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California Law of Contracts

A fresh and up-to-date alternative for business lawyers seeking to ensure that their contracts are fully enforceable and for litigators seeking to challenge enforceability.

A fresh and up-to-date alternative for business lawyers seeking to ensure that their contracts are fully enforceable and for litigators seeking to challenge enforceability.

  • Clear and comprehensive treatment of all aspects of contract law
  • Integrated discussion of current California case law and Civil Code sections
  • Chapter outlines and extensive index enable quick location of topics of interest
  • Capacity, consent, legality, consideration
  • Offer and acceptance, formalities, electronic contracting
  • Contract interpretation, modification, waiver
  • Representations, warranties, covenants, conditions
  • Assignment and delegation, third-party beneficiaries, joint and several obligations
  • Performance or breach of contract
  • Selected enforcement issues, damages, injunctive and declaratory relief
  • Commercial code provisions
  • Selected international issues
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A fresh and up-to-date alternative for business lawyers seeking to ensure that their contracts are fully enforceable and for litigators seeking to challenge enforceability.

  • Clear and comprehensive treatment of all aspects of contract law
  • Integrated discussion of current California case law and Civil Code sections
  • Chapter outlines and extensive index enable quick location of topics of interest
  • Capacity, consent, legality, consideration
  • Offer and acceptance, formalities, electronic contracting
  • Contract interpretation, modification, waiver
  • Representations, warranties, covenants, conditions
  • Assignment and delegation, third-party beneficiaries, joint and several obligations
  • Performance or breach of contract
  • Selected enforcement issues, damages, injunctive and declaratory relief
  • Commercial code provisions
  • Selected international issues

1

Introduction to the California Law of Contracts

  • I.  SCOPE OF TREATISE  1.1
  • II.  NATURE OF CONTRACT
    • A.  Definition of “Contract”  1.2
    • B.  Freedom of Contract and Its Limits  1.3
    • C.  Boundaries of Contract Law: Transactions Excluded and Included  1.4
  • III.  SOURCES OF LAW
    • A.  Civil Code: Its Origins and Relative Importance  1.5
    • B.  Commercial Code  1.6
    • C.  Other California Codes  1.7
    • D.  Decisions of California State Courts  1.8
    • E.  Federal and Out-of-State Decisions  1.9
    • F.  Restatement (Second) of Contracts  1.10

2

Contract Formation: Capacity to Contract

  • I.  INTRODUCTION TO CAPACITY (CC §§1550, 1556)  2.1
  • II.  MINORS (CC §1557; Fam C §§6710–6713, 6751)  2.2
    • A.  Void Contracts: Contracts a Minor Cannot Make (Fam C §6701)  2.3
      • 1.  Delegation of Power (Fam C §6701(a))  2.4
      • 2.  Contracts Relating to Real Property (Fam C §6701(b))  2.5
      • 3.  Contracts Relating to Personal Property Not in Minor’s Immediate Possession or Control (Fam C §6701(c))  2.6
    • B.  Voidable Contracts: Contracts a Minor May Disaffirm
      • 1.  When Disaffirmance Permitted (Fam C §6710)  2.7
      • 2.  Time for Disaffirmance (Fam C §6710)  2.8
      • 3.  No Estoppel by Misrepresentation of Age  2.9
      • 4.  No Need to Restore Consideration  2.10
      • 5.  Disaffirmance of Releases and Settlements  2.11
    • C.  Binding Contracts  2.12
      • 1.  Contracts for Necessaries (Fam C §6712)  2.13
      • 2.  Contracts Authorized or Directed by Statute (Fam C §6711)
        • a.  Certain Contracts for Medical and Health-Related Services  2.14
        • b.  Consent Relating to Adoption  2.15
        • c.  Miscellaneous Contracts Authorized by Statute  2.16
      • 3.  Art, Entertainment, and Professional Sports Contracts (Fam C §§6750–6751)
        • a.  Generally  2.17
        • b.  Coogan’s Law (Fam C §§6752–6753)  2.18
      • 4.  Actions by Parents or Guardians Binding Minors  2.19
      • 5.  Ratification on Attaining Majority  2.20
      • 6.  Contracts by Emancipated Minors
        • a.  Requirements for Emancipation  2.21
        • b.  Effect of Emancipation (Fam C §7050)  2.22
    • D.  Treatment of Minors Under Commercial Code  2.23
  • III.  MENTALLY INCAPACITATED PERSONS (CC §§38–41, 1557(b))
    • A.  Defining Mental Incapacity  2.24
    • B.  Proving Mental Incapacity  2.25
    • C.  Judicial Determination of Incapacity  2.26
    • D.  Conveyance of Real Estate by Incapacitated Person  2.27
    • E.  Intoxicated Persons  2.28
  • IV.  PRISONERS AND PERSONS DEPRIVED OF CIVIL RIGHTS (CC §1556)  2.29
  • V.  AGENCY AUTHORITY (CC §§2295–2300)
    • A.  Definition of Agency Relationship (CC §2295)  2.30
    • B.  Scope of Authority (CC §§2304–2326)  2.31
    • C.  Liability of Principal on Agent’s Contracts (CC §2330)  2.32
    • D.  Actual and Ostensible Authority
      • 1.  Definitions; Creation (CC §§2299–2300, 2315–2317)  2.33
      • 2.  Actual Authority (CC §§2299, 2316)  2.34
      • 3.  Ostensible or Apparent Authority (CC §2317)  2.35
    • E.  Acting Without or in Excess of Authority (CC §2333)  2.36
      • 1.  Ratification by Principal
        • a.  Time and Effect of Ratification  2.37
        • b.  Equal Dignities Rule (CC §§2309–2310)  2.38
        • c.  Ratification by Principal’s Conduct or Acquiescence  2.39
        • d.  Voluntariness Requirement for Ratification  2.40
        • e.  Partial Ratification (CC §2311)  2.41
      • 2.  Ratifications That Prejudice Third Persons (CC §2313)  2.42
      • 3.  Rescission of Ratification (CC §2314)  2.43
    • F.  Notices to Principal or Agent (CC §2332)  2.44
    • G.  Termination of Agency Relationship (CC §2355)  2.45
  • VI.  POWERS OF ATTORNEY (Prob C §§4000–4545)
    • A.  Generally (Prob C §4022)  2.46
    • B.  Application of Power of Attorney Law (Prob C §4050)  2.47
    • C.  Execution of Power of Attorney (Prob C §4120)  2.48
    • D.  Durable and Nondurable Power of Attorney (Prob C §§4022, 4124)  2.49
    • E.  Springing Power of Attorney (Prob C §§4030, 4129)  2.50
    • F.  Scope of Authority Granted in Power of Attorney (Prob C §4123)  2.51
      • 1.  Limited or Special Powers of Attorney (Prob C §4262)  2.52
      • 2.  General Powers of Attorney (Prob C §4261)  2.53
      • 3.  When Express Authority Is Required (Prob C §4264)  2.54
    • G.  Modification of Power of Attorney (Prob C §§4121, 4150)  2.55
    • H.  Revocation or Termination of Power of Attorney (Prob C §4151)  2.56
    • I.  Attorneys-in-Fact
      • 1.  Qualifications (Prob C §4200)  2.57
      • 2.  Multiple Attorneys-in-Fact; Successors (Prob C §4202)  2.58
      • 3.  Delegation of Authority by Attorney-in-Fact (Prob C §4205)  2.59
      • 4.  Resignation of Attorney-in-Fact (Prob C §4207)  2.60
      • 5.  Duties of Attorney-in-Fact (Prob C §4230)  2.61
      • 6.  Revocation or Termination of Authority of Attorney-in-Fact
        • a.  Revocation of Authority (Prob C §4153)  2.62
        • b.  Termination of Authority
          • (1)  Terminating Events (Prob C §4152)  2.63
          • (2)  Affidavit of Lack of Actual Knowledge (Prob C §§4305–4306)  2.64
      • 7.  Third Persons Dealing With Attorney-in-Fact (Prob C §§4300, 4302–4303, 4309–4310)  2.65
    • J.  Uniform Statutory Form Power of Attorney
      • 1.  Use of Form (Prob C §§4401–4402)  2.66
      • 2.  Form Provisions (Prob C §4401)  2.67
      • 3.  Form: Uniform Statutory Form Power of Attorney  2.68
  • VII.  AUTHORITY OF ENTITIES TO CONTRACT
    • A.  Corporations
      • 1.  Contracts With Other Entities (Corp C §§207, 7140)  2.69
      • 2.  Contracts With Directors or Other Entity in Which Director Has an Interest (Corp C §310)  2.70
      • 3.  Preincorporation Contracts  2.70A
      • 4.  Contracts Made While Corporate Powers Suspended  2.70B
    • B.  General Partnerships
      • 1.  Mutual Agency Relationship (Corp C §16301)  2.71
      • 2.  Transfers of Partnership Property (Corp C §16302)  2.72
      • 3.  Statement of Partnership Authority (Corp C §16303)  2.73
      • 4.  Authority of Former Partners to Bind Partnership (Corp C §16702)  2.74
      • 5.  Liability of Dissociated Partner (Corp C §16703)  2.75
    • C.  Limited Partnerships
      • 1.  Authority of General Partners to Contract (Corp C §§15904.02, 15904.04, 15904.06)  2.76
      • 2.  Authority of Limited Partners to Contract (Corp C §§15903.02, 15903.03)  2.77
    • D.  Limited Liability Partnerships (Corp C §16306)  2.78
    • E.  Limited Liability Companies (Corp C §§17703.01, 17713.04(b))  2.79
    • F.  Trusts (Prob C §16200)  2.80
    • G.  Municipalities  2.81
    • H.  State; State and Local Agencies  2.82

