Law School Study Guide

Contracts · full outline · updated 2026-10-21

Contracts Outline

Contracts analysis starts with the governing law, then separates agreement, enforceability, performance and remedy. A merchant's signed hold-open assurance raises a different question from a writing proving the underlying sale; satisfying one requirement does not settle the other. The outline keeps those inquiries apart and places exceptions beside the rule they qualify. Its 69 topics include matters that need no separate doctrine page, such as notice of assignment, divisible performance and the reasonable-value measure of restitution. For disputed terms, identify the actual offer or integrated agreement before deciding what a later form adds. For damages, name the interest claimed, show the calculation and deduct avoided costs without counting the same loss twice.

Contracts attack outlinePractice exam

What does this document establish?

Before treating a document as decisive, identify the particular proposition it supports. Use these four reading tasks beside the complete rules below; each asks for different evidence.

What does this document establish?
Document in the problemSeparate the questions
A seller signs a letter promising to leave an offer open.

Record the assurance, the seller's merchant status and the relevant dates. Separately ask what evidence would establish the underlying sale if acceptance occurs.

A purchase order and a confirmation contain different terms.

Identify the response's operative words before deciding whether an agreement formed. Then examine whether the disputed addition entered that agreement.

A party offers an earlier conversation about a signed agreement.

Identify the purpose of the evidence and the writing's integration status. Interpretation, supplementation and contradiction are different uses of the conversation.

Both parties sign a later change to price or delivery.

Compare the signed change with the first bargain. Which statute or common-law rule applies, did the parties agree, and what formality or enforceability requirement must this adjustment satisfy?

Foundations

Start by finding the governing law and the standard for judging agreement.

Mutual assent: offer and acceptance

A contract needs an offer and an acceptance. This unit covers how each forms, how each ends, and what changes for goods.

Consideration and its substitutes

Identify a requested exchange first, then test any reliance or restitution theory on its own requirements.

  • Consideration. Consideration requires an actual requested exchange, which can include surrender of legal freedom without financial benefit to the promisor. Unequal value does not by itself negate a proved exchange. A gift recital or an apparent promise leaving complete discretion requires examination of the actual obligations.
    • An actual exchange sought by the promisor.
    • Requested performance, forbearance or a genuine return obligation.
    Exceptions and limits:
    • A recital can be rebutted by evidence of a gift.
    • Wood's inference about effort depended on the particular grant of exclusivity and the agreement's surrounding obligations.

    Cases: Hamer v. Sidway, Dougherty v. Salt, Wood v. Lucy, Lady Duff-Gordon

    Authorities: Hamer: requested forbearance and legal detriment; Batsakis: actual exchange and inadequate value; Dougherty: gift and rebutted recital; Wood: reasonable efforts implied from the agreement

    Full explanation with examples →

  • Bargained-for exchange. Identify what the promisor requested in return and what the promisee gave for that promise. Hamer treated requested surrender of legal freedom as consideration. Dougherty treated the note as a gift despite its value-received recital. Kirksey's majority likewise classified the relocation as a condition of a gift, over a contrary view of its burden.
    • A requested performance, forbearance or genuine promise.
    • A connection between that return and the promise sought to be enforced.
    Exceptions and limits:
    • Financial benefit to the promisor is not required.
    • A gift motive can coexist with an exchange; the question is what was requested and given, not whether affection also motivated the promise.

    Cases: Hamer v. Sidway, Dougherty v. Salt

    Authorities: Hamer: requested legal forbearance; Dougherty: gift despite recital; Kirksey: majority and contrary treatment of relocation

  • Past consideration. An act completed before an unrequested later promise ordinarily was not exchanged for that promise. Mills rejected the father's promise concerning care already supplied to his adult son. Webb recognized a different, personal material-benefit basis for a later promise. Treat that exception as jurisdiction-dependent rather than converting gratitude into consideration.
    • A completed benefit and later promise.
    • Whether the earlier act was requested as part of an exchange.
    • Any separately recognized basis for enforcing the later promise.
    Exceptions and limits:
    • Webb concerns a direct material benefit to the promisor and serious injury to the rescuer.
    • Old debts and bankruptcy reaffirmations require their own governing statutes; a later promise is not automatically sufficient.

    Cases:

    Authorities: Mills: prior aid and unenforceable later promise; Webb: direct material benefit and later undertaking

  • Preexisting duty rule. Promising unchanged work already owed does not supply new consideration for higher pay. Angel permits a fair voluntary adjustment before completion in light of unanticipated circumstances. For goods, 2-209 removes consideration but preserves other enforceability requirements.
    • An identified existing obligation.
    • A comparison of the promised performance and alleged new exchange.
    • Any supported exception under the governing law.
    Exceptions and limits:
    • Angel requires more than a voluntary promise or a price increase alone.
    • For goods, separately check agreement, good faith, required form and waiver.

    Cases:

    Authorities: Alaska Packers: unchanged duty and coerced wage demand; Angel: fair voluntary change and unanticipated burden; UCC 2-209: consideration, writing and waiver

    Full explanation with examples →

  • Contract modification. For a goods sale, UCC 2-209 removes the consideration requirement; it does not remove agreement, good faith, or applicable writing requirements. At common law, Angel recognizes a fair voluntary adjustment for unanticipated circumstances before either side fully performs; Alaska Packers rejects a coerced promise to pay more for the same duty.
    • Agreement to the change, rather than a unilateral demand.
    • The consideration rule or applicable exception under the governing law.
    • Any required signed writing and the statutory waiver qualification.
    Exceptions and limits:
    • A merchant-supplied restriction on modification must be separately signed by the other party except between merchants.
    • An ineffective modification may operate as waiver; retraction of an executory waiver requires reasonable received notice and cannot unjustly defeat material reliance.
    • No new consideration does not mean every coerced change is enforceable.

