Contracts and Sales

I. Applicable Law
1. MBE
a. Article 2 of the UCC = applies to the sale of goods (meaning moveable personal property)
b. Common Law = applies to all other contracts (including real property)
2. TX Bar Exam
a. Art 2 = sale of goods
b. Art 2A = lease of goods
3. What if it is both a sale of goods and also a K for services?
a. Key is which element is more important. If it is goods, then it will be governed by UCC.

II. Contract Formation

1. Vocabulary
a. Contract = legally enforceable agreement
i. Express K is created by party’s words (oral or written)
ii. Implied K is created by party’s conduct
b. Quasi Contract = really doesn’t involve a K at all. It protects against unjust enrichment whenever K law yields an
unfair result. It is a remedy of last resort.
i. If Quasi Contract, you can only recover the reasonable value of the benefit conferred, not the K price
(which is a ceiling).
c. Bilateral Contract = offer can be accepted in any reasonable way
d. Unilateral Contract = offer can be accepted only by performance
i. 2 situations when this could occur:
1. offer says you can only accept by performing
2. reward, contest, or prize
2. Formation Methodology
a. Is there an offer?
i. Offer = a manifestation of an intention to be bound
ii. 2 types of problems with offers:
1. Advertisements
a. General rule is that advertisements are NOT offers because there is no quantity term
(unlimited # of people could accept)
b. Exception: An ad will be an offer if it specifies the quantity and who can accept.
2. Indefiniteness
a. If any of the terms are too indefinite to be enforced, then there will not be an offer
b. Requirement Contracts (Art 2)
i. Buyer of goods agrees to buy all requirements from seller- definite enough, even
though no specific quantity mentioned
ii. Ex: F offers to buy all its requirements from seller for 6 years for $1 per can.
OK b/c quantity of goods to be sold can be measured by buyers needs.
iii. However, the buyer cannot take the seller by surprise with their requests and
their order cannot be out of line with the buyer’s prior demands
1. Ex: For last 3 years C has ordered 1000 cans per year and now C
requests seller to deliver 8000 cans this year. Seller does not have to
perform.
c. Open Price Term
i. If the offer doesn’t state a price, then
1. It will be considered too indefinite under the CL
2. BUT Not too indefinite under Art 2.
ii. So need to figure out which body of law applies.
b. Has the offer been terminated?
i. Lapse
1. An offer lapses after a stated term or after a reasonable period of time has passed
ii. Revocation
1. An offer terminates when the offeror revokes the offer
2. General rule is that an offer can be revoked anytime before acceptance by:
a. Direct revocation- offeror directly indicates to offeree that he changed his mind
b. Indirect revocation-
i. Offeror engages in conduct that indicates he changed his mind AND

