
financing and can't just sit on your ass so as to stop the sale on
purpose.
2. Warranties (Promises)
A. Warrranties are representations of quality; if the warranty fails, a party can expose itself to breach of contract damages.
-If material, can rescind transaction (UCC 2-608), if immaterial can get recovery (repair or replacement or damages)
1. Express Warranty
-UCC 2-313: Any affirmation of fact or promise made by the seller to the buyer which relates to the goods and becomes part of the basis of the bargain does create an express warranty that the goods conform to the affirmation. (Description or sample)
a. Opinion or puffing not a warranty
b. Any other promises explicitly stated.
c. Common sense that express warranties cannot be disclaimed.
2. Implied Warranty
1. UCC 2-314: Merchantability: Goods merchantable if seller is a merchant with respect to goods of that kind.
2. UCC 2-315 Fitness for a Particular Purpose: If seller knows of particular purpose for which goods needed, then buyer is relying on seller to furnish suitable goods that are fit for such purpose. (Could apply to non merchants as well)
3. For services, generally 'in a workmanlike manner' or standard of what is accepted/expected in the trade
4. For goods, Implied good title (not stolen, no liens on goods)
3.. Freedom of contract: Seller can disclaim any/all warranties
-To exclude or modify implied warranties, must be in writing and conspicuous. Must mention 'merchantability'
-Common understanding: All warranties excluded by 'as is' or 'with all faults' clauses or signs
IF NONPERFORMANCE NOT EXCUSED BY AN EVENT (I.E. IMPRACTICALITY) AND NOT
DEPENDANT ON ANOTHER EVENT (CONDITION) THEN THERE IS A BREACH OF
PROMISE AND DAMAGES ARE DUE.
----------------------------------------->>>Was this breach an anticipatory repudiation?
A. Generally, must be repudiation rather than just talk. UCC says get adequate assurance. If you are wrong and do not perform because you think the other party will breech, then YOU may be breaching. Allows non-breacher to mitigate/reduce damages earlier--although he is not bound to do so)
1. Was it an anticipatory repudiation?
A. Is it 'clear and unequivocal' rather than a runaround?
1. Taylor horse breeding case, indefinite arrangements and schedule conflicts but could keep trying. A runaround.
2. Express Repudiation--Clear, distinct, unequivocal and absolute
3. Implied Repudiation--Party puts it out of their power to perform
i.e. sells business, goes abroad, etc.
B. Were adequate assurances requested? (UCC 2-609)
1. If party has reasonable grounds for insecurity or sees unacceptable performance standards, can request assurances and suspend performance. 2. If no assurances given within a commercially reasonable period of time, then that is a repudiation (AMF v. McDonalds Corp.)
2. The next step
A. (UCC 2-610) Non-breaching party can wait for a reasonable time for performance, immediately resort to any remedy for breech, or can suspend performance.
B. (UCC 2-611) Repudiation can be retracted up until performance is due, unless aggrieved (non-breacher) has since canceled, covered, or changed his position in reliance of the repudiation
i. Once Seller repudiates, if buyer finds someone else to buy (reliance) then if S tries to retract the repudiation, he cannot.
i. Ask--What was done in reliance of the repudiation? Was it commercially reasonable? If so, you're off the hook.
3. Damages
A. According to UCC § 2-723, Damages based on market price measured at the time when aggreived party LEARNED of the repudiation.
i. In Reliance v. Treat, buyer waits (price may go down, may change their mind, want them to retract) and court allows it wrong.
B. Repudiatee (non-breacher) cannot enhance damages after hearing of the repudiation, and should mitigate if possible
i. Could even mitigate with the DCB
>>DOES PROMISE ALSO OPERATE AS A CONDITION?
-------->>ie, was it material? Did it violate express condition?
OR IS THERE A NAKED CONDITION?