3

Contract Formation: Consent, Legality, Consideration

  • I.  SCOPE OF CHAPTER (CC §1550)  3.1
  • II.  CONSENT
    • A.  Generally (CC §1550(2))  3.2
    • B.  Mutual Consent
      • 1.  Generally (CC §1580)  3.3
      • 2.  Meeting of the Minds  3.4
      • 3.  Knowledge of and Assent to Contract Terms  3.5
      • 4.  Fraud in the Execution  3.6
    • C.  Communication of Consent (CC §§1565, 1581–1583)  3.7
    • D.  Freedom of Consent (CC §§1566–1568)  3.8
      • 1.  Duress
        • a.  Statutory Duress (CC §1569)  3.9
        • b.  Economic Duress  3.9A
      • 2.  Menace (CC §1570)  3.10
      • 3.  Fraud
        • a.  Generally; Fraud in the Inducement (CC §§1571–1574)  3.11
        • b.  Actual Fraud
          • (1)  Intentional Misrepresentation (CC §1572(1))
            • (a)  Elements; False Representation; Scienter  3.12
            • (b)  Misrepresentations of Fact; Statements of Opinion  3.13
            • (c)  Intent to Deceive  3.14
            • (d)  Justifiable Reliance; Materiality  3.15
          • (2)  Negligent Misrepresentation (CC §1572(2))  3.16
          • (3)  Concealment, Suppression of Fact (CC §1572(3))  3.17
          • (4)  Promissory Fraud (CC §1572(4))  3.18
          • (5)  “Any Other Act Fitted to Deceive” (CC §1572(5))  3.19
        • c.  Constructive Fraud (CC §1573)  3.20
      • 4.  Undue Influence (CC §1575)
        • a.  Generally  3.21
        • b.  Fiduciary and Confidential Relationships  3.22
          • (1)  Particular Fiduciary Relationships: Trustee and Beneficiary (Prob C §16004(c))  3.23
          • (2)  Particular Fiduciary Relationships: Attorney and Client  3.24
          • (3)  Particular Fiduciary Relationships: Health Care Provider and Patient  3.25
          • (4)  Particular Fiduciary Relationships: Spouses; Registered Domestic Partners; Unmarried Persons
            • (a)  Spouses (Fam C §721(b))  3.26
            • (b)  Registered Domestic Partners (Fam C §297.5)  3.27
            • (c)  Unmarried Persons  3.28
          • (5)  Particular Fiduciary Relationships: General and Limited Partnerships; LLCs
            • (a)  General Partnerships; Joint Ventures (Corp C §16404)  3.29
            • (b)  Limited Partnerships (Corp C §15904.08)  3.29A
            • (c)  Limited Liability Companies (Corp C §17704.09; former Corp C §17153)  3.29B
          • (6)  Other Fiduciary Relationships  3.30
          • (7)  Legal Relationships That Are Not Fiduciary Relationships  3.31
      • 5.  Mistake (CC §§1567(5), 1576–1579)
        • a.  Generally  3.32
        • b.  Mistake of Fact (CC §§1577, 1579)  3.33
        • c.  Mistake of Law (CC §1578)  3.34
    • E.  Ratification of Voidable Contract (CC §1588)  3.35
  • III.  LEGALITY
    • A.  Generally (CC §§1550(3), 1595–1596, 1667)  3.36
    • B.  Contracts Contrary to Express Provision of Law (CC §1667(1))  3.37
    • C.  How Many Illegal Objects? (CC §§1598–1599)  3.38
    • D.  Balancing Test for Unenforceability  3.39
    • E.  Contracts Contrary to Public Policy (CC §§1667(2), 1668, 1669.7, 1670.6–1670.8)
      • 1.  General Rule (CC §1667(2))  3.40
      • 2.  Examples From Case Law  3.40A
      • 3.  Contracts Unlawful by Statute (CC §§1668, 1669.7, 1670.6–1670.10)  3.40B
    • F.  Contracts Concerning Marriage or Morals (CC §§1667(3), 1669, 1669.5)  3.41
  • IV.  CONSIDERATION
    • A.  Generally (CC §1605)  3.42
    • B.  Adequacy; Sufficiency  3.43
    • C.  Forbearance (CC §1606)  3.44
    • D.  Preexisting Duty Rule (CC §1606)  3.45
    • E.  Moral Obligations; Love and Affection (CC §1606)  3.46
    • F.  Past Consideration  3.47
    • G.  Mutuality of Obligation; Illusory Promises  3.48
    • H.  Unlawful Consideration (CC §1607)  3.49
    • I.  Unilateral Contracts
      • 1.  Generally  3.50
      • 2.  Employment Policies; Personnel Manuals; Bylaws  3.51
      • 3.  Options  3.52
    • J.  Promissory Estoppel  3.53
    • K.  Consideration in Commercial Code Contracts (Com C §1204)  3.54

4

Contract Formation: Offer and Acceptance, Formalities, Electronic Contracting

  • I.  OFFER
    • A.  Generally  4.1
    • B.  Definition of Offer  4.2
    • C.  Requirement of Certainty  4.3
    • D.  Preliminary Negotiations Distinguished
      • 1.  Generally  4.4
      • 2.  Advertisements  4.5
      • 3.  Application Forms  4.6
      • 4.  Price Quotations  4.7
      • 5.  Auctions  4.8
      • 6.  Invitations to Bid; Requests for Proposals
        • a.  Generally  4.9
        • b.  Acceptance of Bids  4.10
        • c.  Subcontractor Bids  4.11
        • d.  Offers by Merchants Under Com C §2205(b)  4.12
    • E.  Revocable Offers (CC §§1586–1587)  4.13
    • F.  Irrevocable Offers; Option Contracts  4.14
    • G.  Firm Offers by Merchants Under Com C §2205(a)  4.15
    • H.  Agreements to Agree, Contracts to Negotiate
      • 1.  Generally  4.16
      • 2.  Letters of Intent  4.17
      • 3.  Loan Commitment Letters  4.18
    • I.  Statutory Offers to Compromise (CCP §998)  4.19
    • J.  Lapse or Expiration of an Offer (CC §1587(2))  4.20
  • II.  ACCEPTANCE
    • A.  Generally  4.21
    • B.  Manifestation of Assent (CC §1581)  4.22
    • C.  Content of Acceptance: Mirror Image Rule; Counteroffers (CC §1585)  4.23
    • D.  Who May Accept  4.24
    • E.  Communication of Acceptance
      • 1.  Generally (CC §1582)  4.25
      • 2.  Timing of Acceptance; Mailbox Rules  4.26
        • a.  Mailbox Rule: Acceptance (CC §1583)  4.27
        • b.  Mailbox Rule: Revocation of Offer  4.28
        • c.  Mailbox Rule: Later Rejection Overtaking Acceptance  4.29
      • 3.  Ratification (CC §1588)  4.30
    • F.  Acceptance by Conduct
      • 1.  Generally  4.31
      • 2.  Silence  4.32
      • 3.  Unsolicited Sending of Merchandise (CC §§1584.5–1584.6)  4.33
    • G.  Implied-in-Fact Contracts (CC §1621)  4.34
    • H.  Rejection of Offers  4.35
  • III.  FORMATION OF CONTRACTS FOR SALE OR LEASE OF GOODS
    • A.  Formation Generally (Com C §§2204, 10204)  4.36
    • B.  Manner of Acceptance (Com C §§2206, 10206)  4.37
    • C.  Nonconforming Acceptance (Com C §2207)  4.38
    • D.  Invoices  4.38A
  • IV.  FORMALITIES
    • A.  Generally  4.39
    • B.  Signatures (CC §14; Com C §1201(b)(37))  4.40
    • C.  Oral Contracts (CC §1622)  4.41
    • D.  Approval by Third Parties  4.42
    • E.  Consent of Spouse or Domestic Partner (Fam C §§297.5, 1100, 1102; Corp C §25246)  4.43
    • F.  Statute of Frauds
      • 1.  Civil Code Statutes of Fraud
        • a.  CC §1624(a)  4.44
        • b.  Certain Contracts for Sale of Personal Property (CC §1624.5)  4.45
        • c.  Other Types of Contracts  4.46
      • 2.  Commercial Code Statutes of Frauds (Com C §2201)  4.47
      • 3.  Requirement of Written Contract  4.48
      • 4.  Divisibility of Agreement  4.49
      • 5.  Estoppel to Plead Statute of Frauds  4.50
    • G.  Delivery (CC §§1626–1627)  4.51
    • H.  Contract Modification
      • 1.  CC §§1697–1698  4.52
      • 2.  Com C §2209  4.53
  • V.  ELECTRONIC CONTRACTING
    • A.  E-Sign (15 USC §§7001–7031)
      • 1.  Introduction to E-Sign  4.54
      • 2.  Electronic Signatures  4.55
      • 3.  Exceptions to Applicability of E-Sign  4.56
      • 4.  Consumer Protection Features  4.57
      • 5.  Electronic Record Retention  4.58
    • B.  Uniform Electronic Transactions Act (UETA) (CC §§1633.1–1633.17)
      • 1.  Overview of UETA; Federal Preemption Issue  4.59
      • 2.  Scope of UETA; Exceptions  4.60
      • 3.  Consent to Conduct Transactions Electronically Required  4.61
      • 4.  Authentication of Electronic Signatures  4.61A
      • 5.  Statute of Frauds  4.61B
    • C.  Uniform Computer Information Transactions Act (UCITA)  4.62
    • D.  ALI Software Contract Principles  4.62A
    • E.  Enforceability of Shrink-Wrap, Click-Wrap, and Browse-Wrap Agreements
      • 1.  Introduction  4.63
      • 2.  Shrink-Wrap Software Licenses  4.64
      • 3.  Click-Wrap Agreements  4.65
      • 4.  Browse-Wrap Agreements  4.66

