Contracts and Sales (MBE) Long Outline

CONTRACTS & SALES MASTER TREATISE OUTLINE (MBE)

This outline covers every Contracts and Sales doctrine tested on the Multistate Bar Examination, the MEE, and state essay exams. Contracts is tested under the common law (as reflected in the Restatement (Second) of Contracts) and UCC Article 2 (sales of goods). Roughly half of all MBE Contracts questions involve Article 2. Where the rules diverge, this outline flags the split every time.

I. APPLICABLE LAW: COMMON LAW VS. UCC ARTICLE 2

Threshold rule: Before analyzing any contracts issue, determine the governing law. UCC Article 2 applies to contracts for the sale of goods. The common law applies to everything else — services, employment, real estate, construction, intangibles (IP licenses, stock), and insurance.

Goods defined (UCC § 2-105): All things movable at the time of identification to the contract. Includes unborn animals, growing crops, and timber to be cut. Excludes money used as price, investment securities, and things in action. Minerals or structures to be removed from realty are goods if severed by the seller.

Mixed (hybrid) contracts — the Predominant Purpose Test (majority): When a contract involves both goods and services, the law governing the predominant purpose of the transaction governs the entire contract. Factors: contract language, nature of supplier's business, relative value of goods vs. services, and the gravamen of the complaint. A minority of courts apply the gravamen test: if the source of the complaint is the goods portion, the UCC applies to that claim even if services predominate.

EXAMPLE: A $12,000 contract to install a home theater ($10,000 equipment, $2,000 labor) is governed by the UCC — equipment predominates. A $12,000 contract to paint a portrait (canvas and paint incidental to the artist's skill) is common law.

Merchant status (UCC § 2-104): A merchant is one who deals in goods of the kind sold, or who by occupation holds himself out as having knowledge or skill peculiar to the practices or goods involved. Most Article 2 rules apply to all sellers and buyers; a critical subset applies only to merchants: the firm offer rule (§ 2-205), the battle of the forms additional-terms rule between merchants (§ 2-207(2)), the implied warranty of merchantability (§ 2-314), the merchant's confirmatory memo exception to the Statute of Frauds (§ 2-201(2)), risk of loss rules (§ 2-509), and the duty of good faith for merchants (honesty in fact plus observance of reasonable commercial standards of fair dealing).

ESSAY WRITING TIP: Open every Contracts essay with the governing-law paragraph: identify goods vs. services, apply the predominant purpose test if mixed, and state whether the parties are merchants. Graders award points for this even when nothing turns on it.

MBE TIP: The examiners love hiding merchant status. A person selling her used car once is NOT a merchant; a car dealer is. The firm-offer and confirmatory-memo rules fail if the relevant party is a casual seller.

II. FORMATION: MUTUAL ASSENT — THE OFFER

Contract defined: A promise or set of promises for the breach of which the law gives a remedy. Formation requires (1) mutual assent (offer + acceptance), (2) consideration or a substitute, and (3) no defenses to formation.

Objective theory of contracts: Assent is measured by the outward manifestations of the parties — what a reasonable person in the position of the other party would believe — not secret subjective intent. A party's hidden intention not to be bound is irrelevant; a joke is an offer if a reasonable offeree would take it seriously (Lucy v. Zehmer).

A. What Constitutes an Offer

Rule: An offer is a manifestation of willingness to enter a bargain, made so that the offeree is justified in understanding that her assent will conclude the deal. Requires (1) intent to be bound, (2) certainty of essential terms, and (3) communication to the offeree.

Essential terms: At common law: parties, subject matter, price, and quantity. Under the UCC, the only truly indispensable term is quantity; the Code's gap fillers supply price, delivery, and time (§ 2-204: contract does not fail for indefiniteness if the parties intended to contract and there is a reasonably certain basis for a remedy).

Advertisements: Generally mere invitations to deal, NOT offers. Exceptions: (1) the ad is specific as to quantity and identifies who may accept ("1 fur coat, first come first served, $1" — Lefkowitz); (2) rewards offers; (3) auction announcements "without reserve" (the goods cannot be withdrawn after bidding starts; in a with-reserve auction — the default — the auctioneer may withdraw anytime before the hammer falls).

Price quotes: Usually invitations; can be offers if sent in response to a specific inquiry stating quantity.

B. Termination of the Offer

An offer can be accepted only while it is alive. It dies by:

1. Revocation: The offeror is "master of the offer" and may revoke any time before acceptance, even if she promised to hold it open (unless an exception below applies). Effective upon receipt by the offeree. Indirect revocation: the offer is revoked when the offeree acquires reliable information of acts of the offeror inconsistent with the offer (e.g., learning from a reliable third party that the house was sold to someone else — Dickinson v. Dodds). A general offer (reward to the public) is revoked by comparable publicity.

2. Rejection or counteroffer: A rejection terminates the offer upon receipt. A counteroffer is both a rejection and a new offer. Distinguish a mere inquiry ("Would you consider $9,000?"), which does not terminate. A rejection of an option does not terminate the option holder's power to accept within the option period unless the offeror detrimentally relied on the rejection.

3. Lapse: After the stated time, or a reasonable time if none stated. Offers made in face-to-face conversation lapse at the end of the conversation absent contrary indication.

4. Death or incapacity of either party: Terminates the offer automatically (even without notice to the offeree) — but does NOT terminate an irrevocable offer (option supported by consideration), and death after a contract is formed does not discharge the contract (the estate is bound) unless personal services were required.

5. Destruction of subject matter or supervening illegality before acceptance terminates the offer by operation of law.

C. Irrevocable Offers

1. Option contract (common law): A promise to keep the offer open supported by separate consideration. Even nominal consideration recited and paid suffices; Restatement § 87(1) makes a signed option reciting purported consideration in a fair transaction irrevocable even if the dollar is never paid.

2. UCC Firm Offer (§ 2-205): An offer (a) by a merchant, (b) to buy or sell goods, (c) in a signed writing, (d) giving assurance it will be held open, is irrevocable WITHOUT consideration for the time stated (or a reasonable time if none stated), but in no event longer than three months. If the assurance term appears on a form supplied by the offeree, the offeror must separately sign that term. NOTE: if consideration IS paid, it is a true option and may exceed three months.

3. Beginning performance of a unilateral contract: Once the offeree begins the invited performance, an option is created — the offeror cannot revoke for the time reasonably necessary to complete (Rest. § 45). Mere preparation to perform is not beginning performance (buying paint vs. starting to paint the house), though substantial preparation may trigger § 87(2) reliance protection. The offeree is never bound to finish; she simply loses the deal if she doesn't.

4. Detrimental reliance (Rest. § 87(2)): An offer the offeror should reasonably expect to induce substantial reliance is binding as an option to the extent necessary to avoid injustice. Classic case: a subcontractor's bid relied on by a general contractor in computing its own bid (Drennan v. Star Paving) — the sub cannot revoke after the general wins the job. But the general is NOT bound to use the sub (no bilateral contract until acceptance), and the rule fails if the sub's bid was so low the general should have known it was a mistake.

