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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
Print BU33610

looseleaf, updated April 2023

$ 490.00
  • Overview
  • Table of Contents
  • Selected Developments
  • Authors
  • OnLAW System Requirements
  • Filing Instructions
  • Page List
  • Specifications

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, 1568.5; 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.  Model Computer Information Transactions Act (MCITA)  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
    • F.  Smart Contracts; Blockchain Technology   4.67

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.  Forum Selection Clauses in California Federal Courts  5.46A
      • 5.  Venue Selection Clauses  5.47
      • 6.  Construction Contracts (CCP §410.42)  5.48
      • 7.  Employment Agreements (Lab C §925)  5.48A
      • 8.  Letters of Credit (Com C §5116(e))  5.49
      • 9.  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.  Non­Commercial 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 or Subsequent 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.  Standing to Bring a Breach of Contract Action as a 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.  Sufficiency of Performance Determined by a Third Party  8.2A
      • 3.  Performance in Manner Directed by Creditors (CC §1476)  8.3
      • 4.  Effect of Partial Performance (CC §1477); Indivisible and Divisible Contracts  8.4
      • 5.  Payment Defined (CC §1478)  8.5
      • 6.  Payment by Check or Promissory Note (Com C §3310)  8.6
      • 7.  Application of Performance to Two or More Obligations (CC §1479)  8.7
      • 8.  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
      • 9.  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
  • V.  INTENTIONAL INTERFERENCE WITH CONTRACTUAL RELATIONS  8.78

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(a), 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.  Nonconsumer 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.  PREDISPUTE NONDISCLOSURE AND NONDISPARAGEMENT CLAUSES IN SEXUAL ASSAULT OR SEXUAL HARASSMENT CASES (42 USC §19403)  9.29A
  • VII.  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 Exemption for Transportation Workers  9.39A
        • c.  FAA Preemption of State Law  9.40
        • d.  FAA Saving Clause  9.40A
        • e.  Parties’ Agreement; Arbitration Procedures; Judicial Review   9.40B
        • f.  Labor Code §432.6 (AB 51) and FAA Preemption  9.40C
        • g.  Sexual Harassment and Sexual Assault Claims; 9 USC §§401–402  9.40D
      • 3.  Arbitrability; Scope of Arbitration Clause
        • a.  Presence or Absence of Delegation Clause  9.41
        • b.  Presumption of Arbitrability but Agreement to Arbitrate Required  9.41A
        • c.  Scope of Arbitration Clause  9.41B
    • E.  Defenses to Enforcement of Arbitration Clause
      • 1.  Unconscionability  9.42
        • a.  Procedural Unconscionability
          • (1)  Unequal Bargaining Power; Oppression or Surprise  9.43
          • (2)  Adhesion Contracts  9.43A
        • b.  Substantive Unconscionability
          • (1)  Overly Harsh, Unfairly One-Sided, or Unreasonably Unfavorable Contract Terms  9.44
          • (2)  Lack of Mutuality  9.44A
          • (3)  Examples of Agreements Found Not Substantively Unconscionable  9.44B
      • 2.  Fraud in the Execution  9.45
      • 3.  Waiver of Right to Compel Arbitration  9.46
      • 4.  Unwaivable Statutory Rights
        • a.  Arbitration of Statutory Claims   9.46A
        • b.  Armendariz: Enforceability Subject to Particular Scrutiny  9.47
        • c.  Armendariz Requirements  9.47A
        • d.  Public Purpose; PAGA Claims  9.47B
        • e.  Enforceability Analysis  9.47C
        • f.  Private Claims  9.47D
      • 5.  Other Defenses  9.48
    • F.  Arbitration of Attorney Fee Disputes  9.49
    • G.  Obligation of Nonsignatories to Arbitrate
      • 1.  General Rule: Nonsignatories Not Bound  9.50
      • 2.  Preexisting Relationship; Successor Business Entities  9.50A
      • 3.  Legal Theories for Enforcement Against Nonsignatories  9.50B
    • H.  Scope of Arbitrator’s Authority to Grant Relief  9.51
    • I.  Finality of Arbitration Award; Judicial Review
      • 1.  General Rule: Final and Binding  9.52
      • 2.  Exceptions  9.52A
      • 3.  CAA Provisions for Judicial Review  9.52B
      • 4.  FAA Provisions for Judicial Review  9.52C
      • 5.  Drafting Considerations  9.52D
    • J.  Optional AAA Appellate Arbitration  9.52E
    • K.  Arbitrations Involving Foreign Party or Foreign Property  9.52F
    • L.  Judicial Arbitration (CCP §§1141.10–1141.31)  9.53
  • VIII.  MEDIATION
    • A.  Generally  9.54
    • B.  Forms of Mediation Clauses  9.55
  • IX.  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 and Time 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; Conditions  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 2023 Update