5

Contract Interpretation, Modification, Waiver

  • I.  GENERAL RULES OF INTERPRETATION
    • A.  Objective Manifestations of Intention  5.1
    • B.  Titles and Headings in Contracts  5.2
    • C.  Civil and Civil Procedure Code Rules of Contract Interpretation  5.3
      • 1.  Uniformity of Interpretation (CC §1635)  5.4
      • 2.  Mutual Intention to Be Given Effect (CC §1636)  5.5
      • 3.  Ascertaining Intention: Civil Code Rules (CC §1637)  5.6
      • 4.  Ascertaining Intention: Contract Language (CC §§1638–1639)  5.7
      • 5.  When Writing May Be Disregarded (CC §1640)  5.8
      • 6.  Interpreting Whole Contract (CC §1641; CCP §1858)  5.9
      • 7.  Interpreting Multiple Contracts in Single Transaction Together (CC §1642)  5.10
      • 8.  Interpreting Contracts to Make Them Lawful and Effective (CC §1643; CCP §1866)  5.11
      • 9.  Interpreting Words in Their Ordinary Sense (CC §1644; CCP §§1861, 1865)  5.12
      • 10.  Technical Words (CC §1645)  5.13
      • 11.  Law and Usage of Place (CC §§1646, 1646.5)  5.14
      • 12.  Circumstances (CC §1647; CCP §1860)  5.15
      • 13.  Restricting Contract to Its Apparent Object (CC §1648)  5.16
      • 14.  Ambiguity or Uncertainty (CC §1649; CCP §1864)  5.17
      • 15.  Particular Clauses Subordinate to General Intent (CC §1650; CCP §1859)  5.18
      • 16.  Original Writing Controls Over Printed Form (CC §1651; CCP §1862)  5.19
      • 17.  Reconciling Repugnancies (CC §1652)  5.20
      • 18.  Inconsistent Words (CC §1653)  5.21
      • 19.  Interpretation Against Persons Causing Uncertainty (CC §1654)  5.22
      • 20.  Implied Stipulations (CC §1655; CCP §1856(c))  5.23
      • 21.  Implied Incidentals (CC §1656)  5.24
      • 22.  Presumptions Concerning Sales Tax, Schedules (CC §1656.1)  5.25
      • 23.  Time of Performance (CC §1657)  5.26
      • 24.  Joint and Several Liability Presumed if Joint Benefit Conferred (CC §1659)  5.27
      • 25.  Joint and Several Liability Presumed in Joint Undertaking (CC §1660)  5.28
      • 26.  Executed and Executory Contracts Defined (CC §1661)  5.29
      • 27.  Uniform Vendor and Purchaser Risk Act (CC §1662)  5.30
      • 28.  Euro as Form of Payment (CC §1663)  5.31
      • 29.  Ascertaining Consideration (CC §§1610–1613)  5.32
    • D.  “Best Efforts” Provisions  5.32A
  • II.  PAROL EVIDENCE RULE
    • A.  Generally (CC §§1625, 1639; CCP §1856)  5.33
    • B.  Parol Evidence Analysis  5.34
      • 1.  Standard of Review  5.35
      • 2.  Merger or Integration Clauses  5.36
      • 3.  Collateral Agreements; Incorporation of Extrinsic Documents by Reference  5.37
      • 4.  Contradictory Evidence  5.38
      • 5.  Latent Versus Patent Ambiguities  5.39
      • 6.  Evidence of the Circumstances (CCP §§1856(g), 1860)  5.40
      • 7.  Exceptions for Mistake, Invalidity, Illegality, Fraud (CCP §1856(e)–(g))  5.41
      • 8.  Course of Dealing, Usage of Trade, Course of Performance (CCP §1856(c))  5.42
    • C.  Commercial Code Parol Evidence Rule (Com C §2202)  5.43
  • III.  CHOICE OF FORUM, CHOICE OF LAW
    • A.  Forum Selection Clauses, Consent to Personal Jurisdiction
      • 1.  Generally  5.44
      • 2.  Who May Enforce  5.45
      • 3.  Mandatory Versus Permissive Forum Selection Clauses  5.46
      • 4.  Venue Selection Clauses  5.47
      • 5.  Construction Contracts (CCP §410.42)  5.48
      • 6.  Employment Agreements (Lab C §925)  5.48A
      • 7.  Letters of Credit (Com C §5116(e))  5.49
      • 8.  Consumer Lease Contracts (Com C §10106(b))  5.50
    • B.  Conflicts of Law; Choice of Law
      • 1.  In Absence of Choice-of-Law Clause  5.51
      • 2.  Enforceability of Choice-of-Law Clauses
        • a.  Choice of California Law
          • (1)  Generally  5.52
          • (2)  Transactions of $250,000 or More (CC §1646.5)  5.53
        • b.  Choice of Non-California Law: Nedlloyd Lines B.V. v Superior Court  5.54
      • 3.  Employment Agreements (Lab C §925)  5.54A
      • 4.  Commercial Code Transactions (Com C §1301)  5.55
  • IV.  COMMERCIAL CODE RULES OF CONTRACT INTERPRETATION
    • A.  Course of Dealing and Usage of Trade (Com C §1303)  5.56
      • 1.  Course of Dealing Defined (Com C §1303(b))  5.57
      • 2.  Usage of Trade Defined (Com C §1303(c))  5.58
    • B.  Course of Performance (Com C §1303(a))  5.59
    • C.  Gap-Filling Rules  5.60
      • 1.  Course of Dealing; Usage of Trade; Course of Performance (Com C §1303(d))  5.61
      • 2.  Open Price Term (Com C §2305)  5.62
      • 3.  Open Quantity Term
        • a.  Output and Requirements Contracts (Com C §2306(1))  5.63
        • b.  Exclusive Dealing Arrangements (Com C §2306(2))  5.64
      • 4.  Open Delivery Terms
        • a.  Number of Deliveries (Com C §2307)  5.65
        • b.  Place of Delivery (Com C §2308)  5.66
      • 5.  Contract Duration: Time for Delivery or Other Performance (Com C §2309)  5.67
      • 6.  Open Payment Terms (Com C §2310)  5.68
      • 7.  Details of Performance (Com C §2311)  5.69
  • V.  SEVERABILITY; DIVISIBILITY
    • A.  General Rules Concerning Severance of Unenforceable Terms (CC §1599)  5.70
    • B.  Severability Issues in Contract Drafting  5.71
    • C.  Divisible Contracts  5.71A
  • VI.  ADHESION CONTRACTS
    • A.  What Is an Adhesion Contract?  5.72
    • B.  Enforceability of Adhesion Contracts  5.73
    • C.  Examples of Adhesion Contracts  5.74
  • VII.  UNCONSCIONABILITY
    • A.  Generally (CC §1670.5)  5.75
    • B.  Procedural Unconscionability  5.76
    • C.  Substantive Unconscionability  5.77
    • D.  Class Action Waivers  5.78
    • E.  Remedies  5.79
  • VIII.  FOREIGN LANGUAGE TRANSLATIONS (CC §1632)  5.80
  • IX.  CONTRACT MODIFICATIONS, WAIVERS, RELEASES
    • A.  Non–Commercial Code Contracts  5.81
      • 1.  Amendments or Modifications
        • a.  Generally  5.82
        • b.  Oral Contracts (CC §1697)  5.83
        • c.  Written Contracts (CC §1698)  5.84
        • d.  Arbitration Agreement Amendments  5.84A
      • 2.  Supplemental Agreements  5.85
      • 3.  Rescission; Cancellation  5.86
      • 4.  Waiver  5.87
      • 5.  Novation (CC §§1530–1532)  5.88
    • B.  Modification, Rescission, and Waiver Under Commercial Code (Com C §§1306, 2209, 10208)  5.89
    • C.  Settlement Agreements; Releases
      • 1.  Generally  5.90
      • 2.  Covenants Not to Sue  5.91
      • 3.  Releases of Existing Obligations (CC §1541)  5.92
      • 4.  Scope of General Releases (CC §1542)  5.93
      • 5.  Third Parties (CC §1543)  5.94
      • 6.  Exculpation Agreements; Prospective Releases (CC §1668)  5.95
    • D.  Statutory Offers to Compromise (CCP §998)  5.96

6

Representations, Warranties, Covenants, Conditions, Indemnities

  • I.  INTRODUCTION TO REPRESENTATIONS, WARRANTIES, COVENANTS, CONDITIONS, AND INDEMNITIES  6.1
  • II.  REPRESENTATIONS AND WARRANTIES
    • A.  Representations
      • 1.  Generally  6.2
      • 2.  Actionable Misrepresentations  6.3
      • 3.  Financial Statements  6.4
      • 4.  Insurance Contracts  6.5
      • 5.  Statements of Opinion Distinguished  6.6
    • B.  Contractual Warranties
      • 1.  Generally  6.7
      • 2.  Implied Warranties in Residential Real Estate Leases and New Construction  6.8
      • 3.  Disclaimer of Warranties  6.9
      • 4.  Survival of Warranties  6.10
      • 5.  Common Law Requirement for Privity of Contract  6.11
    • C.  Commercial Code Warranties  6.12
      • 1.  Express Warranties by Affirmation, Promise, Description, or Sample (Com C §2313)  6.13
      • 2.  Implied Warranty of Merchantability (Com C §2314)  6.14
      • 3.  Implied Warranty of Fitness for Particular Purpose (Com C §2315)  6.15
      • 4.  Warranty of Title; Warranty Against Infringement (Com C §2312)  6.16
      • 5.  Exclusion or Modification of Commercial Code Warranties (Com C §2316)  6.17
      • 6.  Privity of Contract  6.18
      • 7.  Conflict of Warranties (Com C §2317)  6.19
      • 8.  Leases of Goods
        • a.  Generally  6.20
        • b.  Implied Warranties Against Interference and Infringement (Com C §10211)  6.21
    • D.  Consumer Protection Warranties
      • 1.  Generally  6.22
      • 2.  California Law
        • a.  Consumers Legal Remedies Act (CLRA) (CC §§1750–1784)  6.23
        • b.  Song-Beverly Consumer Warranty Act (Lemon Law; CC §§1790–1795.8)  6.24
        • c.  Motor Vehicle Warranty Adjustment Programs (CC §§1795.90–1795.93)  6.25
        • d.  Standards for Warranty Work (CC §§1796, 1796.5)  6.26
        • e.  Mobilehome Warranties (CC §§1797–1797.7)  6.27
        • f.  Grey Market Goods (CC §§1797.8–1797.86)  6.28
        • g.  Home Roof Warranties (CC §§1797.90–1797.96)  6.29
      • 3.  Federal Law
        • a.  Magnuson Moss Warranty-Federal Trade Commission Improvements Act  6.30
        • b.  FTC Regulations Concerning Written Consumer Warranties  6.31
  • III.  COVENANTS
    • A.  Generally
      • 1.  Express Covenants  6.32
      • 2.  Implied Covenants  6.33
    • B.  Implied Covenant of Good Faith and Fair Dealing
      • 1.  Generally  6.34
      • 2.  Requires a Contract  6.35
      • 3.  In Exercise of Discretion  6.36
      • 4.  Insurance Contracts  6.37
    • C.  Implied Covenant Regarding Manner of Performance  6.37A
    • D.  Covenants Not to Compete  6.38
    • E.  Covenants Not to Solicit Employees  6.38A
    • F.  Consumer’s Right to “Yelp"  6.38B
    • G.  Covenants in Contracts Regulated by Civil Code  6.39
    • H.  Attorney Fee Agreements (Bus & P C §6148)  6.40
  • IV.  CONDITIONS
    • A.  Generally (CC §§1434–1435)  6.41
    • B.  Express and Implied Conditions  6.42
    • C.  Conditions Precedent, Concurrent, Subsequent
      • 1.  Conditions Precedent (CC §§1436, 1439)  6.43
      • 2.  Concurrent Conditions (CC §§1437, 1439)  6.44
      • 3.  Conditions Subsequent (CC §1438)  6.45
    • D.  Condition of “Satisfaction”  6.46
    • E.  Condition of “No Material Adverse Change”  6.47
    • F.  Waiver of Conditions  6.48
    • G.  Conditions Resulting in Forfeiture (CC §1442)  6.49
    • H.  Excuse of Conditions (CC §§1440–1441)  6.50
  • V.  INDEMNITY AGREEMENTS
    • A.  Generally (CC §2772)  6.51
    • B.  Indemnity Agreements Under the Civil Code
      • 1.  Agreements to Indemnify Against Past or Future Wrongful Acts (CC §§2773–2774)  6.52
      • 2.  Extension to Acts of Agents (CC §2775)  6.53
      • 3.  Multi-Party Indemnifications (CC §§2776–2777)  6.54
      • 4.  Rules of Interpretation (CC §2778)  6.55
      • 5.  Reimbursement (CC §2779)  6.56
      • 6.  Indemnification Provisions in Construction and Hauling Contracts (CC §§2782–2784.5)  6.57
    • C.  Equitable Indemnity  6.58
    • D.  Guaranty and Suretyship Contracts Distinguished  6.59

7

Assignment and Delegation, Third Party Beneficiaries, and Joint and Several Obligations