    Cases:

    Authorities: UCC 2-209: modifications, writing and waiver; Angel: voluntary fair modification; Alaska Packers: existing duty and coercion

  • Accord and satisfaction. An accord substitutes an agreed performance to settle an existing claim; satisfaction is its completion. For payment by instrument, UCC 3-311 requires good-faith tender in full settlement, an unliquidated or genuinely disputed claim, and collection. A conspicuous settlement statement and the statutory exceptions must also be examined.
    • A good-faith full-settlement tender of an instrument.
    • An unliquidated claim or bona fide dispute, followed by payment.
    • A conspicuous statement in the instrument or accompanying writing, subject to 3-311(c)-(d).
    Exceptions and limits:
    • An organization may protect a designated recipient for disputed debts; the specified conditions matter.
    • Repayment within 90 days can prevent discharge, subject to the organization exception.
    • Knowledge before collection by the claimant or directly responsible agent can establish discharge despite subsection (c).
    • Do not assume every partial payment of an undisputed fixed debt discharges the balance.

    Authorities: UCC 3-311(a)-(d): instrument settlement and exceptions

  • Promissory estoppel. A promise that foreseeably induces a detrimental change of position can support enforcement where denying relief would be unjust despite lack of a bargain. Identify the governing approach: Hoffman does not require a promise containing every term of a complete final deal. Liability and the appropriate remedy remain separate.
    • An identified promise or assurance under the governing jurisdiction's standard.
    • Reliance the promisor had reason to expect.
    • Proof that the assurance caused an adverse change, together with a basis for finding nonenforcement unjust.
    • A remedy justified by the findings rather than assumed from liability.
    Exceptions and limits:
    • Mere sequence does not prove reliance.
    • Drennan does not protect bid shopping or make general-bid submission acceptance.
    • Hoffman does not guarantee every expense or anticipated venture profit.

    Cases:

    Authorities: Ricketts: induced change of position without a bargain; Feinberg: pension-induced retirement; Hoffman: assurances, incomplete deal and limited remedies; Drennan: justified bid reliance and prompt acceptance; James Baird: contrasting treatment of bid reliance

    Full explanation with examples →

  • Restitution and unjust enrichment. Restitution can impose a payment obligation without an actual bargain when the governing law treats retention of the benefit as unjust. Cotnam permits reasonable compensation for necessary emergency services to an unconscious patient, without inventing assent. On its facts, due skill and care mattered; survival and the patient's wealth did not determine the reasonable fee.
    • An identified benefit or service conferred on the recipient.
    • Circumstances supporting a restitution obligation under the governing law.
    • A supported measure of reasonable compensation.
    Exceptions and limits:
    • Cotnam's emergency setting does not authorize charging for every unsolicited favor.
    • Webb concerns a later promise after a material benefit; that is a different enforcement theory.
    • A reasonable fee is not automatically the amount claimed or the amount the recipient can afford.

    Cases:

    Authorities: Cotnam, parts 1-3: emergency services, outcome and compensation; Webb: later promise following personal material benefit

  • Moral obligation. A moral reason to pay is not by itself a bargain. Mills refused enforcement of a father's later undertaking for his adult son's care. Webb enforced a later undertaking after the promisor personally received a life-saving material benefit and the rescuer suffered disabling injury. The cases support different treatment, not a universal gratitude exception.
    • A promise made after the claimed moral obligation arose.
    • The recipient and nature of the earlier benefit.
    • A recognized exception under the governing law.
    Exceptions and limits:
    • Mills is not a rule that every promise following aid is enforceable.
    • Webb should not be used to demand payment for every unsolicited favor.

    Cases:

    Authorities: Mills: moral obligation alone; Webb: material benefit and subsequent promise

Formalities

Writing requirements and electronic form are separate from proof of assent and the remaining enforcement requirements.

Defenses to enforcement

A valid-looking agreement can be avoided for lack of capacity, unfair pressure, deception, mistake, or illegality.

  • Capacity to contract. Identify the claimed incapacity and the governing law rather than treating a disadvantageous choice as incapacity. California's 2025 section 6710 allows a minor to disaffirm subject to statutory exceptions; 6712 defines a qualified necessaries exception. Ortelere considers mental illness affecting reasonable action despite cognitive understanding, with notice to the other party and equitable limits. Lucy distinguishes drinking from inability to comprehend the transaction.
    • A recognized ground for incapacity under the governing law.
    • Evidence of that ground when the agreement was made.
    • Compliance with the applicable avoidance requirements and limits.
    Exceptions and limits:
    • An unwise choice or consumption of alcohol does not alone prove incapacity.
    • California 6712 requires actual provision of necessary support and the stated parental-care condition; it is not an exception for everything a minor buys.
    • Ortelere discusses protection of fair, performed transactions where the other party lacks notice; mental illness does not invariably make every transaction void.

    Cases: Lucy v. Zehmer

    Authorities: California Family Code 6710, 2025 text: disaffirmance timing and statutory exceptions; California Family Code 6712, 2025 text: qualified necessaries exception; Ortelere, pages 202-205: cognition, reasonable action, notice and equity; Lucy: ability to comprehend despite drinking

  • Duress. Under the sections 175-176 framework discussed in Richards, an improper threat must induce assent while leaving no reasonable alternative. Impropriety is not confined to criminal acts. Some threats are improper regardless of the exchange's fairness; others require unfair terms together with the specified abuse of power. Financial pressure or a short decision period alone does not establish the defense.
    • An improper threat under the governing standard.
    • Inducement of assent by that threat.
    • No reasonable alternative to entering the agreement.
    Exceptions and limits:
    • A legal right to take the threatened act does not categorically defeat duress.
    • Richards found no qualifying impropriety on its record; identifying stress was not enough.
    • Undue influence can concern overpersuasion without the same improper-threat analysis.

