Contracts Law: An Exam-Ready Guide for Law Students and Bar Candidates
Prepared as a comprehensive lecture-style volume integrating common-law doctrine, Article Two of the Uniform Commercial Code, and bar-exam analytical frameworks.
I begin this book with the same mindset I use when speaking to a first-year class on the opening day of Contracts. Contract law is a landscape, not a puzzle box. The doctrines—offer, acceptance, consideration, breach, remedies—do far more than structure private bargains. They shape the way we understand promises, the expectations we impose on one another, and the ways we resolve disputes when those expectations break down.
My purpose in preparing this volume is straightforward: to give you a single, coherent resource that will carry you through law school, class exams, and professional licensure. Each chapter is written in a natural, lecture-style tone so that you can read it or listen to it in the same rhythm as an in-person course. The structure mirrors the analytical flow you must master for issue-spotting, essay-writing, and multiple-choice reasoning.
The book brings together traditional common-law principles and the specialized framework of the Uniform Commercial Code, particularly Article Two governing the sale of goods. I assume no prior mastery. I take each doctrine from its first definition, through its real-world application, and finally into its exam posture, so that you can deploy these tools with confidence.
This is not a hornbook of endless citations or footnotes. It is a teaching tool designed to illuminate the machinery of contract law, not bury it under layers of abstraction. Every section is structured to make doctrine intelligible, memorable, and functional.
Now that you are standing at the threshold of the text, let me give you a brief roadmap for getting the most out of it.
As you work through the chapters, treat the material as a sequence of lenses. Each chapter adds a lens that sharpens the way you read and analyze a fact pattern. By the time you reach the end, you will have a complete analytical framework—one that begins with contract formation and moves through enforceability, performance, breach, rights of third parties, and remedies.
You will notice that I intentionally use transitions that mirror spoken lecture. That is deliberate. Contracts is best absorbed when you can hear the doctrinal rhythm: “Next, let’s examine…,” “Now let’s shift our focus…,” “Continuing on, let’s take a look at….” These verbal cues help the material lock into place.
For exam preparation, I recommend a layered method.
Start by reading a full chapter without worrying about memorization.
On the second pass, pause at doctrinal turning points and speak the rule aloud.
On the third pass, apply the rule to a hypothetical of your own creation.
Then, when you practice exam questions, use the same chapter structure as your skeleton outline.
This volume is designed so that every chapter can be used as a standalone reference on that doctrine, while the entire book forms a single, highly cohesive outline.
Let me give you a sense of the architecture you are about to move through.
The book opens with the foundations of contract formation—offer, acceptance, consideration, and promissory estoppel—because those doctrines define when a promise becomes legally enforceable. Without that foundation, nothing that follows makes sense.
From there, we move into doctrines that evaluate whether an agreement should be enforced at all: defenses such as incapacity, misrepresentation, duress, illegality, mistake, unconscionability, and the Statute of Frauds.
Once enforceability is established, we enter the heart of contractual relationships: interpretation, conditions, performance standards, breach classification, anticipatory repudiation, and the doctrines that excuse performance.
Then the book turns outward to include people who are not signatories to the bargain: intended beneficiaries, assignees, and delegates. These doctrines become critical in real transactions where obligations move across organizations and individuals.
Finally, the text culminates with remedies—the way courts translate breach into practical consequences. Expectation, reliance, restitution, liquidated damages, and equitable relief form the backbone of contract litigation, and mastering them is essential for exam success.
To round out the landscape, the last chapter provides a deep dive into the UCC’s Article Two for sales of goods, offering a flexible yet structured approach to modern commercial contracting.
Taken together, the chapters form a complete system. Once you understand how each piece fits, contract law becomes less like a maze and more like a map.
Contracts is not just about identifying rules. It is about learning to move strategically through fact patterns. The bar exam rewards those who can apply doctrine with speed, clarity, and precision. This book is built for that purpose.
I want you to be able to do several things by the time you finish:
Understand how courts determine when a contract forms.
Recognize when a contract is unenforceable and why.
Analyze performance obligations and classify breaches accurately.
Identify when third parties acquire enforceable rights.
Calculate damages using the proper measure under both common law and Article Two.
Navigate the UCC’s unique formation rules, perfect-tender standard, and buyer and seller remedies.
Structure exam answers using a repeatable analytical sequence.
Ultimately, what you learn here should help you approach any contract problem—simple or complex—with a calm, systematic methodology.
The following cases anchor many of the doctrines discussed throughout the book. They are referenced not as historical relics but as functional examples that continue to shape modern doctrine.
This is not an exhaustive list, but it provides the doctrinal compass points used throughout the chapters.
To support exam preparation, the book concludes with a full index of key contract doctrines. For now, here is a brief preview of the kinds of entries you’ll find:
Each term is tied directly to its doctrinal chapter so that you can locate rules and examples quickly.
Now that you’ve seen the structure that lies ahead, I encourage you to think of this book less as a static text and more as a guided course. Treat each chapter like a spoken lecture: let it unfold gradually, let the transitions signal where your attention should go, and let the system become second nature.
With that in mind, let’s step into Chapter One and begin the journey with the core of contract formation.
I begin this chapter by grounding us in the central idea that contract law is, at its heart, a system for enforcing private agreements. Courts are not in the business of enforcing mere wishes or casual promises; they enforce commitments because those commitments allow people to organize their economic and personal lives with predictability. Every doctrine we will discuss—offer, acceptance, consideration, promissory estoppel—exists to help courts determine when a promise is serious enough, and structured enough, to justify legal enforcement.
Now, let’s shift our focus to the architecture of formation. A contract usually emerges from a simple pattern: one party communicates a willingness to enter a bargain, the other party responds in a manner that signifies assent, and both parties exchange something of legal value. You will hear this phrased as offer, acceptance, and consideration. The analysis is simple in outline but complex in application, especially on an exam. My goal is to give you a working model that you can carry into any hypothetical and use to untangle even the most tangled fact patterns.
Before exploring offer and acceptance themselves, I want to look closely at the lens through which courts view party conduct. The so-called objective theory of assent tells us that contractual intent is not measured by what someone privately meant. Instead, courts ask whether a reasonable person in the position of the recipient would interpret the speaker’s words and conduct as an intent to enter into a bargain.
This theory shows up everywhere. When a party claims, “I was joking,” the court does not look into the speaker’s heart. It looks outward at manifestations. Did the circumstances and the language suggest a real transaction, or did they show obvious playfulness? If the reasonable observer would believe the speaker was serious, then the speaker’s private reservations do not matter.
On exams, this doctrine is your anchor. Anytime a party claims they did not intend to be bound, you return to the reasonable-person lens. It helps you avoid becoming lost in subjective side trails.
With the interpretive lens set, I now turn to the first building block: the offer. A valid offer is a manifestation of willingness to enter into a bargain, made in such a way that the offeree reasonably understands that their assent will form a contract.
The key word here is “reasonably.” Because contract law is built on objectivity, a court focuses not on the speaker’s internal thoughts but on whether the communication would lead a reasonable offeree to believe a commitment was being proposed.
An offer must show commitment. It must express terms with enough certainty that a court can identify the parties, the subject matter, and essential terms such as price, quantity, or duration. The level of specificity varies depending on the context.
For example, in real estate transactions, courts expect price and property description. In employment agreements, salary and duties matter. Under the Uniform Commercial Code—pronounced “You-Cee-See”—a contract for the sale of goods can be valid even if some terms are left open, because the UCC provides gap-fillers. However, even under the UCC, quantity usually cannot be left open unless the contract is an output or requirements contract.
Students often stumble on advertisements. The general rule is that advertisements are not offers; they are invitations for customers to make offers. Stores cannot be expected to contract with every person who sees an ad. But an advertisement can become an offer if it is clear, definite, and explicit, leaving nothing open for negotiation.
Imagine a newspaper ad that states, “First come, first served, one mink coat for one dollar.” That is likely an offer because the terms are specific and the ad invites immediate acceptance by action. Most exam hypotheticals play with this boundary.
Next, let’s take a look at how offers cease to exist. An offer does not linger forever. It can disappear through lapse of time, revocation, rejection, counteroffer, death, or incapacity.
Lapse of time depends on the terms of the offer or, if no time is stated, on a reasonable period under the circumstances. A revocation must be communicated to the offeree—either directly or indirectly through reliable information that the offeror has taken inconsistent action, such as selling the item to someone else.
A rejection terminates the offer immediately when received. A counteroffer operates as a rejection and a new offer. Death or incapacity terminates the offer even if the offeree does not yet know about it.
Although most offers are freely revocable, contract law recognizes situations where revocation is not allowed.
The first is the option contract. Here, the offeree gives consideration in exchange for a promise to keep the offer open. This is a separate contract, and the offeror cannot revoke during the option period.
The second is the UCC firm offer rule. A merchant’s signed writing that assures the buyer the offer will be held open is irrevocable for the period stated, or, if no period is stated, for a reasonable time not exceeding three months. The exam often pairs this rule with questions about whether the person is a merchant and whether the writing is signed.
The third is reliance. If an offer foreseeably induces reliance before acceptance and injustice can be avoided only by enforcement, courts may treat the offer as temporarily irrevocable. This doctrine often appears in subcontractor bids, especially in construction-contract fact patterns.
Now that we have built the offer, let us shift our focus to acceptance. Acceptance is a manifestation of assent to the terms of the offer in the manner invited or required. The offeror is the master of the offer; they may dictate the method of acceptance.
Acceptance must be communicated, unless the offer indicates that silence or performance is sufficient. Courts look for a clear expression that the offeree agrees to the proposed deal.
Acceptance can occur by promise, by performance, or by a combination of both. If the offer invites acceptance by performance—such as a reward for returning a lost dog—only performance constitutes acceptance. If the offer is ambiguous, the offeree may accept either by promising to perform or by beginning performance.
The UCC liberalizes the rules further. A buyer may accept by promising to buy the goods, by sending a purchase order, or by beginning performance through shipment of goods.
One of the bar exam’s favorite doctrines is the mailbox rule. It provides that, unless the offer says otherwise, an acceptance is effective upon dispatch. Revocations, on the other hand, are effective only when received.
This creates exam scenarios where acceptance beats revocation even when the revocation arrives first. But remember: the mailbox rule applies only to acceptances, not to counteroffers, rejections, or revocations.
Generally, silence is not acceptance. But exceptions exist. Silence can operate as acceptance when the offeree receives a benefit with a reasonable opportunity to reject it, when prior dealings indicate that silence means assent, or when the offer indicates that silence will suffice and the offeree intends to accept.
Silence-based contracts appear often in problems involving recurring shipments, continuing subscriptions, or neighborhood services such as lawn care or maintenance.
Under the common law, the mirror-image rule states that acceptance must match the offer exactly. If the offeree adds new terms or conditions, the response is a counteroffer, not an acceptance.
The UCC replaces this with a more flexible “battle of the forms” framework. A definite expression of acceptance can be valid even if it includes additional or different terms, unless acceptance is expressly conditioned on the offeror’s assent to those new terms.
Between merchants, additional terms may become part of the contract unless they materially alter the agreement or the offeror objects. The doctrine is thorny, and exams often treat it as a puzzle requiring careful sequencing.
Having established offer and acceptance, I now turn to the third essential requirement: consideration. Consideration is the element that transforms a mere promise into a legally enforceable contract. It requires a bargained-for exchange of legal value. Each party must incur a legal detriment or confer a benefit, with the promise serving as the inducement for the detriment and vice versa.
Legal detriment does not require actual economic harm. It requires giving up a legal right, doing something you are not otherwise obligated to do, or refraining from doing something you are entitled to do. For example, a promise not to smoke, drink, or gamble, if bargained for, can constitute valid consideration.