  • I.  SCOPE OF CHAPTER  7.1
  • II.  ASSIGNMENT AND DELEGATION
    • A.  Definition of Assignment (CC §1039)  7.2
    • B.  Principles of Assignment
      • 1.  Assignment of Contract Rights (CC §1458)  7.3
      • 2.  Assignments of Rights to Payment; Nonnegotiable Instruments
        • a.  Relationship to UCC; Definition of “Account” (Com C §§9102, 9109)  7.4
        • b.  Transfers of Nonnegotiable Instruments (CC §1459)  7.5
      • 3.  Assignments of Choses in Action (CC §§953–954; CCP §§368, 368.5)  7.6
      • 4.  Assignments of After-Acquired Rights, Future Interests (CC §1045)  7.7
      • 5.  How Made
        • a.  Assignments of Contract Rights Generally (CC §§1040, 1052–1056, 1084)  7.8
        • b.  Notice of Assignment  7.9
        • c.  Perfection of Transfers of Nonnegotiable Instruments and Certain Payment Rights (CC §§955, 955.1)  7.10
        • d.  Equitable Assignments  7.11
      • 6.  Effect of Assignment
        • a.  Generally (CC §1084)  7.12
        • b.  Assumption of Obligations (CC §1589)  7.13
        • c.  Effect of “Successors and Assigns” Clause  7.14
        • d.  Assignments for Security  7.15
        • e.  Assignee Subject to Obligor’s Claims and Defenses Against Assignor (CC §1459; CCP §368); Waiver of Defenses  7.16
      • 7.  Priority Among Successive Assignees  7.17
    • C.  Restrictions on Assignment  7.18
      • 1.  Contractual Restrictions
        • a.  Enforcement of Anti-Assignment Clauses Generally  7.19
        • b.  When Assignment Requires Consent of Nonassigning Party  7.20
          • (1)  Real Estate Leases (CC §1995.260)  7.21
          • (2)  Franchise Agreements  7.22
          • (3)  Other Contracts  7.23
        • c.  When Contractual Restrictions Not Enforceable
          • (1)  Assignments of Money Due  7.24
          • (2)  Assignments of Accounts; Grants of Security Interests (Com C §§9406(d), 9408(a))  7.25
          • (3)  Assignments by Operation of Law  7.26
      • 2.  Legal Restrictions
        • a.  Contracts Requiring Unique Personal Skill  7.27
        • b.  Assignments of Patent and Copyright Licenses  7.28
        • c.  Assignments of Wages (Lab C §300)  7.29
    • D.  Delegation of Duties
      • 1.  Definition of Delegation  7.30
      • 2.  Principles of Delegation (CC §1457)  7.31
      • 3.  Novation Compared (CC §§1530–1532)  7.32
      • 4.  How Made  7.33
      • 5.  Nondelegable Duties; Personal Services Contracts  7.34
    • E.  Revocability of Assignments; Modification of Assigned Contract  7.35
    • F.  Assignments for Benefit of Creditors  7.36
  • III.  ASSIGNMENT AND DELEGATION OF CONTRACTS FOR THE SALE OR LEASE OF GOODS  7.37
    • A.  Contracts for the Sale of Goods (Com C §2210)
      • 1.  Scope of Com C §2210  7.38
      • 2.  Distinction Between Assignment and Delegation  7.39
      • 3.  Financing Assignments  7.40
    • B.  Assignment of Rights  7.41
      • 1.  Creation of Security Interest Not Deemed Material  7.42
      • 2.  Contractual Restrictions on Assignment  7.43
      • 3.  When Restrictions on Assignment Are Unenforceable
        • a.  Fully Executed Contracts  7.44
        • b.  Creation of Security Interest  7.45
      • 4.  Material Adverse Effect on Nonassigning Party  7.46
    • C.  Delegation of Duties
      • 1.  Principles of Delegation  7.47
      • 2.  Delegation Implied by Assignment  7.48
      • 3.  Effect of Delegation
        • a.  As Between Nondelegating Party and Assignee  7.49
        • b.  As Between Nondelegating Party and Assignor  7.50
        • c.  As Between Assignor and Assignee  7.51
      • 4.  When Delegation of Duties Prohibited  7.52
    • D.  Leases of Goods (Com C §10303)
      • 1.  Scope of Com C §10303  7.53
      • 2.  Assignment and Delegation  7.54
      • 3.  Subleases of Goods  7.55
      • 4.  Restrictions on Lease Transfers  7.56
      • 5.  When Restrictions on Transfer Unenforceable
        • a.  Transfers of Right to Payment or Damages on Default  7.57
        • b.  Creation of Security Interest  7.58
        • c.  Material Adverse Effect on Other Party  7.59
      • 6.  Priorities Among Conflicting Claimants  7.60
  • IV.  THIRD PARTY BENEFICIARIES
    • A.  Generally (CC §1559)  7.61
    • B.  Scope of Third Party’s Rights  7.62
    • C.  Creditor and Donee Beneficiaries  7.63
    • D.  Intended and Incidental Beneficiaries
      • 1.  Intended Beneficiaries  7.64
      • 2.  Incidental Beneficiaries  7.65
    • E.  Who Qualifies as Third Party Beneficiary  7.66
    • F.  Defenses to Enforcement by Third Party Beneficiary  7.67
    • G.  Rescission or Modification of Third Party Beneficiary Contracts  7.68
  • V.  JOINT AND SEVERAL OBLIGATIONS
    • A.  Introduction (CC §1430)  7.69
    • B.  Two or More Obligors
      • 1.  Interpreting the Contract  7.70
      • 2.  When Joint and Several Liability Presumed (CC §§1659, 1660; Corp C §16306)  7.71
      • 3.  Joint Obligations Distinguished (CC §1431)  7.72
      • 4.  Several Obligations Distinguished  7.73
      • 5.  Suretyship Relationships Distinguished  7.74
      • 6.  Effect of Joint and Several Liability
        • a.  Performance by One Obligor (CC §1474)  7.75
        • b.  Release of One Obligor (CC §1543; CCP §877)  7.76
        • c.  Assignment by Obligee to One Obligor  7.77
        • d.  Rights of Contribution (CC §1432)  7.78
        • e.  Joinder of Joint Obligors in Action on Contract  7.79
    • C.  Two or More Obligees (CC §§1431, 1475)  7.80

8

Performance or Breach of Contract

  • I.  SCOPE OF CHAPTER  8.1
  • II.  PERFORMANCE OF CONTRACTS UNDER THE CIVIL CODE
    • A.  Full and Part Performance
      • 1.  Full Performance Discharges Obligation; Substantial Performance (CC §§1473–1475)  8.2
      • 2.  Performance in Manner Directed by Creditors (CC §1476)  8.3
      • 3.  Effect of Partial Performance (CC §1477); Indivisible and Divisible Contracts  8.4
      • 4.  Payment Defined (CC §1478)  8.5
      • 5.  Payment by Check or Promissory Note (Com C §3310)  8.6
      • 6.  Application of Performance to Two or More Obligations (CC §1479)  8.7
      • 7.  Time for Performance
        • a.  Time of Performance of Contract (CC §1657)  8.8
        • b.  Contracts of Indefinite Duration  8.9
        • c.  When “Time Is of the Essence”  8.10
        • d.  When Time for Performance Falls on a Holiday (CCP §13)  8.11
      • 8.  Performance of Conditions (CC §1439)  8.12
    • B.  Offer or Tender of Performance
      • 1.  Obligation Extinguished by Offer of Full Performance (CC §1485)  8.13
      • 2.  Effect of Offer of Partial Performance (CC §1486)  8.14
      • 3.  Offer of Performance by or on Behalf of Debtor to Creditor (CC §§1487–1488)  8.15
      • 4.  Place of Offer of Performance (CC §1489)  8.16
      • 5.  Time of Offer of Performance (CC §§1490–1491, 1806.3)  8.17
      • 6.  Delay in Performance (CC §1492)  8.18
      • 7.  Good Faith; Ability and Willingness to Perform (CC §§1493, 1495)  8.19
      • 8.  Production of Thing to Be Delivered (CC §§1496–1497; CCP §2074)  8.20
      • 9.  Conditional Offers of Performance (CC §§1494, 1498)  8.21
      • 10.  Debtor’s Right to Written Receipt (CC §1499; CCP §2075)  8.22
      • 11.  Extinction of Pecuniary Obligation by Deposit (CC §1500)  8.23
      • 12.  Waiver of Objections to Tender of Performance (CC §1501; CCP §2076)  8.24
      • 13.  Title to, and Custody of, Thing Offered (CC §§1502, 1503)  8.25
      • 14.  Effect of Offer of Performance on Interest and Other Incidents (CC §1504)  8.26
      • 15.  Creditor’s Retention of Thing Without Acceptance (CC §1505)  8.27
    • C.  Excuse of Performance
      • 1.  Generally  8.28
        • a.  Prevention of Performance by Act of Creditor or Operation of Law (CC §1511(1))  8.29
          • (1)  Act of Creditor  8.30
          • (2)  Operation of Law  8.31
        • b.  Force Majeure (CC §1511(2))  8.32
        • c.  Creditor Induces Debtor’s Nonperformance (CC §1511(3))  8.33
        • d.  Nonoccurrence or Nonperformance of Condition  8.34
        • e.  Impossibility or Impracticability
          • (1)  Generally (CC §1598)  8.35
          • (2)  Temporary Impossibility or Impracticability  8.36
          • (3)  Death or Incapacity  8.37
        • f.  Frustration of Purpose  8.38
      • 2.  Debtor’s Entitlement to Contract Benefits (CC §1512)  8.39
      • 3.  Ratable Recovery of Consideration (CC §1514)  8.40
      • 4.  Refusal to Accept Performance (CC §1515)  8.41
    • D.  Accord and Satisfaction
      • 1.  Generally (CC §§1521, 1523)  8.42
      • 2.  Intent of Parties (CC §§1524–1525)  8.43
      • 3.  Distinguished From Novation (CC §1522)  8.44
      • 4.  Accord and Satisfaction by Use of Instrument (Com C §3311; CC §1526)  8.45
    • E.  Novation (CC §§1530–1532)  8.46
    • F.  Release (CC §§1541–1543)  8.47
  • III.  PERFORMANCE OF COMMERCIAL CODE CONTRACTS
    • A.  Performance Standards
      • 1.  General Obligations of Parties (Com C §§2301, 10301)  8.48
      • 2.  Manner of Seller’s Tender of Delivery (Com C §2503)  8.49
      • 3.  Seller’s Performance by Shipment (Com C §2504)  8.50
      • 4.  Seller’s Shipment Under Reservation (Com C §2505)  8.51
      • 5.  Perfect Tender Rule (Com C §2601)  8.52
      • 6.  Seller’s Cure of Improper Tender or Delivery (Com C §§2508, 2614, 10406)  8.53
      • 7.  Tender of Payment by Buyer (Com C §2511)  8.54
      • 8.  Payment by Buyer Before Inspection (Com C §2512)  8.55
      • 9.  Buyer’s Right to Inspection of Goods (Com C §2513)  8.56
      • 10.  Preserving Evidence (Com C §2515)  8.57
      • 11.  Right to Adequate Assurance of Performance (Com C §2609)  8.58
      • 12.  Acceptance of Performance
        • a.  Sales of Goods (Com C §§2301, 2606–2607)  8.59
        • b.  Revocation of Acceptance (Com C §2608)  8.60
        • c.  Acceptance of Leased Goods (Com C §10515)  8.61
    • B.  Excuse of Performance
      • 1.  Excuse by Failure of Presupposed Conditions; Commercial Impracticability (Com C §§2615, 10404)  8.62
      • 2.  Buyer’s Rights on Seller’s Notice of Inability or Delay in Performance (Com C §§2616, 10405)  8.63
      • 3.  Casualty to Identified Goods (Com C §§2613, 10221)  8.64
    • C.  Installment Contracts (Com C §2612)  8.65
  • IV.  BREACH OF CONTRACT
    • A.  Contracts Not Subject to Commercial Code
      • 1.  Generally  8.66
      • 2.  Elements of Cause of Action for Breach  8.67
      • 3.  Need for Demand for Performance  8.68
      • 4.  Total or Partial Breach  8.69
      • 5.  Material and Immaterial Breach  8.70
      • 6.  Anticipatory Repudiation (CC §1440)  8.71
      • 7.  Waiver of Breach  8.72
      • 8.  Abandonment of Construction Contracts  8.73
    • B.  Breach of Contracts for Sale of Goods
      • 1.  Generally (Com C §§2601–2603, 2605, 2607)  8.74
      • 2.  Anticipatory Repudiation (Com C §2610)  8.75
      • 3.  Retraction of Anticipatory Repudiation (Com C §2611)  8.76
    • C.  Breach of Personal Property Leases (Com C §10501)  8.77