    Authorities: Richards, paragraphs 30-42: sections 175-176 and limits on economic duress; Odorizzi, pages 128-133: separate duress and undue-influence inquiries

  • Undue influence. Odorizzi combines susceptibility to pressure with excessive persuasion that overcomes independent judgment. Unusual timing, demands for immediate action, multiple persuaders and denial of time for advice can support the inquiry. In that California analysis, exploitation of weakness or distress need not occur within a confidential relationship and need not involve a false statement.
    • Vulnerability or susceptibility relevant to the transaction.
    • Excessive persuasion taking unfair advantage of that condition.
    • An effect on the person's independent judgment and consent.
    Exceptions and limits:
    • The listed pressure characteristics are indicators, not seven mandatory elements.
    • A regretted bargain is not enough.
    • Odorizzi found sufficient allegations for further proceedings; it did not decide that undue influence was proved.

    Authorities: Odorizzi, pages 130-135: susceptibility, overpersuasion and pleading posture

  • Misrepresentation. Separate avoidance for a materially false assertion from tort damages for intentional fraud. Barrer recognizes rescission for innocent material misrepresentation when the assertion is false, material and justifiably relied on in assenting; its District of Columbia rule also requires detriment. Odorizzi's actual-fraud inquiry additionally requires knowledge of falsity and intent to induce reliance.
    • An assertion inconsistent with the relevant facts.
    • The materiality or fraud showing required for the claimed relief.
    • Actual, justified reliance inducing assent and any additional local requirement.
    Exceptions and limits:
    • An innocent material misrepresentation need not satisfy the intent elements of a fraud damages claim.
    • An opinion can imply facts in context; merely labeling a statement opinion is not conclusive.
    • Failure to investigate does not automatically defeat reliance under the approach discussed in Barrer.

    Authorities: Barrer, part B: innocent material misrepresentation, reliance and local detriment requirement; Odorizzi, pages 128-129: actual fraud distinguished

  • Nondisclosure. Nondisclosure requires a legal duty to speak, rather than an assumption that every omission is fraud. Hill discusses duties to correct misleading assertions or specified mistakes and duties arising from trust and confidence. It adopts a residential-sale rule requiring disclosure of known facts materially affecting value when not readily observable or known to the buyer.
    • A known, undisclosed fact.
    • A recognized duty to disclose in the transaction.
    • The remaining reliance and remedial requirements of the claim.
    Exceptions and limits:
    • Hill leaves disputed knowledge, materiality and diligence to the factfinder on its record.
    • A general integration clause did not immunize proved fraud under the Arizona analysis.
    • The residential-sale rule does not make every party disclose every immaterial fact in every transaction.

    Authorities: Hill v. Jones, parts II-III and notes: disclosure scope and unresolved factual issues; Barrer: knowledge and specified nondisclosure duties

  • Unconscionability. Unconscionability evaluates unfairness when the agreement was made; meaningful choice and one-sided terms require separate analysis under the governing jurisdiction’s test. For goods, UCC 2-302 permits refusal, severance or limitation after a reasonable opportunity to present commercial-setting evidence. Williams remanded for findings; Burch applied Nevada’s general two-component test and found both.
    • Formation-time unfairness under the governing law.
    • Evidence of meaningful choice and the challenged terms’ substantive effect.
    • A remedy tied to the unconscionable contract or clause.
    Exceptions and limits:
    • An adhesion form or failure to read alone does not decide the issue.
    • Burch’s strong procedural showing reduced the substantive showing; it did not eliminate it.

    Cases: Williams v. Walker-Thomas Furniture Co.

    Authorities: UCC 2-302: timing, remedies and opportunity for evidence; Williams: common-law authority and remand for fact-finding; Burch: adhesion, meaningful opportunity and insurer control; 9 U.S.C. 2: general contract defenses and arbitration

    Full explanation with examples →

  • Illegality. Identify the law that makes the promised object or performance unlawful and the consequence it assigns. California Civil Code 1667, in the cited 2025 text, includes conflict with an express law, its policy or good morals. That classification does not alone decide severability, restitution or whether a particular claimant falls within an exception.
    • An identified contractual object or performance.
    • A specific applicable prohibition or policy rule.
    • The legal consequence for the term, agreement or requested remedy.
    Exceptions and limits:
    • Signatures do not make an unlawful object lawful.
    • Do not infer a uniform remedy from every licensing or regulatory violation.
    • Any severability or restitution exception needs its own authority and supporting facts.

    Authorities: California Civil Code 1667, 2025 text: categories of unlawful object

  • Public policy. A public-policy objection needs an identified legal policy and an analysis of the particular promise. Sullivan weighs the reasons for and against enforcing a physician's specific undertaking and rejects a categorical bar, while requiring clear proof of the promise. The possibility of abuse does not by itself invalidate every agreement of that type.
    • An identified term and request for enforcement.
    • A supported legal policy directed at that enforcement.
    • The governing rule determining the term's effect and available remedy.
    Exceptions and limits:
    • A poor bargain is not automatically a public-policy violation.
    • Sullivan does not convert ordinary medical reassurance into a guaranteed result.
    • A policy-based limit on one term does not establish that every other term or remedy fails.

    Cases: Sullivan v. O'Connor

    Authorities: Sullivan: public-policy concerns, specific promises and clear proof; California Civil Code 1667, 2025 text: express law and policy of law

  • Mutual mistake. Under the Restatement 152/154 framework discussed in Lenawee, a shared error at formation must concern a basic assumption and materially affect the exchange. The adversely affected party cannot obtain mistake relief if that party bears the risk. Agreement, knowing acceptance of limited knowledge or reasonable judicial allocation can assign that risk.
    • Both parties shared a mistaken belief at formation.
    • A foundational factual premise whose error substantially changed the agreed exchange.
    • The claimant did not bear the relevant risk.
    Exceptions and limits:
    • A change in value can result from a basic factual mistake; value impact alone neither proves nor defeats relief.
    • An as-is clause requires interpretation of whose risk and which uncertainty it allocates.
    • Lenawee distinguishes the mistake inquiry from the equitable remedy.