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 ii. The offeree is aware of the conduct
3. Exceptions: 4 situations where an offer cannot be revoked
a. Option = promise to keep the offer open that is paid for
b. Foreseeable reliance before acceptance (rare)
i. Generally if you rely before accepting you are out of luck b/c reliance was not
foreseeable.
ii. However, in a situation where a subcontractor submits a bid for 25,000 and the
contractor relies on the bid in computing own bid for the project, here is one
situation where reliance before acceptance is foreseeable and makes offer
irrevocable.
c. Starting to perform on a Unilateral K
i. If A offers you 1000 to paint the house and offer states that it can only be
accepted by painting the house, and you start painting, then offeror can no
longer revoke the offer.
ii. But if you had just ordered the paint, then mere preparation for performance is
not enough to make the offer irrevocable.
d. Firm Offer (Art 2)
i. In a sale of goods, if a merchant promises in a signed writing to keep an offer
open, then the offer is irrevocable.
ii. Definition of merchant is very broad under Art 2 (includes almost every person)
iii. Signature, initials, symbols or writing on letterhead will satisfy writing req
iv. Firm offer has a 3 month limit so if offer is to keep it open for 6 months, it will
be valid as a firm offer for 3 months only
v. If the offer doesn’t state a time period, then it will be considered a firm offer for
a reasonable period of time not to exceed 3 months
4. Timing
a. Revocation of an offer is effective only on receipt.
b. Mailbox rule doesn’t apply to revocation (only to acceptance).
c. If there has already been acceptance, then you cannot have revocation.
iii. Rejection
1. An offer terminates when the offeree rejects it (provides an inappropriate response)
2. Counteroffer
a. Counteroffers will operate as a rejection
b. However, mere bargaining does not (asking Q is considered mere bargaining)
3. Conditional Acceptance
a. Conditional Acceptance operates as a rejection
b. Ex: Offer is to paint the house for 100. You say, I will accept the offer for 100 to paint
your house if you will provide me lunch too! Conditional acceptance is not acceptance at
all. Just like saying No.
4. Acceptance Varying the offer
a. Differing Rules
i. Acceptance varying the offer operates as a rejection under the CL.
ii. However, Acceptance varying the offer does NOT operate as a rejection under
Art 2
b. CL uses the Mirror Image Rule
i. Acceptance must mirror offerorit will be considered a rejection.
c. Art 2 (Sale of Goods) applies the Battle of the Forms
i. An acceptance does not have to mirror the terms of the offer
ii. Under Art 2, adding a term or changing a term does not prevent acceptance.
You still will have a valid K.
iii. However, the offeree’s terms are not automatically included in the K
1. The additional terms/changes become part of the K only if:
a. Both parties are merchants
b. The term is not a “material” change and
i. Disclaiming all warranties = material change
ii. Adding “Sat. delivery” = not material change
c. The offeror doesn’t object within a reasonable time.
iv. Offeree’s terms almost never become part of the K.
iv. Death
1. Death of either party before acceptance terminates a revocable offer. Knowledge of the party’s
death is irrelevant.
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 2.However, death does not operate as a revocation on an irrevocable offer (like an option K).
3.ex: April 2nd, X makes an offer to Y. X promises not to revoke the offer for 7 days in exchange
for $100. Y pays $100. X dies on April 6th. Y can still accept b/c it is an irrevocable option K
and the K is not terminated by the party’s death.
c. Has the offer been accepted?
i. The language of the Offer controls- if it says you can only accept by performance, then it is a unilateral K
and you can literally only accept by performance.
ii. Starting performance:
1. Bilateral K:
a. Starting performance is acceptance of an offer to enter into a bilateral K and carries with
it an implied promise to finish the job
2. Unilateral K
a. Starting performance is NOT acceptance of an offer to enter a unilateral K; only
completing performance is acceptance.
b. So if you start painting a house on a unilateral K, this does not operate as acceptance.
You accept only by completing performance and if you merely started, you are not bound
to finish the job.
c. Also, the offeror cannot revoke once you started performance b/c it is an option K and the
offeror is stuck with his choice
d. Offeree can walk away after starting performance, but offeror cannot revoke
iii. Improper Performance
1. CL
a. Improper performance operates both as acceptance & breach.
b. Ex: A offers B 10,000 top paint the house maroon and B paints it orange. B accepted
and simultaneously breached the K
2. Art 2 Sale of Goods
a. Improper performance operates as acceptance & breach unless the seller is sending goods
as an accommodation to the buyer
b. Ex: B orders a Britney CD. S sends a letter saying “I am out of Britney CD’s but I am
sending Incubus instead in the hope that it meets your needs.” S has not accepted the
offer. S has instead let B know that the CD is an accommodation. No acceptance and no
breach. S’s CD was merely a counteroffer that the buyer could accept/reject.
iv. Silence
1. The offeree’s silence is generally NOT acceptance.
2. An offeror cannot singlehandledly turn an offeree’s silence into acceptance.
v. Timing of an Acceptance
1. General Rule = Acceptance is effective when mailed (“Mailbox Rule”)
a. Ex: May 6, Borat gets a letter offering him a gig for 5K. On May 7th, he mails his
acceptance. On May 8th, he receives a letter revoking the offer. Borat has accepted the
offer b/c his acceptance is effective when mailed (on the 7th) before the offer was revoked
on the 8th.
2. Policy = to protect the offeree against revocation once he has mailed acceptance.
3. 4 Exceptions to the Mailbox Rule
a. Offer provides otherwise
i. The mailbox rule is a default rule and only applies if offeror doesn’t provide
when the acceptance will be effective. If offeror says acceptance only occurs
when received, then this language will control
b. Irrevocable Offer
i. If offer is irrevocable, then the offeree doesn’t need the protection of the
mailbox rule and it is accepted when received.
c. Where an acceptance is sent first, but rejection arrives first
i. Key is offeror’s reliance
ii. If acceptance is sent first but rejection gets to the offeror first, then the mailbox
rule will still apply unless offeror has relied upon the rejection. Mere fact that
the rejection gets there first does not do away with the mailbox rule.
d. Rejection sent first
i. Mailbox rule doesn’t apply
ii. If A mails a rejection on June 8th and the mails an acceptance on June 9th, then it
is a race to the offeror. Whichever one gets there first is effective.
3. Defenses to a Legally Enforceable Agreement
a. Lack of Capacity
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 i. Categories: Minors (under 18); intoxicated; mentally incompetent
ii. General Rule = an incapacitated defendant has the right to disaffirm or disavow the K if he wants to avoid
it
1. NOT the п.
2. It doesn’t matter whether or not the ∆ told the п that he was of age or of sound mind
3. Also, if the п refuses to go through with the deal, the incapacitated person can enforce the
agreement
a. Ex: Harry is 17. Sean offers to sell Harry a bike for $100. Harry can disaffirm at any
time and if Sean refuses to convey the bike, then Harry can enforce the agreement against
Sean (even though a minor)
iii. Implied Affirmation
1. But once the incapacitated person regains capacity (like turns 18), there is an implied affirmation.
An incapacitated party impliedly affirms a K by retaining the benefit of it without complaint after
gaining capacity.
2. So if Harry turns 18 and keeps the bike and continues to use it, then Sean can enforce the K
against Harry. It is like Harry says OK, I am bound.
3. 3 requirements for an implied affirmation
a. ∆ lacked capacity at time of agreement
b. ∆ regains capacity later on
c. ∆ keeps the benefit of the K without complaint.
iv. Exception
1. An incapacitated person is liable for necessaries (ie food, shelter, clothing, or medical care) but
only on a quasi-K basis
2. ex: If Sean leases Harry an apt (Harry is 17) to live in for $800 per month, Harry is legally
obliged to pay, but only for the reasonable value of the apt (not for the entire K price)
b. Ambiguity/Misunderstanding (parties are on different wavelengths)
i. If parties are both on different wavelengths about the terms of the K, then ambiguity will provide a defense
to formation
1. ex: B&S contract for delivery of cotton on the boat “Peerless” but there are 2 boats with that
name sailing at different times. There will be a defense of ambiguity to formation
ii. But if the buyer knows or has reason to know that there are 2 ships named “Peerless”, then there will be a K
on the seller’s terms. The Innocent party’s meaning will govern.
c. Mistake
i. Mutual Mistake about a Material Fact
1. Ask, was the mistake material, impt, significant?
2. A mistake as to market value of the item will NOT be a material mistake as a defense to
formation.
ii. Unilateral Mistake
1. One party makes a mistake and this is generally not a defense.
2. One party’s mistake is not a fatal flaw unless the other party knows or had reason to know about
the mistake.
3. ex: S agrees to sell B a print for 75,000. B believes the painting is by Andy Warhol. S does not.
After the agreement, B learns that the print is not Andy’s. B is still obligated to buy the print
unless S knew or had reason to know of B’s mistake.
d. Lack of Consideration
i. Consideration is a bargained for legal detriment/benefit
1. Can come in the form of a promise, performance, or even forbearance.
2. ex: S promised to sell B a Lab in exchange for his promise to pay $400. B now refuses to pay.
There was consideration for B’s promise to buy the dog. A’s promise to sell is consideration for
B’s promise to buy.
a. There was a promise for promise exchange (but it doesn’t have to be—can be
forbearance)
3. ex: I promise to pay you $100 to stop listening to Nine Inch Nails. You do what I asked. There is
consideration for my promise to pay $100 b/c forbearance (doing what I asked) is enough. I am
bound to pay the $.
ii. Past Consideration
1. Past consideration is NOT consideration at all.
2. Ex: Simon helps Paula move in. later Paula promises to pay Simon $300 for helping her move in.
Paula now refuses to pay. There was no consideration because Paula wasn’t asking anything in
return for her promise to pay. Past consideration is not actually consideration at all b/c can’t
bargain for something that has already been done.
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 iii. Adequacy of Consideration
1. Adequacy of consideration is irrelevant.
2. If the amount of consideration is offered is significantly lower than market value, it doesn’t matter.
Law doesn’t care about adequacy of consideration and whether you made a good deal as long as
there is a bargain.
iv. Contract Modification
1. CL
a. New consideration is required to modify a K. Performing pre-existing duty is not enough
i. Ex: Ashlee Simpson contracts to sing for 25,000 at Owner’s club. When she
gets there, she demands to be paid 30,000. She sings and then Owner refuses to
pay her the 5000. There is not consideration for the 5000 modification because
Ashlee hasn’t done anything more than perform her pre-existing legal duty. But
if she said she would be paid an additional 5000 if she signed autographs for 1
hour, then this would be enough to b/c she would be doing more than her pre-
existing duty.
b. However, if the agreement to pay is made by a 3rd party, then the pre-existing duty rule
doesn’t apply and the 3rd party will be bound to pay. Pre-existing duty rule can only be
used by an original party to the K (cannot be used as a defense by a 3rd party).
2. Sale of Goods Art 2
a. Consideration is not required to modify the K, but you must show that there is a good
faith reason to modify the terms.
v. Partial Payment of a Debt
1. Whether partial payment of a debt is consideration for a promise to forgive the balance of debt
depends on whether the debt is in dispute
a. If debt is undisputed: You owe Visa 2500 and you and Visa agree that if you pay 2000,
Visa will forgive the 500. You pay Visa 2000 and Visa sues you for the 500. Your
payment of 2000 was not consideration for Visa’s promise because there is no new
benefit to Visa and no new detriment to you because you already owe them the money.
b. If debt is disputed: Then an agreement to pay a lower amount will be enforceable and you
would be off the hook for the 500 because the law favors settlements of disputed claims
vi. Time Barred Debt
1. A written promise to pay a debt, collection of which is barred by SOL, is enforceable even without
consideration.
2. Ex: Visa is barred by SOL from collecting 2500 that you owe them. You write Visa a letter
saying “I know I owe you money. I will pay you 1500.” You now have to pay Visa the 1500.
Even though Visa cannot enforce the original debt, they can enforce a later written promise to pay.
vii. Promissory Estoppel as a Substitute for Consideration
1. First look for consideration. If none, then look to see if Promissory estoppel applies
2. Promissory estoppel makes a promise enforceable if there is foreseeable reliance on the promise,
even if there was no consideration for the promise.
3. Ex: Tenant’s lease expires next month. Landlord promises Tenant that it will renew his lease for
another year. Tenant relies on tha promise by painting the apt. Landlord refuses to renew.
Tenant’s painting was not consideration for promise to renew, because Landlord wasn’t asking for
anything in return
a. But, Tenant can enforce Landlord’s promise to renew by claiming promissory estoppel.
Tenant’s foreseeable reliance on the promise makes it enforceable.

