Chapter 19: Article II of UCC

Article II of UCC governs sales contract; sales of good. It does not deal with real estates, services, or intangible
property. Thus, if the subject matter of a dispute is goods, the UCC governs. If its real estate or service, the common
law applies.
Sales Contract- contacts for the sales of good
Sales- the passing of title from the seller to the buyer
Goods- an item of property that is tangible, and it must be movable
*Good associated with Real estate falls within Article II of UCC
Tangible Property- has physical existence- it can be touched or seen.
Predominant Factor Test- a test that determines whether a contract is primarily for the sale of good or the sale of
service. (Often used to test contract of good and service combined)
Merchant- a person who deals in goods of the kind involved in the sales contract (retailer, wholesaler, and
manufacturer)

Chapter 15: The writing requirement and electronic records

Statue of Fraud- statue that states what type of contract must be in writing to be enforceable
*Name is MISLEADING because does not deal with fraud
*Contracts must be in writing
*MY LEGS
1. Marriage- Unilateral promise to make a monetary payment or to give property in consideration of a promise to
marry must be in writing
2. Year- Contracts that cannot be fully performed within one year must be in writing to be enforceable
3. Land- Contracts involves in transfer of real estate must be in writing to be enforceable
4. Executors- a person that pay off a decease debt personally
5. Goods- goods worth $500 < X, must be in writing to be enforceable ($$$ only one involved in dollar amount $$$)
6. Secondary-surety- 3rd party that promise to pay 1st parties debt if they didnt pay.
Prenuptial Agreement- agreement made before marriage that defines each partners ownership right in others
property
Collateral Promise- secondary promise, is one made by 3rd party to assume the debt of a primary party to a contract
if that party does not perform
Guarantor- the 3rd party of secondary-surety
*Main Purpose Rule- if the 3rd partys promise of secondary-surety is involved with his/her personal benefit, then,
statute of fraud does not apply (The exception to Collateral Promise/ Secondary-surety)

Exceptions to the Writing Requirement

1.
2.
3.

Partial Performance- if a contract is partially performed & the 2 parties cant return to the original position,
then, the court will grant special performance to the contract
Admissions- if the party who the contract is against admits under oath that contract for sale was made,
then the contract is enforceable
Promissory Estoppel- no way to avoid injustice except to enforce the oral promise

Writing
1.
2.
3.
4.
5.
6.
7.
8.
9.

Signature can be anywhere on the document & can be typed or written initials or full name
Several documents can be physically attach together to form a single contract
Written contract does not need to be only one document
Must indicate the parties voluntarily agreed to the terms
Essential terms of the contract
Sales of good contract need to state the quantity
Name the parties & Signed by the party against whom enforcement is sought
Contract of land must indicate the price and describe the property with sufficient clarity
Identify subject matter & reasonable certainty

Parol Evidence Rule- if a court finds that a written contract is fully integrated (represent the final agreement), the
court will not admit parol evidence that contradicts the final agreement will be allowed
*After contract is fully integrated, the court apply Parol Evidence Rule
Parol Evidence- evidences of communication between the 2 parties and its not contained in the contract
Exceptions to Parol Evidence Rule
1.
2.
3.
4.
5.
6.

Contracts Subsequently Modified- evidence of any subsequent modification of a written contract can be
introduce to court (Evidence of any change after a written contract is formed)
Voidable of Void Contract- evidence can be introduce at any time to show the contract is void or voidable
*Misrepresentation, Fraud, Mistake etc.
Incomplete Contract- when the written contract is incomplete (lack essential term), court allows additional
evidence to fill in the gap
Prior Dealing- evidence can be introduced to explain a written contract by a prior dealing
Condition Precedent- if the parties have orally agreed on a condition precedent that does not conflict with
the terms of the written contract, the court may allow parol evidence to prove the oral condition
Gross Clerical- error that clearly would not represent the agreement of the party

Chapter 14: Mistake, Fraud, and Voluntary Consent

Mistakes
1.