For an interesting history of the early development of California law, including the Civil Code, see Tufeld Corp. v Beverly Hills Gateway, L.P. (2022) 86 CA5th 12. See §1.5.

In Rogers v Roseville SH, LLC (2022) 75 CA5th 1065, 1075, the court found that there was insufficient evidence to establish that the son of a resident at an elder care facility had actual or ostensible authority to bind the resident to an arbitration agreement. Although the son signed the arbitration agreement as the resident’s “representative,” that term was not defined in the residency agreement or the arbitration agreement, and the signature blocks in the residency agreement and arbitration agreement did not identify the son as the resident’s agent. Moreover, the son averred that the resident did not direct him to sign the admission documents and never told him that he had the authority to sign any medical document or arbitration agreement, and there was no evidence that the resident was aware that his son had signed an arbitration agreement. See §§2.30, 9.41A.

Under CC §1568.5, a minor’s representation that their parent or legal guardian has consented to the contract will not be deemed to be consent for purposes of contract formation. In enacting CC §1568.5, the legislature was concerned that companies wishing to obtain consent to the terms and conditions of various internet services would often seek consent passively, through the minor child of a parent or guardian, and wanted to prevent contract formation in that manner. See §3.7.

In Fettig v Hilton Garden Inns Mgmt. (2022) 78 CA5th 264, 267–68, the court held that if a party’s consent is induced by a third party, “the contract is voidable by the victim unless the other party to the transaction in good faith and without reason to know of the duress either gives value or relies materially on the transaction’” (quoting Restatement (Second) of Contracts §175 (1981)). The court explained that “duress by a third person cannot void a contract when the other contracting party did not know about the duress and relied in good faith.” 78 CA5th at 265. See §3.21.

The federal Speak Out Act (42 USC §§19401–19404) prohibits the judicial enforceability of a nondisclosure clause or nondisparagement clause in an agreement entered into before a dispute arises involving sexual assault or sexual harassment in violation of federal, tribal, or state law. See §3.37.

Tufeld Corp. v Beverly Hills Gateway, L.P. (2022) 86 CA5th 12 involved a commercial lease with a term longer than 99 years. The court held that the lease was illegal and void to the extent that it exceeded 99 years, and severed the void portion. The court’s opinion includes a helpful discussion of the distinction between void and voidable contracts—in general, contractual provisions that are prohibited by statute are void. However, there is an exception if the statute is not for the benefit of the public at large or if the public benefit is only incidental. An example is the Statute of Frauds. Under this so-called private benefit exception, the contract provision is voidable but not void. See §3.39.

An insured’s assignment of both the underinsured motorist and the medical payments benefits under an automobile policy to a hospital association as payment for emergency care in lieu of or in addition to the payments that health insurers would provide was contrary to public policy and unenforceable. Dameron Hosp. Ass’n v AAA N. Cal., Nev. & Utah Ins. Exch. (2022) 77 CA5th 971. See §3.40A.

As a general rule, California courts do not concern themselves with the adequacy of consideration. “PayPal’s provision of online payment services may be consideration for appellants’ assignment of interest on pooled funds even if PayPal also received additional payment for their services. It is not for the court to second guess the sufficiency of that consideration.” Chen v PayPal (2021) 61 CA5th 559, 577. See §3.43.