---->>>bonus
---->>>event, not certain to occur, whose occurrence makes performance due
---->>>if just a condition, no damages are due for failure (Dove)
IF PROMISE IS ALSO A CONDITION, OR NAKED CONDITION NOT FULFILLED; THEN
OTHER PARTY DOES NOT HAVE TO PERFORM HIS SIDE OF THE BARGAIN and CAN
COLLECT DAMAGES FOR BREECH OF PROMISE
| Promise | Condition | |
| Definition | Manifestation of intention to act or refrain from acting in a specified way so made as to justify a promisee in understanding that a commitment has been made | An event, not certain to occur, which must occur, unless its non-occurrence is EXCUSED before performance under a contract becomes due |
| How to differentiate | Can be fixed, completed, or atoned for with monetary compensation. | Material Breech
Express or implied conditions Dependent promise |
| Breech | Damages, generally expectancy; putting party in the position it would be if promise had been performed | Performance is not due unless the court finds relief to excuse its harsh effects: |
| Examples | Jacob & Youngs v. Kent
Builder sues homeowner for remaining costs to build house. Homeowner refuses, saying house built wrong b/c wrong piping was used. Court says immaterial breach, and so Kent must pay for house, but can subtract any difference in value. Green Beer Generally, delay in performance is immaterial, except when reasonable person would know otherwise, ie. Green beer for St. Patties day. (Promise-beer delivery, Condition-time) |
Dove v. Rose Acre Farms, Inc Employer offers a
bonus for perfect attendance. Guy does the
work, but misses a day, and thus event of perfect
attendance does not occur. Never promised to
work the full term, just if he did bonus
(condition only)
Wal-Noon Corp v. Hill Lessor will do repairs and maintenance. Court implies condition that in order for Lessor to pay for roof, it is reasonable for him to expect notice. No notice, condition not fulfilled-Lessor does not have to pay. Grun v. Cope- Roof wasn't built right, they registered dissent all the way thru, and said $ would be used to get new roof. No substantial perf, so no perf (payment) on the other side. |
3. HOW TO MITIGATE HARSH EFFECTS OF CONDITIONS?
A. Fairness: if the situation merits, courts will find ways of dealing with the harsh effects of conditions in order to avoid forfeiture.
B. Restatement: To the extent non-occurrence of the condition would cause disproportionate
forfeiture, court may excuse the condition unless it is a material part of the exchange.
How can the court mitigate the harsh effects of conditions to allow Dirty K-breaker to recover somewhat?
1. Divisible Contract
-Distinct from restitution, is another way of valuing. Basically, the court reforms the contract into several smaller contracts
-Equal value of parts (feed for a month), rather than final goal (feed so they can be sold)
-Must be or shown to be agreed equivalents.
2. Waiver
A. Wavier is voluntary relinquishment of known right to treat the breach as a condition of performance (damages on the promise still due)
B. Can be conduct of the parties or written.
-In re Carter -A's purchase of B's company dependant upon its financial condition. Was condition, but because A purchased it anyway despite its bad finances, there was wavier of the condition, so no breach.
Clark v. West-Publisher to pay, law prof to write books while sober. Publisher knew he was drinking but led him on anyway, so they waived their right to do anything about it.
C. UCC 2-209, merchant-consumer: A NO oral modification clause has to be signed separately. Even so, what happens is that people will ask for a modification and the other party will agree. Such can operate as a wavier (gave up right to treat as condition by his conduct)
3. Restitution
A. Breeching party becomes entitled to the amount of the benefit conferred (minus any damages for the breech)
B. In computing, look to the contract as a guideline as to the value of the benefit conferred. Ex, in Britton v. Turner, court sees the total employer expected to pay, and gives the employee the pro rata rate for his work MINUS the cost incurred by the employer of hiring the new guy to finish the job.
4. Interpretation
5. Construe as promise (which was substantially performed)
-Thus breech is immaterial (damages only)
6. Installment Contracts
-Question of what the parties intended the payments to cover
7. UCC Contracts
A. SUBSTANTIAL PERFORMANCE--Perfect tender rule (2-601) not sensible; so generally, buyer deducts damage from the total price he expected to pay. (2-717) Courts find non-conforming shipment ok--is both acceptance and breach.
B. DIVISIBLE CONTRACT Even if breach is material, if buyer decides to accept, he must pay for what he accepts. (2-607) (under common law he wouldn't have to pay)
C. INSTALLMENT When promised X, must be delivered all at once, at which time payment becomes due. If circumstances call for partial delivery, then partial payment. (2-307)
i. If installment of part (Bricks)means the rest will be bad, then buyer can get out of whole contract.
ii. If buyer doesn't pay for one shipment, then it has no bearing on the rest. Seller must ship the next shipment.
D. If insecure, Seller can send letter demanding written adequate/reasonable assurances of performance. If none, can suspend performance or cancel. (2-609)
i. If none, breach may become material
ii. Can ask for assurances to determine whether there is an effective delegation (will you do as well?) If not, then breach.