III. Statute of Frauds

1. Do you need a writing to satisfy the SOF?
a. Most oral K are enforceable. Only certain kinds of K need to be in writing to be enforced.
b. When is a writing required?
i. Interest in real property (including transfers of land, leases, easements, etc)
1. Also, if the seller authorizes an agent to sell the property, then the agent’s authority must also be
under writing under the equal dignities doctrine, which says that the agent’s authority should be
treated with equal dignity to underlying transaction
ii. Performance Cannot be completed within 1 year
1. It doesn’t matter that the performance does not actually take place within a year. As long as full
performance within a year is theoretically possible under the K, then no writing is required
2. Any specific task can theoretically take place within year (ex: cut down all the trees)
3. If K agrees to employ someone “for the rest of his life” then this could occur within 1 year b/c the
employee could die within the year (doesn’t fall under SOF)
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 4. But if the K agrees to hire employee for a specific term (like for 3 years), then this K falls under
SOF because the specific time period is greater than 1 year.
iii. Sale of goods for $500 or More (Art 2)
iv. Lease of goods for $1000 or more (Art 2A= TX only)
1. If lease terms are monthly, then make sure you multiply the number of months times the number
of lease payments in order to get the amount of the lease.
v. Suretyship
1. A suretyship is a promise to “answer for” the debt of another (must be in writing to be
enforceable)
2. Ex: House agrees to have me paint his house for $10,000. Cutty chimes in and says “If House
doesn’t pay you, I will”. Cutty’s promise to pay falls within the SOF and must be in writing
because Cutty is liable only as a backup if I House doesn’t pay.
a. However, if you have NO contract with House and Cutty tells me, Paint House’s house &
I will pay you 10,000. Cutty’s promise is now NOT within SOF b/c Cutty is only one
liable on the K and he isn’t a surety.
vi. Contract Modification
1. A modification must be in writing only if the K as modified (not the original K) is within the SOF
2. However, if the parties in original K state that any modification must be in writing (even if the
modification doesn’t fall within SOF), then it must be in writing. Art 2 allows parties to create
their own private SOF
a. However, CL clauses that prohibit oral modification are NOT enforceable
2. If Yes, then Do you have a satisfactory writing?
a. Not every writing will satisfy the SOF. It depends on the nature of the K
b. Art 2 Sale of Goods
i. Under Art 2, a writing must contain:
1. a quantity and
2. be signed by the party charged with the breach (ie the ∆)
ii. Other K within the SOF
1. For all other K within the SOF a writing must contain:
a. All material terms (who and what) and
b. Be signed by the party charged with the breach.
3. If no writing, then do you fall within an exception?
a. If you don’t have a writing and need one under the SOF, then look for one of these exceptions
b. Real Property
i. Leases of one year or less do not have to be in writing
ii. Part Performance (if there is some payment and permanent improvement), no writing needed
1. Ex: Bill Gates alleges that Gilligin orally agreed to sell him Gilligan’s Island for 400,000. Bill
has paid Gilligan the entire 400,000. Does Bill’s further payment satisfy the SOF? No. Pmt
alone (even full payment) is not enough for part performance. But if Bill paid Gilligan $50,000
and landscaped the island, then this is part performance because we have part payment + partial
performance. Gilligan will lose on the SOF defense.
c. One Year Prong
i. Exception for Full Performance.
ii. ex: If there is an oral agreement for you to work for 2 years for $50,000. You work for 2 years and they
won’t pay you then you don’t need a writing to satisfy the SOF. Why? Because there is a very little
chance of fraud b/c you already worked the entire time
1. But if you were hired for 2 years and they fire you after 3 months, then part performance is not
enough to satisfy the full performance exception. You cannot recover under the K b/c you were
barred by SOF. But you can still recover under quasi K for the reasonable value of the time
worked during the 3 mo period.
d. Sale of Goods for $500 or More (Art 2)
i. 4 exceptions under Art 2
1. Goods accepted or paid for by the buyer
a. This exception only applies to goods accepted or paid for (not the whole K)
b. Ex: Alex orally agrees to buy 50 bats for 100 each. Seller delivers 20 bats. Alex keeps
the 20 bats. Seller sues Alex for 2000. Alex does not have a SOF defense b/c Alex has
the 20 bats and there is very little chance of fraud. Seller can recover K price for those 20
bats without a writing.
i. But if the Seller does not deliver the other 30 bats, does the seller have a SOF
defense? Yes b/c this lawsuit is about goods not yet accepted by the buyer.
2. Custom Made goods
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 a. Custom made goods are an exception to the writing requirement as long as seller has
started to make/manufacture them.
3. Judicial Admission
a. If there is an admission in a judicial context (like in testimony, depo, interrogatory), the
agreement does not have to be in writing (ex: I owe the money).
4. Merchant’s confirmatory Memo
a. One party can use its own signed writing to satisfy the SOF against the other party if:
i. Both parties are merchants
ii. the writing claims a prior oral agreement and has a quantity; and
iii. the recipient doesn’t object in writing within 10 days
b. This usually applies in the following fact pattern: 2 merchants agree over the phone and
one follows up with a written confirmation. Art 2 makes the oral agreement enforceable
by letting a merchant use its own confirmatory memo (not signed by the ∆) to satisfy the
SOF against another merchant.
5. Suretyship
a. If surety’s main purpose is to benefit himself, then the suretyship does not have to be in
writing
b. Ex: I buy paint on credit from Lowe’s to paint House’s house. House orally promised to
pay Lowe’s for the paint if I don’t pay (suretyship). Lowe’s can enforce House’s oral
promise against him b/c the surety’s main purpose in making the promise was to benefit
himself. No writing requirement. House made promise so that there would be paint for
his house.

