6. Performance, Modification, & Excuse

Question 1

What is a condition to the buyer’s duty to accept and pay for goods?

Answer 1

The seller’s tender of delivery.

Question 2

What is a condition to the seller’s duty to tender delivery?

Answer 2

Buyer’s tender of payment.

Question 3

What are non-carrier cases,

what must the seller do?

Answer 3

Non-carrier cases are contracts in which it appears that the parties DO NOT intend for the goods to be moved by common carrier.

In non-carrier cases, the seller MUST:
* Make conforming goods available to the buyer
* Provide necessary notifications for delivery
* Allow a reasonable time for the buyer to take possession.

Question 4

What are the requirements for a seller’s tender of goods?

Answer 4

1. At a reasonable hour
2. Goods kept available for the period reasonably necessary for buyer to take possession.

Question 5

What must the buyer furnish to receive the goods?

Answer 5

Facilities reasonably suited to RECEIVING the goods.

Question 6

What characterizes carrier cases?

Answer 6

Contracts where the parties intend for the goods to be moved by common carrier.

Question 7

What are the seller’s duties in a shipment contract?

Answer 7

Unless otherwise specified, contracts are presumed to be shipment contracts where the contract requires shipment by a third-party carrier. Here, the seller’s duties are:
1. Put the goods in possession of a carrier
2. Arrange transportation to the buyer
3. Provide necessary documents for possession
4. Promptly notify the buyer that goods have been shipped.

Question 8

Failure to notify or arrange proper shipment ONLY justifies rejection if

Answer 8

it causes material delay or loss.

Question 9

In a shipment contract, when does the risk of loss pass from the seller to the buyer?

Answer 9

When the seller duly delivers the goods to the third-party carrier.

Question 10

What are the obligations of the seller in a destination contract?

Answer 10

1. Deliver conforming goods to a specific destination
2. Put and hold conforming goods at the buyer’s disposition at the specific location
3. Provide necessary notice of tender
4. Furnish required documents for the buyer to receive delivery.

Question 11

What does F.O.B., Seller’s Place of Shipment stand for and what are its implications?

Answer 11

Free On Board contract at the seller’s place of shipment, the seller’s need ONLY, at his expense and risk, put the goods in possession of the carrier.

Question 12

In an F.O.B. contract at the seller’s place of shipment, who bears the risk of loss?

Answer 12

The buyer bears the risk of loss if goods are damaged in transit.

Question 13

what are the implications of F.O.B., the destination?

Answer 13

If the contract is F.O.B. the destination, the seller MUST, at his expense and risk, tender delivery of the goods at the destination location.

Question 14

In an F.O.B. the destination, who bears the risk of loss?

Answer 14

The seller bears the risk of loss if goods are damaged in transit.

Question 15

Free alongside contracts

Answer 15

In contracts that specify the delivery is free alongside (i.e., “F.A.S.”), the seller MUST:
i.) deliver the goods alongside the vessel (i.e., in the manner usual at the port of delivery); or
ii.) on a dock designated by the buyer; and
iii.) obtain and tender a receipt for the goods.

Question 16

What is the buyer’s duty regarding payment?

Answer 16

The buyer’s tender of payment is a condition to the seller’s duty to tender and complete delivery.

Question 17

When are tender of goods effected?

Answer 17

Tender is effected when the seller:
i.) makes conforming goods available for the buyer’s disposition; and
ii.) gives the buyer notice sufficient to enable the buyer to take delivery

Question 18

What constitutes a sufficient tender of payment?

Answer 18

When made by any means current in ordinary business unless the seller demands cash and gives a reasonable extension of time.

Question 19

What is the rule regarding a buyer’s payment by check?

Answer 19

It is conditional and will be defeated if the check is NOT honored upon presentment.

Question 20

What rights does a buyer have regarding inspection of goods?

Answer 20

The buyer has a right to inspect goods upon tender or delivery BEFORE making payment or acceptance.

Question 21

Non-effects of Contracts Requiring Payment Before Inspection

Payment before inspection DOES NOT count as:

Answer 21

1. acceptance of goods

or

2. limit the buyer’s inspection rights and remedies

Question 22

If a contract requires payment before inspection, when can nonconformity of the goods excuse payment?