E. Tender of payment can be by any form common in the trade. If Seller wants something else, must allow Buyer time to come up with it. (2-511)
F. Buyer can reject just the one bad installment and not be in breach--seller must continue; but, if non-conformity of the installment means that the whole will be bad, then buyer can reject all because seller is in breach. (2-612)
4. WHAT ARE THE DAMAGES?--How can we compensate the injured party?
A. Courts try to put parties in the place they would be AFTER the contract. (As if both parties had performed.
1. EXPECTANCY (net gains prevented)
2. RELIANCE (out-of-pocket, progress, expenses)
B. Materiality/condition effect
1. Material breach/breach of a condition by A
-->B can suspend or cancel
-->A may be able to collect restitution, or other remedy to mitigate harsh condition
2. Trivial breach by A
-->B can NOT suspend or cancel
-->B must perform, but then can collect or subtract damages for the breach
C. Courts recognize the need sometimes to breech or better economic good to do so. Further, no debtors prison, so NO punitive damages.
1. Theory of efficient breach--can breach K and still come out ahead; especially if there is no litigation and easy settlement.
2. Freedom of contract as basis of market system--not locked in.
What are we looking for?
A. Plaintiff must prove:
1. Breach was the substantial cause of the loss complained of
2. The amount of the loss caused with reasonable certainity
3. The losses caused by the breach were reasonably forseeible to the D at the time of contracting
B. Defendant can defend by:
1. Establish a failure to mitigate damages (Plaintiff has a duty to make reasonable efforts to avoid the consequences of the breach)
2. Freedom of contract
C. Judgement will be discounted to equal sum in X number of years if prudently invested.
-may also be adjusted for inflatio
-judgements not subject to taxes, so historically is not adjusted for that
D. Generally, attorney's fees not recoverable in the absence of a particular statute or a provision in the contract.
5. What kinds of Damages are available?
A. First look at EXPECTANCY-put parties in position they would have been had they both performed.
. B. Generally, no damages for mental suffering or injury to reputation unless highly forseeible.
1. Negligent mishandling of a corpse.
2. Damages may be available in tort
3. If physical injury contemplated, then pain and suffering award may be possible
C. Restitution (either party can get it)
1. Restitution for benefit from non-breacher's P.O.V. as to value
A. Not limited by K price for non-breacher. (Restatement)
B. In New Era, (alteration of home, but owner breaches) put the contractor in the place it would have been had the owner fully performed (Net gains prevented-profit) and (unreimbursed expenses in part performance-restitution)
2. Restitution to dirty K-breaker is for the benefit (value to other, or price on market, or courts can look to K as a guideline for value)
A. In Britton, court gives worker restitution to make up for otherwise unjust enrichment of employer. Gives pro rata rate minus damages of cover (higher cost of new employee)
B. Limited by K price.
D. Consequentials--must plead specially. Set of damages that must be paid to NON BREACHING PARTY in addition to expectancy, unless explicitly excluded.
1. Hadley v. Barendale Old case, but rule still applies.
A. Contemplated by the parties at the time of the contract (forseeible damages)
1. Doesn't require agreement, just knowledge.
i. In Spang (cement pouring) court rewards guys attempt to offset damages (prompt, effective, and reasonable mitigation)
B. Those naturally resulting (ascertainable)
1. Will always arise when such K is breached.
i. Examples: lost time, lost profits if measurable, overtime, rush fees
2. Court limits recovery of consequential damages to those reasonably ascertainable and forseeible.
A. Many parties contract around consequentials (exclude them)
i. Can disclaim contract liability, but may still be tort liability
3. Consequential may include the liquidated or other measures of damages to another party:
A. i.e. Owner contracts with broker to find buyer. Buyer ends up not buying. So, buyer responsible for the liquidated damages that Owner had to pay broker.
E. Remedies in Equity--Basically, the Plaintiff has to show that the remedy in law (monetary damages) would not make him whole
1. Why does P think other remedies are inadequate?
a. Unique goods
2. What are the practical problems involved?
a. Personal services almost never specific performance, but injunctions may be possible.
b. Court does not want to have to supervise, whereas non-performance would be contempt and person go to jail.