IV. Contract Terms

1. Words of the Parties
a. Parole Evidence Rule (PER)
i. The PER keeps out evidence of a prior agreement (either oral or written) that contradicts a later writing on
the theory that the prior agreement was subsumed into the later written instrument.
ii. Assume that the later writing is more reliable than anything that came beforehand.
iii. Difference between PER and SOF
1. PER requires a writing
2. So if the fact pattern is an oral agreement, then it will be SOF question.
iv. Exceptions to the PER Rule (so that the evidence comes in)
1. To Correct a clerical error (eg a typo)
2. To establish a defense against formation
a. Ex: Before Liz signed the lease, the manager told her that the Grand Ballroom was
soundproof. Liz seeks rescission because of the misrepresentation. Liz can get this
evidence in because Liz isn’t trying to re-write the K. She just wants out of it. The
evidence of a flaw in the agreement comes in, in order to establish a defense to formation.
3. To interpret a vague or ambiguous term
4. To supplement a partially-integrated writing
a. A final stmt of the terms included, but not a complete stmt of all the terms agreed to
b. Ex: The written lease says nothing about sleeping accommodations. Liz claims that just
before singing the lease, the mgr also promised her that the hotel would throw in a bridal
suite. Liz can get this promise into evidence because she can supplement or add to the
written doc (which doesn’t appear to be complete on its face because it doesn’t mention
sleeping arrangements)
c. However, if there is a merger clause (which says this K is limited to the terms herein),
then this signifies that the writing is complete on its face and cannot be supplemented.
v. Subsequent Developments
1. The PER rule has nothing to do with what happens after an agreement is reduced to writing.
2. If after signing the lease, the manager promised Liz that the Ritz would throw in the bridal suite
for free, this comes in b/c PER looks backwards and has nothing to do with what happens after
terms are reduced to writing
a. Rules on modification might apply or might be problem with SOF but will not have PER
problem.
2. Conduct
a. Conduct can be used to explain terms or to fill in gaps
b. In order of most impt to least impt
i. Course of Performance- what the parties did under this K. It is the best evidence of what parties intended