MBE TIP: "I promise to keep this offer open for 30 days" with NO consideration and NO merchant/writing = freely revocable. The examiners test this constantly: a bare promise of irrevocability is unenforceable at common law.

III. FORMATION: ACCEPTANCE

Rule: Acceptance is a manifestation of assent to the terms of the offer, made by the offeree in a manner invited or required by the offer. Only the offeree (or her agent) may accept; offers are not assignable (but options ARE assignable like any contract right).

A. Manner and Medium of Acceptance

Bilateral vs. unilateral: A bilateral contract is accepted by a return promise; a unilateral contract ("I'll pay $100 when you find my dog") only by complete performance. When the offer is ambiguous (the usual case), the offeree may accept either by promising or by performing (Rest. § 32; UCC § 2-206).

Acceptance by performance requires notice? For unilateral contracts, notice of completed performance is required only if the offeror would not otherwise learn of it with reasonable promptness; failure to notify discharges the offeror.

UCC § 2-206 — orders for prompt shipment: An order inviting prompt shipment is accepted EITHER by a prompt promise to ship OR by prompt shipment of conforming or nonconforming goods. Shipment of nonconforming goods is simultaneously an acceptance AND a breach — unless the seller seasonably notifies the buyer that the shipment is offered only as an accommodation, in which case it is a counteroffer the buyer may accept or reject (no breach).

EXAMPLE: Buyer orders 100 red shirts. Seller ships 100 blue shirts with no explanation: contract formed + breached; Buyer can reject and sue. Seller ships blue shirts with a note "we are out of red; sending blue as an accommodation": counteroffer only — Buyer may send them back, but Seller is not in breach.

Silence as acceptance: Generally NOT acceptance. Exceptions: (1) the offeree takes the benefit of offered services with reasonable opportunity to reject, knowing compensation was expected; (2) prior dealings make silence reasonable; (3) the offeree exercises dominion over offered goods. (Unsolicited merchandise statutes let consumers keep mailed goods as gifts.)

B. The Mirror Image Rule (Common Law)

Rule: Acceptance must mirror the offer exactly. Any addition or change makes the response a counteroffer, which rejects the original offer. Last shot rule: if the parties then perform, the terms are those of the last communicated form before performance — the party who fired the "last shot" wins the terms.

C. UCC § 2-207 — Battle of the Forms

This is the most heavily tested formation rule on the MBE. Work through it mechanically:

Subsection (1): A definite and seasonable expression of acceptance operates as an acceptance even though it states additional or different terms, UNLESS acceptance is expressly made conditional on assent to the new terms (a true "expressly conditional" clause makes the response a counteroffer, not an acceptance).

Subsection (2) — what happens to ADDITIONAL terms: Between non-merchants (either party): the additional terms are mere proposals; they enter the contract only if the offeror expressly assents. Between merchants (both parties): additional terms automatically become part of the contract UNLESS (a) the offer expressly limits acceptance to its own terms, (b) the new term materially alters the contract (surprise or hardship — e.g., arbitration clauses in many courts, warranty disclaimers, drastically shortened claim periods), or (c) the offeror objects within a reasonable time.

DIFFERENT (conflicting) terms — three approaches: (1) Knockout rule (majority): conflicting terms cancel each other; UCC gap fillers fill the void. (2) Treat "different" like "additional" under § 2-207(2). (3) Drop-out rule: the offeror's term controls. The MBE usually signals the knockout rule.

Subsection (3) — contract by conduct: If the writings do not form a contract (e.g., acceptance was expressly conditional) but the parties perform, there is a contract consisting of the terms on which the writings agree plus UCC gap fillers. This abolishes the common law last-shot rule for goods.

ESSAY WRITING TIP: For any goods fact pattern with forms flying back and forth: (1) Is the second form an acceptance under 2-207(1) or expressly conditional? (2) If acceptance — are both parties merchants? Run the three § 2-207(2) exceptions. (3) If no contract on the writings but goods shipped and paid for — § 2-207(3) terms = agreed terms + gap fillers.

D. The Mailbox Rule

Rule: An acceptance by an authorized medium is effective upon dispatch (properly addressed and stamped), even if lost in transit. Everything else — offers, revocations, rejections, counteroffers — is effective upon receipt.

Exceptions and traps: (1) The offer can opt out ("acceptance effective on receipt" controls). (2) Option contracts: acceptance is effective on RECEIPT, not dispatch. (3) Rejection sent first, then acceptance: whichever arrives FIRST controls. (4) Acceptance sent first, then rejection: contract formed on dispatch — UNLESS the rejection arrives first AND the offeror detrimentally relies on it (then the offeree is estopped). (5) Misaddressed acceptance: effective only on receipt. (6) Instantaneous media (phone, face-to-face) are treated as if the parties are present.

MBE TIP: A revocation mailed before an acceptance is dispatched, but received after, does NOT prevent contract formation — revocation requires receipt; acceptance only dispatch.

IV. CONSIDERATION AND ITS SUBSTITUTES

A. The Bargain Requirement

Rule: Consideration is a bargained-for exchange of legal value: the promise induces the detriment and the detriment induces the promise. Legal value = a promise, performance, forbearance from a legal right, or modification/destruction of a legal relation. Either a benefit to the promisor OR a detriment to the promisee suffices (modern view: detriment is the key).

Forbearance: Giving up a legal right (smoking, drinking, suing) is valid consideration (Hamer v. Sidway — nephew's abstention supported uncle's $5,000 promise).

Adequacy irrelevant: Courts do not weigh consideration; a peppercorn suffices if actually bargained for. BUT nominal/sham consideration ("$1 for my Rolls Royce" where the dollar was a mere pretense, never intended to be paid) fails — except in options and guaranties, where recited nominal consideration is enforced.

Gift vs. bargain — conditional gifts: "Walk to my house and I'll give you my old coat" — walking is merely a condition of receiving a gift, not bargained-for consideration. Ask: does the "condition" benefit the promisor? (Tramp hypothetical.)

Past consideration: Something already done before the promise was made is NOT consideration ("I promise to pay you $500 for saving my life last week" — unenforceable at common law). See the material benefit rule below for the modern exception.

B. The Pre-Existing Duty Rule and Modification

Common law rule: A promise to do (or doing) what one is already legally obligated to do is not consideration. A contract modification therefore requires NEW consideration on both sides.

Exceptions: (1) New or different consideration (finish a day early, change the paint color, pay before due); (2) honest dispute about the duty; (3) unforeseen circumstances making performance substantially more burdensome than anticipated (Rest. § 89 — fair and equitable modification in light of circumstances not anticipated, binding without consideration); (4) the duty is owed to a third party, not the promisor (modern view: promise to perform a duty owed a third person IS consideration); (5) mutual rescission followed by a new contract.