9

Selected Enforcement Issues

  • I.  SCOPE OF CHAPTER  9.1
  • II.  CONTRACT STATUTES OF LIMITATIONS
    • A.  Written Contracts and Leases: 4 Years (CCP §§337, 337.2)  9.2
    • B.  Accrual of Cause of Action for Breach  9.3
    • C.  Special Rules (CCP §§336a, 337(1), 338, 339)  9.4
    • D.  Agreements Regarding Statutes of Limitations (CCP §§360, 360.5)  9.5
    • E.  UCC Statutes of Limitations (Com C §§2725, 3118, 5115, 10506)  9.6
  • III.  JURISDICTION; VENUE
    • A.  Jurisdiction, Forum Selection Clauses  9.7
    • B.  Venue Rules for Breach of Contract Actions (CCP §§395, 395.2, 395.5, 396a)
      • 1.  If Defendant Is an Individual Person
        • a.  Non-Consumer Contracts (CCP §395(a))  9.8
        • b.  Consumer Obligations (CCP §§395(b)–(c), 396a)  9.9
      • 2.  If Defendant Is a Corporation, an Unincorporated Association, or an Executor or Trustee (CCP §§395.1–395.2, 395.5)  9.10
      • 3.  Venue Selection Clauses  9.11
  • IV.  ATTORNEY FEES
    • A.  American Rule Prohibits Attorney Fee Award (CCP §1021)  9.12
    • B.  Recovery of Attorney Fees by Contract
      • 1.  General Rule (CCP §§1032, 1033.5; CC §1717(a))  9.13
      • 2.  CC §1717 Is Mutual and Reciprocal  9.14
      • 3.  Attorney Fees if Contract Is Invalid or Rescinded  9.15
      • 4.  CC §1717 Not Waivable  9.16
      • 5.  Determination of “Prevailing Party” (CC §1717(b)(1); CCP §1032(a)(4))
        • a.  Definition; Procedure for Determination  9.17
        • b.  Voluntary Dismissals  9.18
        • c.  Effect of CCP §998 Settlement Offer on Attorney Fee Award  9.19
        • d.  Tender of Payment by Defendant  9.20
      • 6.  What Is an “Action”?  9.20A
      • 7.  Rights of Third Party Beneficiaries  9.21
      • 8.  Fees Must Be “Reasonable”  9.22
      • 9.  Fees on Appeal  9.23
      • 10.  Costs of Litigation  9.24
      • 11.  Attorney Fees in Actions Including Tort or Other Noncontract Claims  9.25
      • 12.  Pro Se Litigants; In-House Counsel  9.26
      • 13.  Attorney Fee Clauses  9.27
    • C.  Statutes Allowing Recovery  9.28
    • D.  Statute Limiting Recovery  9.28A
  • V.  PREDISPUTE WAIVER OF RIGHT TO JURY TRIAL (CCP §631)  9.29
  • VI.  ARBITRATION OF CONTRACT DISPUTES
    • A.  Introduction  9.30
    • B.  Advantages and Disadvantages of Arbitration
      • 1.  Advantages  9.31
      • 2.  Disadvantages  9.32
    • C.  Drafting Arbitration Clauses
      • 1.  AAA Forms of Arbitration Clause  9.33
      • 2.  JAMS Forms of Arbitration Clause  9.34
      • 3.  Self-Executing Arbitration Clauses  9.35
      • 4.  Special Requirements  9.36
      • 5.  Discovery Provisions  9.37
    • D.  Enforcement of Arbitration Clauses
      • 1.  California Arbitration Act (CCP §§1280–1294.2)  9.38
      • 2.  Federal Arbitration Act (FAA) (9 USC §§1–16)
        • a.  Generally  9.39
        • b.  FAA Preemption of State Law  9.40
      • 3.  Arbitrability; Scope of Arbitration Clause
        • a.  Presence or Absence of Delegation Clause  9.41
        • b.  Presumption of Arbitrability  9.41A
        • c.  Arbitration Clauses Interpreted Broadly  9.41B
    • E.  Defenses to Enforcement of Arbitration Clause
      • 1.  Unconscionability  9.42
        • a.  Procedural Unconscionability  9.43
        • b.  Substantive Unconscionability  9.44
      • 2.  Fraud in Execution  9.45
      • 3.  Waiver of Right to Compel Arbitration  9.46
      • 4.  Unwaivable Statutory Rights
        • a.  Armendariz: Enforceability Subject to Particular Scrutiny  9.47
        • b.  Armendariz Requirements  9.47A
        • c.  Public Purpose  9.47B
        • d.  Enforceability Analysis  9.47C
        • e.  Private Claims  9.47D
      • 5.  Other Defenses  9.48
    • F.  Arbitration of Attorney Fee Disputes  9.49
    • G.  Obligation of Nonsignatories to Arbitrate  9.50
    • H.  Scope of Arbitrator’s Authority to Grant Relief  9.51
    • I.  Finality of Arbitration Award; Judicial Review  9.52
    • J.  Optional AAA Appellate Arbitration  9.52A
    • K.  Judicial Arbitration (CCP §§1141.10–1141.31)  9.53
  • VII.  MEDIATION
    • A.  Generally  9.54
    • B.  Forms of Mediation Clauses  9.55
  • VIII.  ELECTION OF REMEDIES
    • A.  Scope of Doctrine  9.56
    • B.  When Made  9.57

10

Remedies: Damages

  • I.  INTRODUCTION TO CONTRACT DAMAGES; GOVERNING LAW  10.1
  • II.  DAMAGES FOR BREACH OF PARTICULAR TYPES OF CONTRACTS  10.2
  • III.  DAMAGES FOR BREACH OF CONTRACT: GENERAL PRINCIPLES
    • A.  Benefit of the Bargain (CC §3300)  10.3
    • B.  Requirement of Foreseeability (CC §3300)  10.4
    • C.  Requirement of Reasonableness (CC §3359)  10.5
    • D.  Requirement of Reasonable Certainty (CC §3301)  10.6
    • E.  Rule Against Windfalls (CC §3358)  10.7
    • F.  General and Special Damages
      • 1.  General Damages  10.8
      • 2.  Special Damages  10.9
    • G.  Nominal Damages (CC §3360)  10.10
    • H.  Distinguished From Tort Damages  10.11
  • IV.  MITIGATION OF DAMAGES  10.12
  • V.  SPECIFIC ITEMS RECOVERABLE
    • A.  Failure to Pay Money Due (CC §3302)  10.13
    • B.  Lost Profits
      • 1.  Generally  10.14
      • 2.  Requirement of Proximate Causation  10.15
      • 3.  Evidence of Lost Profits; Measure of Damages  10.16
      • 4.  Breach of Contract Versus Tort Measures  10.17
      • 5.  Interruption or Destruction of Business  10.18
      • 6.  Lost Profits of New Businesses  10.19
      • 7.  Contract Price–Market Value Differential  10.20
      • 8.  Minority Discount  10.20A
      • 9.  Loss of Goodwill  10.21
    • C.  Interest (CC §§3287, 3289, 3289.5)
      • 1.  Express Contractual Provision for Interest (CC §§3289(a), 3289.5)  10.22
      • 2.  No Contractual Provision But Damages Certain or Calculable (CC §3287(a))  10.23
      • 3.  No Contractual Provision; Damages Unliquidated (CC §3287(b))  10.24
      • 4.  Date From Which Interest Runs  10.25
      • 5.  Prejudgment Interest in Indemnity Actions  10.26
      • 6.  Cost of Borrowing  10.27
      • 7.  Postjudgment Interest  10.28
    • D.  Out-of-Pocket Expenses; Reliance Damages  10.29
    • E.  Tort Damages
      • 1.  Generally  10.30
      • 2.  Damages for Emotional Distress  10.31
      • 3.  Breach of Implied Covenant of Good Faith and Fair Dealing
        • a.  General Rule  10.32
        • b.  Insurance Cases  10.33
        • c.  Other Circumstances  10.34
    • F.  Damages for Breach of Employment or Service Contracts
      • 1.  Contract Measure of Damages  10.35
      • 2.  Tort Remedies  10.36
    • G.  Attorney Fees (CC §1717)  10.37
    • H.  Expert Witness Fees  10.38
  • VI.  LIQUIDATED DAMAGES
    • A.  Introduction to Liquidated Damages (CC §1671)  10.39
    • B.  Contracts Made Before July 1, 1978 (Former CC §§1670–1671)  10.40
    • C.  Contracts Made On or After July 1, 1978 (CC §1671(b))
      • 1.  General Rule  10.41
      • 2.  Rule Against Penalties or Forfeitures (CC §3275)  10.42
    • D.  Liquidated Damages Under Other Applicable Law (CC §1671(a))  10.43
    • E.  Security Deposits as Liquidated Damages  10.44
    • F.  Commercial Code Contracts  10.45
    • G.  Sample Commercial Liquidated Damages Clause  10.45A
    • H.  Consumer Contracts (CC §1671(c)–(d))  10.46
    • I.  Real Property Purchase Contracts (CC §§1675–1681)  10.47
  • VII.  EXEMPLARY (PUNITIVE) DAMAGES (CC §§3294–3296)
    • A.  Generally  10.48
    • B.  Cases Involving Breach of Insurance Contract or Existence of Independent Tort  10.49
    • C.  Not Available for Bad Faith Denial of Contract’s Existence  10.50
    • D.  Proof of Defendant’s Financial Condition  10.51
  • VIII.  CONSUMERS LEGAL REMEDIES ACT (CLRA) (CC §§1750–1784)
    • A.  Application (CC §§1751, 1754, 1761, 1770)  10.52
    • B.  Remedies (CC §1780)  10.53
    • C.  Special Notice and Demand Procedures (CC §1782)  10.54
    • D.  Class Actions (CC §1781)  10.55