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 ii. Course of Dealing- what they did under prior K with each other. Even more removed b/c about prior
deals
iii. Usage of Trade- what others in the trade do in similar K. Usage of trade is furthest removed from this K
because it is about how others act.
3. Seller’s Warranties of Quality in Sale of Goods (Art 2)
a. Express Warranties
i. A seller is liable for breach of an express warranty which includes affirmation of fact or promise, sample or
model, or description
ii. Must be a stmt of material fact, not puffery or opinion
iii. Must form the basis of the bargain.
b. Implied Warranties
i. Implied Warranty of Merchantability
1. Seller must be a merchant (who deals in goods of that kind)
2. Warrants that goods are fit for their ordinary purpose
ii. Implied Warranty of Fitness for a Particular Purpose
1. Warrants that goods are fit for their particular purpose if
a. Seller knows that the buyer is going to put the goods to a particular purpose and
b. Seller has reason to know that buyer is relying on seller to select suitable goods.
c. Disclaimers
i. Seller can disclaim implied, but NOT express warranties
ii. Can disclaim all implied warranty’s with magic language such as “as is” or “with all faults”
iii. If you don’t use the magic language, then the disclaimer must be conspicuous (bold or all caps) and must
state the word merchantability
d. Limitation of Buyer’s remedies
i. General Rule = seller can limit buyer’s remedies for breach of any warranty (express or implied) if the
limitation is not unconscionable.
1. Ex: Bree buys an oven from Sears. The K provides that “All parts are guaranteed for 2 years.”
And “Sears liability is limited to replacement parts.” A year later, a defect in the oven destroys
Bree’s home. Seller can limit the buyer’s remedies for breach of express warranty, but it will be
up to the court to determine if the limitation was unconscionable at the time of the K (hard to say).
ii. Exception = limiting buyer’s remedies for personal injury in the case of consumer goods is presumed to be
unconscionable (this is a rebuttable presumption and seller can rebut with evidence to contrary).
4. Risk of Loss in a Sale of Goods (Art 2)
a. Issue: When goods are damaged before the buyer gets the goods and neither the buyer nor the seller is to blame,
who bears the risk of loss?
i. If the Seller bears the risk: Seller must provide new goods to the buyer for no additional cost, or be liable
for breach of K.
ii. If the Buyer bears the risk: Then the buyer must still pay the K price
b. Hierarchy for determining who bears risk of loss:
i. Agreement- the agreement of the parties controls on who bears the risk of loss
ii. Breach- The breaching party bears any uninsured loss, even if the loss is unrelated to the breach
1. ex: Pearl Beer Co of San Antonio contracts to ship bear to LA. An electrical short causes the beer
to spoil in transit. The K is silent on risk of loss and neither party is to blame. Pearl will have the
risk of loss if Pearl shipped the bear after the K deadline, regardless of the fact that the breach is
unrelated to the loss. Pearl is still liable.
iii. Delivery by a Common Carrier (UPS, Central Freight, etc)- Risk of loss shifts to the buyer when seller
completes delivery obligations
1. Shipment Contract- Seller must get the goods to a common carrier, make delivery arrangements,
and notify the buyer. Buyer bears risk of loss way before it gets the goods.
2. Destination Contract- Seller must get the goods to a specific destination (usually where buyer is
located).
3. FOB- Means “Free on Board” and is followed by the name of the city.
a. If the city is where the seller is located (FOB seller’s place of business), then the K is a
shipment K and the buyer bears risk of loss while goods are in transit.
b. But if it is FOB buyer’s place of business or any other place other than the seller’s city,
then the K is a destination K and the seller has risk of loss while goods are in transit
iv. Non-Carrier Cases- Buyer is to pick up or seller is to deliver the goods- answer depends on whether or not
the seller is a merchant
1. If seller is a merchant- Seller bears the risk of loss until buyer takes possession of the goods.
2. If Seller is not a merchant- Seller bears risk of loss until it “tenders” the goods (makes them
available to the buyer)
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V. Performance of the Contract
1. Performance of the Contract for Sale of Goods (Art 2)
a. Perfect Tender Rule
i. Seller must deliver perfect goods in the right place at the right time. If tender is not perfect, buyer has right
to reject the goods (but it can keep them if it wants)
b. Option to Cure
i. A seller who fails to make perfect tender may have an option to cure. It depends on whether the time for
performance has expired.
ii. Time for performance has NOT expired- seller has the right to cure and provide perfect tender by deadline
iii. Time for performance HAS expired- Generally once time for performance has expired, no opt to cure
1. exception- If based upon prior dealing, the Seller had reason to believe that the buyer would take
the non-conforming goods (look for specific facts where improper performance was OK in the
past)
c. Installment K
i. Definition of Installment K = An installment sales K requires or authorizes the seller to deliver the goods in
separate installments (otherwise the goods have to be delivered in a single delivery).
1. It doesn’t matter what the seller does in delivery, it matters only what the K requires or authorizes
ii. Significance? The Perfect Tender Rule does NOT apply to an installment sales K; so it is more difficult for
a buyer to reject.
1. Right to reject an installment: Buyer may reject an installment only if there is substantial
impairment in the installment that cannot be cured
2. Right to reject the entire K: Buyer may reject the entire K only if a defect in an installment
substantially impairs the value of the entire K.
iii. So with installment K, you need substantial impairment to allow rejection.
iv. But with regular K, buyer can reject if seller isn’t perfect!
d. Buyer’s Acceptance of the Goods
i. Implied Acceptance- Implied acceptance occurs when the buyer keeps the goods without objection after
having an opportunity to inspect (don’t have to actually inspect them).
1. If a spread of time goes by without you inspecting or rejecting the goods, then they will be
impliedly accepted.
2. Once you impliedly accept, you can no longer reject the goods!
3. However, even if there is implied acceptance, a buyer who accepts non-conforming goods can still
get damages.
e. Buyer’s Revocation of Acceptance of Goods
i. General Rule = A buyer cannot revoke his acceptance of goods.
ii. Exception = A buyer can revoke his acceptance of goods if the nonconformity
1. substantially impairs the value of the goods AND
2. the nonconformity was difficult to discover (ie a latent defect)
f. Consequences of Rejection/Revocation of Acceptance (same rules apply)
i. Buyer can:
1. Return the goods to the seller at the seller’s expense
2. get back money already paid (refund)
3. sue the seller for damages for breach
g. Buyer’s Payment Obligation
i. Buyer can pay by check, but seller can refuse it. If seller refuses, buyer has an additional reasonable time
to get cash.
2. Performance of Common Law Contracts
a. Under the CL, performance does not have to be perfect. Substantial performance is all that is required (ie a party
cannot commit a material breach).
i. Ex: I hire Martha Stewart to decorate my entire house. She finishes everything except for one bathroom.
This is substantial performance. She has done almost everything she was hired to do and under CL, almost
is good enough.
ii. Ex: What if Martha quits after decorating only the foyer? This is a material breach. Martha has not
substantially performed.