Answer 22

• Nonconformity appears without inspection
• Documents are forged or materially fraudulent.

Question 23

In a shipment contract, when does the buyer’s risk of loss pass?

Answer 23

When the goods are delivered to the carrier.

Question 24

In a destination contract, when does the buyer’s risk of loss pass?

Answer 24

When the goods are tendered at a particular destination by the carrier.

Question 25

What happens if goods are totally destroyed before the risk of loss passes to a buyer and without the fault of either party?

Answer 25

The contract is VOID and both parties are relieved of obligations.

Question 26

Buyer’s Risk of Loss-Bailee

If the goods are held by a bailee to be delivered without being moved, the risk of loss passes to the buyer when:

Answer 26

(1) buyer receives a negotiable document of title covering the goods;

(2) when the bailee acknowledges the buyer’s right to possess the goods; or

(3) AFTER the buyer receives a nonnegotiable document of title or other written direction to deliver the goods to the buyer, once the buyer has had a reasonable time to present the document or direction to the bailee.

Question 27

Buyer’s Risk of Loss When Seller is A Merchant

Answer 27

If the seller is a merchant, the risk of loss passes to the buyer when the buyer receives (i.e., takes physical possession of) the goods.

Question 28

Buyer’s Risk of Loss When Seller is NOT a Merchant

Answer 28

If the seller is NOT a merchant, the risk of loss passes to the buyer upon tender of delivery.

Question 29

Effect of Breach on Risk of Loss

What is the rule regarding seller’s nonconforming tender or delivery?

Answer 29

Risk of loss remains on the seller until cure or acceptance.

Question 30

Effect of Breach on Breach of Risk

What is the rule regarding Buyer rightful revocation of seller’s goods?

Answer 30

If the buyer rightfully revokes acceptance, the buyer may to the extent of any deficiency in his effective insurance coverage-treat the risk of loss as having been on the seller from the beginning

Question 31

Effect of Breach on Breach of Risk

What is the rule regarding Buyer’s breach before the risk of loss passes to the buyer?

Answer 31

If the buyer breaches before the risk of loss passes to the buyer, the seller may—to the extent of any deficiency in her effective insurance coverage-treat the risk of loss as resting on the buyer for a commercially reasonable time

Question 32

What is required for modification of a contract governed by common law?

Answer 32

• Mutual assent
• Consideration.

Question 33

Under what conditions can a unilateral or mutual modification occur without consideration at common law?

Answer 33

• Due to unanticipated circumstances
• Fair and equitable.

Question 34

Unilateral or Mutual Modification without Consideration at Common Law

Answer 34

A unilateral or mutual Modification without consideration is permitted if:
(i) the modification is due to circumstances that were unanticipated by the parties when the contract was made; and
(ii) it is fair and equitable.

where there is an unforeseen difficulty so severe it rises to the level of impracticability, the consideration required for modification will be considered satisfied by the party’s promise to complete their pre-existing contractual duty.

To be impracticable, the performing party needs to have encountered extreme and unreasonable difficulty or expense that was not anticipated at the time of formation.

Question 35

Exceptions to the Preexisting Duty Rule;

Mutual Modification-Increased Compensation

A promise to increase compensation under an existing contract is enforceable as a mutual modification to the contract if:

Answer 35

i.) both parties agree to a performance that is different from the one required by the original contract; and

ii.) The difference in performance is NOT a mere pretense of a newly formed bargain.

Question 36

Exceptions to the Preexisting Duty Rule;

Unforeseen Circumstances-Increased Compensation

Answer 36

If a promise for increased compensation is made in return for a performance that becomes significantly more burdensome than initially expected by both parties, the preexisting duty rule does NOT apply.

Question 37

What does the UCC state regarding modifications of contracts for the sale of goods?

Answer 37

No consideration is needed for an agreement modifying an existing contract.

Modifications MUST, however, meet the UCC’s good-faith test, and a failure to do so will render them unenforceable.

The good-faith test for modifications applies even to modifications that are supported by consideration.

Question 38

Two violations of the obligation of good faith for UCC Modifications

With respect to modifications, good faith is violated by:

Answer 38

i.) use of bad faith to escape performance on the original contract terms; and

ii.) the extortion of a ‘modification’ WITHOUT legitimate commercial reason.