Consideration requires bargaining: each promise must induce the other. Courts analyze whether the parties exchanged promises or performances because they wanted the return promise or performance. If a promise is made merely out of generosity or moral duty, it lacks the bargaining element and is not enforceable under consideration doctrine.
Exam questions frequently turn on the preexisting duty rule. A promise to perform an obligation one already owes is not new consideration. For example, a police officer cannot claim a reward for catching a criminal because the officer is already under a legal duty to enforce the law.
Modifications also implicate this rule. Under the common law, a contract modification must be supported by new consideration. However, the UCC modifies this concept. A modification to a contract for the sale of goods does not require additional consideration as long as it is made in good faith.
Another important aspect to consider is the difference between a real promise and an illusory one. An illusory promise gives the promisor unfettered discretion to perform or not perform. For example, “I will buy your car if I feel like it” is not a binding promise. Because the promisor has not committed to anything, there is no consideration.
However, not every discretionary phrase creates an illusory promise. Requirements contracts and output contracts—where the buyer agrees to purchase all requirements from the seller or the seller agrees to sell all output to the buyer—are valid under the UCC because the parties must act in good faith.
One of the easiest traps for students is past consideration. A promise made in recognition of a benefit previously received is not enforceable because the benefit was not bargained for. If I rescue your pet from danger and you later promise to pay me, the promise is not supported by consideration unless the benefit was requested beforehand.
Courts sometimes enforce promises based on moral obligation, but only in narrow circumstances, such as when a material benefit was conferred and the promisor later makes a promise to compensate. These “material benefit” cases are exceptional and exam writers often push students to decide whether they apply.
Now that we’ve covered the doctrine of consideration, let’s examine the equitable backstop: promissory estoppel (pronounced “eh-stah-puhl”). When consideration fails, promissory estoppel may allow enforcement when a promise has induced reasonable and foreseeable reliance.
This doctrine requires three elements. There must be a clear promise. The promise must induce reasonable reliance. And enforcement must be necessary to avoid injustice. The remedy is often limited to reliance damages rather than the full expectation damages available in ordinary contract cases.
Promissory estoppel shows up frequently in exam problems involving employment offers, charitable pledges, and subcontractor bids. It serves as a substitute for consideration when the promisor should have expected reliance and the promisee actually relied to their detriment.
Now that we’ve covered each formation doctrine individually, let’s examine how they work together in a typical exam hypothetical. Examiners often design fact patterns that present multiple formation issues in a sequence. Your job is to walk through the steps methodically.
Imagine a set of facts involving a business that places an online advertisement for a limited-quantity item. A customer sends an email stating “I accept your offer.” The business responds with a message adding additional shipping terms. Before the goods are shipped, the business sells them to someone else at a higher price. The customer sues.
To analyze this, I begin by asking whether the advertisement was an offer or an invitation to deal. If it lacked sufficient specificity, it likely was not an offer but merely an invitation. Next, I examine whether the customer’s email amounted to an offer or an acceptance. If it is an offer, the business’s message adding new terms may constitute a counteroffer or acceptance depending on whether common-law or UCC rules apply. If no contract forms, I then assess whether promissory estoppel is available based on any reliance.
Exams reward structure. The examiner wants to see a clean analytical pathway: offer → termination → acceptance → consideration → UCC or common-law classification → defenses or promissory estoppel.
Let’s delve into another significant topic: preliminary negotiations and reliance during the formation phase. Parties often exchange drafts, letters of intent, or memoranda of understanding. Whether these communications create enforceable obligations depends on whether the parties intended to be bound.
When parties express an intent not to be bound until a formal writing is executed, courts generally honor that intent. However, if the essential terms are all agreed upon and the formal writing is a mere memorialization, a court may find that the contract is already formed.
Option contracts become especially important in this context. When a party pays for the right to hold an offer open, the courts enforce that right even if the underlying terms remain under negotiation. Reliance-based option contracts also appear in construction-contract scenarios where subcontractors make bids that general contractors use in forming overall proposals. The exam may invite you to analyze whether promissory estoppel makes the subcontractor’s bid temporarily irrevocable.
Although the deeper discussion of defenses appears in later chapters, formation is not fully complete without briefly noting capacity. A party must have the legal ability to contract. Minors, persons who are mentally incompetent, and intoxicated persons may lack capacity.
The typical exam scenario involves a minor entering a contract and later disaffirming it, often after receiving benefits from the agreement. The key principle is that a minor may disaffirm before reaching the age of majority or within a reasonable time thereafter. Courts usually require restitution of any remaining benefits but will not enforce the contract itself unless it is for necessities.
Capacity arises at the formation stage because it affects whether a contract exists at all and whether it is voidable. Always consider it when the hypothetical mentions age, mental condition, or intoxication.
Another important topic in formation is indefiniteness. A contract must be sufficiently definite for a court to enforce it. Essential terms must be present. Courts may fill in missing terms if they can ascertain the parties’ intent and provide a reasonable basis for granting a remedy.
Under the UCC, this requirement becomes more forgiving. Gap-fillers can provide price, delivery terms, time of delivery, and even time of payment. Quantity, however, generally must be fixed unless it is framed as a requirements or output contract.
In exam problems involving uncertainty, I always examine whether the missing terms are essential and whether the UCC or common law applies. If the contract is for goods, the UCC’s flexibility often saves the agreement.
Let’s shift our focus to a common area of confusion: preliminary agreements. Modern commerce often unfolds in stages. Parties negotiate, draft outlines, exchange unsigned agreements, and sometimes announce deals in principle. The question becomes whether these communications form a binding contract. Courts look to the language used, the context of negotiations, the nature of the agreement, and whether the parties intended to be bound immediately or only after executing a formal contract.
Examiners frequently create scenarios where parties disagree about whether the deal was “final.” You apply the objective theory: What would a reasonable person think? If both sides acted as if they believed a final deal existed—by beginning performance, taking preparatory steps, or communicating as though the contract were final—courts may find binding contractual intent.
Auction settings provide another rich field for formation issues. In an auction “with reserve,” the auctioneer may withdraw the goods at any time until the hammer falls. In an auction “without reserve,” the auctioneer must accept the highest bid. Bidders are generally considered to be making offers, and acceptance occurs with the fall of the hammer.
Exam writers often use auction scenarios to test your understanding of revocation. A bidder can revoke a bid any time before acceptance unless the auction is without reserve.
Now that we’ve examined common-law formation in detail, let’s take a look at how the UCC shapes the process for goods contracts. The UCC simplifies many aspects of formation. A contract may form even if the moment of formation cannot be pinpointed. A writing may be enforceable even with missing terms.
One of the first questions in any exam involving goods is whether the UCC applies exclusively or whether common law also plays a role. Mixed contracts—part goods, part services—require the predominant-purpose test. If the primary thrust of the transaction is the sale of goods, the UCC governs. If the primary purpose is providing services, common law governs.
Exam fact patterns often complicate this with custom orders, installation services, or bundled transactions. Your task is to determine which law applies before applying formation rules.
Modern commerce brings new formation contexts. Online contracting, for example, raises questions about assent. Courts analyze the validity of “click-wrap” agreements—where users must click “I agree”—differently from “browse-wrap” agreements—where terms are linked at the bottom of a webpage.
Click-wrap agreements are generally enforceable because they require explicit assent. Browse-wrap agreements are enforceable only if the user had notice of the terms. Exams may test your ability to evaluate whether online assent was reasonably communicated.
Digital signatures, electronic exchanges, and automated contracting systems also fall under standard formation principles. Courts again use objective manifestations: did the conduct reasonably communicate an intent to enter a bargain?
In this chapter, I explored the foundational doctrines of contract formation—offer, acceptance, and consideration—through the lens of the objective theory of assent. I examined how offers are created, how they terminate, and when they become irrevocable. I walked through the mechanics of acceptance, the mailbox rule, silence, and the battle of the forms. I discussed consideration, legal detriment, bargained-for exchange, and common pitfalls such as illusory promises and past consideration. I then examined promissory estoppel as an alternative means of enforcing reliance-based promises, and surveyed related formation doctrines including capacity, indefiniteness, preliminary agreements, auctions, mixed contracts, and electronic contracting.
By mastering these ideas and applying them systematically, students build the analytical structure necessary for evaluating contract formation on both law school exams and the bar.
I begin this chapter by placing these doctrines into the broader structure of contract analysis. In the first chapter, I built the architecture of formation. In the second chapter, I examined the defenses that may render an otherwise valid agreement unenforceable. Now I shift our focus to a set of doctrines that sit at the intersection of formation, enforceability, and performance. The Statute of Frauds determines when a writing is required for enforcement. The parol evidence rule guides courts in deciding whether terms outside a writing may alter or supplement the written agreement. And the doctrines of interpretation help courts resolve ambiguity and fill gaps when language is unclear or incomplete.
These doctrines appear frequently on exams because they require careful sequencing. You must first ask whether a contract exists. Then, if a writing is required, determine whether the Statute of Frauds is satisfied. If it is satisfied, turn to whether the writing is final and integrated. Only then do you apply the parol evidence rule. And if the agreement contains ambiguous language, you shift to interpretive tools—course of dealing, usage of trade, course of performance, and common-law principles of construction.
To help you internalize this flow, I’ll teach each doctrine in the order courts apply them, using natural transitions that mirror real-world analysis and bar-exam logic.
Let’s start with the Statute of Frauds. Despite its dramatic name, it is not a criminal statute. It is an evidentiary doctrine designed to prevent fraud and perjury in the enforcement of certain important agreements. The core insight is that some contracts are considered too significant to be enforceable without a signed writing evidencing their essential terms.
Now let’s take a look at the categories. Traditionally, the Statute of Frauds covers the following agreements:
• A contract for the sale of land
• A contract that cannot be performed within one year
• A promise to act as surety for another’s debt
• A contract made in consideration of marriage
• A contract for the sale of goods priced at or above five hundred dollars under the Uniform Commercial Code
These categories provide fertile ground for exam questions because they require both classification and practical reasoning.
Land-sale agreements almost always fall within the Statute of Frauds. This includes sales of homes, transfers of easements, and long-term leases. Courts require a signed writing describing the property, identifying the parties, and indicating the price or method for determining it. Without a writing, enforcement is generally barred unless an exception applies.
Exams often present someone who orally agrees to buy property, then invests resources in preparing or improving the land. This sets the stage for the doctrine of part performance, which I’ll discuss shortly.
Next, let’s examine the one-year provision. If a contract cannot possibly be performed within one year from the date it is made, a writing is required. The key word is “cannot.” If performance is possible within one year—even if highly unlikely—the Statute does not apply.
For example, a lifetime employment contract does not fall within the Statute because death is possible within one year. But a two-year lease for equipment does fall within the Statute because it cannot be completed earlier.
Exam writers love this category because students instinctively assume that long-term arrangements must be in writing. But possibility, not probability, governs the analysis.
A suretyship agreement is a promise to pay another’s debt if the other person fails to do so. These promises must be in writing unless the “main purpose” exception applies. If the promisor’s leading motivation is to advance their own economic interest—such as a corporate owner guaranteeing a subcontractor’s payment to ensure the business project continues—the agreement may fall outside the Statute.
This category covers agreements where marriage is the bargained-for exchange. It typically arises in premarital agreements, requiring a writing signed by both parties.
Now let’s shift to the UCC. For contracts involving the sale of goods priced at five hundred dollars or more, a signed writing is required. The writing need not include all essential terms; quantity is the only term that must appear. Courts allow the UCC’s gap-fillers to supply price, delivery time, payment terms, and even place of delivery.
