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title: 26 Week Contracts Slides
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PCL 1L Contracts

@peoplescollolaw

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Part I

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Review

Nonmonetary and Other Remedies

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Specific Performance

When a legal remedy is inadequate a court may award specific performance. Generally a legal remedy is considered unique when the contract's subject matter is rare or unique. Either party can seek this remedy.

• Available sale of land contracts
• Available for rare or unique goods

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Not available for service contracts — court considers it involuntary servitude prohibited in the thirteenth amendment of the US Constitution, plus other problems of enforcement.

• injunctions under noncompete clauses (covenants) are generally allowed if the services or employment is unique and the convenant is reasonable. Reasonable defined:
  • necessary to protect a legitimate interest of the party benefiting from the covenant
  • reasonable in duration and geographic scope
  • must not harm the public

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Equitable Defenses

• Laches there is a delay in bringing an equitable action that prejudices the defendant
• Unclean Hands party bringing an equitable action has engaged in wrongdoing in the instant transaction directly related to the lawsuit
• Bona Fides Purchaser If a party buys the land or goods in good faith (i.e. is unaware of the existing dispute) the right to specific performance is cut off and plaintiff must seek damages instead

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Specific Performance

An equitable remedy where the court compels the breaching party to perform. There must be a valid contract, the non-breaching party has either performed or is capable of performing, the enforcement is feasible, and remedies at law (damages) are inadequate.

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UCC Buyer's Nonmonetary

• Cancellation A buyer may cancel after rejecting nonconforming goods
• Replevin of Identified Goods in the case of prepayment or inability to cover
  • Prepay: (even partial) replevy if 1) seller is insolvent within 10 days of first payment
  • or 2) goods for personal, family, or household
  • Cover: replevy if a reasonable effort is unable to secured adequate substitute
• Specific Performance

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UCC Seller's Nonmonetary

• Right to Withhold Goods on failure of buyer to make payment on or before delivery, or upon knowlege of insolvency if on credit
• Right to Recover Goods May demand from an insolvent buyer within 10 days of buyers receipt of goods
• Bailee recoveries: (bailees are typically common carries — i.e. shipping), read that section in your barbi, I've never seen this tested

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Restitution

A return of value bestowed on another party to avoid unjust enrichment. Available in certain circumstances for breach of contract, unenforceable contracts, and situations where there was no contractual relationship between the parties (e.g. quasi contract).

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Unenforceable or No Contract

Restitution for implied in law contracts in either quasi-contract or quantum meruit

• Restitution of value of benefit conferred

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• On breach: nonbreaching party that has not fully performed may cancel and sue for restitution
  • See barbri notes on "losing contracts"
• Breach by plaintiff: in certain cases restitution less damages caused by breach
• Advance Payments or Deposit if buyer is in breach
  • See specific UCC rules in barbri

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Quasi-Contract

A contract is unenforceable (e.g. a valid defense) or no contract involved, but unjust enrichment would otherwise result.

• Barbri examples for unenforceable
• No contract situations require: 1) plaintiff conferred a benefit; 2) with a reasonable expectation of compensation; 3) defendant knew or had reason to know of expectation; 4) defendant would be unjustly enriched.

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Rescission

Equitable remedy voiding and rescinding a contract as if never made.

• For DTFs: including Mutual Mistake, Misrepresentation, Duress, Undue Influence, Illegality, Lack of Capacity, Failure of Consideration
• Unilateral Mistake if other party knew or should have known about mistake or hardship to mistaken party so extreme it outweighs other party's contract expectation
• Equitable defenses are available

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Reformation

Equitable remedy where the writing is changed to conform to the original intent of the parties.

• For Mistake reformation requires 1) agreement between parties; 2) agreement to put agreement in writing; 3) variance between original agreement and writing.
• Continues…

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Reformation Continued

• For Misrepresentation writing is inaccurate because of misrepresentation, plaintiff can elect contract avoidance versus reformation. Only the content or legal effect will be reformed to reflect the intent of the parties. Not reformed for misrepresentation of subject matter.
• Equitable defenses are available

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Part II

Third-Party Beneficiaries

When a promisor and a promisee make an contractual agreement that the promisor will tender their performance (a benefit) to a party other than the promisee, we have a third party beneficiary situation.

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Concepts

Promisor and Promisee

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Promisor and Promisee

↘️

Third Party

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After Contracting

Promisor: owes a duty of performance to the third party

Promisee: is owed the performance to the third party

Third Party: not in privity of contract, but owed performance by promisor

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Overall Analysis

Approach problems by asking the following:

• Is the third party an intended beneficiary? If so, what kind?
• Can the promisor and promisee change contract terms without the third party's consent?
  • Alternatively, ask have the third party's rights vested?
• What are the rights of the parties?

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Can the Third Party Beneficiary Sue?

• an intended third party beneficiary can sue
• an incidental third party beneficiary has no contractual rights

The latter may benefit, but it is not the primary purpose of contract to benefit them

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Intended Beneficiary?

Frequently the language of the contract will indicate if the promisee intended to confer a right of performance to the third party.

If it is not clear in the language of the contract, then the court will look at several factors to determine intent.

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Factors to Determine Intent

• Is the third party expressly designated in the contract?
• Is performance to be made directly to the third party?
• Does the third party have any rights defined in the contract?
• Does the third party have a relationship with the promisee that would create an inference of intent to benefit?

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Which Type of Intended Beneficiary?

Ask what the promisee's purpose was in inducing the promisor's performance to the third party.

• Creditor Beneficiary: the promisee owed the third party an obligation
• Donee Beneficiary: the promisee wanted to confer a gift on third party

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Can the Contracting Parties Make Changes?

The promisor and promisee are free to modify, rescind, or discharge the contract as they see fit until the intended beneficiary's rights have vested.

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Vesting of Rights

An intended beneficiary's rights vest when they…

• justifiably rely to their detriment on the promise (change of position)
• bring a suit to enforce the promise
• manifest assent to the promise at the request of either party

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Party Rights and Defenses

Third-Party Beneficiary v. Promisor

• the beneficiary may sue the promisor for failure to perform
• promisor's defenses
  • any defenses that promisor had against promisee
  • if the promise is not absolute, then promisor can assert the defenses the promisee would have against the beneficiary

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Party Rights and Defenses

Third-Party Beneficiary v. Promisee

• Donee Beneficiary: generally no right to sue promisee
  • exception where there's been detrimental reliance (change of position)
    • in that case they are suing under promissory estoppel/detrimental reliance, not as a third-party beneficiary

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Party Rights and Defenses

Third-Party Beneficiary v. Promisee

• Creditor Beneficiary: can sue for the value of the pre-existing debt or obligation

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Party Rights and Defenses

Promisee v. Promisor

• promisee may sue for promisor's failure to tender performance to third-party beneficiary
  • promisee and third-party beneficiary cannot both recover from promisor
  • courts will sometimes order specific performance in circumstance where the promisor was to pay for an unpaid debt

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Prior FYLSX

Assignment and Delegation

October 2017 Q3
June 2017 Q1

Third Party

June 2018 Q1
October 2014 Q4

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Part III

Questions, then Cases.

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Our cases this week

Lawrence v. Fox

Seaver v. Ransom

H.R. Moch Co. v. Rensselaer Water Co.

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@peoplescollolaw

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