    Cases:

    Authorities: Sherwood: disputed shared premise and new-trial instruction; Lenawee: basic assumption, risk allocation and as-is clause

    Full explanation with examples →

  • Unilateral mistake. Under the section 153 framework discussed in Donovan, a one-sided basic-assumption error must materially harm the mistaken party, who must not bear its risk. Relief can depend on unconscionable enforcement or on the other party's reason to know or responsibility for the error. Donovan adopts the unconscionability route under California law; ordinary carelessness is not automatically a bar there.
    • A one-sided error concerning a basic assumption.
    • Material adverse effect and no allocation of the risk to the claimant.
    • The additional ground required by the governing mistake rule.
    Exceptions and limits:
    • A financial or price error is not categorically excluded from relief.
    • Drennan protects justified reliance where the general contractor had no reason to recognize the bidding error; a low bid alone did not establish notice.

    Cases:

    Authorities: Donovan, part V: section 153, risk and neglect of duty; Drennan: bidding error and justified reliance

  • Misunderstanding. Under the section 20 framework discussed in Hill-Shafer, materially different meanings can prevent assent when neither party knows or has reason to know the other's meaning, or when both have the specified awareness. Unequal awareness can instead make one meaning operative under subsection (2). Evaluate objective circumstances rather than an undisclosed preference alone.
    • Materially different meanings attached to the manifestations.
    • Objective evidence supporting the alleged misunderstanding.
    • The knowledge or reason-to-know combination required by the applicable subsection.
    Exceptions and limits:
    • One party's awareness does not automatically make its own preferred reading control.
    • Hill-Shafer applies subsection (1)(a) and reserves the alternatives; the quoted framework is broader than that case's holding.
    • Raffles is a short report of the Peerless dispute, not a detailed judicial exposition of every modern subsection.

    Cases:

    Authorities: Hill-Shafer, pages 473-476: section 20 and objective manifestations; Raffles: report of the Peerless misunderstanding

Interpretation and the parol evidence rule

Courts decide what the agreement means, and which earlier statements can be used to prove it.

  • Contract interpretation. Read the disputed language with the context the governing law permits. UCC 1-303 first seeks reasonable consistency among express terms, performance, dealings and trade usage. Its priority rules resolve unreasonable inconsistency, subject to the separate waiver provision. Frigaliment tests competing meanings against the transaction's evidence and the claimant's burden of proof.
    • A disputed term and competing meanings.
    • The governing rule for contextual evidence.
    • Evidence and burden supporting the proposed reading.
    Exceptions and limits:
    • Writing a term expressly does not automatically exclude explanatory trade practice.
    • California's PG&E preliminary-context approach should not be labeled the rule of every jurisdiction.

    Cases:

    Authorities: UCC 1-303(d)-(f): context, consistency, priority and waiver; Frigaliment: text, trade evidence and burden; PG&E: reasonable susceptibility and preliminary evidence

  • Ambiguity. Competing assertions do not establish ambiguity by themselves. In PG&E, California required preliminary consideration of credible context to determine whether the words were reasonably susceptible to the offered meaning. Frigaliment found the disputed word ambiguous and then weighed the text, negotiations, trade evidence and price rather than stopping at a dictionary.
    • An identified disputed expression.
    • A reasonable competing reading supported by relevant evidence.
    • The jurisdiction's method of deciding admissibility and meaning.
    Exceptions and limits:
    • PG&E does not admit evidence to assign a meaning to which the writing is not reasonably susceptible.
    • A failed interpretation claim is not necessarily a finding that no contract existed.

    Cases:

    Authorities: PG&E: preliminary context and reasonable susceptibility; Frigaliment: ambiguity followed by evidentiary evaluation

  • Parol evidence rule. A final writing protects its integrated terms against contradictory prior agreements; a complete and exclusive writing also excludes consistent additional terms. Identify intended scope separately from interpretation; commercial-context evidence receives distinct treatment under UCC 2-202. Admission of evidence does not prove its truth or final effect.
    • A writing adopted as final on identified terms.
    • The scope of any complete and exclusive integration.
    • The purpose and timing of the offered evidence.
    Exceptions and limits:
    • Masterson admits a consistent collateral agreement that might naturally be separate on its facts.
    • PG&E permits preliminary context relevant to a reasonably susceptible meaning.
    • For goods, 2-202 distinguishes commercial context from consistent additional terms.
    • Later modifications raise separate agreement and formality requirements.

    Cases: Masterson v. Sine

    Authorities: UCC 2-202: final expression and additional terms; Masterson: scope of integration and collateral agreement; PG&E: preliminary interpretation evidence and reasonable susceptibility; Nanakuli: usage, performance, consistency and merger language

    Full explanation with examples →

  • Integration clauses. A merger clause bears on whether a writing is final and exclusive, but its effect depends on the governing law and the evidence offered. Under 2-202, final written terms may receive commercial-context explanation; complete integration separately limits consistent additional terms. Masterson determines integration from the writing and circumstances, while Nanakuli distinguishes general merger language from negating trade usage.
    • A writing and the asserted merger language.
    • The integrated subject and degree of exclusivity.
    • The applicable treatment of the particular evidence.
    Exceptions and limits:
    • A general merger clause does not automatically erase usage under the Nanakuli analysis.
    • Do not infer a universal fraud or oral-condition exception without the governing jurisdiction's rule.

    Cases: Masterson v. Sine

    Authorities: UCC 2-202: final writing and commercial explanation; Masterson: writing, circumstances and collateral agreement; Nanakuli: merger language and trade usage

  • Course of performance. Under UCC 1-303(a), a course of performance involves repeated occasions for performance in the same transaction, known conduct and an opportunity for objection, followed by acceptance or acquiescence without objection. It can explain or qualify terms. Read it consistently with express terms when reasonable; the section separately preserves its relevance to waiver or modification subject to 2-209.
    • Repeated occasions for performance under this transaction.
    • Knowledge of the nature of performance and opportunity to object.
    • Acceptance or acquiescence without objection.
    Exceptions and limits:
    • An isolated event does not establish the required sequence.
    • The interpretive hierarchy applies when reasonable consistency is impossible, subject to the waiver/modification provision.