3. Are there any questions of fairness associated with enforcing?
a. Windfall for plaintiff, unconscionability of exchange
4. Damages too?
5. Remedies:
A. Specific Performance
a. Coal miners in NIBSCO want specific performance, says it is to help their workers. However, the court says no, wouldn't be done anyway and hard to supervise. Monetary damages only.
B. Injunction
a. Wallgreens-allow injunction, to prohibit Mall from bringing in competing pharmacy. Court sees how the parties should negotiate fair bargain between them based on market forces once the injunction is granted.
F. Liquidated Damages-strongly disfavored by courts, but great for legal economists
1. UCC
A. Enforceable if the amount fixed is reasonable in light of anticipated or actual harm caused by the breach.
B. In case of deposits, UCC 2-718, when buyer breaches so that seller refuses to deliver, buyer can get restitution for prior payments/deposits, if it exceeds amount set for liquidated damages or the smaller of 20% of the value of performance or $500. (Thus, court is enforcing the liquidated damages)
2. Freedom of K and simplicity and practicality of knowing damage award in advance.
3. Requirements
a. Reasonably proportionate to the probable loss/actual damages
b. Amount of actual loss is incapable or difficult of precise estimation at the time of contracting.
c. Inconvenience or impossibility of other kind of remedy
d. NOT PUNITIVE
4. Billman v. Hensel-Buy house if mortgage is secured, with provision for $1000 whether or not financing condition occurs. They are implying a promise to try to get financing. Fact that they didn't get it, would not be a breach. Fact that they didn't try IS a breach, so the $1000 is damages for the breach of them failing to buy the house ultimately
5. Non-negotiated (standard forms) may be problematic
i. Arbitrary, not an attempt to actually ascertain damages
ii. Unequal bargaining power/unconscionability
| What damages can the parties expect? | Dirty Contract Breaker can try to recover AFTER paying NBP their 'expectancy' | Non-Breaching Party gets what they woulda had, if both parties performed as in the K |
| Beginning | EFFICIENT BREACH
(just pay the other party expectancy and end up ahead) |
Expectancy/profit only, possible reliance
(preparations)
|
| Material Breach/Start of performance
(In this case, may be failure of a condition
also)
*Must weigh purpose to be served, desire to be gratified, excuse for deviation from the letter, cruelty of enforced adherence (Cardozo sees the breach of pipes as trivial, not material or a condition) Jacob & Youngs v. Kent |
Restitution
(value of benefit conferred
acc'd to NBP) limited to the
Kprice
Anti-Forfeiture Measures
*if other party justified in not accepting 'benefit' no restitution (Grun roof case) *also UCC, don't have to accept, but if you do--pay for that part |
Expectancy (cover to get Kthing at
contracted for price)
>cost of completion >difference in value >profit
Reliance
Restitution--ex. losing K. DCB materially
breaches, but was getting a benefit of
greater value than he expected to pay.
Expectancy is O, but high restitution is for
value of benefit conferred. (New Era)
Consequentials
Incidentals
---->always minus the savings
*If breach mid-way, restitution not limited
by the Kprice, but duty to mitigate by
stopping work so as to confer no more
benefit
*discharge by impossibilty-after perf has begun, perf-party entitled to restitution (labor, materials, etc.) only, but not profits.
When finished, limited to Full price of K, (restitution cannot exceed contract price) plus other damages |
| Trivial Breach/Substantial Perf
(Failure to fully perform on the Contract) |
*Kprice-cover price +
incidentals+consequentials -
savings (Britton v. Turner)
(NBP must perform, but can
subtract damages Jacob)
Basically, Kprice-any damages caused by the breach. |
What about remedies for Buyers and Sellers under the UCC?
| Article 2 Remedies |
Who is in Breach? | ||
|
Buyer |
Seller | ||
| Who has the goods? | Buyer | Seller recovers:
Kprice + incidentals (Buyer accept or they cannot be resold)
*this is only when there is NO market (custom goods) 2-709 |
Buyer recovers:
*Kprice - damages (nonconformity in tender) usually diff in value *(Breach of warranty) Value as warranted - value as accepted + incidentals + consequentials |
| Seller | Seller recovers:
*Kprice (when custom goods) *Kprice - resale + incidentals - savings *Kprice - market + incidentals - savings *Lost profits (volume seller) *liquidated damages, or down payment (lesser of $500 or 20%) |
Buyer recovers:
*Kprice - cover price (resell) + incidentals + consequentials - savings *Kprice - market price + incidentals +
consequentials - savings
| |
1. UCC §2-601 Perfect tender rule:
1. Minor defect, buyer cannot reject--the remedy is damages
a. Must read in substantial performance
b. If you accept anything (even if there was a breach of some kind) you must pay for what you accept, minus your damages
c. Can only reject if there is material breach. Buyer doesn't owe, can still get damages.