Once we determine that a writing is required, the next step is to examine whether the writing satisfies the Statute. The writing must:
• Identify the parties
• Describe the subject matter
• State the essential terms
• Be signed by the party against whom enforcement is sought
The signature can be informal—a typed name, initials, letterhead, or even an electronic signature may suffice.
Under the UCC, the writing can be even more flexible. A confirmation memo between merchants may satisfy the Statute unless the recipient objects within ten days.
Exam questions often push you to determine whether multiple document fragments may be read together. Courts allow this as long as the writings clearly relate to the same transaction and at least one is signed.
Now that we’ve examined the writing requirement, let’s shift our focus to the exceptions. These exceptions allow enforcement of oral agreements when fairness outweighs evidentiary concerns.
Part performance is one of the strongest exceptions. Courts allow enforcement if the buyer has taken possession, made improvements, or paid substantial consideration. These actions must be unequivocally referable to the contract—meaning they make sense only if a land-sale agreement truly existed.
For example, if a person moves into a house, renovates the kitchen, and pays half the price, these actions strongly suggest an agreement.
Promissory estoppel may override the Statute when a party reasonably relies on a promise to their detriment. The reliance must be substantial and foreseeable. Courts use this exception sparingly, but exam writers often use it as a twist.
Under the UCC, several exceptions apply:
• Goods specially manufactured for the buyer that cannot be sold to others
• Goods accepted or paid for
• Admissions in court
• Merchant confirmation rule (a written confirmation sent between merchants)
Remember that these exceptions often allow partial enforcement corresponding to the goods accepted, received, or manufactured. Exams frequently highlight deliveries made under an oral agreement to determine whether partial-performance exceptions apply.
It is important to recognize that the Statute of Frauds does not prevent contract formation; it merely prevents enforcement absent a writing. This distinction allows the Statute to function as an affirmative defense. A party may admit that an agreement was made but assert that it cannot be enforced due to the absence of a writing.
Exam answers should reflect this nuance by explaining that a contract may exist but may not be enforceable unless an exception applies.
Now that we've explored the Statute of Frauds, let’s shift our focus to the parol evidence rule—one of the doctrines students often misunderstand. Despite its reputation for complexity, the rule makes sense once you understand its placement in the sequence.
The Statute of Frauds deals with whether a writing is required at all. The parol evidence rule applies only after determining that a written agreement exists. It asks a different question: What is the legal effect of the writing? Specifically, does the writing reflect the parties’ final and complete agreement, such that earlier or contemporaneous oral or written agreements are excluded?
The parol evidence rule is an exclusionary rule. It prevents a party from introducing prior or contemporaneous agreements that contradict the final written contract. The idea is simple: when parties reduce their agreement to a writing intended as the final expression, that writing should govern.
However, the rule does not exclude evidence for all purposes. It applies only when:
• A written agreement exists
• The writing is integrated
• The evidence concerns prior or contemporaneous negotiations
It never applies to later modifications.
Integration determines whether the writing is the final expression of the parties’ agreement. A “completely integrated” writing is both final and complete, barring any prior or contemporaneous terms that contradict or supplement the writing.
A “partially integrated” agreement is final but incomplete. For these, the rule bars contradictory evidence but permits consistent additional terms.
Courts use two competing methods to determine integration.
Some courts examine the writing itself. If the document appears complete and unambiguous, extrinsic evidence is excluded.
Other courts allow extrinsic evidence to determine whether the writing is integrated. This approach is more flexible and common in modern settings.
A merger clause—stating that the writing constitutes the complete and exclusive embodiment of the agreement—is strong evidence of complete integration but is not always conclusive.
Exams love merger clauses because they force students to discuss integration instead of jumping straight to admissibility.
Once a writing is deemed integrated, the rule excludes earlier or contemporaneous statements offered to:
• Contradict a term
• Add a term (if the writing is completely integrated)
• Modify a term (unless offered as a later modification, which is always allowed)
Students often mistakenly think the parol evidence rule bars any extrinsic evidence whatsoever. But the rule is far narrower.
Now let’s examine the categories of evidence that are admissible despite the parol evidence rule.
Courts allow extrinsic evidence to interpret ambiguous terms. The rule does not bar explanatory evidence because it does not alter the terms but clarifies their meaning.
If a contract calls for “premium grade cotton,” extrinsic evidence may show industry usage to determine what the term means.
Evidence may be admitted to show the real consideration, even if different from what the writing states.
Extrinsic evidence may establish that the contract was subject to a condition precedent that never occurred. For example, if a written employment agreement never mentions the requirement of board approval, a party may introduce evidence of this oral condition.
The parol evidence rule never prevents a party from presenting evidence of defenses to contract formation. If a party claims the contract was induced by fraud or misrepresentation, extrinsic evidence is admissible.
The rule applies only to prior or contemporaneous agreements. Later modifications—oral or written—are always admissible, subject to the Statute of Frauds.
Now that we understand what the rule admits and excludes, the next step is to explore how courts interpret ambiguous contractual language. Even a fully integrated contract may contain unclear terms. Interpretation doctrine exists precisely because contract language is not always self-explanatory.
Ambiguity may appear on the face of the document (patent ambiguity) or become apparent only when the language is applied to external facts (latent ambiguity).
A classic example is the “Peerless” case, where a contract referred to a ship named Peerless, but there were two ships with that name. The term was clear on its face, but ambiguous when applied.
Courts use extrinsic evidence to resolve both forms of ambiguity. Exam questions often present ambiguous pricing terms, conflicting delivery clauses, or disputed meanings of technical language.
Now let’s take a look at the tools courts use when interpreting contractual language. These principles form a hierarchy that guides judicial reasoning.
This refers to how the parties behaved when performing earlier installments under the same agreement. Conduct during performance often best reflects the parties’ understanding.
This refers to the parties’ prior transactions under earlier agreements. A history of similar behavior suggests consistent intent.
Usage of trade means industry customs or professional norms. Courts use trade usage to interpret terms that have specialized or customary meanings within a particular field.
These interpretive tools become especially powerful under the UCC, which explicitly incorporates them as part of the interpretive process.
The UCC adopts a flexible approach, allowing courts to consider extrinsic evidence even before finding ambiguity. Under the UCC, written terms are supplemented—and sometimes qualified—by:
• Course of performance
• Course of dealing
• Usage of trade
If the three conflict, courts apply the following hierarchy:
Course of performance prevails over course of dealing, which prevails over usage of trade.
This reflects the insight that how parties actually behave is the strongest indicator of intent.
At common law, courts often apply additional tools, such as:
• Construing the contract as a whole
• Preferring reasonable interpretations over unreasonable ones
• Interpreting ambiguous terms against the drafter
• Giving specific terms greater weight than general terms
• Giving handwritten or typed terms more weight than printed boilerplate
“Contra proferentem”—interpreting ambiguity against the drafter—applies most often in adhesion contracts and insurance agreements.
Contracts often omit terms. Courts do not treat omission as fatal. Instead, they fill gaps using standards such as:
• Reasonable time for performance
• Reasonable price (UCC)
• Good faith and fair dealing (implied in every contract)
Under the UCC, gap-fillers are robust. For example:
• If price is missing, courts supply a reasonable price at time of delivery
• If delivery terms are missing, place of business or residence applies
• If time for delivery is missing, courts supply a reasonable time
Exams often use missing terms as a springboard to test your knowledge of these gap-fillers.
Let’s shift our focus to how these doctrines interact. In practice, courts rarely apply these doctrines in isolation. A typical exam question will embed all three in a single fact pattern.
Here’s the analytical sequence:
First, determine whether a contract exists.
Second, determine whether a writing is required under the Statute of Frauds.
Third, examine whether the writing satisfies the Statute or whether an exception applies.
Fourth, if the contract is enforceable and written, determine whether the writing is integrated for parol-evidence purposes.
Fifth, determine whether extrinsic evidence is admissible for interpretation or for exceptions to the parol-evidence rule.
This sequence showcases your mastery and avoids the common mistake of treating these doctrines as interchangeable.
Exam writers love using these doctrines because they require careful, disciplined analysis. Let me walk you through recurring themes.
A party argues the oral agreement contained a term not reflected in the writing. You must apply the Statute of Frauds first, then the parol-evidence rule.
Parties disagree over terms like “first-quality,” “premium grade,” or “commercially reasonable delivery.” This triggers interpretation using course of dealing or trade usage.
A merger clause signals potential complete integration. You must determine whether the clause is decisive or merely persuasive.
Under the UCC, missing terms require gap-fillers, interpretation tools, and possibly partial-performance exceptions to the Statute of Frauds.
Sometimes a party claims extrinsic evidence contradicts the writing when it actually clarifies ambiguity. Your task is to identify the difference.
These doctrines serve fundamental functions in contract law:
• They ensure reliability in commercial transactions
• They balance fairness and predictability
• They allow parties to determine the meaning of their own agreements
• They reduce litigation by narrowing the field of permissible evidence
Understanding not only what these doctrines do but why they exist enhances your analytical depth and strengthens exam writing.
In this chapter, I examined the Statute of Frauds, focusing on when a writing is required and how courts determine whether a writing satisfies the rule. I explored exceptions such as part performance, promissory estoppel, and the UCC’s specialized rules. I then shifted to the parol evidence rule, explaining integration, merger clauses, and the distinction between what the rule excludes and what it permits. After that, I walked through interpretation doctrine, covering ambiguity, interpretive tools, and UCC versus common-law approaches. I tied these doctrines together through exam-oriented sequencing and highlighted common patterns that reveal how these issues arise in hypothetical problems.
By weaving these doctrines into your analytical process, you gain a powerful framework for understanding not only what contracts say, but how courts determine what those words truly mean.
Conditions, Performance, Breach, and Excuse
I begin this chapter by stepping into the middle of the contractual relationship—past the moment of formation, and before the outcome of remedies. This is where much of contract doctrine actually lives. Once an agreement is formed and enforceable, courts must determine what each party is obligated to do, when they must do it, and what happens when something goes wrong. These questions revolve around conditions, performance obligations, breach, and the doctrines that excuse performance.
This chapter is central for exam success because many hypotheticals hinge not on whether a contract exists, but whether a party performed as required or is in breach. These fact patterns require a sharp understanding of timing, sequencing, and the interaction between express conditions, constructive conditions, material breach, substantial performance, anticipatory repudiation, and doctrines such as impossibility and frustration of purpose.
My goal is to build a clear analytical pathway so that when you encounter a complex scenario—delayed deliveries, defective goods, construction irregularities, or unexpected intervening events—you can move step by step through the doctrines that determine liability.
I start with conditions because they structure the obligations of performance. A condition is an event that must occur before a contractual duty becomes due. Conditions sit like gateways within the contract, controlling when duties arise and whether failure to satisfy the event suspends or discharges performance.
Conditions fall into several categories: express, implied (or constructive), and conditions subsequent. Let’s walk through each so you understand how they operate in real scenarios.
Express conditions appear directly in the contract, often using language such as “on condition that,” “provided that,” “if,” or “subject to.” These conditions require strict compliance. Courts do not treat substantial performance as sufficient when the parties clearly expressed a conditional requirement.
For example, suppose a real-estate purchase agreement states, “Seller’s duty to convey the property is conditioned upon Buyer securing financing by June first.” If the buyer secures financing on June third, the seller may be excused. The exam lesson is simple: express conditions demand literal fulfillment.
However, courts sometimes excuse express conditions through doctrines such as waiver, prevention, or forfeiture. If the party benefiting from the condition acts in a way that prevents or hinders its fulfillment, the condition is excused. This aligns with the duty of good faith and fair dealing.