Question 39

What can invalidate an oral modification under a contract with a ‘no oral modifications’ clause?

Answer 39

The presence of such a clause can affect enforceability.

There is NO specific language required for this type of provision. “No oral modifications,” “all modifications must be in writing” or any such similar language would suffice.

Question 40

UCC and Subsequent Oral Modifications

Answer 40

Under Section 2-209, clauses prohibiting subsequent oral modifications are presumptively valid.

An oral modification made in violation of such a clause may nevertheless be enforceable if the disadvantaged party relies on the modification or the parties perform in accordance therewith.

Question 41

Section C: Excusing Performance Due to Faulty Assumptions

Faulty Assumptions about Present Facts

What is a unilateral mistake in contracting?

Answer 41

a party operating under a faulty assumption about material facts at the time of contracting is NOT excused from their obligations UNLESS:
i.) the other party KNEW OR had REASON to KNOW of the mistake; or
ii.) the mistake was a clerical error.

Question 42

In all unilateral mistake situations, if the non-mistaken party is aware of the other party’s mistake and takes advantage of the innocent party’s mistake, the contract is ___________

Answer 42

VOIDABLE at the discretion of the mistaken party.

Question 43

Rescission is available only when _______________ about the unilateral mistake.

Answer 43

the non-mistaken party knows or should have known

Question 44

Unilateral Mistakes in an Offer

Answer 44

If a mistake is made in an offer, and the offeree is or should be aware of the mistake, there will be NO contract.

The offeree is NOT allowed to take advantage of the error.

Question 45

What are three requirements for a mutual mistake to void a contract?

Answer 45

1. Mistake concerns a basic assumption on which the contract was made.
2. Material effect on agreed exchange of performances;
3. Disadvantaged party did not assume the risk of the mistake

Question 46

In mutual mistake, the party wishing to avoid the contract must show that ___________________

Answer 46

the resulting imbalance in the agreed exchange is so severe that he cannot fairly be required to carry it out

Question 47

The general test for when a mutual mistake relates to the basic assumption on which the contract is founded is if one party will get _____________.

Answer 47

an unexpected, unbargained-for gain and the other party will suffer an unexpected loss.

Question 48

Under mutual mistake, A disadvantaged party will not be able to avoid the contract if the risk of that mistake was and still is allocated to him.

The risk can be re-allocated to the other party in three ways:

Answer 48

(i) by agreement of the parties;
(ii) when a party is aware at the time the contract is made that he has only limited knowledge with respect to the facts related to the mistake but treats his limited knowledge as sufficient; or
(iii) the risk is allocated by the court as is reasonable under the circumstances.

Question 49

True or False:Market conditions and financial ability are NOT considered assumptions that are basic to the contract, and a mutual mistake on those terms will NOT void the contract.

Answer 49

True.

Question 50

If the party seeking to avoid enforcement of the contract on the basis of mutual mistake is the one who originally took on the risk that there might be a mistake, he will NOT be able to raise a mutual mistake defense.

This commonly occurs where:

Answer 50

i.) one party is in a better position to know the risks than the other party (e.g., contractor vs. homeowner);
or
ii.) the parties knew their assumption was doubtful (i.e., the parties were consciously aware of their ignorance).

To be a defense, it MUST truly be a mistake, NOT uncertainty.

Question 51

Faulty Assumption of Future Facts

What is the doctrine of impossibility in contract law?

Answer 51

It releases both parties from obligations if performance becomes:
i.) objectively impossible due to unforeseen events AFTER the contract’s formation;

ii.) Performance under the contract becomes literally impossible due to circumstances BEYOND the parties’ control; and

iii.) the contingency was UNKNOWN at the time of contracting.

Question 52

What is subjective impossibility?

Answer 52

Occurs when performance becomes impossible due to the fault of the performing party.

Under those circumstances, the performance obligation is NOT EXCUSED and will be considered as a breach of the contract.

Question 53

What are the two types of unknown contingency of impossibility that can occur?

Answer 53

1. Supervening Contingency: performance was possible at contracting but later became impossible. party’s performance is made impracticable without his fault due to the occurrence of an event, the non-occurrence of which was a basic assumption on which the contract was made
2. Existing Contingency: a contingency existed at contracting but was unknown to the parties.

Question 54

What are the damages for when a contract has been rescinded on grounds of supervening impossibility?