In Mendoza v Trans Valley Transp. (2022) 75 CA5th 748, 788–91, the court found that a former employee did not assent to arbitration of his wage-and-hour claims by working for his former employer after receiving a copy of an employee handbook that contained an arbitration policy. The parties did not enter into an implied-in-fact agreement to arbitrate when (1) the handbook did not expressly address the effect of a failure to execute the arbitration policy or provide that on commencing employment, the former employee was deemed to have consented to arbitration; (2) the handbook, and the forms signed by the former employee acknowledging receipt of the handbook, declared that they (a) did not create any binding obligations, (b) were designed for quick reference, and (c) provided general information; and (3) acknowledgment forms did not mention arbitration policy. See §§3.51, 4.31, 9.41A.

In Munoz v Patel (2022) 81 CA5th 761, 772 (citations omitted), the court stated the rule that “[p]reliminary negotiations or an agreement for future negotiations are not the functional equivalent of a valid, subsisting agreement.” See §4.16.

A “click-wrap” agreement is a contract formed by a user’s action of clicking on a button or icon on a web page, or a screen launched as part of the installation of a software program on the user’s computer, to indicate acceptance of contract terms. Click-wrap agreements are more accurately referred to as “click-through” or “click-to-accept” agreements and are now ubiquitous in online retail sales transactions. See Berman v Freedom Fin. Network, LLC (9th Cir 2022) 30 F4th 849, 856; Sifuentes v Dropbox, Inc. (ND Cal, June 29, 2022, No. 20–cv–07908–HSG) 2022 US Dist Lexis 125273 (plaintiff accepted Dropbox’s 2011 terms of service by clicking “I agree” box). See §4.63.

Website design is a crucial issue that will generally determine the enforceability of click-wrap agreements. In Sellers v JustAnswer LLC (2021) 73 CA5th 444, the court denied a petition to compel arbitration because notices on the defendant’s website were not sufficiently clear and conspicuous. See also Berman v Freedom Fin. Network, LLC, supra (design and content of website did not adequately call to plaintiffs’ attention either existence of terms and conditions or fact that plaintiffs agreed to be bound by those terms by clicking on “continue” button; enforceable agreement to arbitrate was never formed); Sifuentes v Dropbox, Inc., supra (plaintiff had no actual or inquiry notice of post-2011 changed terms of service). See §§4.65–4.66.

In Sifuentes v Dropbox, Inc., supra, the court found that the plaintiff’s continued use of the defendant’s service was irrelevant to the question of whether the changes to the defendant’s terms of service were enforceable. The court found that there was no evidence that the plaintiff had actual or inquiry notice of the changed terms. See §4.66.

In JJD-HOV Elk Grove, LLC v Jo-Ann Stores, LLC (2022) 80 CA5th 409, 423, the court stated that the general rule that a court will not alter a contract or make a new contract for the parties applies “even if a contract gives one party what might appear to be an unfair windfall.” See §5.8.

In Ramirez v Charter Communications (2022) 75 CA5th 365, 387, the court found that the arbitration agreement at issue was permeated with many unconscionable terms, and thus not severable. The agreement was an adhesion contract, inasmuch as it was a mandatory condition of employment. See §§5.71, 5.74.

A hospital’s standard printed admissions form was an adhesion contract. Dameron Hosp. Ass’n v AAA N. Cal., Nev. & Utah Ins. Exch. (2022) 77 CA5th 971, 992. See §5.74.

In Ramirez v Charter Communications, supra, the court found that an employment-related arbitration agreement had a low degree of procedural unconscionability but the degree of substantive unconscionability was high enough to render the agreement unenforceable. See §5.75.

In Mills v Facility Solutions Group, Inc. (2022) 84 CA5th 1035, the court found that the arbitration agreement at issue was procedurally unconscionable; it was in a small font and was difficult to read. See §5.76.

In Nelson v Dual Diagnosis Treatment Ctr., Inc. (2022) 77 CA5th 643, 662, the court held that an agreement between a residential treatment facility and a psychiatric patient was procedurally unconscionable; it was presented to the patient experiencing a psychotic episode on a take-it-or-leave-it basis, and referenced American Arbitration Association rules that were contrary to the agreement’s express terms. See §5.76.