Now let’s shift our focus to constructive conditions. These are conditions not expressly stated but imposed by courts to ensure fairness. Constructive conditions often arise in bilateral contracts where each party’s performance depends on the other’s.
For example, in a construction contract, the builder must substantially complete the project before the owner’s duty to pay arises. The law imposes a constructive condition requiring substantial performance because the parties’ obligations depend on orderly exchange.
A condition precedent must occur before a duty becomes due. A condition subsequent terminates a duty already in existence. For example, an insurance policy might create a condition subsequent requiring the insured to notify the insurer of claims within a certain period.
On exams, be attentive to sequencing. Many students mistakenly treat conditions subsequent as conditions precedent. The distinction affects whether a duty ever existed or instead was discharged.
Now that we’ve defined conditions, let’s examine performance itself. Courts classify performance obligations differently depending on the nature of the contract.
In contracts for the sale of goods under the UCC, the perfect-tender rule applies. Goods and tender must conform exactly to the contract terms. If the goods fail in any respect, the buyer may reject them.
This rule is strict, but it is softened by the seller’s right to cure. If time remains under the contract, or if the seller reasonably believed the buyer would accept the goods, the seller may correct the defect.
Under common law, especially in service and construction contracts, the standard is far more forgiving. Substantial performance—performance that falls short in minor ways but still conveys the essential benefit—satisfies the obligation. A builder who installs minor deviations in materials may have substantially performed. Deficiencies result in damages, but they do not prevent recovery.
This doctrine reflects the impracticality of requiring perfect performance in complex construction or service contracts.
The exam test is straightforward: does the deviation defeat the essential purpose of the contract? If not, substantial performance likely applies.
Performance doctrine intertwines closely with breach classification. A breach is material if it substantially undermines the benefit of the bargain. A minor breach allows recovery of damages but does not excuse the other party from performance. A material breach excuses the other party from performing the remaining obligations.
Courts consider several factors when determining materiality:
• Extent to which the injured party is deprived of the expected benefit
• Likelihood of cure
• Degree of performance already rendered
• Willfulness of the breach
• Adequacy of compensation through damages
Examiners often present construction-contract scenarios where defects range from trivial (wrong shade of paint) to substantial (wrong foundation materials). Your job is to assess which side of the line the defect falls on.
Now that performance is defined, let’s take a look at breach itself. A breach occurs when a promisor fails to perform when duty is due. Breach may be partial, material, or total.
A partial breach occurs when the deviation is minor. The nonbreaching party must continue performing but may recover damages.
A material breach suspends the nonbreaching party’s performance. If the breach is cured within a reasonable time, the contract may continue; if not, the breach may escalate to a total breach.
A total breach discharges remaining duties and allows the nonbreaching party to sue for full expectation damages.
Exam analysis here is often about timing: is the breach curable? Is performance due immediately? Has the breach gone to the essence of the contract? These distinctions matter enormously when calculating remedies.
Now let’s shift the discussion to anticipatory repudiation—one of the most exam-tested topics in contract law. This doctrine applies when a party unequivocally indicates they will not perform when the time for performance arrives.
A repudiation must be clear, definite, and unambiguous. Vague expressions of doubt do not suffice. Courts look for statements or conduct demonstrating that performance will not occur.
If anticipatory repudiation occurs, the nonbreaching party may choose between:
• Treating the repudiation as a breach and suing immediately
• Waiting for performance to become due, in case the repudiating party retracts
But waiting carries risk. If the nonbreaching party continues to perform despite repudiation, they risk increasing damages that may not be recoverable.
A repudiating party may retract its repudiation unless the other party:
• Materially changed position, or
• Indicated that they consider the repudiation final
Under the UCC, the aggrieved party may demand adequate assurance. If reasonable grounds for insecurity arise, a written demand may be made. Failure to provide adequate assurance within thirty days constitutes repudiation.
Exams routinely present insecurity in commercial settings—declining financial stability, delayed deliveries, or contradictory assurances. Adequate-assurance doctrine provides a structured way to analyze these issues.
Now that we’ve explored breach, we turn to doctrines that discharge duties even without breach. These doctrines excuse performance when events outside the parties’ control alter the contractual landscape in ways they did not anticipate.
Impossibility occurs when performance becomes objectively impossible for anyone to perform. Classic examples include destruction of the subject matter, death or incapacity of a special-skill performer, or supervening illegality.
A violinist who becomes permanently disabled cannot perform a contracted concerto; the performance is impossible.
Exams often push students to distinguish impossibility from mere hardship. Impossibility requires that no one could perform—not simply that performance has become burdensome.
Now let’s examine impracticability. This doctrine applies when performance becomes excessively difficult or expensive due to unforeseen events. The burden must be extreme, not merely inconvenient or unprofitable.
For example, if a supplier’s factory burns down unexpectedly, courts may treat the event as excusing performance because the risk was not allocated and the impact is catastrophic.
Under the UCC, impracticability applies when supplies are cut off due to unforeseen shortages, embargoes, or crop failures.
Frustration applies when an unforeseen event destroys the principal purpose of the contract, and both parties understood that purpose at the time of contracting.
A classic example is renting a balcony to watch a parade that is subsequently canceled. Performance remains possible, but the value of the contract has evaporated.
Exam writers frequently use frustration-of-purpose scenarios involving event cancellations, regulatory changes, or shifts in market demand that neutralize the benefit of the bargain.
A condition may fail without either party’s fault. If a condition precedent does not occur, the duty never arises. This is neither breach nor repudiation; it is simply non-occurrence of a condition that prevents any duty from maturing.
Let’s now take a look at divisibility—a doctrine that determines whether one breach affects the entire contract or only part of it.
A contract is divisible when:
• Performance is divided into matching parts
• Each part is separately valued
• Each part can be independently performed
Exams often use employment or installment-delivery scenarios. For example, if a musician is hired to perform three concerts and breaches one, the question becomes whether the breach taints the entire contract or only the affected portion.
Divisibility can save a breaching party from catastrophic liability by isolating the breach to the severable portion of the contract.
Although Chapter Six will discuss third-party beneficiaries, assignments, and delegations, some third-party interactions affect performance directly.
A duty may be delegated unless the contract prohibits delegation or the duty involves special skill or personal judgment. Delegation does not excuse the delegating party; they remain liable if the delegate fails to perform.
Assignment generally does not affect performance unless it materially changes the obligor’s duties. If assignment changes the nature or risk of performance, the obligor may be excused.
All contracts include an implied covenant of good faith and fair dealing. Good faith prevents parties from undermining the contract's purpose or engaging in opportunistic behavior.
For example, a buyer under a requirements contract cannot manipulate quantity demands in bad faith. A seller cannot withhold necessary cooperation to sabotage the buyer’s ability to perform.
Good faith often appears on exams when a party uses technical compliance to defeat the contract’s spirit.
To understand how these doctrines operate in practice, imagine a hypothetical involving a contractor hired to renovate a home for a set fee. The contract specifies the use of premium-grade materials. The contractor completes the work using nearly identical but slightly lower-grade materials. Meanwhile, the homeowner fails to make progress payments. Later, a supply-chain disruption prevents the contractor from acquiring custom components. Then the homeowner declares they are terminating the project due to the contractor’s delays.
This single hypothetical triggers multiple doctrines:
• Substantial performance (did the contractor meet the obligation?)
• Material breach (did deviations justify withholding payment?)
• Constructive conditions (did homeowner’s payments depend on stages of performance?)
• Impracticability (did supply-chain issues excuse delays?)
• Anticipatory repudiation (did homeowner’s termination constitute repudiation?)
• Adequate assurance (should the contractor have demanded clarification?)
Exams often pack all these issues into a single narrative. Students who treat the scenario as one broad dispute miss the granular analysis that earns full credit. You must isolate every moment where a condition arises, where performance is due, where breach occurs, and where excuse might apply.
Now let’s take a closer look at how the UCC modifies performance and breach analysis in goods contracts.
In installment contracts, buyers may reject a single installment only if the nonconformity substantially impairs the value of that installment and cannot be cured. The contract as a whole is breached only when the nonconformity substantially impairs the entire contract.
As mentioned earlier, sellers may cure defective tenders if time remains under the contract or if the seller reasonably believed the buyer would accept. Cure is a powerful tool for limiting breach classification.
Buyers may revoke acceptance when defects substantially impair value and were difficult to discover or were accompanied by assurances that defects would be fixed.
Although risk of loss technically belongs in later chapters, it interacts with performance. If a buyer bears the risk at the time of loss, they must still pay. If the seller bears the risk, duty may be discharged.
Performance doctrines intertwine with modification principles. Under common law, modification requires new consideration unless it is fair and equitable due to unanticipated circumstances. Under the UCC, good-faith modifications require no new consideration.
A party may also waive a condition by voluntarily relinquishing it. Waivers may be retracted unless the other party relied on the waiver.
Exams frequently use homeowners who waive strict deadlines or buyers who overlook minor defects and later attempt to enforce full rights.
Sometimes strict enforcement of conditions results in unfair forfeiture. Courts use equitable doctrines to avoid disproportionate outcomes. For example, if failure to comply with an express condition would cause extreme forfeiture compared to the gravity of the failure, courts may excuse the condition.
This is more likely to appear in situations involving minor technical defects in performance.
Here is the analytical framework I use when teaching students how to approach performance and breach problems. I narrate it here so you can internalize the rhythm of analysis.
First, identify any conditions—express or implied—that control when duties arise.
Next, determine whether performance occurred as required—perfect tender for goods, substantial performance for services.
Then ask whether any breach occurred and, if so, whether it was partial, material, or total.
After that, determine whether any anticipatory repudiation occurred and whether proper steps—such as adequate assurance—were taken.
Finally, evaluate whether any doctrines excuse performance, including impossibility, impracticability, frustration, failure of condition, or equitable principles.
This sequence ensures you never overlook a doctrine and that your exam answer flows naturally.
In this chapter, I examined conditions as the gatekeepers of contractual obligations, distinguishing express, implied, and subsequent conditions and discussing how their failure affects duties. I then explored performance doctrines, comparing perfect tender under the UCC with substantial performance under common law. I moved into breach analysis—partial, material, and total—before explaining anticipatory repudiation and adequate-assurance mechanisms. Finally, I surveyed the doctrines that excuse performance, including impossibility, impracticability, frustration of purpose, and equitable avoidance of forfeiture.
Together, these doctrines create the analytical bridge between formation and remedies, allowing courts to determine whether a party has performed its obligations, breached them, or been excused from performing due to events beyond their control. Understanding this structure is essential for navigating the heart of any contract dispute.
Remedies — Expectation, Reliance, Restitution, and Equitable Relief
I begin this chapter by shifting us from liability to consequences. Up to now, I have focused on when contracts form, when they fail, and when performance is excused. Remedies answer the next question: assuming there has been a breach that is not excused, what should the law do about it?
Contract remedies are not primarily about punishment. They are about calibration. Courts aim to put the injured party in the right “place” relative to a world where the contract had been performed, or in some cases relative to a world where the promise had never been made. Once you understand which “world” a particular remedy is trying to recreate, the doctrines begin to feel far more coherent.
In this chapter, I move through expectation damages, reliance damages, restitution, and equitable relief such as specific performance and injunctions. Along the way, I highlight limitations like foreseeability, certainty, and mitigation, and I incorporate UCC remedies for buyers and sellers of goods. The goal is to build a remedy toolkit you can deploy in any exam scenario.
I start by grounding us in the three classic remedial interests described in contract theory.
Expectation damages aim to place the injured party in the position they would have occupied if the contract had been fully performed. This is the dominant remedy in contract law, and it drives most exam problems.