Mistake of Fact- a mistake that makes a contract voidable, must involve some material fact- a fact that a
reasonable person would consider important when determining action
a. Bilateral Mistake- mutual mistake, mistake is made by both parties
b. Unilateral Mistake- mistake made by only one of the parties
Unilateral mistake does not give the party any right to relief form the contract
Normally, the contract is enforceable

c.

2 Exceptions to Unilateral Mistake

-The other party known or should have known that the mistake of fact was made

-Error was due to substantial mathematical mistake such as + - X and it was made with gross
(extreme) negligent
2. Mistake of Value- mistake concerns the value or quality of the object of the contract, the mistake is one of value,
and the contract is normally enforceable (Too Bad; Right to be Stupid)
Fraudulent Misrepresentation
1.
2.
3.
4.

Innocent party is fraudulently induced to enter the contract

Contract normally is voidable- no voluntarily consent party can rescind (dismiss) the contract
With Fraud, pleading must be specific
Fraud is both tort and crime

4 Element of Fraud
1.
2.
3.
4.

Misrepresentation of fact must occur

Scienter: Intent to deceive (lie) guilty knowledge
Innocent party justifiable rely on the misrepresentation
To collect damage, a party must have been harmed as result of misrepresentation

Misrepresentation by Conduct- when a party take specific action to conceal a fact that is material to the contract
Statement of Opinion- statement of opinion and representations of future fact (prediction) is not misrepresentation
*Expert Opinion in some degree, may lead to fraud
Misrepresentation by Law- usually not able to relief from damage; people are assumed to know state and local law
Misrepresentation by Silence- no party is responsible for fact, thus, court usually do not care about this
Latent Defects- defects that could not easily be identified
Innocent Misrepresentation- he/she believe to be true, but actually misrepresents material fact; not fraud
Duress- agreement to the contract is not voluntary if one of the parties is forced into agreement.
1.
2.
3.

One party forced (threated) another to enter contract

Must prove threat
Prove threatening party has no right to do so

Undue Influence- arise form relationships in which 1 party can greatly influent another party, thus, taking advantage
of that partys free will
Voluntary Consent- both party agree to enter a contract
~ If there is an ambiguous term on the contract, the court will go after authoror; the person whom made the contract
Authoror party whom made the contract
Authoree party whom the contract is made to

Chapter 13: Capacity and Legality

Minimum mental capacity required by law for a party who entered a contract can be bound: 18
Minors- age < 18
-

Majority- age > 18

Minors dont have the mental capacity to be bound by a contract

Disaffirmance- Minors right to walk away from a contract (voidable)

1.
2.
3.
4.

Can be done by word or action

Expressed or implied
Anytime during minority & reasonable time after majority
Must disaffirm all part of contract

Exception to Minors right to Disaffirm

1.
2.

Misrepresentation of Age- minor can disaffirm contract even when they misrepresented their age
Contract for Necessaries- minor may disaffirm a contract of necessaires but remain liable for reasonable
value of goods, necessaries are good, clothing, water. What is necessaries for one might be luxury for
another, thus, depend on minors standard of living.
*Even damaged good can be disaffirm and return for full refund

Ratification- the act of accepting and giving legal force to an obligation that previously was not enforceable
1.
2.

Express Ratification- when individual reach majority states orally or in writing that he or she intended
to be bound by contract
Implied Ratification- when minor, reaching majority, indicate an intent to continue with the contract

~ Parent are not liable for contract enter by their minor, but parent are liable for torts caused by their minor
Intoxication- condition which a person normal mental capacity to think is inhibited by alcohol or drug. Contract
enter under intoxication can be void or voidable
Defense against Intoxication
1.
2.

Drunk but still have the mental capacity to think

Voluntarily consent

Support to Intoxication
1.
2.