    Authorities: UCC 1-303(a), (d)-(f): performance, interpretation and waiver

  • Course of dealing. Under UCC 1-303(b), a course of dealing is a sequence of conduct in previous transactions between the parties that establishes a common basis for understanding their expressions and conduct. Construe it consistently with express terms and other relevant context when reasonable. If consistency is unreasonable, express terms and course of performance prevail over course of dealing, which in turn prevails over trade usage.
    • A sequence involving previous transactions between the same parties.
    • A common basis of understanding relevant to the present expressions or conduct.
    Exceptions and limits:
    • Conduct under the present transaction belongs to course of performance instead.
    • The priority rules resolve unreasonable inconsistency; they do not require ignoring context whenever a writing exists.

    Authorities: UCC 1-303(b), (d)-(e): prior dealings and interpretive priority

  • Trade usage. UCC 1-303 requires a practice sufficiently regular to justify expecting it in this transaction; its existence and scope are facts to prove. Relevant usage can explain, supplement or qualify terms for participants in the trade or those aware or chargeable with awareness. Seek reasonable consistency before applying the priority of express terms and other contextual sources.
    • A proved practice with sufficient regularity and relevant scope.
    • The statutory connection to the parties or place of performance.
    • A supported explanation of how it qualifies the disputed obligation.
    Exceptions and limits:
    • Nanakuli does not require an ancient or universal practice.
    • Section 1-303(g) requires sufficient notice to prevent unfair surprise from the offered usage evidence.
    • Course-of-performance waiver or modification remains separately relevant under subsection (f).

    Cases:

    Authorities: UCC 1-303(c)-(g): usage, hierarchy and notice; Nanakuli: local market proof and limited price protection

  • Good faith and fair dealing. UCC 1-304 imposes good faith in performance and enforcement of duties within the Code. Revised 1-201(b)(20) combines honesty in fact with reasonable commercial standards of fair dealing, subject to its Article 5 exception and the governing enactment. Nanakuli distinguishes authority to set a price from the manner of implementing an increase.
    • An existing contractual or Code duty.
    • An identified act of performance or enforcement.
    • Failure to meet the governing good-faith standard.
    Exceptions and limits:
    • Good faith is not a free-standing power to rewrite the agreed price.
    • Nanakuli's objective commercial evidence concerned the manner of the increase; it did not decide that the amount itself was excessive.

    Cases:

    Authorities: UCC 1-304: performance and enforcement; UCC 1-201(b)(20): revised definition; Nanakuli: implementation, commercial standards and concurrence

Performance, conditions, and breach

Who must perform first, what counts as breach, and when events after signing excuse a party.

  • Express conditions. An unmistakable express condition ordinarily requires literal occurrence; substantial performance alone does not satisfy it. Identify whether it conditions formation or performance, and test any separate ground for excuse. Oppenheimer recognizes possible excuse including waiver, breach or disproportionate forfeiture, with a limit where occurrence is material to the exchange.
    • Identify the conditional event and the duty or formation it controls.
    • Determine whether the agreed event occurred in the required time and form.
    • If not, establish a supported independent excuse rather than substantial compliance alone.
    Exceptions and limits:
    • Doubtful language may be read as a promise or constructive condition.
    • Forfeiture-based excuse is limited where occurrence was material to the agreed exchange.
    • A satisfaction condition may require good-faith judgment, as in Mattei’s commercial leases.

    Cases: Oppenheimer & Co. v. Oppenheim, Appel, Dixon & Co.

    Authorities: Oppenheimer: express conditions, substantial performance and excuse; Mattei: conditional performance and good-faith satisfaction; Jacob & Youngs: constructive conditions and reserved express-condition issue

    Full explanation with examples →

  • Constructive conditions. A court-imposed dependency between performances need not make every small defect a condition defeating the counterperformance. Jacob & Youngs considers the purpose of the promise, excuse, significance of the departure and hardship of forfeiture. Oppenheimer separates that substantial-performance inquiry from literal compliance with unmistakable express conditions.
    • Related contractual performances and the claimed dependency.
    • Classification as constructive rather than unmistakably express.
    • The significance of the failure under the applicable performance rule.
    Exceptions and limits:
    • Substantial performance does not erase the remaining damages claim.
    • A constructive-condition analysis cannot substitute for occurrence or a supported excuse of an express condition.

    Cases: Oppenheimer & Co. v. Oppenheim, Appel, Dixon & Co.

    Authorities: Jacob & Youngs: dependent promises and insignificant departure; Oppenheimer: express versus constructive conditions

  • Waiver of conditions. Failure of an express condition and excuse of that condition are separate questions. Oppenheimer preserves waiver and estoppel as possible independent grounds, although the jury rejected them there. For goods, UCC 2-209 permits an ineffective attempted modification to operate as waiver and limits retraction where material reliance would make it unjust.
    • An identified condition or term and the party entitled to insist on it.
    • Words or conduct supporting waiver under the governing law.
    • If retraction is claimed, its timing, notice and effect on reliance.
    Exceptions and limits:
    • Under 2-209(5), retraction concerns an executory portion and requires reasonable notification received by the other party.
    • Material reliance can make retraction unjust.
    • Oppenheimer does not establish waiver merely because the condition was nearly performed.

    Authorities: Oppenheimer: separate excuses and rejected waiver/estoppel; UCC 2-209(4)-(5): waiver and retraction

  • Substantial performance. Under Jacob & Youngs, an innocent, insignificant construction deviation can permit recovery subject to damages rather than total forfeiture. Assess the promise's purpose, the departure, excuse and correction burden. The opinion withholds that leniency from willful transgression and reserves the parties' power to create an unmistakable condition.
    • Performance sufficient under the governing substantial-performance standard.
    • A defect evaluated in the context of the whole promised exchange.
    • Compensation for any remaining proved loss.
    Exceptions and limits:
    • Substantial performance is not a defense to every defect or an automatic right to the full price.
    • Oppenheimer requires a separate occurrence-or-excuse analysis for express conditions.
    • A completion-cost dispute does not alone establish substantial performance.