Reliance damages aim to put the injured party back where they would have been if the contract had never been made. They compensate for expenditures made in reliance on the promise.
Restitution focuses not on the injured party’s loss, but on the breaching party’s gain. It aims to prevent unjust enrichment by forcing the breaching party to disgorge benefits received.
Equitable remedies sit somewhat apart. Specific performance and injunctions compel or restrain conduct rather than awarding money. They are exceptional, used when money damages are inadequate.
Now that the landscape is sketched, I’ll walk into each remedy and the doctrinal constraints that shape it.
Expectation damages are the default remedy in contract law. When a court awards expectation, it is trying to give the promisee the “benefit of the bargain.” That means the value of what was promised minus the value of what was actually received, plus any incidental and consequential losses, minus any savings the breach produced.
A simple way to express the idea is:
Value of promised performance
minus
Value actually received
plus
Other reasonably foreseeable loss
minus
Costs avoided
The math can look different depending on the context—construction, employment, goods—but that basic structure is always nearby.
Within expectation, courts often distinguish general (or direct) damages from consequential damages.
General damages are the losses that flow naturally and ordinarily from the breach itself. If a seller fails to deliver goods, the buyer’s cost to procure substitute goods at a higher price is a general damage.
Consequential damages are additional losses that result from the injured party’s particular circumstances, such as lost profits from resale contracts or shutdown of a manufacturing line. These do not automatically follow from every breach; they depend on how the injured party uses the contract.
The key doctrinal lens for consequential damages comes from the famous rule of Hadley v. Baxendale. Damages are recoverable only if they were reasonably foreseeable at the time of contracting—either because they arise in the ordinary course of events or because the special circumstances were communicated.
On exams, you will see a small business that loses profits when a supplier breaches. The question becomes whether those lost profits were within the contemplation of the parties at the time they made the contract.
Expectation damages are powerful, but they are bounded by three classic limitations.
Foreseeability restricts damages to those that were reasonably foreseeable when the contract was made. If a breaching party had no reason to know of a particular risk, they are not liable for that risk.
Certainty demands that damages be proven with reasonable certainty. Courts are hesitant to award speculative lost-profits claims, especially for new businesses without a track record. The more speculative the projection, the more likely a court will decline to award it.
Mitigation, sometimes called the duty to mitigate, requires the injured party to take reasonable steps to reduce damages. The injured party may not passively let losses pile up and then hand the bill to the breaching party. If reasonable alternatives existed, recoverable damages are reduced by what the injured party could have avoided through reasonable efforts.
These limitations are exam favorites. A well-structured answer will always test each one after calculating a rough expectation figure.
Now that we’ve covered the general idea, let’s take a closer look at how expectation damages are calculated in common contract scenarios: construction contracts, employment contracts, and the sale of goods. Exam problems often embed their trickiness in these context-specific formulas.
In construction contracts, expectation damages commonly take one of two forms: cost to complete or diminution in value.
Cost to complete is the expense required to bring the work into conformity with the contract. Diminution in value is the difference between the value of the structure as constructed and the value it would have had if built as promised.
Courts often choose between these measures based on reasonableness. If the cost to complete is grossly disproportionate to the difference in value, courts may award only the diminution in value to avoid economic waste.
A classic example is a contractor who uses slightly different pipe than specified, but the building’s market value is essentially the same. Ordering the entire structure torn apart to replace pipe may be viewed as wasteful, and courts may award only the small difference in value.
On an exam, you should identify both measures, then argue which best aligns with doctrine and policy.
For wrongful termination, the employee’s expectation damages are generally the salary and benefits under the contract minus earnings from comparable employment obtained or that could have been obtained with reasonable effort.
For wrongful discharge of an at-will employee, remedies are more limited because long-term job security is not promised. The focus is usually on unpaid wages or benefits.
Meanwhile, if an employee breaches by quitting early, the employer can seek the additional cost of hiring a replacement, adjusted by any earnings the employee would have received.
Mitigation is central here. The fired employee must make reasonable efforts to find comparable work. Failure to do so limits recovery.
Now let’s move into the UCC. When a seller breaches a contract for the sale of goods, a buyer has several remedy options.
If the buyer covers by purchasing substitute goods in good faith and without unreasonable delay, the buyer may recover the difference between the cover price and the contract price, plus incidental and consequential damages, minus expenses saved.
If the buyer does not cover, they may recover the difference between the market price at the time they learned of the breach and the contract price, plus incidental and consequential damages, minus savings.
If the goods are nonconforming but accepted, the buyer may recover the difference between the value of the goods accepted and the value they would have had if they conformed, plus incidental and consequential damages.
Buyers may also seek specific performance for unique or specially identified goods, which I will discuss when we reach equitable remedies.
When a buyer breaches, sellers also have multiple remedies.
If the buyer wrongfully rejects goods or repudiates, the seller may resell the goods in a commercially reasonable manner and recover the difference between the resale price and the contract price, plus incidental damages, minus expenses saved.
If the seller does not resell, they may recover the difference between the market price at the time and place for tender and the contract price, plus incidental damages.
For lost-volume sellers—those who could have made both the original sale and the resale—the ordinary contract-minus-resale formula under-compensates. In these cases, the seller can sometimes recover lost profits, because the breach cost them one full sale.
If the buyer accepts goods but fails to pay, the seller may sue for the price, essentially an action akin to specific performance in money form, particularly for goods that cannot be resold.
Exam problems frequently ask you to choose among these formulas and to explain why, under the facts, a particular remedy better reflects the seller’s expectation interest.
Now that expectation is clear, let’s shift the focus to reliance damages. Reliance damages aim to put the injured party back into the position they would have occupied had the contract never been made. They reimburse expenditures made in preparation for or in performance of the contract.
Reliance is particularly important when expectation damages are difficult to measure or too speculative—for example, in new business ventures where profit projections lack a track record.
The classic example is a performer who relies on a promoter’s promise by spending money on rehearsals, costumes, and travel. If the promoter cancels in breach of contract, the performer can claim those expenditures as reliance damages.
Reliance is also central in promissory estoppel (pronounced “eh-stah-puhl”) cases where consideration is lacking. When courts enforce a promise based on detrimental reliance rather than a fully formed contract, they often limit recovery to reliance, not expectation.
A tricky issue arises when the contract would have been a losing one—meaning the injured party would have lost money even if the contract had been performed. In that scenario, reliance damages, if fully reimbursed, might put the injured party in a better position than performance would have.
Most courts respond by allowing the breaching party to prove the contract would have been a net loss, thereby reducing reliance damages accordingly. The goal remains compensatory, not windfall.
On an exam, if you see evidence that a project was doomed to lose money, you should flag this issue and discuss whether reliance damages should be reduced to reflect the expected loss.
Now let’s examine restitution. Restitution focuses not on the promisee’s lost expectation but on the promisor’s unjust gain. The question shifts from “How much did the injured party lose?” to “How much did the breaching party unfairly gain?”
Restitution may be available even when no enforceable contract exists, through quasi-contract or “contract implied in law” theories. In those scenarios, the law treats the situation as if a promise existed to avoid unfair enrichment.
A classic pattern involves a party conferring a benefit with the reasonable expectation of being paid, where the recipient knowingly accepts and retains the benefit. Courts can award restitution measured by the reasonable value of the services or the increase in the recipient’s wealth.
When a non-breaching party has partially performed and the other party breaches, restitution allows recovery of the value of the benefit conferred. The injured party is not confined to contract damages; they may elect to pursue restitution instead, particularly if expectation damages are low or negative.
This is especially useful in losing contracts. If performance would have produced a net loss, the non-breaching party may prefer restitution to avoid that loss.
An often underappreciated doctrine is that even a breaching party may sometimes recover in restitution. If a party commits a minor or even material breach after conferring a substantial benefit on the other party, courts may allow restitution to prevent unjust enrichment.
For example, if a contractor partially completes a building before breaching, the owner still benefits from the partial work. Courts may require the owner to pay the reasonable value of the benefit received, minus any damages suffered from the breach.
Exam questions occasionally test whether a breaching party is completely barred from recovery. The nuanced answer is that restitution may still be available, especially to avoid a windfall for the non-breaching party.
Now that we’ve explored expectation, reliance, and restitution, let’s take a look at liquidated damages clauses. These are contract terms that specify in advance the amount of damages payable in the event of breach.
Liquidated damages are enforceable if, at the time of contracting, actual damages were difficult to estimate and the amount chosen is a reasonable forecast of anticipated loss. If the specified sum is unreasonably large compared to anticipated or actual harm, courts treat it as an unenforceable penalty.
Contract law disallows penalties because remedies must compensate, not punish. This is a doctrinal point examiners love: they want to see that you recognize penalties are disfavored.
On an exam, you should ask three questions: Were damages difficult to estimate at the time of contracting? Is the stipulated amount reasonably related to anticipated or actual losses? Does the clause operate as a genuine pre-estimate or as a threat?
If the answers support reasonableness, the clause is likely a valid liquidated-damages provision. If not, the clause is treated as a penalty, and the injured party must prove damages under ordinary rules.
Not all breaches produce measurable economic loss. Sometimes a breach is technical but harmless. In that case, courts may award nominal damages—symbolic sums such as one dollar—to acknowledge the breach.
Emotional-distress damages, by contrast, are rarely awarded in contract cases. Contract law is aimed at economic interests, not emotional well-being. There are narrow exceptions, such as contracts whose very purpose is to provide peace of mind or emotional security—think of handling a loved one’s remains or a wedding photography contract—but these are the exception, not the rule.
Punitive damages are also extremely rare in contract law, unless the breach constitutes an independent tort such as fraud or bad-faith insurance handling. Again, the law’s core remedial goal is compensation, not punishment.
Exam problems sometimes tempt you to ask for punitive or emotional-distress damages, but a strong answer acknowledges that such remedies are disfavored in pure contract actions.
Now let’s turn to equitable relief, where the court does not award money but instead orders or restrains conduct. The classic tool here is specific performance: an order compelling a party to carry out their contractual obligations.
Specific performance is not a routine remedy. It is reserved for situations where money damages are inadequate. Typical examples include contracts for unique goods—such as rare art, heirlooms, or unique real property—as well as certain land-sale contracts.
Real property is generally treated as unique. As a result, buyers under land-sale contracts can ordinarily seek specific performance if the seller breaches. The uniqueness of the parcel makes substitution difficult.
In goods contracts, specific performance may be granted where the goods are unique or in other proper circumstances—for instance, when substitute goods cannot be obtained.
Employment contracts occupy a special place. Courts will not order specific performance of personal services; forcing someone to work against their will looks too much like involuntary servitude. However, courts may issue negative injunctions preventing an employee from working for a competitor if a valid non-compete clause exists and the restriction is reasonable in scope, geography, and duration.
Equitable remedies are discretionary. Courts may deny specific performance if the contract is unconscionable, if the injured party has unclean hands, or if enforcement would be impractical.
On exams, the key questions are: Are money damages inadequate? Is the subject matter unique or otherwise irreplaceable? Are equitable defenses such as laches, unclean hands, or hardship implicated?
Because more than one remedy may be available, courts sometimes require an election of remedies. A party typically may not collect both expectation and restitution when that would lead to double recovery.
For example, a party cannot recover the full contract price as expectation damages and also claim the full value of the benefit conferred in restitution. Remedies must be aligned so that the injured party is made whole, not enriched beyond performance.
On an exam, this comes up when a fact pattern invites you to calculate multiple damages measures. You should demonstrate you understand which are alternatives and that a court will choose one consistent measure rather than stack them.
To make this practical, I like to give a mental roadmap for exam analysis.