11

Remedies: Injunctive and Declaratory Relief; Other Remedies

  • I.  INTRODUCTION TO INJUNCTIVE AND DECLARATORY RELIEF AND OTHER REMEDIES  11.1
  • II.  INJUNCTIVE RELIEF GENERALLY
    • A.  Specific or Preventive Relief (CC §§3367–3368, 3422)  11.2
    • B.  Not Available to Enforce a Penalty or Forfeiture (CC §§3275, 3369)  11.3
    • C.  Preventive Relief for Breach of Contract
      • 1.  When Contract Is Specifically Enforceable (CC §3422; CCP §526(a))  11.4
      • 2.  When Contract Is Not Specifically Enforceable (CC §3423(e); CCP §526(b))  11.5
      • 3.  Certain Personal Service Contracts (CC §3423(e); CCP §526(b))  11.6
  • III.  SPECIFIC PERFORMANCE
    • A.  When Available (CC §3384)
      • 1.  Preliminary Considerations  11.7
      • 2.  Inadequacy of Legal Remedy  11.8
      • 3.  Mutuality of Remedy (CC §3386)  11.9
      • 4.  Contracts to Transfer Real Property (CC §§3387, 3395)  11.10
      • 5.  Contracts to Transfer Personal Property  11.11
      • 6.  Incidental Damages  11.12
      • 7.  Contracts Signed by One Party Only (CC §3388)  11.13
      • 8.  Contracts With Liquidated Damages Clauses (CC §3389)  11.14
      • 9.  Plaintiff’s Partial Performance Is Immaterial or Fully Compensable (CC §3392)  11.15
    • B.  When Specific Performance Is Not Available
      • 1.  Personal Service Contracts
        • a.  Contracts to Render Personal Services (CC §3390(1); Lab C §2855)  11.16
        • b.  Contracts to Employ Another in Personal Service (CC §3390(2))  11.17
        • c.  Collective Bargaining Agreements (Lab C §1126)  11.18
        • d.  Special or Unique Services  11.19
        • e.  Contracts to Make a Will: Quasi-Specific Performance  11.20
        • f.  Marvin Agreements  11.21
      • 2.  Inability Lawfully to Perform (CC §3390(3))  11.22
      • 3.  Agreement to Procure Act or Consent of a Third Party (CC §3390(4))  11.23
      • 4.  Agreements With Uncertain Terms (CC §3390(5))
        • a.  Requirement of Certainty  11.24
        • b.  Extrinsic Evidence  11.25
        • c.  Future Agreement of Parties  11.26
      • 5.  When Performance Is Impossible  11.27
      • 6.  Uniform Vendor and Purchaser Risk Act (CC §1662)  11.28
      • 7.  When Damages Are Adequate  11.29
      • 8.  Parties Who Cannot Be Compelled to Perform (CC §3391)  11.30
        • a.  Inadequate Consideration (CC §3391(1))  11.31
        • b.  Unjust or Unreasonable Contracts (CC §3391(2))  11.32
        • c.  Misrepresentation, Concealment, or Unfair Practices (CC §3391(3))  11.33
        • d.  Mistake, Misapprehension, Surprise (CC §3391(4))  11.34
      • 9.  Lack of Full Performance by Plaintiff (CC §3392)
        • a.  General Rule  11.35
        • b.  Time for Performance  11.36
        • c.  Relief From Forfeiture  11.37
      • 10.  Seller’s Inability to Convey Marketable Title (CC §3394)  11.38
      • 11.  Continuous Supervision  11.39
  • IV.  DECLARATORY RELIEF
    • A.  Availability in Contract Disputes (CCP §1060)  11.40
    • B.  Equitable Remedy  11.41
    • C.  Requirement of Actual Controversy (CCP §1060)  11.42
    • D.  Requirement of Urgency (CCP §1061)  11.43
    • E.  Cumulative Nature of Remedy (CCP §1062)  11.44
    • F.  Res Judicata Effect  11.45
  • V.  RESCISSION (CC §§1688–1695.17)
    • A.  General Rules (CC §§1688, 1689, 1690–1693)  11.46
    • B.  As Distinct From Restitution  11.47
    • C.  Who May Rescind  11.48
    • D.  Grounds for Rescission
      • 1.  Mutual Consent (CC §1689(a))  11.49
      • 2.  Unilateral Rescission (CC §1689(b))  11.50
      • 3.  Mistake or Fraud (CC §§1689(b)(1), 1690)  11.51
      • 4.  Failure of Consideration (CC §1689(b)(2)–(4))  11.52
    • E.  Must Involve Entire Contract  11.53
    • F.  Procedure for Rescission (CC §1691)  11.54
      • 1.  Notice of Rescission (CC §§1691(a), 1693)  11.55
      • 2.  Restoration of Consideration (CC §§1691(b), 1693)  11.56
    • G.  Relief Based on Rescission (CC §1692)  11.57
    • H.  Statutory Rescission Rights for Particular Types of Contracts  11.58
  • VI.  CANCELLATION
    • A.  Extrajudicial Cancellation (CC §§1699–1701)  11.59
    • B.  Judicial Cancellation (CC §§3412–3414)  11.60
  • VII.  ABANDONMENT  11.61
  • VIII.  REFORMATION
    • A.  Generally (CC §§3399, 3402)  11.62
    • B.  Presumption of Intent; Principles of Revision (CC §§3400–3401)  11.63
    • C.  Reformation for Mistake  11.64
  • IX.  LOST OR DESTROYED DOCUMENTS (CC §3415)  11.65
  • X.  QUASI-CONTRACT; RESTITUTION
    • A.  What Is Quasi-Contract?  11.66
    • B.  Effect of Express Contract  11.67
    • C.  Benefit or Enrichment  11.68
    • D.  Benefit or Enrichment Must Be Unjust  11.69
    • E.  Restitution as Remedy for Unjust Enrichment  11.70
    • F.  Common Counts
      • 1.  Generally  11.71
      • 2.  Quantum Meruit  11.72
      • 3.  Money Had and Received  11.73

12

Remedies: Commercial Code

  • I.  PRELITIGATION REMEDIES FOR BREACH OF CONTRACTS FOR THE SALE OF GOODS
    • A.  General Considerations
      • 1.  Remedies Cumulative  12.1
      • 2.  Supplementary Principles of Law Applicable (Com C §1103(b))  12.2
    • B.  Seller’s Remedies  12.3
      • 1.  Refusing Delivery Except for Cash on Buyer’s Insolvency (Com C §2702(1))  12.4
      • 2.  Withholding Delivery (Com C §2703)
        • a.  Grounds  12.5
        • b.  Effect  12.6
      • 3.  Stopping Delivery (Com C §2705)
        • a.  Grounds and Effect  12.7
        • b.  Limits on Right to Stop Delivery (Com C §2705(2))  12.8
        • c.  Procedure for Stopping Delivery (Com C §2705(3))  12.9
        • d.  Buyer’s Forfeiture of Its Deposit (Com C §2718)  12.10
      • 4.  Reclamation of Goods
        • a.  Grounds and Effect (Com C §2702(2))  12.11
        • b.  Ten-Day Limitation and Exception (Com C §2702(2))  12.12
        • c.  Other Limitations  12.13
        • d.  Rights of Third Parties  12.14
      • 5.  Identifying Goods to the Contract (Com C §2704)
        • a.  Grounds and Effect  12.15
        • b.  What Constitutes Identification? (Com C §2501(1))  12.16
        • c.  Unfinished Goods  12.17
        • d.  Seller’s Security Interest (Com C §2505(1))  12.18
      • 6.  Reselling Goods (Com C §2706)
        • a.  Grounds, Purpose, Good Faith Standard  12.19
        • b.  Public or Private Resale?  12.20
        • c.  Private Sale Procedures (Com C §2706(3))  12.21
        • d.  Public Sale Procedures (Com C §2706(4))  12.22
      • 7.  Canceling the Contract (Com C §2703(f))
        • a.  Grounds and Effect  12.23
        • b.  Limitation on Right to Cancel  12.24
    • C.  Buyer’s Remedies
      • 1.  Selection of Responses (Com C §2711)  12.25
      • 2.  Buyer’s Identification of Goods to the Contract (Com C §§2501–2502)  12.26
      • 3.  Buyer Remedies for Seller Defaults (Com C §§2711–2717)  12.27
      • 4.  Notice to Seller (Com C §2607(3)(A))  12.28
      • 5.  Remedies Available
        • a.  Rejecting Goods (Com C §2601)  12.29
          • (1)  Perfect Tender Rule (Com C §2601)  12.30
          • (2)  Limitations  12.31
          • (3)  Effect  12.32
          • (4)  Partial Acceptance (Com C §2601(c))  12.33
          • (5)  Time and Manner of Rejection (Com C §2602)  12.34
          • (6)  Duties of Buyer With Respect to Rejected Goods (Com C §§2602–2603)  12.35
        • b.  Revoking Acceptance
          • (1)  What Constitutes Acceptance? (Com C §2606(1))  12.36
          • (2)  Effect of Revocation of Acceptance  12.37
          • (3)  Circumstances in Which Acceptance May Be Revoked  12.38
          • (4)  Time and Manner of Revocation  12.39
        • c.  Covering
          • (1)  Purpose and Consequences  12.40
          • (2)  Time and Manner  12.41
          • (3)  Effect of Inability or Failure to Cover  12.42
        • d.  Duty to Repair or Replace Nonconforming Consumer Goods Under Warranty  12.43
        • e.  Enforcing Buyer’s Security Interest
          • (1)  Purpose and Scope of Security Interest  12.44
          • (2)  Procedure for Sale  12.45
        • f.  Buyer’s Right to Possession of Goods  12.46
        • g.  Offsetting Buyer’s Damages Against Price  12.47
        • h.  Canceling the Contract
          • (1)  Grounds and Effect  12.48
          • (2)  Notice of Cancellation  12.49
          • (3)  Contract Reinstatement  12.50
  • II.  REMEDIES IN LITIGATION OVER CONTRACTS FOR THE SALE OF GOODS  12.51
    • A.  Seller’s Remedies
      • 1.  Damages  12.52
        • a.  Damages Measured by Market Price  12.53
        • b.  Damages Measured by Resale  12.54
        • c.  Incidental and Consequential Damages  12.55
        • d.  Lost Profits  12.56
        • e.  Lost Volume Sellers  12.57
        • f.  Component Sellers  12.58
        • g.  Jobbers or Middlemen  12.59
        • h.  Punitive or Exemplary Damages  12.60
        • i.  Attorney Fees  12.61
      • 2.  Contract Price Recovery (Com C §2709)
        • a.  When Available  12.62
        • b.  Procedural Aspects  12.63
    • B.  Buyer’s Remedies
      • 1.  Damages Generally (Com C §§2711, 2713)  12.64
        • a.  Damages Measured by Market Price (Com C §2713)  12.65
        • b.  Damages Measured by Cover (Com C §2712)  12.66
        • c.  Damages After Acceptance (Com C §2714)  12.67
          • (1)  Determining Value of Goods as Accepted  12.68
          • (2)  Determining Value of Goods as Warranted  12.69
          • (3)  Choosing Appropriate Measures of Damages  12.70
      • 2.  Notice of Breach (Com C §2607(3))  12.71
      • 3.  Incidental Damages (Com C §2715(1))  12.72
      • 4.  Consequential Damages (Com C §2715(2))  12.73
        • a.  Lost Profits  12.74
        • b.  Loss of Goodwill  12.75
        • c.  Contractual Exclusion of Consequential Damages (Com C §2719(3))  12.76
        • d.  Mitigation of Damages (Com C §2715(2))  12.77
      • 5.  Attorney Fees  12.78
      • 6.  Punitive or Exemplary Damages  12.79
      • 7.  Deduction of Damages From Price (Com C §2717)  12.80
      • 8.  Replevin (Com C §2716(3))  12.81
      • 9.  Specific Performance (Com C §2716(1)–(2))  12.82
      • 10.  Restitution of Payments
        • a.  After Breach by Seller (Com C §2711(1))  12.83
        • b.  After Breach by Buyer (Com C §2718(2))  12.84
  • III.  RESTRICTION, QUALIFICATION, AND ENLARGEMENT OF REMEDIES
    • A.  Liquidated Damages (Com C §2718)  12.85
    • B.  Contractual Modification of Remedies (Com C §2719)
      • 1.  Power to Modify  12.86
      • 2.  Limitations
        • a.  Overview  12.87
        • b.  Types of Clauses  12.88
        • c.  Repair Time  12.89
        • d.  Consumer Goods  12.90
    • C.  Cumulation and Election of Remedies  12.91
  • IV.  REMEDIES FOR BREACH OF LEASES OF GOODS
    • A.  Lessee’s Remedies
      • 1.  General Provisions  12.92
      • 2.  Notice to Lessor (Com C §10502)  12.93
      • 3.  Rejection of the Goods (Com C §§10509–10510, 10513–10514)  12.94
      • 4.  Revocation of Acceptance (Com C §10517)  12.95
      • 5.  Security Interest (Com C §10508(e))  12.96
      • 6.  Damages
        • a.  Measure of Damages Following Cover (Com C §10518)  12.97
        • b.  Measure of Damages Without Cover or Nonqualifying Cover (Com C §10519)  12.98
        • c.  Incidental and Consequential Damages  12.99
      • 7.  Specific Performance and Other Remedies (Com C §10521)  12.100
      • 8.  Restitution  12.101
    • B.  Lessor’s Remedies
      • 1.  General Provisions (Com C §10523)  12.102
      • 2.  Retention or Repossession of Goods (Com C §10525)  12.103
      • 3.  Disposition of Goods Under Substantially Similar Lease (Com C §10527)  12.104
      • 4.  Damages
        • a.  Measure of Damages in Absence of Qualifying Disposition (Com C §10528)  12.105
        • b.  Recovery of Rent for Balance of Lease Term (Com C §10529)  12.106
        • c.  Incidental Damages (Com C §10530)  12.107
        • d.  Consequential Damages  12.108
    • C.  Other Remedies
      • 1.  Liquidated Damages (Com C §10504)  12.109
      • 2.  Cancellation; Termination (Com C §10505)  12.110