    Cases: Oppenheimer & Co. v. Oppenheim, Appel, Dixon & Co.

    Authorities: Jacob & Youngs: innocent departure, forfeiture and damages; Oppenheimer: express-condition limit

  • Material breach. Under the Restatement approach discussed in Frazier, materiality and final discharge are separate. Evaluate lost benefit, compensation, forfeiture, likelihood of cure and good faith, then whether cure is still timely. Goods rejection, cure and installments have distinct statutory rules.
    • A proved failure of promised performance.
    • Its significance under the applicable materiality factors.
    • A separate basis for suspension, discharge or the claimed damages.
    Exceptions and limits:
    • An uncured material failure may suspend performance before final discharge.
    • An essential timing requirement can eliminate a cure interval.
    • Sections 2-508 and 2-612 qualify the goods rejection rules.

    Cases:

    Authorities: Frazier: Restatement 241 and 242, materiality versus discharge; Jacob & Youngs: purpose, excuse and correction burden; UCC 2-601: rejection and commercial units; UCC 2-508: timely cure and reasonable grounds; UCC 2-612: installment and whole-contract impairment

    Full explanation with examples →

  • Divisible contracts. Under the Restatement 240 approach discussed in Filet Menu, corresponding parts must be agreed equivalents. Performance of a matched part can earn its allocated return despite a breach elsewhere. The contract remains one agreement, and an uncured material failure can excuse further performance of uncompleted parts.
    • Performances capable of apportionment into corresponding parts.
    • Agreed equivalence between each part and its allocated return.
    • Performance of the part for which compensation is claimed.
    Exceptions and limits:
    • Installment billing alone does not prove that each payment purchases an agreed equivalent part.
    • Divisibility does not erase damages or make every part an independent contract.

    Authorities: Filet Menu, pages 860-861: agreed equivalents and remaining duties

  • Anticipatory repudiation. Model UCC 2-610 addresses repudiation of future performance whose loss substantially impairs contract value. The aggrieved party may await performance commercially reasonably or resort to remedies, with suspension available. Section 2-611 permits retraction only before the next performance is due and subject to earlier bars.
    • Future performance and repudiation.
    • Substantial impairment under the governing rule.
    • A supported remedial choice and loss-avoidance response.
    Exceptions and limits:
    • Retraction can be barred by cancellation, material change of position or final-treatment indication.
    • Retraction must include justifiably demanded assurance and allows for resulting delay.
    • Section 2-609 limits suspension and makes thirty days an assurance ceiling.

    Cases: Rockingham County v. Luten Bridge Co.

    Authorities: UCC 2-610: substantial impairment and remedial choices; UCC 2-611: deadline, bars and effect of retraction; UCC 2-609: reasonable insecurity and assurance; Rockingham: repudiation notice and avoidable work

    Full explanation with examples →

  • Adequate assurances. For a goods sale under UCC 2-609, reasonable grounds for insecurity permit a written demand for adequate assurance. Pending assurance, suspension is permitted only if commercially reasonable and only for performance whose agreed return has not already been received. After receipt of a justified demand, failure to give adequate assurance within a reasonable time, at most thirty days, is repudiation.
    • Reasonable grounds for insecurity about performance.
    • A written and justified demand received by the other party.
    • An assurance adequate for the circumstances, evaluated within a reasonable time.
    Exceptions and limits:
    • Between merchants, commercial standards govern insecurity and adequacy.
    • Accepting an improper delivery or payment does not forfeit the right to assurance of future performance.
    • A suspension cannot withhold an obligation once the counterperformance owed for it is already in hand.

    Authorities: UCC 2-609: demand, suspension and repudiation limits

  • Impossibility. Taylor treats the continued existence of an identified person or thing as an implied foundation where the agreement depends on it. Destruction without the relevant party's fault can excuse performance when that party did not undertake the risk. The question concerns the agreed performance, not whether someone could supply a different venue or person.
    • The agreement relies on a specified person or asset remaining available to supply the promised performance.
    • A later destructive event outside the claimed party's fault.
    • No contractual assumption of the relevant risk.
    Exceptions and limits:
    • Taylor's identified hall differs from an obligation satisfiable through an available substitute.
    • Transatlantic requires examining the actual alternative and allocation rather than treating any disruption as excuse.

    Cases:

    Authorities: Taylor: particular dependency, destruction, fault and assumed risk; Transatlantic: available alternative and risk allocation

  • Impracticability. A changed contingency may excuse performance when the party did not bear its risk and the resulting burden makes performance commercially impracticable. Transatlantic separates unexpected contingency, allocation and practicability; foreseeability alone is not allocation. For sales, UCC 2-615 requires a qualifying basic-assumption contingency or good-faith compliance with an applicable government order; it preserves assumed greater obligations and requires fair allocation of partial capacity and seasonable notice, subject to reasonable substitute delivery under 2-614.
    • An identified contingency affecting the agreed performance.
    • No allocation or assumed greater obligation defeating the claimed excuse.
    • Commercial impracticability assessed against the actual alternatives.
    Exceptions and limits:
    • A reasonable substitute delivery method may be required under UCC 2-614.
    • A partly affected seller must allocate fairly and reasonably and give the required seasonable notice.

    Cases:

    Authorities: Transatlantic: contingency, risk allocation and alternative performance; Taylor: destruction of the identified hall; UCC 2-615: excuse, allocation and notice; UCC 2-614: commercially reasonable substitute delivery

    Full explanation with examples →

  • Frustration of purpose. A later event can defeat the agreed foundation of a transaction even while physical performance remains possible. Identify the principal purpose incorporated into the bargain and the allocation of the event's risk. Krell excused the unpaid balance for the lost procession view but did not adjudicate the abandoned deposit claim.
    • A purpose forming the transaction's shared foundation.
    • A later event defeating that foundation, rather than only reducing profit.
    • A supported account of why the disappointed party did not bear the risk.
    Exceptions and limits:
    • Knowledge of a destination alone does not necessarily condition an ordinary journey.
    • A party's ability to draft more precautions is not by itself proof of actual risk allocation.