Once you have determined that there is a contract, that there has been a breach, and that no defense excuses the breach, you move into remedies by asking:
What is the injured party’s expectation interest—where would they be if the contract had been fully performed?
What limitations apply—were the damages foreseeable, proven with reasonable certainty, and reasonably mitigated?
If expectation is too speculative or produces a loss, does reliance provide a better measure?
Is restitution available to recapture benefits conferred or unjust enrichment—especially in losing contracts or when a breaching party has partially performed?
Is there a liquidated-damages clause, and if so, is it a valid estimate or an unenforceable penalty?
Are equitable remedies such as specific performance or injunction appropriate because money damages are inadequate, especially in land or unique-goods contracts?
That sequence keeps your answer disciplined and shows the examiner that you understand remedies as a structured system rather than a loose bag of numbers.
In this chapter, I explored the core remedial interests of contract law: expectation, reliance, and restitution, and then moved into equitable remedies like specific performance and injunctions. I explained how expectation damages seek to give the injured party the benefit of the bargain, subject to the constraints of foreseeability, certainty, and mitigation. I then shifted to reliance as a way to reimburse expenditures when expectation is hard to prove or linked to promissory estoppel, and to restitution as a tool for preventing unjust enrichment, even in losing contracts or when the breaching party seeks recovery. I examined context-specific formulas for construction contracts, employment agreements, and UCC sales of goods, and I discussed liquidated-damages clauses, penalties, nominal damages, emotional-distress and punitive damages, and the availability and limits of specific performance.
Together, these doctrines provide the machinery by which courts translate breach into concrete outcomes. In exam practice, the art lies in selecting the remedy that best matches the facts and articulating how the law positions the injured party relative to the world the contract was supposed to create.
Third-Party Rights — Beneficiaries, Assignment, and Delegation
I begin this chapter by stepping outward from the immediate contracting parties and examining what happens when a contract radiates beyond its original pair. Contracts are not sealed bubbles. They influence and involve people who never signed the agreement—intended beneficiaries who stand to gain, assignees who receive rights, delegates who undertake duties, creditors who expect payment, and occasionally third parties who assert defenses or liabilities arising from the agreement.
This chapter forms an essential part of exam readiness because third-party issues frequently appear disguised inside other fact patterns. A student may spend time analyzing formation or breach and miss the subtle clue that the real question concerns whether a third party has enforceable rights or whether duties can be shifted. My goal here is to give you a clear, first-person, narrative roadmap to navigate these doctrines with confidence.
I’ll explore intended and incidental beneficiaries, vesting of rights, assignment of contract benefits, delegation of contractual duties, and the limits that courts impose on these transfers. Each section flows naturally, because in real life and on exams, these doctrines often overlap.
Let’s begin with third-party beneficiaries—individuals who benefit from a contract formed between two other parties. The doctrine answers a simple but powerful question: When may a non-party enforce a contract?
At common law, strangers generally had no enforcement rights. Over time, courts recognized that many agreements are expressly made to benefit people who never sign the contract. The law now allows these intended beneficiaries to sue for enforcement.
The core distinction is between intended beneficiaries and incidental beneficiaries.
Intended beneficiaries are those the parties meant to benefit. They may enforce the contract once their rights vest.
Incidental beneficiaries are merely passive recipients of advantage. They cannot sue because the contract was not designed for them.
Suppose a city contracts with a developer to build a public park. Nearby homeowners may benefit from increased property values, but unless the contract expressly intends to benefit them, they are incidental. They cannot enforce delays or defects.
On exams, look for language indicating purpose. Did the contract exist to benefit the third party? Was performance owed “directly to” that person? Did the promisee bargain for the benefit?
Traditionally, intended beneficiaries fall into two types.
A creditor beneficiary is someone to whom the promisee owes a preexisting obligation. When the promisor agrees to fulfill that obligation, the beneficiary gains enforceable rights.
For example, if A owes B money and A contracts with C that C will pay B, B becomes a creditor beneficiary.
A donee beneficiary receives the benefit as a gift. If a family member contracts with a life-insurance company to pay a spouse, the spouse is a donee beneficiary.
Modern doctrine collapses these categories and simply asks whether the parties intended to confer enforceable rights.
Exams may still reference the terms creditor and donee, so understanding them remains important, but your analysis should rely on intent as the decisive element.
Next, let’s examine vesting—the moment a third party acquires enforceable rights. Before vesting, the original parties may modify or cancel the contract. After vesting, they may not revoke the benefit without the beneficiary’s consent.
Rights vest when a beneficiary:
• Manifests assent to the contract (when invited to do so),
• Brings suit to enforce the promise, or
• Reliably changes position in justifiable reliance on the promise.
Under modern approaches, vesting may also occur automatically when the contract so provides.
On exams, timing is essential. If the original parties modify the agreement before vesting, the beneficiary has no claim. If they modify afterward, the beneficiary can insist on the original promise.
Another important aspect to consider is whether the promisor may assert defenses against the beneficiary. A third-party beneficiary stands in the shoes of the promisee. Therefore, the promisor may raise any defense they could have asserted if the promisee had sued.
This includes non-performance by the promisee, fraud, duress, failure of condition, or any defense arising from the contract itself.
Beneficiaries cannot acquire greater rights than the promisee had. They take the contract subject to its vulnerabilities.
This rule frequently appears in hypotheticals where the beneficiary sues, and the student must analyze whether the promisor has viable defenses based on the underlying agreement.
Now let’s shift our attention to assignment—the transfer of rights under a contract. Assignment allows a contractual right to be handed from the original promisee (the assignor) to another party (the assignee).
Once an assignment is made and notice is given to the obligor, the assignee stands in place of the assignor and may enforce the assigned right.
Most contractual rights may be freely assigned, unless:
• The assignment would materially change the duty or burden of the obligor,
• The contract expressly prohibits assignment,
• The assignment violates public policy, or
• The right involves personal judgment or special skill.
For example, a right to receive payment may be freely assigned. But a right to receive personal tutoring from a specific professor cannot be assigned because it materially alters the performer’s duty.
On exams, look for contractual terms such as “no assignment” or “assignment void.” Courts interpret these differently:
A clause prohibiting assignment of the contract may forbid delegation but still allow assignment of rights.
A clause stating rights are “void” if assigned may invalidate the assignment altogether.
Exam analysis must turn on the specific wording.
Assignments require:
• A present intent to transfer rights,
• Reasonable identification of the right transferred, and
• Notice to the obligor (for practical effect).
Assignments do not require consideration. Gratuitous assignments are valid but may be revoked unless supported by consideration.
Gratuitous assignments are generally revocable by:
• Death of the assignor,
• Bankruptcy of the assignor,
• Notifying the assignee of revocation, or
• Assigning the same right to another person.
Assignments supported by consideration, however, are irrevocable. This distinction plays out heavily in priority disputes.
The assignee takes all the rights the assignor had, but not more.
Likewise, the obligor may assert against the assignee any defense that would have been good against the assignor—for example, fraud, failure of condition, or prior breach.
Examiners love scenarios where an obligor mistakenly pays the assignor after assignment. The general rule is that the obligor discharges the duty unless they had notice of the assignment.
Multiple assignments sometimes appear in exam fact patterns. If the same right is assigned twice, which assignee prevails?
Most jurisdictions follow the first-assignment rule: the first assignee in time generally wins.
However, under the minority “English rule,” the first assignee to give notice prevails.
Students must pay attention to jurisdictional hints.
Now let’s take a look at delegation, which shifts focus from transferring benefits to transferring burdens. A delegator attempts to assign performance duties to a delegate. Unlike assignment, which transfers rights, delegation transfers obligations.
The default rule is that duties may be delegated unless:
• The contract prohibits delegation,
• The duty involves personal skill or special judgment, or
• Delegation would materially change the reasonable expectations of the obligee.
For example, a painter selected for their unique artistic style may not delegate the duty to an assistant. But a routine construction or delivery task may be freely delegated.
Delegation does not relieve the delegator of liability. The delegator remains on the hook unless a novation occurs.
A novation is a substituted contract where all parties agree that the delegate replaces the delegator entirely. This requires explicit consent.
Without novation, the delegator is secondarily liable if the delegate fails to perform.
Exams frequently test whether a student mistakenly believes delegation relieves liability. It does not—unless novation appears.
If the delegate promises the delegator that they will perform, the obligee may be able to enforce that promise as a third-party beneficiary. This creates a layered structure: delegation plus beneficiary rights.
A common exam pattern: A contracts with B to deliver goods. B delegates to C. C promises B they will perform. If C fails, A can sometimes sue C directly because A is an intended beneficiary of C’s assumption promise.
These three doctrines often intersect. To illustrate, imagine the following situation:
• A contracts with B to provide landscaping services for B’s elderly parent, P.
• A knows the service is for P’s benefit.
• B later assigns the payment obligation to C.
• A delegates the work to D.
• D fails to perform.
This triggers a multi-layer analysis:
(1) P is an intended beneficiary and may sue A.
(2) B assigned payment rights to C, so A must pay C once notified.
(3) A delegated duties to D, but remains liable because no novation exists.
(4) B may sue A, and A may sue D for breach of delegation.
(5) P may sue A for failing to perform to her benefit.
The ability to weave multiple doctrines is crucial on exams. You must treat each transfer or benefit as a separate doctrinal moment.
Contracts may attempt to limit these transfers through clauses such as “no assignment,” “no delegation,” or “rights are personal and non-transferable.”
Courts interpret these restrictions carefully. A clause prohibiting “assignment of the contract” generally bars delegation, not assignment of payment rights. A clause prohibiting assignment of “rights” bars assignment but not delegation.
If a contract treats rights as “void if assigned,” courts often invalidate unauthorized assignments altogether.
A common exam trick is to determine whether the transfer violates the clause and what consequences follow—unenforceability, breach, or voidness.
Under the UCC, assignment and delegation are presumed permissible unless materially altering the obligation. The UCC explicitly permits delegation of performance except in cases involving unique goods or when the obligee has a substantial interest in the original promisor’s performance.
Financial rights under goods contracts—payments, refunds, warranties—are generally freely assignable under UCC Article Two.
The bar exam frequently embeds UCC questions inside service contracts. Your task is to classify the contract correctly before applying assignment or delegation rules.
Let’s explore the obligor’s position after assignment. The obligor may raise:
• Defenses arising from the original contract,
• Defenses arising after notice of assignment (unless caused by the assignee),
• Claims in recoupment related to the same transaction.
For example, if a buyer has an outstanding claim against the seller for defective goods, and the seller assigns the right to payment to a financing company, the buyer may still assert the defect as a defense.
This prevents obligors from being burdened by unexpected holders of rights.
Delegation often overlaps with beneficiary doctrine. If a delegate promises the delegator they will perform and the promisee is the intended beneficiary of that promise, the promisee may sue the delegate directly.
This doctrine creates horizontal movement across the contract. It enfranchises a promisee who otherwise has no privity with the delegate.
On exams, students often assume privity blocks the claim. But third-party rules override privity when intent is present.
Now let’s highlight the recurring traps students face in this area.
This is the most common error. Assignment transfers rights; delegation transfers duties. Many hypotheticals contain both.
Some clauses prohibit assignment but do not void it. The typical legal effect is breach, not invalidity. Always parse the clause’s wording.
Students often mistakenly treat delegation as though it cuts off liability. Only novation does that. Unless all parties clearly agree, the delegator remains liable.
Exam writers frequently test whether a modification occurred before or after vesting. Rights change dramatically based on the timing.
Sometimes the beneficiary is not obvious. Service contracts for spouses, children, elderly relatives, or creditors often create intended beneficiaries.
A beneficiary can enforce only the rights of the promisee and is subject to the same defenses. If the promisee breached a condition, the beneficiary’s claim may fail.