In Nunez v Cycad Mgmt. (2022) 77 CA5th 276, the court held that an employer’s failure to provide a Spanish-speaking employee with a Spanish translation of the arbitration agreement or an arbitration fee schedule demonstrated oppression and surprise amounting to procedural unconscionability; the employer knew the employee was not proficient in English, yet did not explain the arbitration provision in Spanish or provide a translation, and did not allow the employee time to review, ask questions, or have the agreement translated. The court also held that the arbitration agreement was substantively unconscionable; it allowed the arbitrator to shift all attorney fees and costs to the employee and severely limited discovery. See §§5.76–5.77.

In George v eBay, Inc. (2021) 71 CA5th 620, 631, the court ruled that an allegation by on-line sellers that their user contract with the operator of an e-commerce website was an adhesion contract offered on a take-it-or-leave-it basis was insufficient to show procedural unconscionability; the sellers did not allege that they had no alternatives, e.g., other online marketplaces through which to sell their products. See §5.76.

In Mills v Facility Solutions Group, Inc., supra, the court held that an employer’s arbitration agreement was substantively unconscionable; it required the employee to pay for filing, postponement, and attorney fees and costs for some claims absent bad faith, contrary to the Labor Code, lacked adequate discovery, conflicted with CCP §1281.12, and waived a representative Private Attorneys General Act of 2004 (PAGA) (Lab C §§2698–2699.5) claim. See §5.77.

In Nelson v Dual Diagnosis Treatment Ctr., Inc. (2022) 77 CA5th 643, 663, the court ruled that a psychiatric treatment facility’s enrollment agreement with an arbitration clause was substantively unconscionable; it required the patient’s unilateral release of claims for the company’s negligence, and its reimbursement and attorney fee provision made the patient the financial guarantor in any dispute arising from his presence at the facility. See §§5.77, 9.44A.

In Ramirez v Charter Communications (2022) 75 CA5th 365, 373, the court held that an arbitration clause in an employment agreement was substantively unconscionable based on (1) its restriction on the statute of limitations for claims under the California Fair Employment and Housing Act (FEHA) (Govt C §§12900–12996), (2) a provision granting the prevailing party any remedy (including attorney fees) available under applicable law, (3) a separate provision granting attorney fees in connection with a successful motion to compel arbitration, and (4) a limitation on the number of depositions. See §5.77.

In George v eBay, Inc. (2021) 71 CA5th 620, the court found that a provision of a contract between the sellers and eBay for “final value fees” to be payable by the sellers for transactions that were refunded as a result of buyers initiating a dispute resolution process did not render the contract substantively unconscionable; the fees legitimately incentivized the sellers to resolve disputes informally with buyers and thus benefited all users of the website. Further, eBay’s policy of deleting duplicate listings of the same item and charging sellers an insertion fee for placing a duplicate listing was not substantively unconscionable. See §5.77.

In Chen v PayPal (2021) 61 CA5th 559, 581–82, the court held that provisions in a contract between an online financial services provider and users of an online marketplace that (1) allowed the provider to retain any interest earned on funds attributable to users while those funds were maintained in a pooled account and (2) allowed buyers 180 days in which to dispute purchases on certain grounds were not substantively unconscionable. See §5.77.

In Viking River Cruises v Moriana (2022) ___ US ___, 142 S Ct 1906, 1924–25, the U.S. Supreme Court held that “the FAA preempts the rule of Iskanian insofar as it precludes the division of PAGA actions into individual and non-individual claims through an agreement to arbitrate.” Thus, the employee’s waiver of her individual PAGA claims was enforceable. Nevertheless, the Court held that “the aspect of Iskanian” invalidating “wholesale waiver of PAGA claims” was not preempted by the Federal Arbitration Act (FAA) (9 USC §§1–16). See §§5.78, 9.40, 9.47B.

If the court finds that unconscionable provisions have tainted other sections of the contract, it may deny enforcement of the entire contract. See, e.g., Mills v Facility Solutions Group, Inc. (2022) 84 CA5th 1035 (pervasive unconscionability; severance denied); Nelson v Dual Diagnosis Treatment Ctr., Inc. (2022) 77 CA5th 643, 665–66; Ramirez v Charter Communications (2022) 75 CA5th 365, 387 (arbitration agreement was “permeated by significant unconscionable terms” and thus not severable). See §5.79.