Drunk and lack mental capacity to think nor able to understand the contract
Objective person theory (reasonable person will not be able to think when drunk)
I didnt understand the nature & the legal consequence of the contract I enter while I was drunk

~ Court looks at objective theory determine if the intoxicated person lacks mental capacity
~ Court rarely permits contract to be avoided due to intoxication
Disaffirmance after Intoxication
1.
2.
3.

Contract may be voidable

The intoxicated person can decide to disaffirm or not within reasonable time
Must be able to return all considerations

Mental Incompetence- individual whom lacks the ability to think, weak in intelligent, usually contracts is
1) void, 2) voidable or 3) valid.
1.

If court has previously judged that the person is mentally incompetence, then the contract is VOID

2.
3.

If a court has not previously judged the person is mental incompetence, then the contract can be
VOIDABLE if the person prove he lacks mental capacity during signing contract
If court has not previously judged that the person is mental incompetence, and the person is mentally
capable at the moment, then the contract is VALID

Legality
Legality- for a contract to be valid and enforceable, it must be form with legal purpose and lawful.
*Contract against public policy are unenforceable
Usury- lender who makes loan at a higher interest rate than lawful maximum
Reformation- when court reforms the contract because of unreasonable hardship to one party
Contract Contrary Public Policy- contract are not enforceable because of the negative impact they would have on
society
Contract in Restraint of Trade- contract in restraint of trade usually adversely affect public policy that favors
competition in economy, thus, unenforceable.
*Exception: when restraint is reasonable and is contained in the contract (employee contracts)
Covenant Not to Compete- contract restraining employee to work for competitors company within a period of time
Sale of an Ongoing Business- contract restraining to open the same type of business within specific radius
Unconscionable- extremely unfair as to be void
1.
2.

Procedural Unconscionability- lack opportunity to negotiate, take it or leave it

Substantial Unconscionability- contract of part of the contract is oppressive overly harsh

Exculpatory Clauses- release a party from liability in the event of monetary or physical injury no matter who is at
fault. Sometimes is ruled unconscionable; almost always unenforceable; sometime against public
policy
* Enforceable if doesnt violate public policy, reasonable, and do not protect parties from liability
for
intentional misconduct, but generally unenforceable
Adhesion Contract- the weaker partys consent is not voluntary
1.
2.
3.

Contract written exclusively by one party and presented to the other side on take it or leave it basis
No opportunity to negotiate
Only those that unreasonably favor the drafter is unenforceable

Mutual Assent- when both parties have voluntary consent to one common goal

Chapter 12: Consideration

Element of Consideration
1.
2.

Something of legal sufficient value exchange for promise

Must be a bargained-for exchange: Both party put up something of legal sufficient value on the table

*A promise must be enforceable to be a promise, supported by something valuable

Legal Sufficient Value
1.
2.
3.

Promise to do something that one has no prior legal duty to do

Perform a action that you have no prior obligation to do
Forbearance- refraining an act that one has right to do

*Legal sufficient value does not always equals to value, it could be something else: Performance, Promise, Value
Bargained-for Exchange
1.

Item of value must be given or promised by promisor in return for the promisees promise, performance or
promise of performance

*When there is lack of voluntary consent, the court will judge adequacy of consideration
*Court usually dont judge adequacy of consideration
Adequacy of Consideration- involves how much consideration is given; fairness of bargain
Agreement that lacks Consideration
1.
2.
3.

Pre-Existing Duty- a promise to do something one is already obligated to do is inadequacy (unenforceable), the
same duty cannot be serve for 2nd contract *Exception: Unforeseen difficulties
Past Consideration- no consideration, promise made for a action that already taken place in the past
Illusory Promise- contract is uncertainty & not have promised to do something, unenforceable no
commitment
fake promise

Requirement & Output Contract

Requirement contract- buyer & seller agree that buyer will purchase from seller all the good buyer need
I buy all I (buyer) need from you (seller)
Output contract- buyer & seller agree buyer to buy all sellers product produced (all sellers output, want)
All things I (seller) produce Im selling it to you (buyer)
Accord & Satisfaction
-

A debtor offers to pay a lesser amount of $ to creditors original claim, but creditor accepts.
The agreement is accord
Performing contract is satisfaction
The debt must be in dispute: Un-liquidated, not fixed

Liquidate- $ amount fixed, agreed on, settled

Un-liquidate- $ amount is not fixed, agreed on, settled
Convent not to sue- parties simply substitute a contractual obligation for some other type of legal action based on a
valid claim
Release- a contract in which one part forfeits its right to pursue (bring) a legal claim against the other party
1.
2.
3.