Answer 54

a party may obtain restitution of any benefit conferred by way of party performance of the contract.

Question 55

The doctrine of impossibility will NOT apply where:

Answer 55

i.) the parties have allocated the risk of the contingency and provided remedial measures in the event of its occurrence;

ii.) If events render performance ONLY temporarily impossible, then this will typically ONLY suspend the obligations of the parties UNTIL the impossibility ends; or

iii.) pending laws that haven’t taken effect at the time of the contract or transaction

Question 56

What are the three main categories of impossibility?

Answer 56

1. Destruction of the subject matter of the contract
2. Death or incapacity
3. Illegality

Question 57

True or False: The doctrine of impossibility applies when parties have allocated the risk of a contingency.

Answer 57

False

Question 58

Faulty Assumptions of Future Facts

What is impracticability?

Answer 58

A promisor may be excused from performance where unforeseen difficulties have made performance prohibitively expensive or otherwise extremely burdensome.

i.) the impracticability of the performance was caused by some unforeseen contingency;

ii.) The risk was neither assumed nor allocated by the parties; and

iii.) the increase in the cost of performance would be far beyond what either party anticipated.

Question 59

What does temporary impracticability do to contractual duties?

When will duty NOT “spring back”?

Answer 59

It suspends contractual duties, but does NOT discharge them.

When performance becomes possible again following impracticability, the duty “springs back” into existence.

Duty will NOT spring back into existence if the burden on either party to the contract would be substantially increased or different from that originally contemplated.

Question 60

Under UCC 2-615, what happens if the sale of goods becomes impossible or commercially impracticable?

Answer 60

unless otherwise agreed, delay or non-delivery by a seller is not a breach of a contract of sale where performance has been made impracticable by the occurrence of an event the non-occurrence of which was a basic assumption of the contract.

This test is designed to allow courts to allocate risk between the parties, based on what the court thinks parties would have done if they had planned for the contingency that is currently making performance impracticable

Question 61

Excuse on grounds of impracticability will not be available, when

Answer 61

if the event in question was sufficiently foreshadowed so as to fairly be viewed as part of the risks that the seller assumed when entering into the contract.

Question 62

What is required for increased cost to excuse performance under UCC?

Answer 62

Increased cost alone does NOT excuse performance UNLESS:
1. The rise in cost is due to an unforeseeable contingency
2. Alters the essential nature of performance

Question 63

Fill in the blank: A rise or collapse in the market will NOT justify _______.

Answer 63

impracticability

Question 64

What examples can trigger impracticability due to severe shortages?

Answer 64

• War or embargo
• Local crop failure
• Unforeseen shutdown of major sources of supply

Question 65

Contractual Allocation of the Risk of Non-Performance;

Answer 65

The parties are free to allocate the risk of a contingency or to specify the remedial measure to dictate performance in the event of a contingency.

Where they do so, the performance that would otherwise be excused by impracticability will be governed by their contractual agreement.

Question 66

Faulty Assumption of Future Facts

What is the doctrine of frustration of purpose?

Answer 66

It may excuse a party from contractual obligations if a contingency significantly diminishes the performance’s value.

Question 67

What are the conditions for frustration of purpose to apply?

Answer 67

1. Main reason for the contract is thwarted
2. Frustration is substantial
3. Event’s non-occurrence was a fundamental contract assumption

Question 68

Frustration of Purpose does NOT apply when:

Answer 68

i.) the risk of the supervening event was reasonably foreseeable;
ii.) the parties could and should have anticipated it and made provision for it in the agreement.
OR
iii.) Where the parties contractually allocate the risk of the non-occurrence of the event.

Question 69

Section D: Excusing Performance by Agreement of the Parties

a) What is rescission in contract law?

Answer 69

Rescission is permissible where BOTH parties to a contract have remaining performance due.

Question 70

b) What is an accord?

Answer 70

parties to an existing obligation agree to accept a different future performance in satisfaction of the obligation.

Question 71

What is a bilateral executory accord?

Answer 71

An agreement that an existing claim will be discharged in the future by the rendition of a substituted performance.

If the substituted performance is properly rendered, then there is an accord and satisfaction; the contract has been fully performed according to the modified agreement.