UCC § 2-209 — modification of sales contracts: NO consideration needed; the only test is good faith (extortion of a modification without legitimate commercial reason is bad faith and unenforceable). The modified contract must satisfy the Statute of Frauds if the contract as modified is within it. No-oral-modification (NOM) clauses are enforceable under the UCC (unlike common law, where they can be waived orally); an attempted oral modification can still operate as a waiver, retractable as to future performance unless relied upon.

EXAMPLE: Contractor demands $1,000 extra mid-project to finish a deck "because I'm tired." Common law: unenforceable — pre-existing duty. Same demand because excavation revealed solid granite no one anticipated: enforceable under Rest. § 89. Supplier demands 10% more for steel due to a genuine market shock, buyer agrees: enforceable under UCC § 2-209 (good faith), no new consideration needed.

Partial payment of a debt: Payment of a lesser sum than an undisputed, liquidated, due debt is NOT consideration for a promise to forgive the balance (Foakes v. Beer). But if the debt is disputed or unliquidated, or payment is early/in a different medium, the compromise binds — this is an accord and satisfaction. A check tendered "in full satisfaction" of a disputed claim, cashed by the creditor, discharges the claim (UCC § 3-311) even if the creditor strikes out the notation.

C. Illusory Promises and Mutuality Problems

Rule: A promise that commits the promisor to nothing ("I'll buy if I feel like it") is illusory — no consideration. But courts imply obligations to save apparent bargains:

Requirements and output contracts (UCC § 2-306): Valid — quantity is measured by actual good-faith requirements/output, not unreasonably disproportionate to estimates or prior comparable amounts. A buyer may reduce requirements to zero in good faith (going out of business) but not to divert demand elsewhere.

Exclusive dealing: Implies a best-efforts obligation on both sides (Wood v. Lucy, Lady Duff-Gordon).

Satisfaction clauses: Not illusory — "satisfaction" judged by good faith (taste, fancy: subjective honesty) or reasonableness (commercial utility: objective).

Termination clauses: A right to terminate at will may be illusory; a right to terminate on notice or after a period supplies consideration. UCC § 2-309: termination of an ongoing contract requires reasonable notice.

Voidable promises (minor's, fraud victim's) are NOT illusory — they constitute consideration despite the power to avoid.

D. Promissory Estoppel (Rest. § 90)

Rule: A promise is enforceable without consideration if (1) the promisor should reasonably expect it to induce action or forbearance, (2) it does induce such reliance, and (3) injustice can be avoided only by enforcement. Remedy "may be limited as justice requires" — frequently reliance damages rather than expectation.

Classic applications: gratuitous promises relied upon (pension promises — Feinberg v. Pfeiffer), charitable subscriptions (enforceable under § 90(2) without proof of reliance), construction bidding (§ 87(2)), promises of franchise relied on by selling a business (Hoffman v. Red Owl — pre-contractual reliance).

E. Moral Obligation / Material Benefit Rule

Traditional rule: Moral obligation is not consideration. Exceptions enforceable without new consideration: (1) promise to pay a debt barred by the statute of limitations (enforceable per its new terms; must be in writing in most states); (2) promise to perform a voidable obligation (new promise after reaching majority); (3) promise to pay a debt discharged in bankruptcy (now heavily regulated by the Code); (4) material benefit rule (Rest. § 86, minority/modern): a promise made in recognition of a material benefit previously received by the promisor is binding to the extent necessary to prevent injustice (Webb v. McGowin — promise of pension to man crippled saving promisor's life), but not where the benefit was a gift or the value is disproportionate.

V. DEFENSES TO FORMATION AND ENFORCEMENT

A. Incapacity

Minors (infancy): Contracts of persons under 18 are voidable at the minor's option — the minor may disaffirm any time before or within a reasonable time after reaching majority; the adult is bound. Upon disaffirmance the minor must return whatever she still has (majority: no liability for depreciation/use; minority/benefit rule: must account for value received). Ratification after majority (express, by conduct, or by retaining benefits) binds the minor. Necessaries exception: a minor is liable in restitution (quasi-contract, reasonable value — not the contract price) for necessaries: food, shelter, clothing, medical care.

Mental incapacity: Voidable if the party could not understand the nature and consequences of the transaction (cognitive test), or — Restatement — could not act reasonably and the other party had reason to know (volitional test). If adjudicated incompetent with a guardian, contracts are VOID, not voidable. Liable in restitution for necessaries.

Intoxication: Voidable only if so intoxicated as to be unable to understand, AND the other party had reason to know. Must disaffirm promptly on sobering; restitution for value received.

B. Duress and Undue Influence

Duress: (1) Physical compulsion — contract VOID. (2) Improper threat (economic duress) — contract VOIDABLE if a wrongful threat left the victim no reasonable alternative. Threatening to do what one has a legal right to do (sue, refuse to deal) is generally not duress; threatening to breach an existing contract to extort a modification IS, where the victim cannot obtain substitute performance and damages would be inadequate.

Undue influence: Unfair persuasion of a party under the domination of the persuader, or in a relationship of trust justifying assumption the persuader will not act contrary to her welfare. Look for: susceptibility + excessive pressure (Odorizzi factors: unusual time/place, insistence on haste, multiple persuaders, no independent advice). Voidable.

C. Misrepresentation, Fraud, and Nondisclosure

Fraudulent misrepresentation (fraud in the inducement): A (1) misrepresentation of fact, (2) that is fraudulent (knowledge of falsity + intent to induce) OR material, (3) actual reliance, (4) justifiable reliance → contract VOIDABLE by the innocent party. Damages or rescission available; tort remedies (punitive) possible for fraud.

Fraud in the factum (execution): Deception about the very nature of the document signed (told it's an autograph; it's a deed) → VOID.

Innocent/negligent misrepresentation: Voidable if material and justifiably relied upon — no scienter needed for rescission.

Nondisclosure: Generally no duty to disclose; silence is not misrepresentation. EXCEPT: (1) active concealment (painting over the crack); (2) half-truths; (3) fiduciary/confidential relationship; (4) failure to correct the other party's known basic mistaken assumption where nondisclosure violates good faith (latent material defects — modern trend); (5) subsequently acquired information falsifying an earlier statement. Opinions/puffery are not actionable unless by an expert vis-à-vis a layperson.

D. Mistake

Mutual mistake (Rest. § 152): Voidable by the adversely affected party if (1) both parties were mistaken at formation, (2) about a basic assumption on which the contract was made, (3) with material effect on the exchange, and (4) the adversely affected party did not bear the risk of mistake. Risk is borne when allocated by agreement, when a party proceeds with conscious ignorance ("as is"; aware of limited knowledge), or when allocated by the court as reasonable. Classic: barren cow sold as sterile turns out fertile (Sherwood v. Walker — rescission); contrast mere mistakes of value or quality (uncut gem sold for $1 — no relief; both knowingly gambled on identity/value).

Unilateral mistake: One party mistaken. Voidable only if the non-mistaken party knew or should have known of the mistake (snapping up an obviously erroneous bid), OR enforcement would be unconscionable, and the mistaken party doesn't bear the risk. Mechanical/clerical errors in bids are the classic case; errors of judgment get no relief.