13

Selected International Issues

  • I.  INTRODUCTION TO UNCITRAL, CISG, AND UNIDROIT PRINCIPLES  13.1
  • II.  UNITED NATIONS COMMISSION ON INTERNATIONAL TRADE LAW (UNCITRAL)
    • A.  Overview of UNCITRAL  13.2
    • B.  Selected UNCITRAL Model Codes, Rules, and Conventions  13.3
  • III.  UNITED NATIONS CONVENTION ON CONTRACTS FOR THE INTERNATIONAL SALE OF GOODS (CISG)
    • A.  Introduction to CISG  13.4
    • B.  Some Key Differences Between CISG and UCC  13.5
    • C.  Application of CISG
      • 1.  Application; Choice of Law  13.6
      • 2.  Scant U.S. Case Law  13.7
    • D.  Scope of CISG  13.8
    • E.  Preemption Issues  13.9
    • F.  Jurisdiction and Venue Issues  13.10
    • G.  Terms and Definitions  13.11
      • 1.  Incoterms  13.12
      • 2.  Goods  13.13
    • H.  Intent
      • 1.  Objective and Subjective  13.14
      • 2.  Relevant Factors  13.15
    • I.  Contract Formation
      • 1.  Offer  13.16
      • 2.  Acceptance  13.17
        • a.  Time Limits  13.18
        • b.  New or Different Terms  13.19
      • 3.  Statute of Frauds  13.20
      • 4.  Parol Evidence Rule  13.21
    • J.  Risk of Loss  13.22
      • 1.  Third Party Claims  13.23
        • a.  Intellectual Property Rights  13.24
        • b.  Need to Notify  13.25
      • 2.  Conforming and Nonconforming Goods  13.26
    • K.  Buyer’s Duties
      • 1.  Examination of Goods  13.27
      • 2.  Notice of Nonconformity  13.28
        • a.  Seller’s Opportunity to Cure  13.29
        • b.  Breach  13.30
      • 3.  Terms of Delivery
        • a.  Place of Delivery  13.31
        • b.  Consignment  13.32
        • c.  Time of Delivery  13.33
        • d.  Documentation  13.34
      • 4.  Payment  13.35
        • a.  Price of Goods  13.36
        • b.  Place of Payment  13.37
        • c.  Preservation of Goods Pending Payment or Return  13.38
    • L.  Anticipatory Breach
      • 1.  Suspending Performance  13.39
      • 2.  Installment Contracts  13.40
    • M.  Excusing Performance  13.41
    • N.  Remedies for Breach
      • 1.  Remedies for Buyer’s Breach  13.42
        • a.  Delayed Performance  13.43
        • b.  Failure to Provide Specifications  13.44
      • 2.  Remedies for Seller’s Breach  13.45
        • a.  Nonconforming Goods  13.46
        • b.  Imperfect Delivery  13.47
        • c.  Avoiding the Contract  13.48
          • (1)  Refund and Restitution  13.49
          • (2)  Damages  13.50
          • (3)  Current Price  13.51
  • IV.  INTERNATIONAL INSTITUTE FOR THE UNIFICATION OF PRIVATE LAW (UNIDROIT)
    • A.  Introduction to UNIDROIT  13.52
    • B.  UNIDROIT Instruments  13.53
    • C.  Selected UNIDROIT Instruments  13.54
  • V.  UNIDROIT PRINCIPLES OF INTERNATIONAL COMMERCIAL CONTRACTS
    • A.  Introduction to UNIDROIT Principles  13.55
    • B.  Summary of UNIDROIT Principles
      • 1.  Purpose and Scope  13.56
      • 2.  Application of UNIDROIT Principles  13.57
      • 3.  Contract Form  13.58
      • 4.  Meaning of Terms  13.59
      • 5.  Good Faith and Fair Dealing  13.60
      • 6.  Prohibition of Inconsistent Behavior  13.61
      • 7.  Elements of Contracting
        • a.  Offer  13.62
        • b.  Acceptance  13.63
        • c.  Acceptance With Different Terms  13.64
        • d.  Missing Terms  13.65
        • e.  Authority of Agents  13.66
      • 8.  Forming a Valid Contract  13.67
        • a.  Mistake  13.68
        • b.  Reasons for Avoidance  13.69
      • 9.  Interpretation
        • a.  Determining Intent  13.70
        • b.  Words and Terms  13.71
      • 10.  Express and Implied Obligations  13.72
      • 11.  Third Party Rights  13.73
      • 12.  Performance  13.74
        • a.  Part Performance  13.75
        • b.  Hardship  13.76
      • 13.  Nonperformance  13.77
        • a.  Option to Cure  13.78
        • b.  Clauses Limiting Liability  13.79
        • c.  Force Majeure  13.80
        • d.  Specific Performance  13.81
      • 14.  Termination  13.82
        • a.  Anticipatory Repudiation  13.83
        • b.  Damages  13.84
          • (1)  Interest  13.85
          • (2)  Payment Methods  13.86
      • 15.  Set-off  13.87
      • 16.  Assignment of Rights, Transfer of Obligations, and Assignment of Contracts  13.88
      • 17.  Limitation Periods  13.89

Selected Developments

April 2018 Update

Revenue and Taxation Code §23304.1 provides that any contract made in California by a taxpayer during the time that the taxpayer’s corporate powers, rights, and privileges have been suspended or forfeited in accordance with Rev & T C §23301, §23301.5, or §23775 is voidable in accordance with Rev & T C §23304.5 at the instance of any party to the contract other than the taxpayer. “This means the suspended corporation cannot sell, transfer or exchange real property in California, and contracts entered into during the time of suspension are voidable … through legal action.” Casiopea Bovet, LLC v Chiang (2017) 12 CA5th 656, 662. See §2.70B.

In Western Sur. Co. v La Cumbre Office Partners, LLC (2017) 8 CA5th 125, the court held that under Corp C §17703.01(d), an LLC that was the sole manager of another LLC did not have actual authority to execute an indemnity agreement on behalf of LLC that it managed. However, the agreement was valid and binding because the other party did not have actual knowledge of the manager’s lack of authority. See §2.79.

In general, consent of the parties, or mutual assent, is an essential element of any valid contract. Harshad & Nasir Corp. v Global Sign Sys., Inc. (2017) 14 CA5th 523, 537; Esparza v Sand & Sea, Inc. (2016) 2 CA5th 781, 788. See §3.2.

Whether mutual assent exists—whether there has been a meeting of the minds—is determined by objective rather than subjective criteria. Harshad & Nasir Corp. v Global Sign Sys., Inc. (2017) 14 CA5th 523, 537; Esparza, 2 CA5th at 788. See §3.4.

One example of provisions that are void for illegality are loan provisions that violate the usury law. Hardwick v Wilcox (2017) 11 CA5th 975. See §3.37.

Agreements that California courts have ruled violative of public policy include an agreement to arbitrate claims for public injunctive relief under the Consumers Legal Remedies Act (CLRA) (CC §§1750–1784), the unfair competition law (UCL) (Bus & P C §§17200–17210), or the false advertising law (Bus & P C §§17500–17509). McGill v Citibank, N.A. (2017) 2 C5th 945, 951. See §3.40A.

In Esparza v Sand & Sea, Inc., supra, the court held that an employee handbook with an arbitration clause did not create an agreement to arbitrate when “[t]he welcome letter at the beginning of the handbook explicitly stated that ‘this handbook is not intended to be a contract (express or implied), nor is it intended to otherwise create any legally enforceable obligations on the part of the Company or its employees.’” 2 CA5th at 788. See §3.51.

In Norcia v Samsung Telecommunications Am., LLC (9th Cir 2017) 845 F3d 1279, 1286, the Ninth Circuit held that a mobile phone buyer was not bound by an arbitration provision in a phone’s “in-the-box” warranty brochure; there was no evidence that the buyer assented to the provision; the buyer’s silence did not constitute consent. See §§4.22, 4.64.

In Meyer v Uber Technols., Inc. (2d Cir 2017) 868 F3d 66, applying California law, the Second Circuit held that Uber’s smartphone app provided reasonably conspicuous notice of Uber’s terms of service. Notice of the terms was provided simultaneously with a user’s registration, and a reasonably prudent user would understand that the terms related to creation of a user’s account. The user in this case unambiguously manifested his consent to the terms of service by clicking the registration button, signing up for an account, and giving Uber his credit card information. See §4.65.

Civil Code §1636 expresses the paramount rule of contract interpretation—that “[a] contract must be so interpreted as to give effect to the mutual intention of the parties as it existed at the time of contracting, so far as the same is ascertainable and lawful.” See Mountain Air Enters., LLC v Sundowner Towers, LLC (2017) 3 C5th 744, 752; Medina v South Coast Car Co., Inc. (2017) 15 CA5th 671, 682; Wind Dancer Prod. Group v Walt Disney Pictures (2017) 10 CA5th 56, 68. See §5.5.

In Iqbal v Ziadeh (2017) 10 CA5th 1, 12, the court applied CCP §1859 to a release and held that, even though the plaintiff expressly acknowledged that the release was a general release and waived his rights under CC §1542, the general provisions did not supersede the specific provisions of the release, which limited its scope to certain specified classes of persons that did not include the defendant. See §5.18.

If a written contract is not integrated (i.e., is not the final and complete agreement of the parties), then the parol evidence rule does not prohibit the introduction of extrinsic evidence concerning any matter on which the agreement is silent and which is not inconsistent with its written terms. Kanno v Marwit Capital Partners II, L.P. (2017) 18 CA5th 987, 999. See §5.33.