Any effort to import the laws of a different state into a contract to enforce a noncompete clause may not succeed. In Nuvasive, Inc. v Miles (Del Ch, Aug. 26, 2019, No. 2017–0720–SG) 2019 Del Ch Lexis 325, an employment contract included a choice of law provision that selected Delaware law to govern nonsolicitation and noncompete covenants. The court held that the covenants were unenforceable because Delaware’s interest in freedom of contract was outweighed by California’s interest in overseeing the conditions of employment relationships in that state by (among other things) prohibiting the enforcement of noncompete clauses. See §6.38.

In NetOne, Inc. v Panache Destination Mgmt. (Oct. 28, 2020, No. 20–cv–00150–DKW–WRP) 2020 US Dist Lexis 201129, NetOne planned to sponsor an event for 500 people in Hawaii in late March 2020. Panache agreed to provide services for the event, and NetOne made deposits of over $150,000 to Panache. NetOne cancelled the event in response to public health guidance from the Hawaii Governor, and when Panache refused to return its deposits, NetOne brought suit, arguing that Panache’s refusal to return the deposits violated the force majeure clause in their agreement. The district court granted Panache’s motion for judgment on the pleadings, holding there was nothing in the contract providing for the return of the deposits in the event of a force majeure. See §8.32.

Effective December 7, 2022, the federal Speak Out Act (Pub L 117–224, 136 Stat 22904), codified at 42 USC §§19401–19404, prohibits judicial enforcement of predispute nondisclosure and nondisparagement contract clauses in disputes relating to claims of sexual assault or sexual harassment. The Act applies only to nondisclosure and nondisparagement clauses signed before a dispute arises and makes such clauses unenforceable in sexual assault or sexual harassment disputes when the conduct is alleged to have violated federal, state, or tribal law. See §9.29A.

In Aronow v Superior Court (2022) 76 CA5th 865, the court held that, in California, when a litigant in a judicial proceeding has qualified for in forma pauperis status, a court may not compel the indigent party to pursue an expensive private alternative proceeding that the litigant cannot afford and that, in effect, negates the benefit and purpose of the party’s in forma pauperis status. Although courts may generally outsource to private arbitrators all or part of the court’s judicial duties with respect to litigants who can afford private arbitration services, “a court may not engage in such outsourcing in the case of in forma pauperis litigants when the practical effect is to deprive such litigants of the equal access to justice that in forma pauperis status was intended to afford.” 76 CA5th at 880 (citation omitted). See §9.38.

Because only the slightest factual nexus to interstate commerce will bring a transaction within the FAA, an arbitration agreement between drivers and their employer may “involve” interstate commerce, thus triggering application of the FAA (see ), but not trigger the transportation worker exemption because the driver was not “engaged” in interstate commerce. That exemption applies only to those workers actually engaged in the movement of goods in interstate commerce. Mendoza v Trans Valley Transp. (2022) 75 CA5th 748, 762–63 (parties conceded plaintiffs were transportation workers). See, e.g., Evenskaas v California Transit, Inc. (2022) 81 CA5th 285, 296 (transportation worker exemption inapplicable to paratransit drivers’ contract). See §9.39A.

Effective March 3, 2022, under 9 USC §§401–402, no predispute arbitration agreement or predispute joint-action waiver is valid or enforceable with respect to cases involving sexual harassment or sexual assault. Moreover, the validity and enforceability of the agreement or waiver are to be determined by a court, not by an arbitrator. 9 USC §402(b). See §9.40D.

In Kokubu v Sudo (2022) 76 CA5th 1074, 1084–91, the court found that the moving party’s right to compel arbitration had been waived when it delayed 2 years in seeking arbitration, invoked “litigation machinery,” and deprived the opposing parties of the benefits of arbitration by engaging in extensive litigation activity, including case management conferences, motion filings, seeking ex parte relief, and pursuing discovery. See §9.46.

In Morgan v Sundance (2022) ___ US ___, 142 S Ct 1708, 1713–14, the Supreme Court held that under the FAA, federal courts may not condition a waiver of the right to arbitration on a showing of prejudice, stating: “The FAA’s ‘policy favoring arbitration’ does not authorize federal courts to invent special, arbitration-preferring procedural rules.… [9 USC §6] instructs that prejudice is not a condition of finding that a party, by litigating too long, waived its right to stay litigation or compel arbitration under the FAA.” See §9.46.