2. Seller in Breach of Waranty/Buyer has the defective goods
1. Buyer can accept, find the immaterial breach and then receive damages for repair
2. If nonconformity substantially impairs the value of the goods, can revoke acceptance and refuse to pay.
3. If limited remedy fails of its essential purpose, court will strike warranty and award damages, and may also be striking the 'no consequentials' provision.
4. In consumer transaction, seller may/may not be able to avoid consequential damages for personal
injury.
Mitigation?
1. No duty to mitigate, but damages would be what they would have been if you had.
a. Burden is on D to prove you didn't but could have.
b. If non-mitigating, then expectancy is (Kprice-market price)
2. When you spend money to mitigate, even if you are unsuccessful---still get reimbursed for these expenses if commercially reasonable to do so.
A. Worker looking for new job (airfare, phone, etc)
B. Cost of arranging resale (storage, phone, travel, etc.)
3. After buyer breaches, can seller recover the full price for goods sitting around his warehouse?
A. If there is no market (custom goods) then he can get full K price. Rare.
B. Usually, there will be a market, so seller must re-sell and recover the difference (2-706)
1. Seller must mitigate by reselling for the best price possible, and then can recover (Kprice-resell price + incidentals - savings)
2. If he does not resell or the goods not made, can recover (Kprice - market price + incidentals - savings)
4. After seller breaches, buyer must try to mitigate
A. Buyer has a duty to buy at the lowest price possible to cover
B. If buyer doesn't buy from someone else (says forget it!) he can recover the Kprice-market price + consequentials + incidentals - savings
5. It's not mitigation if you could have done it anyway (if time not freed up by the breach) ex. Night and day job (so breacher can't pay less)
A. General rule: contractors can have more than one job at the same time, so 'replacement' job not mitigation.
B. Volume--no mitigation, because would have sold one more anyway
What about Third Parties?
A. Generally, the law favors assignment and delegation.
1. Exception:
a. If in the Contract
b. If the rights/duties are personal
c. If it is more difficult to perform because of the assignment/delegation
B. Are rights freely assignable?
1. Rights are like property transferred by the assignor (who is in K with obligor) to assignee
a. At that point, the 'assignee' stands in the shoes of the 'assignor' and must take his own action for recovery.
2. Right to receive money is virtually always assignable (except wages)
a. Contractual prohibition of assignment of account (money owed) ineffective UCC 9-318(4)
b. Right to damages for breach of sales contract always assignable 2-210(2)
c. Once obligor has notice (of the assignment) must pay the assignee. If he pays the wrong person, he may be able to get restitution, but does so at his own risk.
3. Rights are not assignable when
a. Assignment would materially change the duty of the obligor
i. Personal insurance, output-requirements
b. Materially increase the burden or risk imposed by the contract
i. Insurance, credit
c. Materially impair his chance of obtaining return performance,
d. Materially reduce the value of the K or change its terms
4. Effect of provisions (UCC)
a. 'This K may not be assigned'
i. Right to receive $ may be assigned
ii. Duties may not be assigned
b. 'This K may be assigned
i. Rights may be assigned, duties may be delegated
c. 'Rights under this K may not be assigned'
i. Majority rule: Assignment is not prohibited (not a material breach)
ii. Obligor (non-assigning party) may have an action against the assignor, but unless there is an injury caused, only nominal damages.
iii. Assignment fully enforceable
d. 'Any assignment is void'
i. Assignment not effective.
e. 'Any delegation is void'
ii. Delegation of duties is not effective
2. Are the duties freely delegable?
A. Duties can be delegated except for where performance by delegee would vary materially from performance promised.
i. Personal services not delegable w/o obligee's consent
ii. In UCC, delegation of duties entitles obligee to demand assurances of performance from delegee.
ii. Sally Beauty--assignment of rights and duties to competitor not okay
B. Delegation does not relieve original obligor (delegant becomes secondarily liable)
i. Whereas, novation is a three-party agreement to completely discharge obligor and substitute parties.