A merger or integration clause is intended to confirm that no previous understandings or agreements exist between the parties other than those contained in the instant writing. The inclusion of an integration clause in a contract may be conclusive on the issue of integration. It will be given great weight, although it may not in itself be determinative. Kanno,18 CA5th at 1001 (presence of integration clause is not conclusive but is a factor). See §5.36.

Although evidence of course of performance may be relevant to determining the parties’ intent at the time of execution of a written contract, that evidence cannot be used to contradict or vary the unambiguous terms of the contract. Wind Dancer Prod. Group, 10 CA5th at 72. In the Wind Dancer case, the court held that evidence of the defendant’s prior course of conduct raised triable issues of material fact with respect to equitable estoppel. See §5.42.

In Farrar v Direct Commerce, Inc. (2017) 9 CA5th 1257, 1273, the court held that an arbitration provision with a carve-out for any claims relating to a confidentiality agreement between the company and the employee was unconscionable, but severable. In contrast, in Magno v The College Network, Inc. (2016) 1 CA5th 277, 292, the court held that an arbitration clause was not severable when it was “permeated” by several unconscionable terms; some provisions, including the arbitrator selection procedure, could only be remedied by rewriting the entire agreement. See §5.70.

In Poublon v C.H. Robinson Co. (9th Cir 2017) 846 F3d 1251, the Ninth Circuit held that an arbitration clause with a waiver of representative claims was not substantively unconscionable even though the waiver was not enforceable under California law. Further, the provisions regarding venue, confidentiality, limitations on discovery, sanctions, and unilateral modification all favoring the defendant were not substantively unconscionable. See §§5.77, 9.44.

In McGill v Citibank, N.A., supra, the California Supreme Court held that an agreement to arbitrate claims for public injunctive relief (i.e., “relief that has the primary purpose and effect of prohibiting unlawful acts that threaten future injury to the general public”) under the Consumers Legal Remedies Act (CLRA) (CC §§1750–1784), the unfair competition law (UCL) (Bus & P C §§17200–17210), or the false advertising law (Bus & P C §§17500–17509) was invalid and unenforceable. 2 CA5th at 961. See §§5.78, 9.47B, 9.48.

In Betancourt v Prudential Overall Supply (2017) 9 CA5th 439, 445, the court held that an employee’s PAGA claims were not arbitrable because the state, the real party in interest, was not bound by the employee’s predispute agreement to arbitrate. See §§5.78, 9.47B.

In Hardwick v Wilcox (2017) 11 CA5th 975, the court ruled that a unilateral general release of a borrower’s claims against a lender did not operate to waive the protections of the California usury laws. Such a waiver would be against public policy and unenforceable. See §5.92.

In Iqbal v Ziadeh (2017) 10 CA5th 1, 10, a personal injury case, the court held, as a matter of law, that a release agreement between a car dealership and the plaintiff, who had been seriously injured while working on a car, did not immunize the car’s owner. There was no evidence that the contractual relationship between the owner and the dealership made the owner an agent or otherwise under the control of the dealership. See §§5.94, 7.64.

If the parties have an express contract of indemnity, the scope of the duty to indemnify must be determined from the contract and not with reference to the doctrine of equitable indemnity, which is an independent doctrine. Oltmans Constr. Co. v Bayside Interiors, Inc. (2017) 10 CA5th 355, 361. See §6.51.

In G & W Warren’s, Inc. v Dabney (2017) 11 CA5th 565, 574, the court held that a guaranty secured only specified obligations; it could not be construed to guarantee obligations arising from other agreements, which were not listed as obligations secured. See §7.74.

The parties to a contract may agree to a shorter “private statute of limitations” applicable to actions between them, provided that the period is not so short as to be unreasonable or to give the party seeking to enforce it an undue advantage. Wind Dancer Prod. Group, 10 CA5th at 73 (incontestability clause providing for 24-month limitations period without benefit of discovery rule was not unreasonable or unenforceable). See §9.5.

Civil Code §1717 has no application if attorney fees are sought as an element of damages on a contract claim. If attorney fees are pled as damages in a breach of contract action, the plaintiff has a right to have a jury determine the amount of attorney fees resulting from its alleged breach. Monster, LLC v Superior Court (2017) 12 CA5th 1214, 1230. See §9.13.

The right to recover attorney fees under CC §1717(a) applies regardless of which party initiates the action. Pacific Custom Pools, Inc. v Turner Constr. Co. (2000) 79 CA4th 1254. As a first step, however, the court must determine whether the parties entered into a contract for payment of attorney fees, and if they did, what was the scope of their agreement regarding fees. Mountain Air Enters., LLC v. Sundowner Towers, LLC, supra. See §9.13.

If one party obtains an unqualified victory in a contract dispute (including a defendant who defeats the plaintiff’s entire claim), that party is considered the prevailing party as a matter of law for purposes of CC §1717. If, however, the results of the litigation are mixed, the court has discretion to determine that no party has prevailed. DisputeSuite.com, LLC v Scoreinc.com (2017) 2 C5th 968, 973 (party that enforced forum selection clause not entitled to attorney fees as prevailing party). In Burkhalter Kessler Clement & George LLP v Hamilton (Jan. 8, 2018, No. G054337) ___ CA5th ___ , 2018 Cal App Lexis 16, the court held that there can be more than one prevailing party if there are more than two parties to a lawsuit involving an alleged breach of a contract and the case involves independent claims that must be separately examined. See §9.17.

In Los Angeles Unified Sch. Dist. v Safety Nat’l Cas. Corp. (2017) 13 CA5th 471, 483, the court held that, because the parties to an arbitration agreement did not expressly agree to apply FAA procedures, California state court procedures applied, and the trial court had authority under CCP §1281.2(c) to deny the motion to compel arbitration based on the possibility of conflicting rulings in pending litigation with third parties. See §9.40.

The courts in both Harshad & Nasir Corp. v Global Sign Sys., Inc. (2017) 14 CA5th 523, 543, and Esparza v Sand & Sea, Inc. (2016) 2 CA5th 781, 788, held that an employee handbook with an arbitration clause did not create an agreement to arbitrate when each handbook expressly stated that the handbook was not intended to be a contract. See §9.41A.

In Baxter v Genworth N. Am. Corp. (2017) 16 CA5th 713, the court held that an arbitration agreement was procedurally unconscionable because it was presented to the employee as a condition of continued employment, with no opportunity to negotiate. See §9.43.

In Baxter v Genworth N. Am. Corp., supra, the court held that provisions in an arbitration agreement restricting communications with other employees, limiting discovery to the extent that would be inadequate to vindicate an employee’s statutory rights, shortening the limitations period to pursue relief for statutory claims, and requiring arbitration of statutory claims before the administrative investigation were substantively unconscionable. See §9.44.

In Jensen v U-Haul Co. of Cal. (Dec. 11, 2017, No. E065887) ___ CA5th ___ , 2017 Cal. App. Lexis 1096, the court held that an arbitration clause in an equipment rental contract was not enforceable against a nonsignatory employee of the company that rented the equipment because the employee was not a third party beneficiary of the contract; there was no indication of any intent to benefit the employee. See §9.50.

The parties themselves may agree to limit the scope of the arbitrator’s authority by expressly providing for review of the award in the arbitration agreement. Harshad & Nasir Corp., 14 CA5th at 535. See §9.52.

In a suit for wrongfully denied disability benefits, prejudgment interest was recoverable only from the time the county retirement board erroneously denied the application for benefits, even though the trial court’s award of benefits was retroactive to an earlier date. Flethez v San Bernardino County Employees Retirement Ass’n (2017) 2 C5th 630. See §10.26.

In general, a liquidated damages provision will be considered unreasonable, and therefore unenforceable, if it does not bear a reasonable relationship to the range of actual damages that the parties could have anticipated would flow from a breach. Whether the parties reasonably estimated the damages that were foreseeable under the circumstances is a question of fact. Krechuniak v Noorzoy (2017) 11 CA5th 713, 723. See §10.42.

Under CC §3275, any contractual provision by which money or property could be forfeited regardless of the actual damage suffered may be unenforceable as a penalty. If a liquidated damages clause is found to be a penalty, the party that has suffered damage may collect only the amount of actual damages it has sustained. Vitatech Int’l, Inc. v Sporn (2017) 16 CA5th 796, 806. See §10.42.

In Guan v Hu (2017) 12 CA5th 406, the court held that, to be entitled to consequential damages under CC §1692, a party who has sought rescission must either be awarded rescissionary relief first (12 CA5th at 417) or have succeeded on a claim for breach of contract (12 CA5th at 419). The plaintiff in Guan had done neither, so the court of appeal reversed the trial court’s judgment in plaintiff’s favor. See §11.57.

In Sanjiv Goel, M.D., Inc. v Regal Med. Group, Inc. (2017) 11 CA5th 1054, the court of appeal held that the trial court properly considered a variety of evidence to determine the reasonable market value of emergency treatment rendered by an interventional cardiologist, including expert testimony concerning fees charged by other physicians for similar emergency services. See §11.72.

About the Authors

GEORGE W. KUNEY is a Lindsay Young Distinguished Professor of Law and Director of the Clayton Center for Entrepreneurial Law at the University of Tennessee College of Law, Knoxville, Tennessee, where he teaches courses in business associations, bankruptcy, contracts, contract drafting, commercial leasing, remedies, property, and business law. He received his B.A., majoring in economics, from the University of California, Santa Cruz; his J.D., cum laude, from the University of California, Hastings College of the Law; and his M.B.A., with a new venture management emphasis, from the University of San Diego. Before his appointment to the faculty of the University of Tennessee School of Law, he was a partner in the San Diego office of Allen Matkins Leck Gamble & Mallory LLP, where he concentrated his practice on insolvency and reorganization matters. Previously, he practiced with Howard, Rice, Nemerovski, Canady, Robertson & Falk LLP and Morrison & Foerster LLP in his home town of San Francisco. He is a member of the State Bars of California and Tennessee and practices law and consults in matters nationwide. He is the author or co-author of numerous books (including Contracts: Transactions & Litigation (West 2011); The Elements of Contract Drafting (West 2014); Business Reorganizations (LexisNexis 2013); and Bankruptcy in Practice (ABI 2013)) and articles in the areas of business transactions, business litigation, bankruptcy, contract and property law, and Chapter 11 reorganization. He can be reached at http://law.utk.edu/people/george-kuney/.

DONNA C. LOOPER is an Adjunct Professor of Law at the University of Tennessee College of Law, Knoxville, Tennessee, where she teaches legal process and related courses. She received her A.B. from Barnard College, Columbia University, New York, and her J.D., cum laude, from the University of California, Hastings College of the Law, San Francisco. She clerked for the Chief Judge of the United States District Court for the Eastern District of Louisiana and then for the United States Court of Appeals for the Ninth Circuit. Before teaching at the University of Tennessee School of Law, Ms. Looper was a Senior Attorney for the California Court of Appeal, Fourth District, Division One, and prior to that was in private practice in San Diego and San Francisco. She is the co-author with George W. Kuney of A Civil Matter: A Guide to Civil Procedure and Litigation (West 2014); Mastering Appellate Advocacy and Process (Carolina Academic Press 2011); Mastering Intellectual Property (Carolina Academic Press 2009); and Mastering Legal Analysis and Drafting (Carolina Academic Press 2009). She is a member of the State Bars of California and Tennessee and practices and consults in matters nationwide.

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