VI. Excuses Based on Later Events

1. Other Party’s Breach
a. The other party’s breach may provide an excuse for non-performance. Whether it does depends on nature of the K
b. Sale of Goods Art 2
i. Seller’s failure to make perfect tender excuses buyer from having to pay, but buyer has 3 options.
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 ii. If seller fails to make perfect tender, buyer can:
1. accept all the goods
2. reject all the goods or
3. accept any commercial unit and reject the rest.
iii. Damages: Whichever option buyer takes, he can still get damages
c. Common Law K
i. Damages: The injured party can recover damages for any breach of K, whether the breach is material or
not. But only a material breach excuses the injured party from having to perform.
ii. Ex: I hire Martha Steward to decorate my house. She finishes except for one bathroom. Martha has
breached the K so you can get damages from her. But you are not excused from paying her the K price
because Martha substantially performed.
1. But if Martha quits after only decorating the foyer, then there is a material breach, so you can get
damages but also you are excused from paying the K price. However, Martha can still recover in
quasi-K for the reasonable value of services rendered.
d. Divisible K
i. Where payment is to be made on a per unit basis, the breaching party can recover the K price for any unit
on which he has substantially performed.
ii. Ex: Martha K to decorate 10 identical cabanas for 9,000 each. If Martha completes only 3 units, then she
will get 27,000 even though she committed a material breach.
iii. Ex: In contrast, if Martha K to decorate 10 identical cabanas for 90,000, and she only completes 3 units,
then she has committed a material breach and is only authorized to recover the reasonable value of services
rendered for those 3 cabanas.
2. Anticipatory Repudiation
a. Anticipatory repudiation of the K provides an excuse for non-performance unless the repudiation is retracted.
b. Ex: Martha contracts to decorate my house for 50,000, payable on completion. After Martha starts the job, I tell her
I am not going to pay her. This is an anticipatory repudiation and Martha can stop and sue for damages. It operates
just like a material breach.
i. But if I tell Martha the next day that I’ve changed my mind, and will pay her as promised, this is OK and
you can retract the anticipatory repudiation as long as Martha has not relied (ie taken another job)
3. Later Agreement
a. A later agreement between the parties may provide an excuse.
b. 4 types of later agreements (distinction between these is impt)
i. Rescission
1. Parties enter into an agreement to cancel the K before the performance has taken place or while
there is some performance remaining (otherwise there wouldn’t be any consideration).
2. But if the agreement to cancel the K takes place after performance, then the obligation to pay is
not excused by rescission.
ii. Modification
1. An agreement to replace an existing K with a new one
2. ex: Mike borrows 2K from Susan and promises to repay her with interest. Later Susan agrees to
discharge the debt now if Mike promises to fix her hot tub. Mike makes the promise. If Mike
doesn’t fix her hot tub as promised, Susan can only sue Mike on the hot tub deal b/c Mike’s duty
to pay the 2000 was discharged by the modification agreement which took effect immediately.
iii. Accord and Satisfaction
1. An accord is an agreement to accept performance in future satisfaction of an existing duty.
Satisfaction is performance of the accord.
a. How can you tell if Mike and Susan have a modification or accord? See whether their
agreement takes effect now or later on.
2. ex: Same facts except that they agreed that if Mike fixes Susan’s hot tub, then she will discharge
the debt. If Mike doesn’t fix the hot tub, then Susan can sue Mike on the hot tub deal or the
original debt b/c the underlying obligation is not extinguished until accord is satisfied.
iv. Novation
1. An agreement to substitute a new party for an existing one.
2. The key is that all of the parties are in agreement on the substitution of a new party.
3. ex: Opie K to mow Helen’s lawn. Later, Opie, Goober, and Helen agree that Goober will mow it
instead. If Goober does not mow the lawn, can Helen sue Opie for breach of K? No. Opie is
excused by the novation. The key is that Helen agreed to the substitution and gave up rights
against Opie.
a. But if Opie and Goober agree that Goober will mow the law without Helen’s consent,
then Helen can still sue Opie. No novation because Helen did not consent to the
substitution. Here there is simply a delegation of duties.
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4. Impossibility/Impracticability
a. A later unforeseen event that makes a seller’s performance impossible (under CL) or impracticable (under Art 2)
may provide the seller with an excuse for non-performance
i. Impracticability and impossibility are only seller’s excuses
b. Destruction of Something Necessary for Performance
i. Common Law
1. Destruction provides an excuse for non-performance. Destruction will make the performance
impossible
ii. Sale of Goods Art 2
1. Art 2 adopts the same general rule as the CL, but there are 2 trick Q to look out for.
2. Unidentified goods- if the damaged goods have not been “identified to the K” the seller is not
excused.
a. Ex: B K to buy 500 computers from S. After the K and before delivery, fire destroys one
of S’s warehouses. Thousands of computers are destroyed. Is S excused from
performing? Only if the computers that were destroyed had been tagged or set aside for
the particular buyer.
3. Risk of Loss
a. A seller who bore the risk of loss when goods were damaged or destroyed is excused by
impracticability but a buyer who bore risk of loss is NOT.
c. Death/Incapacity of Essential Person (not just any person)
i. Ex: Ida hires Van Gogh to paint her portrait. If Van Gogh gets hurt and cannot paint, he is not liable and is
excused by his incapacity because the artist has unique skills and is essential for painting.
1. But if Ida hired Van to paint the exterior of her barn rather than her portrait, then Van is not
essential and not excused from performing (anyone can paint a barn)
2. Also, if Van were to paint a portrait and Ida dies, then her estate is liable for the $ b/c anyone can
pay the $.
d. Supervening Govt Regulation
i. If after the K is executed and before performance, the govt enacts a regulation or statute that makes
performance unlawful.
5. Frustration of Buyer’s Primary Purpose
a. A buyer’s excuse, and elements include:
i. At the time of the K, the Seller knew of the Buyer’s primary purpose and
ii. A later unforeseen even thwarted that purpose
b. Ex: Hire rents Jerry’s loft for Thanksgiving because of the great view for the parade. Jerry knows why Hiro is
renting the loft. The parade is cancelled 2 days before Thanksgiving. Hiro is excused because (1) Jerry knew of
Hiro’s purpose and (2) a later unforeseen event thwarted that purpose
6. Failure of an Express Condition
a. An express condition limits obligations created by other contract language; it does not create an independent
obligation. Look for words like “if” “as long as” “when” “provided that” “on condition that” or “unless”.
b. Requires Strict Compliance
i. Ex: Tori agreed to buy a house provided that the house is appraised for at least 300,000. The house is
appraised for 299,500. Tori is excused from buying the house. Express conditions must be completely
satisfied. If not, performance is excused. Almost is not good enough. However, Tori cannot sue for
breach of K because the house didn’t appraise for 300,000 because express conditions do not create
obligations—they just limit other obligations created by the K.
c. Satisfaction Clauses
i. Satisfaction is measured by a reasonable person standard (objective) unless the K deals with art or matters
of personal taste.
ii. Ex: Xena contracts to have her house painted and to pay 6000if she is satisfied with the work. If everyone
else likes the house except Xena, then Xena has to pay because satisfaction means reasonable satisfaction.
1. However, if Xena contracted to have her portrait painted and she didn’t like it, then all that matters
is that Xena herself is not satisfied and she will be excused from paying.
d. 4 Types of Express Conditions
i. Condition Precedent (Tiger Woods agrees to let TO use his golf clubs for 100/week if it rains on July 4th)
ii. Condition Concurrent (Tiger agrees to let TO use his golf clubs for 100/week as long as TO is a Cowboy)
iii. Condition Subsequent (Tiger agrees to let TO use his clubs for 100/week until Astros win World Series)
e. Excusing Occcurence of a Condition
i. Occurrence of a condition may be excused by the later action or inaction of the person who is protected by
the condition.
ii. Failure to cooperate

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 1. Ex: Tori agrees to buy a house provided that she gets a 2 million mortgage. Tori makes no effort
to get the mortgage and refuses to close on the deal saying that she didn’t get the mortgage. Tori
is not excused by the failure of the condition because she didn’t even look for a mortgage ans she
loses protection of the condition.
iii. Waiver
1. Where the party who is protected by the condition voluntarily relinquishes the protection of the
condition
2. ex: Owner’s duty to make montly payments is conditioned on Builder’s providing an architect’s
certificate for the work. Owner tells Builder he will pay without a certificate. The next month
builder does not provide a certificate. Owner refuses to pay. Owner will not be excused because
Owner who was protected by the condition voluntarily gave up protection. Builder relied on the
stmt. Owner can retract waiver for future payments to the extent that the other party has not
relied.