Mistake in transcription → reformation: When a writing fails to reflect the parties' actual prior agreement, either party may have the writing reformed to match the true deal (parol evidence rule is no bar). Requires clear and convincing evidence.

Misunderstanding (Rest. § 20): When a term is ambiguous and the parties attach different meanings: (1) neither knows of the ambiguity → NO contract if the meanings differ materially (Raffles v. Wichelhaus — two ships "Peerless"); (2) one party knows of the other's meaning → contract on the innocent party's meaning; (3) both know → no contract.

E. Illegality and Public Policy

Rule: A contract with illegal subject matter (drug deal, gambling where prohibited, bribe) is VOID. If only the purpose is illegal and one party doesn't know, the innocent party may enforce. Courts leave parties in pari delicto where they lie; exceptions: party protected by the statute (regulatory licensing — unlicensed contractor cannot enforce; revenue-raising license — contract enforceable), withdrawal before the illegal act, fraud/duress/justifiable ignorance.

Covenants not to compete: Enforceable only if (1) ancillary to a legitimate transaction (employment, sale of business), (2) protecting a legitimate interest (trade secrets, goodwill — not mere competition), (3) reasonable in scope, geography, and duration, and (4) not harmful to the public. Courts split on remedies for overbroad covenants: blue-pencil (strike offending words), reformation (rewrite to reasonable), or void entirely.

Exculpatory clauses: Cannot exempt intentional or reckless wrongdoing; negligence waivers fail where a public interest is involved (common carriers, hospitals) or grossly unequal bargaining power exists.

F. Unconscionability (UCC § 2-302; Rest. § 208)

Rule: A court may refuse to enforce a contract or any clause it finds unconscionable at the time of formation. Two strands, usually both required on a sliding scale: procedural (defects in bargaining: fine print, surprise, no meaningful choice, adhesion) and substantive (terms unreasonably one-sided: cross-collateral clauses — Williams v. Walker-Thomas; grossly excessive price; remedy limitations). A question of LAW for the judge. Court may refuse the whole contract, strike the clause, or limit its application.

G. Statute of Frauds

Rule: Certain contracts are unenforceable (not void) unless evidenced by a writing signed by the party to be charged (the one resisting enforcement). The mnemonic: MY LEGS.

M — Marriage: Contracts in consideration of marriage (prenups, "marry my daughter and I'll convey the farm") — not mutual promises to marry.

Y — Year: Contracts incapable of full performance within one year of formation. Measured from the date of MAKING, not start of performance. Test is theoretical possibility, not likelihood: a contract "for life" is OUTSIDE the statute (the person could die tomorrow — full performance); "for two years" is within it. Full performance on one side takes the contract out of the one-year prong (majority).

L — Land: Contracts for the sale of an interest in real property — sales, mortgages, easements, leases over one year. NOT: contracts to build, or short leases. Part performance exception: a buyer in possession who has paid part and/or made valuable improvements (any two of: payment, possession, improvements in most states) may obtain specific performance of an oral land contract (equity only — not damages).

E — Executor: An executor's promise to pay estate debts from her OWN funds.

G — Goods $500 or more (UCC § 2-201): The writing must (1) indicate a contract for sale, (2) be signed by the party to be charged, and (3) state a quantity (enforceable only up to the quantity stated; price and other errors don't matter). Four UCC exceptions (SWAP): (a) Specially manufactured goods not suitable for sale to others, once the seller substantially begins manufacture or procurement; (b) Written merchant's confirmatory memo — between merchants, a signed confirmation binding the SENDER also binds the RECIPIENT who has reason to know its contents and fails to object in writing within 10 days; (c) Admission in pleading or testimony that a contract was made (enforceable up to quantity admitted); (d) Performance — goods paid for and accepted, or received and accepted (enforceable pro tanto, only as to the goods paid for/accepted; courts split on indivisible items like a single car with a deposit).

S — Suretyship: A promise to answer for the debt of another, made to the CREDITOR. Main purpose exception: if the surety's main purpose is her own economic benefit (guaranteeing a supplier's debt so deliveries to her own project continue), no writing required.

What writing suffices (common law): One or more documents, signed by the party to be charged, identifying the parties, subject matter, and essential terms. Need not be made as a "contract" — letters, receipts, even a repudiating letter work. Signature includes initials, letterhead, e-signatures (E-SIGN/UETA).

Effect of noncompliance & other escape routes: (1) Full performance of a services contract takes it out; (2) restitution is always available for benefits conferred under an unenforceable contract; (3) equitable estoppel / promissory estoppel (Rest. § 139): reliance can make an oral promise enforceable notwithstanding the statute (minority of courts resist); (4) the statute is a personal defense — strangers cannot raise it; (5) failure to plead it waives it.

MBE TIP: "Signed by the party to be charged" decides many questions — A signs, B doesn't: B can enforce against A; A cannot enforce against B. Also: an oral contract for $499 of goods needs no writing; $500 exactly does.

VI. TERMS, INTERPRETATION, PAROL EVIDENCE, AND WARRANTIES

A. The Parol Evidence Rule

Rule: When parties reduce their agreement to a writing intended as the final expression of the deal (an "integration"), evidence of prior or contemporaneous agreements (oral or written) is inadmissible to contradict the writing; if the integration is complete (intended as exclusive), prior consistent additional terms are barred too. If only partial, consistent additional terms may supplement.

Determining integration: Traditional/Williston "four corners" view: judge looks at the document (merger clause nearly conclusive). Modern/Corbin & UCC view: all circumstances considered; a term is excluded under the UCC only if it certainly would have been included in the writing had it been agreed (§ 2-202 cmt. 3 — "would certainly" test; Rest.: "naturally" omitted test).

What the rule NEVER bars (the exceptions — heavily tested): Evidence offered to show (1) formation defects — fraud, duress, mistake, illegality, lack of consideration; (2) a condition precedent to effectiveness of the entire agreement (deal not to be operative unless financing approved); (3) interpretation of ambiguous terms (plain meaning rule vs. modern contextual approach — PG&E v. Thomas Drayage); (4) subsequent agreements/modifications (the rule only covers PRIOR/contemporaneous matter); (5) grounds for reformation; (6) collateral agreements supported by separate consideration; (7) under the UCC, course of performance, course of dealing, and usage of trade — admissible to explain or supplement EVEN a complete integration (hierarchy: express terms > course of performance > course of dealing > usage of trade).

ESSAY WRITING TIP: Structure: (1) Is there an integration? Merger clause? (2) Complete or partial? (3) Is the evidence offered to contradict (barred), supplement (barred only if complete), or for an exception (always admitted)? Never say "the parol evidence rule excludes all oral statements" — it has no application to subsequent agreements.

B. UCC Gap Fillers and Delivery Terms

Gap fillers: Price — reasonable price at time of delivery (§ 2-305 open price term); Place of delivery — seller's place of business (§ 2-308); Time — reasonable time (§ 2-309); Payment — due at time and place buyer is to receive the goods (§ 2-310); Single delivery presumed (§ 2-307).