One of the subtler aspects of third-party doctrine is how it ties into performance, breach, and remedies.
For example:
• A delegate’s failure to perform constitutes a breach by the delegator.
• An assignee’s right to damages mirrors the assignor’s expectation interest.
• A beneficiary may seek specific performance under certain conditions.
• Restitution may arise if a delegate unjustly enriches themselves through partial performance.
This interplay often appears on exams in questions that appear purely remedial but hinge on whether the plaintiff has standing as an assignee or beneficiary.
To master third-party doctrine, adopt this flow:
First, identify whether the third party is a beneficiary, an assignee, or a delegate.
Next, determine whether rights have vested (for beneficiaries) or whether the assignment or delegation is valid.
Then, analyze what rights and defenses flow to or from the third party.
After that, consider the impact of modifications, revocations, or novation.
Finally, integrate performance and breach doctrines to determine liability and remedies.
This step-by-step method ensures that you never miss a subtle doctrinal pivot.
In this chapter, I examined the mechanisms by which contract rights and duties extend beyond the original parties. I explored intended versus incidental beneficiaries, vesting of rights, and the defenses available against beneficiaries. I then moved into assignment of rights, highlighting formal requirements, revocability, priority disputes, and the rights and defenses of assignees. Next, I turned to delegation of duties, explaining when delegation is permitted, how liability persists absent novation, and how assumption by a delegate may create beneficiary rights. I wove these doctrines into a unified exam framework and demonstrated how they intersect with performance, breach, and remedies.
Together, these doctrines complete the contractual landscape by showing how obligations move and transform when people outside the original agreement become part of the contractual web. Understanding their interactions ensures you can navigate fact patterns where standing, enforcement, and liability turn on relationships beyond the signing parties.
UCC Article Two — Sales of Goods and Exam Strategy
I begin this chapter by zooming in on one of the bar exam’s favorite playgrounds: the Uniform Commercial Code, Article Two. This is the domain of contracts for the sale of goods—tangible, movable things—from lawnmowers to laptops. When you see a bar question about widgets, processors, or custom machinery, there is a high chance Article Two is quietly running the show in the background.
Up to now, I’ve talked mostly in the language of common-law contracts. Article Two keeps the basic architecture—offer, acceptance, consideration, breach, remedies—but it remodels a lot of the walls, loosens some of the strict rules, and adds a highly commercial, “let’s-keep-business-going” sensibility. My goal in this chapter is to walk through the core doctrines of Article Two and show you how to integrate them into exam analysis in a systematic way.
I’ll start with scope and definitions—what counts as goods, who qualifies as a merchant—then move into formation under Article Two, the battle of the forms, the perfect-tender rule and its softening mechanisms, risk of loss, warranties, and remedies. I will close with a strategy framework specifically tuned to UCC questions.
I begin with the threshold question you must always ask: does Article Two apply at all? The UCC does not govern everything; it governs contracts for the sale of goods.
“Goods” are things that are both tangible and movable at the time they are identified to the contract. Cars, grain, phones, and furniture count. Intellectual property, real estate, services, and money in its role as currency do not.
When a contract is purely for services—like legal advice or surgery—the common law governs. When it is purely for goods, Article Two governs. When it is a mix of goods and services, courts apply the “predominant purpose” test. They ask: is the main thrust of the agreement the sale of goods, with services incidental, or vice versa?
Think of an exam fact pattern involving a custom software system that includes both physical servers and extensive consulting. If the primary point is the consulting, that leans toward common law. If the centerpiece is the hardware, with installation as a side detail, that leans toward Article Two.
Once I decide Article Two applies, I do something very simple in my head: I flip my internal toggle from “common law defaults” to “UCC defaults” and adjust my formation, breach, and remedy analysis accordingly.
Now let’s take a look at the special status of merchants. Under Article Two, some rules apply to all parties, while others apply specifically to merchants.
A “merchant” is someone who deals in goods of the kind or otherwise holds themselves out as having special knowledge or skill with respect to the goods or practices involved. A car dealer is a merchant with respect to cars. A schoolteacher selling their personal car is not.
Some provisions are “merchant-only”—for example:
When you work through an exam question, it helps to explicitly note whether the seller or buyer is a merchant. That decision quietly toggles a number of doctrinal switches.
Next, I turn to formation itself. Article Two relaxes some of the stricter common-law rules in the name of commercial practicality. It is less concerned with ritual and more concerned with whether the parties intended to make a deal.
Under Article Two, a contract for the sale of goods can be formed even if one or more terms are left open, as long as the parties intended to contract and there is a reasonably certain basis for giving a remedy. The code supplies “gap-fillers” for missing terms:
One term Article Two is less forgiving about is quantity. For most contracts, quantity is essential and cannot be supplied by a gap-filler. There is an exception for output and requirements contracts, where quantity is tied to a party’s output or needs and governed by a good-faith standard.
At common law, an option contract requires consideration to make an offer irrevocable. Article Two adds a more generous device: the firm offer.
A firm offer exists when:
That offer is irrevocable for the time stated, or if no time is stated, for a reasonable time, but in no event longer than three months. No separate consideration is needed.
On an exam, whenever you see a merchant send a signed letter or email saying something like “This quote will remain open for thirty days,” your UCC instinct should wake up. That smells like a firm offer.
Now I want to shift to one of the most famously disliked but heavily tested UCC doctrines: the so-called battle of the forms. This is where Article Two diverges sharply from the common-law mirror-image rule.
Under the common law, an acceptance that adds or changes terms is treated as a counteroffer, not an acceptance. The UCC moves away from that rigidity. In modern commercial practice, businesses routinely exchange forms—purchase orders, confirmations—that contain boilerplate language and extra terms. Article Two tries to make contracts out of this chaos rather than treat everything as endless counteroffers.
The basic structure is this: a definite and seasonable expression of acceptance or a written confirmation operates as an acceptance even though it states terms additional to or different from those offered, unless acceptance is expressly made conditional on assent to the additional or different terms.
Once you have an acceptance, the question becomes: what happens to the additional terms?
“Material alteration” is the magic phrase. Terms that would result in surprise or hardship if incorporated without express awareness—such as harsh disclaimers of warranties or significant limits on remedies—will be treated as material and therefore kept out.
If the writings do not form a contract but the parties behave as if they have one—for example, they ship and accept goods—Article Two treats conduct as creating a contract. In that case, the terms of the contract consist of those terms on which the writings agree, plus UCC gap-fillers for the rest.
On exams, battle-of-the-forms questions are basically a three-step dance:
Continuing on, I turn to performance, where Article Two famously enshrines the perfect-tender rule. Unlike the lenient substantial-performance standard in common-law service contracts, Article Two gives buyers the right to insist on exact conformity.
Under the perfect-tender rule, if goods or the tender of delivery fail in any respect to conform to the contract, the buyer may:
That sounds brutally strict, and in theory it is. But the UCC tempers this severity with a robust right to cure and special rules for installment contracts.
If the seller delivers nonconforming goods but the time for performance has not yet expired, the seller may notify the buyer of an intent to cure and then deliver conforming goods within the contract time.
In that scenario, an initial rejection does not kill the contract. The seller gets a second bite at the apple.
Even after the time for performance has passed, the seller may sometimes cure if they had reasonable grounds to believe the nonconforming tender would be acceptable, with or without a money allowance. If that belief was reasonable—often because of past dealings or industry practice—courts allow a short additional window for cure.
Exam questions often hinge on whether the seller’s belief was reasonable. For example, if the buyer has a history of accepting minor defects, that can make the belief more plausible.
Now let’s take a look at installment contracts, which are contracts that require delivery of goods in separate lots to be separately accepted. Article Two softens the perfect-tender rule in this context.
For an installment contract, the buyer may reject an installment only if the nonconformity substantially impairs the value of that installment and cannot be cured. And the buyer may cancel the entire contract only if the nonconformity substantially impairs the value of the whole contract.
This is a very different standard from the all-or-nothing perfect tender rule on a single shipment. The UCC recognizes that long-term installment arrangements cannot be blown up for trivial defects.
On exams, when you see monthly or quarterly shipments, alarms should go off: the proper test is not “any defect equals rejection” but “substantial impairment” for both the installment and the contract as a whole.
Next, I want to explore risk of loss. Even when nobody has breached, things can go wrong: goods can be destroyed in transit, stolen, or damaged by accidents. Article Two provides a set of rules to decide which party bears the economic consequence.
The analysis depends on three big variables:
A shipment contract requires the seller to get the goods to a carrier and make reasonable arrangements for delivery; title and risk generally pass when the goods are delivered to the carrier. These contracts are often signaled by shipping terms like “F.O.B. seller’s city.”
A destination contract requires the seller to deliver the goods to a particular destination, usually the buyer’s place of business. Risk passes when the goods are tendered at that destination. These contracts are often signaled by terms like “F.O.B. buyer’s city.”
The default assumption is that a contract is a shipment contract unless the contract clearly requires delivery to a particular destination.
If the seller delivers nonconforming goods that give the buyer a right to reject, risk of loss remains with the seller until cure or acceptance. That is true even if the risk would otherwise have passed under the normal rules.
If the buyer wrongfully rejects goods or wrongfully repudiates, risk of loss may shift to the buyer to the extent of the seller’s insurance deficit, provided the goods are identified to the contract.
Exam questions often hide risk-of-loss issues in simple mishap narratives—trucks overturning, warehouses catching fire. The key is to ask: who had control, who had breached, and was tender properly made?
Now that we have performance and risk in place, let’s shift our focus to warranties, which are promises about quality embedded within contracts for the sale of goods. Article Two recognizes several types: express warranties, implied warranty of merchantability, and implied warranty of fitness for a particular purpose.
Express warranties arise when the seller makes statements of fact or promises about the goods, provides descriptions, or shows samples or models that become part of the basis of the bargain.
Statements like “this engine produces two hundred horsepower” or “these tires will last fifty thousand miles” can create express warranties. Descriptions—“all stainless steel,” “100 percent cotton”—and samples do as well.
Mere puffery or sales talk—“this is the best car in town”—does not create a warranty. The difference lies in whether the statement is specific and factual or generalized flattery.
This warranty springs into existence automatically when a merchant seller sells goods of that kind. The goods must be fit for the ordinary purposes for which such goods are used. They must be of fair, average quality and adequately packaged and labeled.
If a merchant sells a refrigerator that fails after one day of normal use, that likely breaches the implied warranty of merchantability.
This warranty arises when:
In that case, the goods must be fit for that specific purpose—not just ordinary use.
For example, if a farmer tells a seed seller they need seeds suitable for highly saline soil, and the seller recommends a particular seed that fails under those conditions, that may breach the implied warranty of fitness.
This warranty does not require the seller to be a merchant. Any seller with apparent expertise whose advice is relied on can trigger it.
Of course, lawyers and businesses hate unlimited liability, so Article Two allows sellers to disclaim or limit warranties—within reason.
To disclaim the implied warranty of merchantability, the seller must mention “merchantability” and, if the disclaimer is in writing, it must be conspicuous. Words like “as is” or “with all faults” can also serve as broad disclaimers of implied warranties if they are conspicuous and understood.
To disclaim the implied warranty of fitness, the disclaimer must be in writing and conspicuous, and it typically must mention “fitness.”
Beyond disclaiming warranties entirely, sellers may limit remedies—such as by restricting the buyer’s remedy to repair or replacement. These limitations are enforceable unless they fail of their essential purpose, meaning they leave the buyer without a meaningful remedy when the product breaks repeatedly or cannot be fixed.
Exams often test whether a remedy limitation is unconscionable or fails of its essential purpose. If a product is chronically defective and the seller can never actually repair or replace effectively, the limitation may be set aside.