VII. Remedies
1. Non-Monetary Remedies
a. Specific Performance
i. Specific performance is an equitable remedy available only if monetary damages are clearly inadequate.
Whether specific performance is available in a given case depends on the nature of the contract.
1. Real property- specific performance is generally available because real property is unique
2. Sale of Goods Art 2- Specific performance is available only if the goods are:
a. Unique OR
b. There are other proper circumstances (ie an inability to buy substitute goods in the mkt)
3. Service Contracts- specific performance is not available in service K but injunctive relief may be
available (specific performance would be considered indentured servitude)
b. Unpaid Seller’s Right to Reclaim Goods (Art 2)
i. General rule is that an unpaid seller has no rights under Art 2 in goods it has delivered to the buyer
ii. Exception – an unpaid seller has a right to reclaim goods from buyer if the buyer was:
1. insolvent when it received the goods AND
2. seller demands return of the goods within 10 days after buyer receives them
a. If goods have already been sold to a 3rd party, seller has no right under Art 2 to reclaim
goods from the 3rd party. The right only exists against the original buyer
iii. Exception – an unpaid seller can reclaim goods at any time if the buyer misrepresented its solvency to
seller in writing within 3 months before delivery
c. Entrustment of Goods (Art 2)
i. An owner who entrusts goods to a merchant who deals in goods of that kind has no rights against a BFP of
the goods. Only rights are against the seller for conversion.
d. Right to Request Assurance in a Sale of Goods (Art 2)
i. A party with reasonable grounds for insecurity may request in writing adequate assurance that the other
party will perform in accord with the K.
ii. If the seller does not provide adequate assurance, ten the buyer can treat the failure as an anticipatory
repudiation of the K.
2. Monetary Remedies (Damages)
a. Punitive Damages
i. Punitive damages are not awarded for breach of K because the purpose of K damages is to compensate not
punish.
b. Liquidated Damages
i. Liquidated damages will be upheld if the damages were
1. difficult to estimate in advance and
2. are a reasonable forecast of probable damages
3. But liquidated damages cannot operate as a penalty
ii. Court will generally treat a lump sum damage agreement as invalid b/c with liquidated damages, one size
doesn’t fit all.
iii. If the liquidated damages clause is struck down as a penalty, then you are still entitled to actual damages.
iv. Ex: But if Simon hires Thom to redo his office and the K provides for damages for 100/day for each day
Thom is late. Thom finishes 20 days late. The liquidated damages clause is valid b/c the 100/day is
flexible. Damages are not graduated. They go up with the length of delay and this makes them a
reasonable forecast. These types of damages are common in construction K.
c. Expectation Damages
i. Puts an injured party in as good of a position as full performance. Expectation damages are the general rule
ii. Common Law Damages
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 1. Amt of damages that will compensate you and give you the benefit of the bargain.
2. Ex: I agree to paint House’s house for 10,000. I breach. House pays another painter 13,000 to
paint the house. House can recover 3K for the breach b/c he expected to pay 10K and had to pay
3K extra as a result of your breach.
3. Ex: Now House refuses to pay me after I start painting the house. I have already spent 5,000. I
expected to clear a 1,500 profit. Now the damages are 6,500 because you must compensate him
for what he has paid and also for what he expected to gain from the K.
iii. Sale of Goods Art 2
1. Expectation damages are the general Rule
2. Buyer’s Damages (3 options)
a. Cover Damages = cover price – contract price if buyer covers in good faith
b. Market Damages = market price – contract price if buyer doesn’t cover in good faith or
doesn’t cover at all.
c. Loss in value = value as promised – value delivered if buyer keeps non-conforming
goods.
3. Seller’s Damages (4 options)
a. Resale damages = K price – resale price if seller resells in good faith
b. Market damages = K price – market price if seller does not resell in good faith or does
not resell at all
c. Lost profits = lost profits if seller is a lost volume dealer
i. Lost volume dealer has an unlimited supply so it not only could have sold the
product to you (before you breached) but it could also have made another sale to
a subsequent purchaser. It could have made 2 sales instead of 1.
ii. Dealer has lost the profits it would have made on the initial sale
iii. Ex: A car dealer contracts to sell a car out of its regular inventory to Izzy for
7K. Izzy breaches. A week later, the dealer sells the same car to George for 7K.
The dealer’s damages are NOT 0, but instead the lost profits the dealer suffered.
d. Contract price = contract price can be recovered if seller cannot resell the goods
i. If the goods were custom made and no one would want them, then the buyer is
liable for the full K price (buyer then gets to keep the goods).
iv. Incidental Damages
1. Incidental damages involve the cost of transporting or caring for goods after breach and costs
associated with arranging a substitute transaction (ie advertising). Incidental damages are
available to both the buyer and seller.
v. Consequential Damages
1. Consequential damages are damages that are special to the п and were reasonably foreseeable by
the breaching party at the time of the K.
a. These damages are ONLY available to the buyer (not the seller under Art 2)
2. ex: Miller K with UPS to ship a broken mill shaft back to the manufacturer. UPS delays in
shipping the shaft. Miller does not have another shaft. As a result, the mill is shut for 9 extra
days. But Miller cannot recover the 20,000 in lost profits during the 9 day period because this
shutdown was not foreseeable at the time that the K was entered into. No consequential damages.
But if Miller had told UPS that if they didn’t ship it in time, that they would have to shut down
their operation, then UPS would be liable for the 20,000 in lost profits.
vi. Avoidable Damages
1. An injured party cannot recover damages he could have avoided (mitigated) with reasonable
effort.
2. ex: Kay is fired in violation of her K. She makes 900/week. Her former employer alleges that
Kay can get a comparable job for 800/week. What are Kay’s damages? 100/week. Kay can’t sit
around the house doing nothing and expect to fully get paid. Comparable amt means same kind of
job in the same city. You don’t have to take the other job; your damages will just be reduced
accordingly. So Kay can sit and do nothing and still get paid 100/week. Or she could work in the
mkt for 800/week and be made whole with the extra 100/week from her employer.