Shipment vs. destination contracts: FOB seller's city / "shipment" contract (the DEFAULT): seller's duties end when it (1) puts conforming goods in the carrier's possession, (2) makes a reasonable contract for transport, (3) obtains and tenders documents, and (4) promptly notifies the buyer (§ 2-504). FOB buyer's city / destination contract: seller must tender goods AT the destination (§ 2-503). FAS = alongside the vessel. CIF/C&F = price includes freight (and insurance for CIF) — shipment contracts.

C. Risk of Loss (UCC §§ 2-509, 2-510)

No breach — work down this ladder: (1) Agreement of the parties controls. (2) Carrier cases: shipment contract — risk passes to buyer on delivery to the carrier; destination contract — on tender at destination. (3) Bailee holding goods without movement — risk passes when buyer receives a negotiable document of title, the bailee acknowledges buyer's right, or after receipt of a non-negotiable document. (4) All other (non-carrier) cases: merchant seller — risk passes on buyer's physical receipt; non-merchant seller — risk passes on tender of delivery.

Effect of breach (§ 2-510): If the goods are so nonconforming the buyer may reject, risk stays on the SELLER until cure or acceptance. A buyer who rightfully revokes acceptance may treat risk as the seller's to the extent of any insurance deficiency. A breaching buyer bears risk of loss on identified goods to the extent of the seller's insurance deficiency for a commercially reasonable time.

EXAMPLE: Dealer sells a piano to Consumer, "pick it up Saturday." Dealer tenders; Consumer doesn't show; fire destroys the piano Sunday without Dealer's fault. Merchant seller + no receipt = risk still on DEALER... but Consumer breached by not taking delivery, so under § 2-510(3) risk shifts to Consumer to the extent Dealer's insurance doesn't cover.

D. Warranties (UCC Article 2)

1. Express warranties (§ 2-313): Any affirmation of fact or promise relating to the goods, description, sample, or model that becomes part of the basis of the bargain. No reliance showing required (presumed); no intent required. Puffery/opinion ("best car on the market," statements of value) creates no warranty. Cannot be disclaimed — a disclaimer inconsistent with an express warranty is inoperative (§ 2-316(1)).

2. Implied warranty of merchantability (§ 2-314): Implied in every sale by a merchant who deals in goods of that kind: goods must be fit for their ordinary purpose, pass without objection in the trade, be adequately packaged and labeled, etc. Applies to food and drink (reasonable expectation test for bones in the fish chowder).

3. Implied warranty of fitness for a particular purpose (§ 2-315): Arises when ANY seller (merchant or not) (1) has reason to know the buyer's particular purpose, (2) has reason to know the buyer is relying on the seller's skill or judgment to select the goods, and (3) the buyer actually relies.

4. Warranty of title (§ 2-312): Every seller warrants good title, rightful transfer, and freedom from undisclosed security interests; merchants regularly dealing warrant against infringement. Disclaimed only by specific language or circumstances (sheriff's sale).

Disclaimers (§ 2-316): Merchantability — may be oral, but must mention "merchantability"; if written, must be conspicuous. Fitness — must be in a writing and conspicuous (need not mention fitness; "There are no warranties beyond the description" works). Both are disclaimed by "AS IS," "with all faults," or similar language; by buyer's examination (or refusal to examine) as to defects an examination should reveal; and by course of dealing/usage of trade.

Remedy limitations (§ 2-719): Parties may limit remedies (repair/replace) — but if the limited remedy fails of its essential purpose, all Code remedies revive. Consequential damage exclusions stand unless unconscionable; exclusion of consequential damages for personal injury from consumer goods is prima facie unconscionable.

Privity & third-party beneficiaries of warranty (§ 2-318 Alt. A): Warranties extend to family/household members and guests of the buyer who suffer personal injury.

MBE TIP: Magnuson-Moss aside, remember the disclaimer asymmetry: merchantability can be disclaimed ORALLY (saying "merchantability"); fitness only in WRITING. "As is" kills both implied warranties but never an express warranty.

VII. CONDITIONS AND PERFORMANCE

A. Conditions Classified

Rule: A condition is an event, not certain to occur, that must occur before performance under a contract becomes due. Failure of a condition is not breach — it simply discharges the duty it conditions; breach is failure to perform a PROMISE. Interpretation preference: when language is ambiguous, courts construe it as a promise rather than a condition (avoids forfeiture).

By source: Express conditions (created by language: "if," "provided that," "on condition that," "subject to") demand strict (perfect) compliance — substantial performance does NOT satisfy an express condition. Constructive (implied-in-law) conditions are supplied by courts to fix the order of performance and are satisfied by substantial performance.

By timing: condition precedent (must occur before the duty arises), conditions concurrent (capable of simultaneous performance — tender of deed and price), condition subsequent (cuts off an existing duty; shifts burden of pleading/proof to the party asserting it).

Order of performance: Where performances can be exchanged simultaneously they are concurrent conditions; where one performance takes time (services), that performance is due first — the employee works before being paid.

Satisfaction conditions: "Payment on condition of my satisfaction" — mechanical/commercial fitness judged OBJECTIVELY (reasonable person); aesthetics/personal taste judged SUBJECTIVELY but in good faith. Satisfaction of a third party (architect's certificate): condition strictly enforced, excused by the third party's bad faith, death, or collusion.

B. Excuse of Conditions

A duty becomes absolute when its condition occurs OR is excused. Conditions are excused by:

1. Waiver: Voluntary relinquishment of a known right. A party may waive a condition that is for her benefit. Conditions that are immaterial to the exchange can be waived without consideration; waiver of a MATERIAL part of the bargained exchange requires consideration (otherwise it is a modification). A waiver of a condition relating to future performance may be retracted with reasonable notice unless the other party has relied.

2. Estoppel: Waiver before the condition's time, relied upon — retraction barred.

3. Prevention / hindrance (bad faith): A party whose own wrongful conduct prevents a condition's occurrence cannot rely on its non-occurrence (duty of good faith — owner fires the contractor before completion; the completion condition is excused). Includes failure to cooperate.

4. Anticipatory repudiation by one party excuses the other's conditions.

5. Avoidance of disproportionate forfeiture (Rest. § 229): A court may excuse a non-material express condition to the extent enforcement would cause extreme forfeiture.

6. Election: continuing to perform after a condition fails, with knowledge, waives the right to treat the duty as discharged.

C. Performance at Common Law: Substantial Performance

Rule: A party who substantially performs (no material breach) can enforce the contract; the other side must perform and sue for damages from the deficiencies. Factors for materiality (Rest. § 241): extent the injured party is deprived of expected benefit; adequacy of damages as compensation; forfeiture to the breaching party; likelihood of cure; good faith of the breaching party. Willful breach traditionally defeats substantial performance.