    Cases:

    Authorities: Krell: agreed foundation, cab comparison and separate deposit claim

    Full explanation with examples →

Remedies

What a court awards after breach, and the limits on the award.

  • Expectation damages. Expectation compares the position promised by performance with the position after breach: missing performance value plus recoverable additional loss, less costs or losses avoided, without counting an item twice. A buyer’s UCC cover calculation uses substitute price less contract price, qualifying additional losses and saved expenses. Completion-cost disputes require the governing rule, the scope of the work promised, and evidence supporting the proposed loss measure.
    • A proved breach and an identified performance shortfall.
    • A supported measure of that shortfall and any additional recoverable losses.
    • Deduction of expenses or losses actually avoided, without counting any item twice.
    Exceptions and limits:
    • Cover requires a reasonable substitute purchase in good faith without unreasonable delay.
    • Peevyhouse’s diminution exception requires both incidental purpose and gross disproportionality; Groves leaves the scope of grading for a new trial.

    Cases: Hawkins v. McGee

    Authorities: Colorado Environments: expectation formula and unavoidable expenses; Hawkins: promised result and agreed operation pain; Peevyhouse: incidental purpose, disparity and valuation evidence; Groves: completion cost and unresolved grading obligation; UCC 2-712: cover; UCC 2-715: incidental and consequential losses; UCC 2-713: market-price measure

  • Reliance damages. Reliance measures the claimant's detriment from acting on the promise rather than the full benefit of performance. Sullivan permits that measure in its patient-physician setting and includes more than the fee transferred to the doctor. Freund recognizes foreseeable, ascertainable preparation or performance loss but found none alleged. A failed profit claim does not prove reliance expenditures.
    • An identified detriment incurred in reliance.
    • Proof connecting that detriment to the undertaking.
    • A supported measure without duplicate recovery.
    Exceptions and limits:
    • Sullivan does not categorically prohibit expectation recovery in every promised-result medical case.
    • Hoffman limits relief to the loss supported by the assurance and proof; it does not award the uncompleted franchise bargain.

    Cases: Sullivan v. O'Connor, Freund v. Washington Square Press, Inc.

    Authorities: Sullivan: reliance, restitution and expectancy distinguished; Freund: ascertainable reliance loss versus speculative royalties; Hoffman: tailored reliance remedy

  • Restitution damages. Restitution focuses on the benefit conferred on the recipient. Algernon Blair allowed the justifiably stopping subcontractor to seek the reasonable value of furnished labor and equipment, less payments, despite a projected loss on completion. That Miller Act decision illustrates a remedy for the injured performer, not a general right to every profit the defendant later earns.
    • An identified benefit conferred on the defendant.
    • A recognized ground for restitution in the transaction.
    • Valuation with appropriate payment and loss offsets under the applicable rule.
    Exceptions and limits:
    • In Algernon Blair, contract price was evidence of value rather than an automatic ceiling.
    • For a breaching goods buyer's deposit, 2-718 supplies its own limits and seller offsets.
    • Do not add restitution to expectation for the same transferred value.

    Authorities: Algernon Blair, pages 640-641 and notes: reasonable value after justified termination; UCC 2-718(2)-(3): buyer restitution and offsets

  • Foreseeability of damages. Analyze ordinary consequences and special losses made probable by circumstances known at contracting. For goods, 2-715(2)(a) considers needs the seller had reason to know and whether cover or another reasonable response could prevent loss. Notice does not establish causation or amount.
    • A particular claimed consequence of breach.
    • Ordinary consequences or relevant knowledge at formation.
    • Causation, support for the loss and any applicable avoidance requirement.
    Exceptions and limits:
    • Hadley records notice of stoppage but still rejects these profits on its facts.
    • An unnamed customer does not automatically defeat reason to know of the underlying need.

    Cases: Hadley v. Baxendale

    Authorities: Hadley: reported notice and limits on profit recovery; UCC 2-715: seller knowledge and reasonable prevention

  • Certainty of damages. A claimed loss needs an evidentiary basis for a reasonable estimate. Freund rejected royalties because the author supplied no stable foundation for estimating them, not because royalties are inherently unrecoverable. It also rejected publication cost as a substitute for the author's unproved loss and protected the separately established restitution interest.
    • A legally recoverable loss caused by breach.
    • Evidence supporting a reasonable estimate of its amount.
    • A measure that compensates rather than invents a substitute gain.
    Exceptions and limits:
    • A prior publication does not by itself prove this work's expected royalties.
    • Failure to prove substantial expectation damages can leave nominal damages; a claimant must still establish any separate reliance or restitution loss.

    Cases: Freund v. Washington Square Press, Inc.

    Authorities: Freund: stable foundation, nominal damages and separate interests

  • Mitigation. Recovery excludes avoidable loss under the governing reasonable-response rule. Rockingham limits unnecessary post-notice work while preserving appropriate expenditures and expected profit. Parker requires proof about suitable substitute work; a different or inferior offer does not establish the claimed offset.
    • An actual reasonable alternative response to breach.
    • Proof supporting the claimed reduction in loss.
    • A damages calculation accounting for avoided loss without forfeiting unrelated recovery.
    Exceptions and limits:
    • Equal compensation alone does not establish comparable employment under Parker.
    • For unfinished goods, 2-704 permits commercially reasonable completion as well as cessation.
    • The profit measure in 2-708(2) requires inadequacy of the ordinary measure and its specified accounting.

    Cases: Rockingham County v. Luten Bridge Co.