As noted above, in Viking River Cruises v Moriana (2022) ___ US ___, 142 S Ct 1906, 1924, the U.S. Supreme Court ruled that PAGA claims could be divided into individual and nonindividual claims in an arbitration agreement and confirmed that waivers of wholly representative PAGA claims were unenforceable. But in Gavriiloglou v Prime Healthcare Mgmt., Inc. (2022) 83 CA5th 595, 605, the California court of appeal clarified that “[w]hat the Supreme Court called, as shorthand, an ‘individual PAGA claim’ is not actually a PAGA claim at all. It would exist even if PAGA had never been enacted. It is what we are calling, more accurately, an individual Labor Code claim.” See §9.47B.

In general, only the signatory parties to an arbitration agreement may enforce it. Pacific Fertility Cases (2022) 85 CA5th 887. In Pacific Fertility Cases, finding that equitable estoppel did not apply, the court ruled that there are two situations in which equitable estoppel may apply in the context of arbitration: First, when a signatory to an arbitration clause must rely on the terms of the underlying agreement to assert claims against the nonsignatory; and second, when the claims against the nonsignatory are founded on or inextricably connected with the obligations imposed by the underlying agreement. See §§9.50, 9.50B.

In Starr v Mayhew (2022) 83 CA5th 842, 850, the court emphasized that the standard of any judicial review of an arbitration award is “highly deferential.” In the court’s view, the fact that the parties have chosen an arbitral forum means that the parties expect finality and the arbitrator’s decision should end the dispute. See §9.52.

In Honchariw v FJM Private Mortgage Fund, LLC (2022) 83 CA5th 893, the court found that an arbitrator’s decision enforcing an unreasonable liquidated damages provision in a mortgage contract exceeded the arbitrator’s powers, and thus was reviewable by the court. See §9.52B.

In Lewis v Simplified Labor Staffing Solutions, Inc. (2022) 85 CA5th 983, the court held that, under a predispute agreement to arbitrate all claims arising from the employment relationship, arbitration had to be compelled as to the PAGA claims because the FAA, construed by the U.S. Supreme Court in Viking River Cruises to be applicable to PAGA claims, preempted California case law that had found predispute agreements to arbitrate PAGA claims unenforceable based on the absence of state consent. In the Lewis case, the question whether nonindividual PAGA claims had to be arbitrated was a matter to be determined by the arbitrator because the parties’ agreement incorporated the rules of the specified arbitration provider, which made clear that a determination regarding the scope of the arbitration clause was an issue for the arbitrator to address. See §9.47B.

In Moore v Centrelake Med. Group, Inc. (2022) 83 CA5th 515, the plaintiff’s personally identifiable information had been stolen in a data breach. The court held that the plaintiffs had adequately pleaded general damages under the benefit-of-the-bargain theory because the plaintiff alleged the breach of a contractually binding promise to keep the data secure. Benefit-of-the-bargain damages compensate for a plaintiff’s lost expectation interest. See §§10.3, 10.8.

In JJD-HOV Elk Grove, LLC v Jo-Ann Stores, LLC (2022) 80 CA5th 409, 422–23, the court found that a cotenancy provision in a commercial lease, which allowed the tenant to pay substitute rent if the shopping center did not have either three anchor tenants or 60 percent of space leased, was not a liquidated damages provision or a forfeiture. See §10.42.

The most common action for specific performance is one to enforce an arbitration agreement through a motion to compel arbitration. See Nelson v Dual Diagnosis Treatment Ctr., Inc. (2022) 77 CA5th 643, 653. See §11.7.

In Fettig v Hilton Garden Inns Mgmt. (2022) 78 CA5th 264, 267–68, the court held that if a party’s consent is induced by a third party, “‘the contract is voidable by the victim unless the other party to the transaction in good faith and without reason to know of the duress either gives value or relies materially on the transaction’” (quoting Restatement (Second) of Contracts §175 (1981)). See §11.50.

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 University of California College of the Law, San Francisco; 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 https://law.utk.edu/directory/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 University of California 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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