Question 72

Accord alone will NOT discharge the original duty, but once the accord is made, the original duty will be ___________ subject to the terms of the accord UNTIL the obligor ___________.

Answer 72

the original duty will be suspended

Until the obligor has the chance to make the substituted performance.

Question 73

What is satisfaction in terms of the accord?

Answer 73

If the performance is carried out (satisfaction), the duty under the original contract is discharged AND the accord contract.

The parties will NOT be able to sue for damages as a result of any injuries by the new performance.

If the different performance is NOT carried out, the original contract remains enforceable.

Question 74

What happens if the obligor breaches the accord?

Answer 74

The obligee is NO LONGER bound under the accord and can 1. enforce either the original duty; or
2. the duty under the accord.

Question 75

what happens if the Obligee Breaches the Accord?

Answer 75

The original duty is NOT discharged, BUT the obligor can:
i.) seek specific performance of the accord; and
ii.) damages for partial breach.

Question 76

What is required for an accord to be valid?

Answer 76

An accord MUST be supported by consideration where:
i.) the substituted consideration differs significantly from that required by the original duty; or
ii.) A claim is to be paid by a third party.

Question 77

If a monetary claim is uncertain or is subject to a bona fide dispute, an accord and satisfaction may be accomplished by:

Answer 77

i.) a good faith tender and acceptance of a check; or

ii.) check (or an accompanying document) conspicuously states that the check is tendered in full satisfaction of the debt.

Question 78

What is an account stated?

Answer 78

A contract between parties agreeing to an amount as a final balance due from one to the other.

Question 79

c.) What constitutes anticipatory repudiation?

Answer 79

Anticipatory repudiation happens when a party, BEFORE their performance is due:

i.) makes a definitive statement indicating that he will commit a breach of contract; OR

ii.) voluntary OR affirmative act that renders the party unable to perform OR apparently unable to perform (e.g., the sale of the contracted-for item to a third party).

Question 80

There is NO Anticipatory Repudiation when there is:

Answer 80

i.) Expressions of doubt or fear as to a party’s ability to perform; or
ii.) a mere request by a party that the other party considers modifying their agreement.

Question 81

Common Law Requirement for Adequate Assurance of Performance;

If anticipatory repudiation cannot be established but there are reasonable grounds for insecurity, the insecure party may make a demand for adequate assurance of performance either:

Answer 81

1. By oral communication; OR
2. In writing.

Question 82

Under the UCC, how must a demand for adequate assurance of performance be made?

Answer 82

It must be made in writing.

Question 83

The adequate assurance doctrine requires that a party respond to a demand for adequate assurance only if the demand is

Answer 83

reasonable and justified.

No reasonable grounds for insecurity=no repudiation

Question 84

In order for a demand for assurances to be justified, the insecurity must relate either

Answer 84

relate to the inability or unwillingness of the other party to perform.

Question 85

Upon making a demand for assurances, a party with reasonable grounds for insecurity may SUSPEND its own contractual performance so long as:

Answer 85

i) suspension is commercially reasonable;
ii.) the insecure party has NOT yet received the agreed-upon return for the performance in question; AND
iii.)does NOT respond in a manner that provides reasonable assurance to the other party.

Question 86

Under the UCC, Upon making a demand for assurances, a party with reasonable grounds for insecurity may SUSPEND its own contractual performance so long as:(timing requirement)

Answer 86

does NOT respond to a demand for assurance within 30 days under the UCC

Question 87

What are the rights of the aggrieved party upon anticipatory repudiation?

Answer 87

• Cancel the contract * Bring an action for damages * Bring an action for specific performance

Question 88

If the aggrieved party chooses to treat the anticipatory breach as a breach of contract, the party may:

Answer 88

i.) immediately resort to one of their remedies upon repudiation; or
ii.) wait until performance should have occurred.

Question 89

Aggrieved Parties Remedies for AR

An aggrieved party may:

Answer 89

1. cancel the contract AND terminate all rights and obligations under it;
2. bring an action for damages; OR
3. Bring an action for specific performance.

Question 90

Under the UCC, when either party to a contract for the sale of goods repudiates the contract with respect to a future performance that will substantially affect the value of that performance, the nonrepudiating party may

Answer 90

resort to any appropriate remedy for breach.