Damages measure with substantial performance: contract price minus cost to complete/repair; where repair cost is grossly disproportionate to the loss in value (economic waste — Jacob & Youngs v. Kent, Reading pipe), diminution in value instead.

Divisible contracts: If performance is divisible into corresponding pairs of part performances treated as agreed equivalents, recovery is allowed at the contract rate for completed units even if the whole is unfinished.

Quasi-contract for the breaching plaintiff: Modern rule — even a materially breaching party recovers restitution for benefits conferred minus the other party's damages (traditional rule denied any recovery to a willful breacher).

D. Performance Under the UCC: Perfect Tender and Its Limits

Perfect tender rule (§ 2-601): If the goods or tender fail to conform in any respect, the buyer may (1) reject the whole, (2) accept the whole, or (3) accept any commercial units and reject the rest. Substantial performance does NOT apply to single-delivery sales. Good faith limits pretextual rejections.

Rejection mechanics (§§ 2-602–2-605): Must occur within a reasonable time after delivery and before acceptance, with seasonable notice; buyer must hold goods with reasonable care; a MERCHANT buyer must follow reasonable seller instructions and sell perishables. Failure to particularize defects ascertainable by reasonable inspection waives those defects where the seller could have cured.

Seller's right to CURE (§ 2-508): (1) If time for performance has NOT expired: seller may cure with seasonable notice as of right. (2) After the time for performance: seller gets further reasonable time to cure if it had reasonable grounds to believe the tender would be acceptable (with or without money allowance — e.g., prior dealings, replacing with a newer model).

Acceptance (§ 2-606): Occurs when the buyer (1) after reasonable inspection signifies conformity or that she will keep them despite nonconformity, (2) fails to make an effective rejection, or (3) does an act inconsistent with the seller's ownership. Acceptance precludes rejection, shifts the burden to the buyer to prove breach, and requires notice of breach within a reasonable time (§ 2-607(3)(a)) or the buyer is barred from ANY remedy.

Revocation of acceptance (§ 2-608): Allowed only where the nonconformity substantially impairs the value of the goods to the buyer AND acceptance was induced (a) by the difficulty of discovering the defect, or (b) by the seller's assurances. Must occur within a reasonable time after discovery, before any substantial change in the goods' condition, and is not effective until notice. Revoking buyer has the rights of a rejecting buyer.

Installment contracts (§ 2-612): Perfect tender does NOT apply. Buyer may reject an installment only if a nonconformity substantially impairs the value of that installment and cannot be cured (or documents are defective). The WHOLE contract is breached only if the nonconformity substantially impairs the value of the entire contract. Acceptance of a nonconforming installment without seasonable notice of cancellation reinstates the contract.

MBE TIP: Single delivery = perfect tender (any defect → reject). Installment = substantial impairment. Revocation after acceptance = substantial impairment + discovery excuse. Match the standard to the posture.

VIII. BREACH, REPUDIATION, AND ASSURANCES

A. Material vs. Minor Breach (Common Law)

Material breach (no substantial performance): the non-breaching party may (1) suspend performance and, if uncured after a reasonable time, (2) terminate and sue for total breach. Minor breach: the victim must still perform but recovers damages. Time is NOT of the essence unless the contract so states or circumstances make it so; late performance is ordinarily a minor breach. A "time is of the essence" clause makes timely performance an express condition.

B. Anticipatory Repudiation

Rule (Rest. § 250; UCC § 2-610): An unequivocal statement or voluntary act before performance is due indicating the party will not perform (mere expressions of doubt are not repudiation — they may justify demanding assurances). Repudiation requires that the threatened breach would itself be material/total.

Victim's options: (1) treat the contract as breached and sue immediately; (2) suspend own performance and await performance for a commercially reasonable time; (3) urge retraction; (4) ignore (but cannot enhance damages — duty to mitigate kicks in). EXCEPTION: if the only performance left is the repudiating party's unilateral duty to pay money at a future date, the victim must WAIT until performance is due to sue.

Retraction (§ 2-611): A repudiation may be retracted until the aggrieved party (a) materially relies, (b) accepts the repudiation as final, or (c) sues. Retraction reinstates the contract with due allowance/excuse for delay.

C. Adequate Assurance of Performance (UCC § 2-609; Rest. § 251)

Rule: When reasonable grounds for insecurity arise, a party may make a written demand for adequate assurance and, if commercially reasonable, suspend its own performance. Failure to provide assurance adequate under the circumstances within a reasonable time (max 30 days under the UCC) is a repudiation. Insolvency rules: a seller discovering the buyer's insolvency may refuse delivery except for cash (§ 2-702) and may reclaim goods delivered on credit within 10 days of receipt (no limit if insolvency was misrepresented in writing within 3 months) — reclamation is cut off by good-faith purchasers.

IX. EXCUSE OF PERFORMANCE: IMPOSSIBILITY, IMPRACTICABILITY, FRUSTRATION

Common framework: After formation, an event occurs (1) the non-occurrence of which was a basic assumption of the contract, (2) without the fault of the party seeking excuse, and (3) the party does not bear the risk (by contract language or circumstances). Both parties' remaining duties are discharged; restitution for benefits already conferred.

1. Impossibility (objective): Performance literally cannot be done by anyone. Classic triggers: (a) death or incapacity of a person whose personal performance is essential (unique services — the portrait painter; NOT generic services a delegate could render, and never duties to pay money); (b) destruction of the specific subject matter essential to performance (the music hall burns — Taylor v. Caldwell); (c) supervening illegality / governmental order. Subjective inability ("I can't afford it") never excuses. Construction nuance: destruction of a partially built BUILDING does not excuse the builder (it can rebuild — risk on builder until completion; but time extended and majority allows recovery for work destroyed where owner supplied the structure being renovated).

2. Impracticability (Rest. § 261; UCC § 2-615): Performance possible but only with extreme and unreasonable difficulty or expense due to an unforeseen contingency. Mere cost increases, market shifts, and currency fluctuations do NOT qualify (these are the risks fixed-price contracts allocate); crop failure of a contracted-for specific farm, embargo, war, terrorist destruction of the supply chain may. UCC allocation: a partially excused seller must allocate production among customers fairly and seasonably notify; buyer may then accept the allocation or terminate.

3. Frustration of purpose: Performance remains possible, but a supervening event destroys the principal purpose of the contract, known to both parties at formation (renting a flat to watch the coronation — Krell v. Henry). Requires near-total destruction of purpose; the event's non-occurrence must have been a basic assumption; economic disappointment is insufficient.

Casualty to identified goods (UCC § 2-613): Goods identified WHEN the contract was made (this specific boat), destroyed without fault before risk of loss passes: total loss → contract avoided; partial → buyer may take with price allowance. Unidentified/fungible goods: seller is NOT excused (can procure substitutes).

Temporary or partial impracticability suspends rather than discharges; performance revives unless materially more burdensome.

ESSAY WRITING TIP: Always identify WHO bears the risk first. Foreseeability matters: a foreseeable, unaddressed risk is usually allocated to the promisor. Then choose the right doctrine: can't be done (impossibility); can be done at ruinous cost (impracticability); can be done but pointless (frustration).