VIII. Third Party Problems

1. Third Party Beneficiaries
a. A third party beneficiary situation arises when two people enter into a K intending to benefit a 3rd party (you are
intending to confer a benefit on the 3P)
b. Hypo: Arnold pays Travis Tritt 5000 to sing for W on July 4th. W is the 3rd party beneficiary on K between Arnold
and Travis. W brings along Scooter Libby

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 i. 3rd Party beneficiary def = a person who is not a party to a K but has rights under the K because the K was
intended to benefit him. (W)
ii. Promisor def = the party who promises to perform for the 3rd party (Travis)
iii. Promisee def = the party who secures the promise (Arnold)
iv. Incidental Beneficiary def = a person who just happens to benefit
c. Only an intended beneficiary (not incidental beneficiary) has legal rights.
i. Ex: W invited Scooter Libby to come hear Travis on July 4th. Travis doesn’t show up. Scooter as
incidental beneficiary cannot sue Travis under the K and recover damages. Scooter doesn’t have any legal
rights under the K (only W).
d. Creditor/Donee Beneficiary
i. Creditor Beneficiary = if performance will satisfy a debt that the promisee owes to the 3rd party, then the
3rd party is a creditor beneficiary
1. In order to pay off a debt that Arnold owes to W, Arnold pays Travis 5000 to sing for W on July 4.
W is a creditor beneficiary.
ii. Donee Beneficiary = otherwise the 3rd party is a donee beneficiary
1. ex: In gratitude for W’s campaign support, Arnold pays Travis $5000 to sing for W on July 4. W
is donee beneficiary b/c Arnold is just making a gift of Travis’ performance. This is the usual
case.
e. Rescission/Modification
i. The promisor and promisee can rescind or modify the contract until the rights of the 3rd party have vested.
ii. When does the 3rd party beneficiary’s rights vest?
1. when the 3rd party beneficiary knows of the K AND
2. the 3rd party beneficiary relies on the K.
iii. Exception = contrary language in the K will control (ie party’s have the right to change beneficiaries)
f. Rights of a 3rd Party Beneficiary
i. Against the Promisor- a 3rd party beneficiary can sue the breaching promisor but is subject to the same
defenses the promisor could have raised against the promisee
1. ex: Can W sue Travis for breach if Travis does not perform as promised? Yes. Intended
beneficiary can sue breaching promisor even though no privity between them. But if Arnold paid
Travis and Arnold’s check bounced, then W cannot recover damages from Travis because Arnold
couldn’t have recovered damages against Travis as a result of his material breach.
ii. Against the Promisee- only a creditor beneficiary can sue the promisee
g. Rights of the Promisee against the Promisor- either can sue the other because there is a valid K between them.
2. Delegation of Duties
a. Definition = transfer of burdens under the K (delegating duties to someone else).
b. Contractual duties may be delegated without the consent of the person to whom performance is owed (obligee)
c. Exceptions:
i. Contract Language controls – if K between the parties prohibits delegation, then the duty cannot be
delegated.
1. Also if the K says that it prohibits assignment, then it also prohibits delegation too.
ii. Special Skill or Reputation- if the person to whom you have K with to perform the duties has special skills
or reputation, they cannot delegate their duties to ANYONE (not even someone with the same skills).
Delegation is improper.
iii. Rights of the Obligee-
1. Against the Delegating Party: The delegating party remains liable to the obligee
a. Ex: Opie K to mow Crump’s lawn for 25. Opie delegates the duty to Goober. Goober
goofs and does not mow the lawn. Can Helen still sue Opie for breach of K? Yes. With
a delegation, delegating party remains liable. Contrast this with novation, where if
Crump knew of the delegation and consented, then it is a novation (not a delegation) and
the delegating party is off the hook.
2. Against the Delegate: If the delegate is liable to the obligee only if the delegate received
consideration for its services.
a. Ex: Can Crump sue Goober for breach of K? Only if Goober got consideration from
Opie for mowing the lawn. Then he will be liable to Crump as well.
3. Assignment of Rights
a. Definition = Transfer of benefits due under the K
i. Assignment of rights transfers only rights
ii. Assignment of the entire K transfers both rights and obligations
b. Two people make a K; later, one person (assignor) transfers his rights under the K to a 3rd party (assignee). The
party who owes the duty to perform is called the obligor.
i. With an assignment, two parties K and a 3rd party (the assignee) appears later on.
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 ii. With a 3rd party beneficiary situation, all 3 parties are present from the outset.
c. Hypo: Batman contracts to provide security for Gotham City for 200,000. Batman (assignor) assigns his right to
payment to Robin (assignee). Robin has the right to receive payment from Gotham City (obligor).
d. Requirements of proper assignment
i. Need Language of present assignment – can’t promise to assign in the future. The language of the
assignment must say something to the affect of “I Assign” or “I hereby assign”
ii. Consideration is NOT necessary (gifts of assignments are valid)- absence of consideration will only affect
revocability
iii. Restrictions on Assignment
1. K language controls – distinguish between a clause that prohibits assignment from one that
completely invalidates it.
a. If the K says “Rights under this K are NOT assignable”- this language prohibits
assignment but if the parties assign the rights to someone else, the assignment will still be
valid but the assignor is still liable for breach.
b. If the K says “All assignments under this K are void” then this language invalidates the
assignment. Means Don’t do it and if you do, it won’t be valid.
2. Cannot Substantially Change Duties of the Obligor
a. Assigning right to payment will not be a substantial change because you are simply just
paying just as you always did, but are now paying another person.
b. However, assignment of right to services is a substantial change.
3. Assignment of rights under requirement K
a. Can assign a right as long as the assignee’s requirements are not out of line with the
assignor’s.
e. Assignee’s Rights against the Obligor
i. Defenses: The assignee can sue the obligor but is subject to the same defenses the obligor could have
raised against the assignor
ii. Payment by Obligor: Payment by the obligor to the assignor is effective unless the obligor is aware of the
assignment.
f. Multiple Assignments
i. Gratuitous “Gift” Assignments: The Last gratuitous assignee in time prevails over earlier gratuitous
assignees because a later gift assignment revokes an earlier one
ii. Assignments for Consideration: The First assignee for consideration prevails (even over gift assignments)
because assignments for consideration are much more durable.
1. Exception: A later assignee for consideration prevails if
a. he does NOT know of the earlier assignment AND
b. is the first to get payment from or a jdmt against the obligor

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