    Authorities: Rockingham: notice, avoidable work and preserved profit; Parker: different or inferior substitute and employer proof; UCC 2-715: avoidable consequential loss; UCC 2-704: reasonable commercial judgment for unfinished goods; UCC 2-708: alternative profit measure when market measure is inadequate

  • Liquidated damages. Under model UCC 2-718(1), stipulated damages must be reasonable in light of anticipated or actual harm, proof difficulty and the practicability of another adequate remedy. An unreasonably large amount is a penalty. Deposit restitution and offsets require separate analysis under subsections (2)-(3).
    • A term fixing compensation for covered breach.
    • An amount supported by the governing reasonableness factors.
    • Any separate deposit or remedy-limit analysis.
    Exceptions and limits:
    • A maximum liability cap is not automatically an unreasonably large penalty.
    • Invalidating a stipulated amount does not prove ordinary damages.
    • Section 2-718 deposit limits operate with its specified offsets.

    Authorities: UCC 2-718: reasonable liquidation, deposits and offsets; UCC 2-719: distinct remedy limits; Neri: alternative damages offset and final deposit accounting

    Full explanation with examples →

  • Penalty clauses. Under UCC 2-718(1), an unreasonably large stipulated damages amount is void as a penalty. Evaluate anticipated or actual harm, proof difficulties and the practicability of another remedy. Invalidating the clause does not establish the amount of ordinary damages.
    • A term fixing damages for breach.
    • The amount in relation to anticipated or actual harm.
    • Difficulty proving loss and obtaining an adequate remedy.
    Exceptions and limits:
    • A maximum-liability cap is distinct from an unreasonably large damages payment; examine UCC 2-719 for agreed remedy limits.
    • If the clause fails, prove loss under the otherwise applicable remedial rules rather than awarding the invalid amount.

    Authorities: UCC 2-718(1): reasonableness and penalties; UCC 2-719: contractual remedy limitations

  • Specific performance. Specific performance requires an enforceable obligation and a supported basis for equitable relief. For goods, UCC 2-716 permits a decree for uniqueness or other proper circumstances, with just conditions. Separate applicable restrictions on personal service, certainty and lawful performance.
    • An enforceable and ascertainable obligation.
    • A supported equitable or statutory ground for the requested performance order.
    • Applicable conditions and defenses.
    Exceptions and limits:
    • Uniqueness is not the sole goods route under 2-716.
    • Land does not automatically resolve formation, fairness and defenses.
    • California 3390 bars specified personal-service obligations; an alternative injunction needs its own basis.

    Cases: Lucy v. Zehmer

    Authorities: UCC 2-716: unique goods, proper circumstances and replevin; Lucy: equitable relief after separate formation and defense analysis; Mattei: satisfaction and enforceable obligation; California Civil Code 3390: personal service and uncertainty, statutory text

Third parties

Who else can enforce a contract, and how rights and duties move to someone new.

  • Third-party beneficiaries. Distinguish a promised performance for an intended beneficiary from incidental advantage. Lawrence permits a creditor's enforcement despite consideration coming from the debtor. Modification and vesting depend on the applicable rule and reserved powers; the Restatement 311 formulation is not universal.
    • An enforceable underlying promise.
    • A supported right in the claimant under the governing beneficiary doctrine.
    • The effect of any reservation, modification or vesting rule.
    Exceptions and limits:
    • Beneficial effects do not automatically confer enforcement rights.
    • Hickox applies a creditor-beneficiary vesting rule different from Restatement 311.
    • Nonsignatory arbitration obligations require separate analysis.

    Cases: Specht v. Netscape Communications Corp.

    Authorities: Lawrence v. Fox: majority and dissent on enforcement by creditor; Hickox: jurisdictional vesting rule and contrasting Restatement 311; Specht: speculative benefit and arbitration

  • Assignment of rights. An assignment transfers a right; delegation concerns performance and does not by itself release the original obligor. Model UCC 2-210 governs specified goods-contract transfer limits. For covered payment rights, 9-404 and 9-406 distinguish defenses, notification, discharge and proof, with stated exceptions.
    • An identified transferred right.
    • The governing limits on assignment or delegation.
    • Applicable notification, proof and defense rules.
    Exceptions and limits:
    • A general goods-contract assignment ban may concern delegation only.
    • Effective notification and proof requirements matter under 9-406.
    • Section 9-404 distinguishes transaction defenses from other claims and limits certain offsets.

    Cases: Masterson v. Sine

    Authorities: UCC 2-210: assignment, delegation and prohibitions; UCC 9-404: applicable assignee defenses and limits; UCC 9-406: effective notification and proof exceptions; Masterson: disputed nonassignment agreement and proof

    Full explanation with examples →

  • Delegation of duties. Under UCC 2-210, performance may be delegated unless the agreement forbids it or the obligee has a substantial interest in the original party performing or controlling performance. Delegation does not release the original obligor. An accepted general assignment can include a promise to perform, subject to its language and circumstances.
    • A duty proposed for performance by another.
    • No contrary agreement or substantial interest in original performance or control.
    • Separate evaluation of the delegate's promise and the original obligor's continuing liability.
    Exceptions and limits:
    • Language or circumstances, including a security assignment, may exclude implied delegation.
    • The obligee may treat delegated performance as grounds for insecurity and demand assurances under 2-609.
    • These are model Article 2 rules; a nongoods contract requires its governing law.

    Authorities: UCC 2-210(1), (4)-(5): delegation and continuing liability

  • Novation. A novation substitutes a valid new obligation and extinguishes the old one through the required parties' consent. Imperial Hotels, applying Michigan law, requires a valid displaced obligation, capable parties, sufficient consideration and agreement to the substitution and discharge. Consent to another person's payment or assumption alone does not necessarily release the original obligor.
    • A valid existing obligation and a valid replacement.
    • The required parties' agreement supported by sufficient consideration.
    • Intent to extinguish the old obligation rather than add another performer.
    Exceptions and limits:
    • Acceptance of third-party payments alone does not prove discharge under Imperial Hotels.
    • Consent may be shown by circumstances under that governing law, but must actually be established.
    • A later default by the substitute does not by itself revive a duty already extinguished by a valid novation.

    Authorities: Imperial Hotels, part II: Michigan novation elements and consent to assumption

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