Agreement is made in good faith (honesty)

Release contract is in a signed writing
Contract is accompanied by consideration

Exceptions to the Consideration Requirement

1.
2.
3.

Promissory estoppels- promise that induce detrimental reliance

Promise to pay debt that are barred (stop) by statute of limitation
Promise to make charitable contributions

Promissory Estoppels- a person that has reasonable & substantial reliance on the promise that made by another
person to obtain some measure of recovery
*Estoppels (prevent) *Try to serve justice
*A promise is enforceable is people relies on it (change of position)

Charitable Subscription- a promise to make a donation to a religious, educational, or charitable institution; usually
enforceable
Promise to pay debts barred by statute of limitation- statute of limitation require creditor to sue within a specific
period of time to recover a debt, if creditor fails to sue in time, recovery of the debt is barred by statute of limitation
Rescission- the unmaking of a contract so the 2 party can return to the position they occupied before contract was
made
*Promise V.S. Gift

Need V.S. Want

Chapter 11: Agreement

Agreement- the parties must agree on the terms of contract and manifest to each other their mutual assent
(agreement) to the same bargain
1.
2.
3.

Serious intent (Purpose)

Reasonable term and are definite (Price)
Communication to offeree (Knowledge to offer- consideration)

*can not accept a offer that one didnt know about

*if there was no offer made, nothing can be accepted
*must be a offer and a acceptance
Offer: a promise made with serious intent
Acceptance: parties whom accept offer , voluntary act by the offeree, only the offeree has the power to accept offer
Whats not an Offer
1.
2.
3.
4.

Expressions of opinion- no intent

Statement of future intent- intent to do something in the future
Preliminary negotiation- invitation to negotiate
Advertisement- its a invitation to negotiate

Termination of Offer
Revocation- when authoror takes back offer before offeree accepts the offer
Irrevocable Offers- offer that cannot be revoked
Counter Offer- reject authorors offer, authoree then makes a new offer to authoror
* Authoror and Authoree changed position
*Rejection + Offer = Counteroffer
~Rejection Kills offer
Rejection- rejects the offer by words or conduct, then the offer terminates
Option Contract- offeror promise to hold an offer for a specified period of time in return for a payment give by
offeree
Mirror Image Rule- Offerees acceptance to match the offerors offer exactly same- mirror image
Lapse of Time- an offer terminates automatically by law when time is specified in offer has passed

Destruction of the Subject Matter- offer is terminated when the specific subject matter of the offer is destroyed
before offer is accepted
Supervening Illegality of the Proposed Conduct- state court terminate offer when its formed illegal
Death or Incompetence of the offeror or offeree- if the offeror or offeree die or becomes incompetent, this offer
terminates (unless offer is irrevocable)
The Mailbox Rule- acceptance became valid when its dispatched (sent to post office)

Chapter 10: Nature & Terminology

Objective Theory of Contracts
1.
2.

Determines the intent

Reasonable person standard

Reasonable Person Standard- what party said, how they act, the circumstances around

Ambiguity (unclear)
1.
2.
3.
4.

When intent of the parties cant be determined from contracts language

When contract lacks provision on a dispute term
When a term has more than one meaning
When there is uncertainty about a provision

Void- no contract
Voidable- the parties have the opinion to avoid or enforce the contract
Valid- contract that have all requirements and is enforceable
Unenforceability- contract exist, but not enforceable