X. DISCHARGE OF DUTIES

1. Full performance or tender of performance (tender of payment discharges liability for interest, not the debt).

2. Mutual rescission: Both parties agree to cancel while duties remain executory on BOTH sides (if one side has fully performed, rescission needs consideration or a writing). Oral rescission generally effective even for written contracts (except where SOF requires otherwise for the remaining interests, e.g., land already conveyed).

3. Accord and satisfaction: An accord is an agreement to accept different performance in satisfaction of an existing duty; satisfaction is the performance of the accord, which discharges BOTH the accord and the original duty. Before satisfaction, the original duty is merely suspended; if the debtor breaches the accord, the creditor may sue on EITHER the original obligation or the accord. Consideration: usually supplied by a good-faith dispute over the original debt or different performance.

4. Substituted contract: Immediately discharges the original duty and replaces it (breach → sue only on the new contract). Whether the parties made an accord (suspension) or substituted contract (immediate discharge) is an intent question; doubts resolve toward accord.

5. Novation: A new contract substituting a NEW PARTY for an original party, with the assent of all three. The departing party is discharged. Distinguish delegation: absent novation, a delegating party remains liable.

6. Release: At common law required consideration or a sealed writing; UCC § 1-306: a claim may be discharged without consideration by a signed record.

7. Account stated; merger into judgment; discharge in bankruptcy; running of the statute of limitations (bars remedy, not the debt).

XI. REMEDIES

A. Expectation Damages (The Default)

Rule: Put the non-breaching party in the position performance would have. Formula (Rest. § 347): loss in value of the breaching party's performance + incidental and consequential losses − costs and losses avoided by not having to perform.

Limitations (every damages answer runs these three): (1) Foreseeability (Hadley v. Baxendale): recoverable damages are those arising naturally from the breach (general) or those the breaching party had reason to know of at FORMATION from communicated special circumstances (consequential). (2) Certainty: proved with reasonable certainty — new businesses' lost profits traditionally too speculative (modern courts allow with adequate proof). (3) Mitigation (avoidable consequences): no recovery for losses the victim could have avoided with reasonable effort; burden of proving failure to mitigate is on the breacher. Wrongfully discharged employee: contract salary minus what was earned or could have been earned in comparable (not inferior or different) employment. A contractor must stop work on repudiation (Rockingham County v. Luten Bridge).

Employment breaches: by employer — full salary for the term minus mitigation; by employee — cost of replacing the employee.

Construction breaches: by owner before completion — builder gets profit + costs expended (or contract price − cost of completion); by builder — owner gets cost of completion + delay damages (or diminution in value if completion is economically wasteful).

Land sale breaches: difference between contract price and market value; (English rule limited seller-breach damages to restitution where title failed in good faith).

Nominal damages are always available for breach; punitive damages are NOT recoverable for pure breach of contract (absent an independent tort).

Liquidated damages: Enforceable if (1) damages were difficult to estimate at formation, and (2) the amount is a reasonable forecast of probable loss (UCC § 2-718 also looks at actual harm). An unreasonably large amount is a penalty — void; the victim then recovers actual damages. A valid LD clause is the exclusive damages remedy; "$X per day of delay" formulas are favored.

B. Reliance and Restitution

Reliance damages: Expenditures made in performance or preparation, putting the plaintiff in the pre-contract position. Chosen when expectation is too uncertain (or for § 90 promises). Cannot exceed the contract price; reduced by any loss the defendant proves the plaintiff would have suffered had the contract been performed.

Restitution (quasi-contract / quantum meruit): Recovery of the benefit conferred to prevent unjust enrichment. Available: (1) to a non-breaching party who chooses it instead of expectation — and here the contract PRICE DOES NOT CAP recovery (losing-contract plaintiff can recover the value of work even above the pro-rata price; exception: a party who has FULLY performed and is owed only money is limited to the contract price); (2) to a breaching party for benefits conferred minus damages (modern rule); (3) when a contract is unenforceable (SOF, incapacity, impossibility); (4) where no contract exists but benefits were conferred non-officiously (emergency medical services to an unconscious patient).

C. Specific Performance and Equitable Remedies

Rule: Available only when the legal remedy (damages) is inadequate. Requirements: definite and certain terms, feasibility of enforcement, inadequate legal remedy, mutuality concerns satisfied (modern: security of performance suffices), no equitable defenses (laches, unclean hands, BFP has taken the property).

Land: ALWAYS unique — buyer gets SP routinely; sellers too (traditional mutuality). Goods: SP only if unique (heirlooms, works of art, custom goods) or "in other proper circumstances" (§ 2-716 — inability to cover); buyer may also get replevin of identified goods if cover is unavailable. Personal services: NEVER specifically enforced (13th Amendment / supervision problems) — but a court may issue a negative injunction barring a unique employee (opera singer — Lumley v. Wagner) from performing for competitors.

D. UCC Buyer's Remedies (the seller breaches)

Buyer's menu when seller fails to deliver, repudiates, or buyer rightfully rejects/revokes (§ 2-711): cancel, recover the price paid, AND:

1. Cover (§ 2-712): Buy substitute goods in good faith without unreasonable delay; recover cover price − contract price + incidental/consequential − expenses saved. Failure to cover does not bar other remedies, but bars consequentials cover would have prevented.

2. Market damages (§ 2-713): Market price (at the time buyer LEARNED of the breach, at the place of tender) − contract price + incidentals/consequentials.

3. Warranty damages — accepted goods (§ 2-714): Value of goods as warranted − value as accepted (often = cost of repair) + incidentals/consequentials. Remember the § 2-607 notice requirement.

4. Specific performance / replevin (§ 2-716) as above; recovery of identified goods on seller's insolvency (§ 2-502).

Incidental damages: inspection, transport, care of rightfully rejected goods. Consequential damages: § 2-715 — losses from needs the seller had reason to know at formation that could not reasonably be prevented by cover, plus injury to person/property proximately caused by breach of warranty.

E. UCC Seller's Remedies (the buyer breaches)

When buyer wrongfully rejects, revokes, fails to pay, or repudiates (§ 2-703): withhold delivery, stop goods in transit (carload+ for insolvency; any size for breach), AND:

1. Resale (§ 2-706): Resell in good faith and commercially reasonable manner (notice required for private sale; for public sale, notice unless perishable): recover contract price − resale price + incidentals − expenses saved. Seller keeps any profit on resale.

2. Market damages (§ 2-708(1)): contract price − market price at time and place for tender.

3. LOST PROFITS — the lost volume seller (§ 2-708(2)): If market/resale damages are inadequate to put the seller in as good a position as performance (seller has unlimited supply and would have made BOTH sales), recover the profit (with reasonable overhead) the seller would have made from full performance. The MBE's favorite: retail dealer with unlimited inventory always gets lost profit, not the (zero) resale differential.