The UCC explicitly imposes an obligation of good faith in the performance and enforcement of every contract. For merchants, good faith includes both honesty in fact and observance of reasonable commercial standards of fair dealing.
This concept shows up in situations such as requirements contracts, where a buyer cannot suddenly drop their requirements to zero just to escape a contract, or in cases where a seller tries to exploit a technicality to avoid performance.
Unconscionability also appears in Article Two as a safety valve. Courts may refuse to enforce oppressive terms, especially when there is a combination of procedural unfairness—unequal bargaining power, surprise—and substantive harshness—terms that shock the conscience.
On exams, you often see unconscionability used to challenge extreme disclaimer clauses or one-sided remedy limitations.
Remedies have their own dedicated chapter, but Article Two adds specific twists. It is worth briefly revisiting them here with a UCC lens on.
For buyers:
For sellers:
The exam trick is not the arithmetic; it is choosing the correct formula given the posture of the breach: Did the buyer reject, revoke, or simply fail to pay? Did the seller resell? Is the seller a lost-volume seller or an ordinary one? Once you classify the situation correctly, the rest follows.
Now that we’ve walked through the major features of Article Two, I want to close with a strategy-driven framework you can apply whenever you suspect the UCC is in play.
When you see a sales-of-goods scenario, I suggest this mental sequence:
First, classify the contract: is it for goods, services, or a mix? If goods predominate, flip into UCC mode and note whether anyone is a merchant.
Next, analyze formation: do the parties have an agreement under the UCC’s flexible rules? Is there an issue with firm offers, battle of the forms, or gap-fillers?
Then, check for Statute of Frauds issues: is the contract for goods priced at or above five hundred dollars, and if so, is there a sufficient writing or an applicable exception (part performance, specially manufactured goods, merchant’s confirmatory memo, admission)?
After that, move into performance and breach: is there a perfect-tender issue, a cure opportunity, or an installment contract with a substantial-impairment standard? Has there been anticipatory repudiation and a demand for adequate assurance?
Once breach is established, ask about risk of loss and warranties: who bore the risk when the goods were damaged or lost? Were there express or implied warranties, and were any effectively disclaimed or limited? Did the limitation fail of its essential purpose?
Finally, choose remedies: for a buyer, is cover available and reasonable? For a seller, is resale practical, or is this a lost-volume situation? Are incidental and consequential damages appropriately claimed and foreseeable?
This entire process sits on top of the general contract analysis from the earlier chapters. You do not abandon offer and acceptance, defenses, or remedies; you simply apply their UCC versions.
In this chapter, I examined Article Two of the Uniform Commercial Code as a specialized but deeply integrated branch of contract law. I began with its scope—contracts for the sale of goods—and the special status of merchants. I walked through UCC formation, including open terms, firm offers, and the battle of the forms. I then shifted to performance, focusing on the perfect-tender rule, cure, and installment contracts, followed by risk-of-loss rules that allocate accidental losses between buyers and sellers. I explored express and implied warranties, their disclaimers and remedy limitations, and the overlay of good faith and unconscionability. Finally, I connected Article Two’s buyer and seller remedies with the broader remedial framework and laid out a practical exam strategy for spotting and analyzing UCC issues.
With this chapter, the book’s treatment of Contracts comes full circle: you now have both the common-law and UCC toolkits needed to analyze formation, performance, breach, and remedies in the wide variety of fact patterns that law school exams and bar questions like to throw at you.
I like to think of the back matter as the place where the book turns from instructor to companion. It gathers the practical tools, the exam strategies, and the polished definitions that help you convert doctrine into performance. By the time you reach this section, you’ve moved through formation, enforceability, performance, breach, third-party rights, remedies, and UCC Article Two. The purpose now is to consolidate that learning into a set of resources you can return to repeatedly—especially when your mind feels cluttered by the volume of material.
This section contains three components: the Exam Strategy Guide, the Key Terms Index, and a set of Closing Notes that help bridge this book into your continued study.
I begin this guide with a simple philosophy: contracts questions reward structure. They are not tests of memory alone. They are tests of sequence, clarity, and disciplined movement through doctrine. What follows is a practical, step-by-step analytical method that you can apply to almost any fact pattern.
Now let’s take a look at the system.
This framework is designed to be spoken, written, or mentally rehearsed. It mirrors the flow of this book and organizes your thinking so that no doctrine is overlooked.
Start with offer, acceptance, and consideration. Ask whether there was a present intent to bargain, whether acceptance was timely and unambiguous, and whether consideration or promissory estoppel supports enforcement.
If you cannot establish a contract, move directly into quasi-contract or restitution theories.
This is where you check for formation defenses: incapacity, duress, undue influence, misrepresentation, fraud, mistake, unconscionability, illegality, and the Statute of Frauds.
If the fact pattern hints at a missing writing, ask whether an exception applies—partial performance, merchant’s memo, specially manufactured goods, or admissions.
Before performance can be analyzed, you need to know what the parties actually promised. Interpret ambiguous terms using course of dealing, course of performance, and usage of trade.
Then shift your focus to conditions—express, implied, precedent, and subsequent. Conditions govern when duties arise and when nonoccurrence discharges obligations.
Ask whether the performance standard is perfect tender (for goods) or substantial performance (for services or construction).
Classify any failure as a partial breach, material breach, or total breach. The degree of breach determines whether duties remain, are suspended, or are fully discharged.
If a party signals an intention not to perform, determine whether that constitutes anticipatory repudiation. If reasonable grounds for insecurity exist, analyze whether a demand for adequate assurance was available or required.
After assessing breach, ask whether performance was excused by impossibility, impracticability, frustration of purpose, or failure of condition. These doctrines can eliminate liability even when performance does not occur.
Expectation, reliance, restitution, liquidated damages, specific performance, replevin, rescission—each has a context. Analyze foreseeability, certainty, and mitigation. For goods contracts, choose between cover damages, market damages, resale damages, lost-volume seller damages, or damages for nonconforming acceptance.
Check whether the fact pattern involves beneficiaries, assignments, or delegations. If so, determine whether rights vested, whether an assignment was valid, whether a delegation relieved liability, and whether novation occurred.
This eight-step framework gives you a way to handle even the most chaotic exam questions with a clear, predictable rhythm.
To help you hear the cues hidden in fact patterns, here are common signal phrases and the doctrines they often point toward.
This hints at ambiguous offer-and-acceptance moments. Look for mirror-image issues, counteroffers, option contracts, or firm offers.
This is a flashing Statute of Frauds sign.
This may signal misrepresentation, waiver of conditions, or warranty formation.
Perfect tender, cure, installment contracts, or risk-of-loss issues may be hiding here.
Think impracticability or frustration of purpose.
Test assignment validity, defenses against the assignee, and notice requirements.
Substantial performance, economic waste, and material breach questions often follow.
That may indicate anticipatory repudiation or a demand for additional consideration.
When you train yourself to hear these signals, doctrine begins to activate automatically.
Students often ask for a template they can overlay onto any Contracts essay. Here is a streamlined version:
Contract Formation
• Offer
• Acceptance
• Consideration or promissory estoppel
Enforceability
• Defenses
• Statute of Frauds
Terms and Interpretation
• Parol evidence
• Ambiguity resolution
• Conditions
Performance and Breach
• Substantial performance or perfect tender
• Material vs. minor breach
• Anticipatory repudiation
Excuse
• Impossibility
• Impracticability
• Frustration
• Failure of condition
Third-Party Issues
• Beneficiaries
• Assignment
• Delegation
Remedies
• Expectation
• Consequential damages
• Reliance
• Restitution
• Liquidated damages
• Equitable remedies
Every Contracts question maps onto some version of this structure.
Below is the comprehensive index that supports quick review. The terms are alphabetized and include only brief notations because the chapters themselves contain the depth. Use this section as a locator.
Adequate assurance — Demand for assurance when performance is uncertain.
Anticipatory repudiation — Clear unwillingness to perform before performance is due.
Assignment — Transfer of contractual rights to a new party.
Battle of the forms — UCC § 2-207 framework for differing terms in merchant forms.
Breach (material) — Failure going to the essence of the contract; excuses other party’s performance.
Breach (minor/partial) — Failure requiring damages but not discharge.
Capacity — Legal ability to enter into a contract.
Consideration — Bargained-for exchange supporting contract formation.
Consequential damages — Losses beyond the contract arising from special circumstances.
Condition precedent — Event that must occur before performance becomes due.
Contract modification — Change to an agreement; consideration required at common law.
Cover — Buyer’s purchase of substitute goods after seller breach.
Delegation — Transfer of duties; delegator remains liable absent novation.
Duress — Improper threat undermining voluntary assent.
Economic waste — Limitation on cost-to-complete damages.
Expectation damages — Benefit-of-the-bargain measure.
Firm offer — Merchant’s written assurance keeping an offer open under UCC.
Foreseeability — Damages recoverable only if foreseeable when contracting.
Frustration of purpose — Principal purpose destroyed by unforeseen event.
Gap-fillers — UCC-supplied terms when contract terms are missing.
Impossibility — Objective inability to perform due to external event.
Impracticability — Extreme difficulty or expense excusing performance.
Incidental damages — Transaction-related expenses from breach mitigation.
Integration — Whether a writing is final for parol-evidence purposes.
Liquidated damages — Pre-agreed damages valid if reasonable, not punitive.
Merchantability — Implied warranty that goods are fit for ordinary use.
Mirror-image rule — Common-law rule requiring acceptance matching offer.
Mitigation — Duty to reduce damages after breach.
Novation — Substituting new party and releasing original obligor.
Option contract — Offer kept open with consideration.
Parol evidence rule — Limits extrinsic evidence contradicting final writing.
Perfect-tender rule — UCC requirement that goods conform exactly.
Promissory estoppel — Enforcement based on reliance instead of consideration.
Reliance damages — Compensation for expenditures made in reliance.
Remedy limitation — Contractual restriction on damages or relief.
Requirements contract — Buyer agrees to purchase all requirements from seller.
Rescission — Canceling a contract to return parties to pre-contract position.
Restitution — Preventing unjust enrichment by compensating benefit conferred.
Revocation — Withdrawal of offer before acceptance.
Risk of loss — Allocation of accidental loss under UCC.
Specific performance — Equitable order compelling performance.
Statute of Frauds — Writing requirement for categories of contracts.
Substantial performance — Common-law standard for imperfect performance.
Third-party beneficiary — Intended recipient who acquires enforcement rights.
UCC Article Two — Rules governing contracts for the sale of goods.
Unconscionability — Oppressive contract terms invalidated by court.
Usage of trade — Industry norms informing contract interpretation.
Vesting — Moment when beneficiary’s rights become enforceable.
Warranty (express) — Affirmation or description forming part of bargain.
As you leave the final page of the main text and enter this back matter, take a moment to recognize something important: contracts is one of the few subjects where everything is interconnected. The doctrines reinforce each other. The UCC borrows from the common law and reshapes it. Remedies depend on breach classification. Breach classification depends on conditions. Conditions depend on interpretation. Interpretation depends on enforceability. And enforceability depends on formation.
Once you internalize the chain, Contract Law stops feeling overwhelming and begins to feel almost elegant.
The most successful exam takers I’ve taught do not memorize isolated doctrines—they practice moving through the structure. They learn the rhythm of the subject. They develop a sense for where the problem wants to go. And they use frameworks like the ones collected here to bring clarity to even the messiest fact patterns.
This back matter is meant to be your anchor. Return to it before exams, during bar prep, and whenever you feel a concept slipping. It will guide you back into the system and remind you how each chapter connects to the next.