4. Action for the PRICE (§ 2-709) — the seller's "specific performance," available ONLY when: (a) goods were accepted; (b) risk of loss had passed and conforming goods were lost or damaged thereafter; or (c) goods are identified and the seller is unable to resell at a reasonable price after reasonable effort (custom goods).

5. Buyer's deposit forfeiture (§ 2-718): A breaching buyer recovers her down payment minus the smaller of a valid LD clause or a statutory offset (20% of the price or $500, whichever is smaller) and minus seller's actual damages.

MBE TIP: Match the remedy to the goods' location: buyer keeps the goods → 2-714 warranty measure. Seller keeps the goods → resale, market, lost profits, or (rarely) price. The action for the price is wrong unless one of the three § 2-709 triggers appears.

XII. THIRD-PARTY RIGHTS

A. Third-Party Beneficiaries

Rule: Only an intended beneficiary acquires rights under a contract; an incidental beneficiary (the neighbor benefited by your new fence) has none. Intent factors: is the beneficiary named/identified, does performance run directly to her, what relationship to the promisee? Vocabulary: the promisor owes the performance benefiting the third party; the promisee extracted that promise. Creditor beneficiary: performance discharges the promisee's debt to her; donee beneficiary: a gift.

Vesting (Rest. § 311): The contracting parties may modify or rescind the third party's rights UNTIL the beneficiary (1) materially changes position in justifiable reliance, (2) brings suit, or (3) manifests assent at a party's request. After vesting, no modification without consent.

Who can sue whom: Beneficiary v. promisor — yes (subject to any defense the promisor has against the PROMISEE arising from the contract: failure of consideration, conditions, formation defenses). Beneficiary v. promisee — only a CREDITOR beneficiary (on the underlying debt; donee beneficiary has nothing unless detrimental reliance). Promisee v. promisor — yes (and may get specific performance to compel performance to the beneficiary).

EXAMPLE: Nephew contracts with Contractor to build a house for Aunt as a gift. Aunt is an intended donee beneficiary; she may sue Contractor for non-performance but not Nephew. If Contractor's duty was conditioned on Nephew's progress payments and Nephew never paid, Contractor asserts that defense against Aunt.

B. Assignment of Rights

Rule: A transfer of a contract RIGHT to a third party (assignee), extinguishing the assignor's right. No consideration, no writing (generally), and no obligor consent required — only present words of transfer ("I assign" not "I promise to assign").

What cannot be assigned: rights whose assignment would (1) materially change the obligor's duty or risk (personal service contracts where the master's identity matters; requirements contracts pre-UCC — but § 2-210 allows assignment of requirements rights with good-faith limits; insurance coverage), (2) personal rights involving trust/confidence, or (3) future rights in contracts not yet in existence (equitable assignment only).

Anti-assignment clauses (construction hierarchy): A clause barring "assignment of THE CONTRACT" bars only DELEGATION of duties. A clause barring "assignment of rights" makes assignment a BREACH (assignor liable) but the assignment is still EFFECTIVE — unless the clause says assignments are void (destroys the power, not just the right). Assignments of the right to receive MONEY or damages are effective notwithstanding any prohibition (UCC §§ 2-210, 9-406).

Revocability: An assignment FOR VALUE is irrevocable. A gratuitous assignment is revocable (by death, later assignment, or notice) UNLESS: delivery of a token/writing, estoppel through reliance, or payment already received.

Rights of the assignee: Sues the obligor directly; takes subject to all defenses, setoffs, and counterclaims arising from the contract that accrued before the obligor received notice of assignment. After NOTICE, the obligor must pay the assignee — payment to the assignor is no defense, and modifications between obligor and assignor don't bind the assignee (except UCC good-faith modifications before performance).

Implied warranties of the assignor (to assignee for value): the right exists, is not subject to undisclosed defenses, and the assignor will do nothing to defeat it — but NO warranty that the obligor will perform or is solvent.

Successive assignments: First-in-time prevails (American/majority rule). Exceptions ("four horsemen" — a later BFP assignee for value without notice wins if she first): obtains payment, obtains judgment, obtains a novation, or possesses a token/symbolic writing. (English/minority rule: first to give notice to the obligor wins.)

C. Delegation of Duties

Rule: Duties are delegable EXCEPT: (1) personal services involving special skill, taste, or discretion (the surgeon, the artist); (2) where delegation materially varies the obligee's expectancy; (3) the contract prohibits it. The obligee must accept performance from a qualified delegate of routine duties.

Liability: The delegator ALWAYS remains liable unless the obligee agrees to a novation. The DELEGATE is liable to the obligee only if she received consideration for assuming the duty (the obligee is then a third-party creditor beneficiary of the assumption). A bare delegation without assumption creates no delegate liability.

"Assignment of the contract" (UCC § 2-210(4)): A general assignment of "the contract" or "all my rights under the contract" is BOTH an assignment of rights AND a delegation of duties, with the assignee's acceptance constituting a promise to perform — enforceable by either the assignor or the other original party.

MBE TIP: Distinguish vocabulary ruthlessly: rights are ASSIGNED; duties are DELEGATED. "A assigns the contract to B" = assignment + delegation + B's implied assumption. And the delegator's continuing liability is the single most-tested point in this section.

XIII. THE CONTRACTS ATTACK PLAN

1. Governing law: Goods (UCC) or not (common law)? Merchants? State it in one paragraph, always.

2. Formation: Offer (intent, terms, communication) → still alive (revocation/rejection/lapse/death; irrevocability: option, firm offer, part performance, reliance)? → Acceptance (mirror image or 2-207; mailbox timing) → Consideration (bargain, pre-existing duty, or a substitute: § 90, material benefit)?

3. Defenses: Incapacity, duress, undue influence, misrepresentation, mistake, illegality, unconscionability, Statute of Frauds (MY LEGS + exceptions).

4. Terms: Parol evidence (integration → contradiction/supplement/exception), interpretation, UCC gap fillers, warranties and disclaimers, risk of loss, delivery terms.

5. Performance: Conditions (express = strict; constructive = substantial performance; excuse: waiver, prevention, forfeiture) → CL substantial performance vs. UCC perfect tender (cure, rejection, acceptance, revocation, installments).

6. Breach: Material vs. minor; anticipatory repudiation (unequivocal? retraction? insecurity → § 2-609 demand).

7. Excuse: Impossibility, impracticability, frustration, casualty to identified goods; discharge (rescission, accord & satisfaction, novation, release).

8. Remedies: Expectation (foreseeable, certain, mitigated) → liquidated damages valid? → reliance/restitution alternatives → SP if damages inadequate → UCC menus (buyer: cover/market/warranty/SP; seller: resale/market/lost profits/price) → don't forget incidental + consequential.

9. Third parties: Intended vs. incidental beneficiary (vesting; defenses), assignment (effective? notice? competing assignees), delegation (delegable? delegator still liable; delegate assumed?).

Related

➡ Contracts One-Page Cheat Sheet
➡ California Contracts Distinctions