Question 91

If an aggrieved party chooses to ignore a repudiation, then he is

Answer 91

PREVENTING from continuing to perform on the contract if performance would INCREASE her damages from the contract.

Question 92

If the aggrieved party can prove to the court that he was willing, ready, and able to render performance had the anticipatory repudiation not occurred, then the aggrieved party is relieved of:

Answer 92

1. performance of contractual obligations; and
2. performance of any conditions precedent.

Question 93

A party who has made an anticipatory repudiation to the other party may retract the repudiation UNLESS and UNTIL the other party:

Answer 93

1. acts in reliance on the repudiation;
2. positively accepts the repudiation by signifying this to the breaching party; or
3. commences a suit for damages or specific performance.

Question 94

When a party retracts his previous repudiation, it will ONLY be effective when

Answer 94

it is actually communicated to the non-repudiating party.

Question 95

What is the measure of damages for nondelivery or repudiation by the seller?

Answer 95

i.) The difference between the market price at the time the buyer learned of the breach;

ii.) the contract price;

iii.) together with incidental and consequential damages, but less any expenses saved due to the breach

Question 96

Under the UCC, where the buyer has repudiated a contract the seller may, if resale is done in accordance with UCC rules (which among other things requires giving notice to buyer of any private resale), recover

Answer 96

i.) The difference between the contract price; and

ii.) the resale price, plus any incidental damages.

Question 97

What alternative recovery can a seller seek if resale does not occur?

Answer 97

The difference between the contract price and the market price at the time for tender.

Question 98

Under what condition can a seller recover lost profits?

Answer 98

If the seller can demonstrate that it could have profitably made the extra sale had the contract gone forward, being a ‘lost volume’ seller.

Question 99

Define a promissory condition.

Answer 99

A promissory condition is where the contract performance is conditioned on the occurrence of the promised performance by the other party.

Question 100

Define a pure condition.

Answer 100

Pure conditions are typically where contract performance is conditioned on the occurrence of events beyond the control of either party.

Question 101

What are express conditions?

Answer 101

Express conditions are those which the parties expressly include in the provisions of the contract.

Question 102

What is required for strict compliance with express conditions?

Answer 102

Strict compliance with express conditions is ordinarily necessary before the other person’s duty of performance arises.

Question 103

What happens if an express condition fails to occur?

Answer 103

The non-occurrence will discharge the contractual obligation of a party who is subject to the condition unless waived.

Question 104

What are implied conditions?

Answer 104

Implied conditions are those fairly to be inferred from evidence of the parties’ intentions.

Question 105

Define a constructive condition.

Answer 105

A constructive condition is one NOT agreed on by the parties but which courts impose as a matter of law to ensure fairness.

Question 106

What is the rule when the contract is silent as to the order of performance?

Answer 106

If one party’s performance requires time and the other does not, the performance over time is treated as an implied condition.

Where the parties can exchange performance more or less simultaneously, then the performances are treated as concurrent conditions of each other.

Question 107

Where one party’s performance is to take place over a period of time, that party must complete its
performance before

Answer 107

the other party is required to perform, unless the language or circumstances indicate otherwise.

Question 108

What is the treatment of performance in sales contracts under the UCC?

Answer 108

Performance is treated as concurrent, and each performance is conditioned on the performance of the other.

Question 109

True or False: Parties to a contract for the sale of goods may agree that one party has the right to decide a specific term regarding performance at a later date.

Answer 109

True

Question 110

What happens if the time for performance has passed?

Answer 110

The party awaiting performance may agree to a new commercially reasonable time for performance prior to cancellation.

Question 111

What is the effect of failing an express condition?

Answer 111

The failure of the condition will discharge the party’s obligation to perform.

Question 112

In the absence of clear language, an express condition may be established by

Answer 112

trade usage, course of dealing, or course of performance evidence.

Question 113

What are the three situations that may excuse the failure of an express condition?

Answer 113

• Waiver
• Bad Faith Conduct
• Avoiding Forfeiture

Question 114

What is waiver in contract law?

Answer 114

The party who has been discharged from performing by the failed condition may waive the right to discharge and perform anyway.

When the party waives the condition, the waiving party’s obligation becomes absolute because it is no longer subject to the condition.

Question 115

If one party indicates via words or conduct that he is waiving a provision of a contract prior to completion of performance and the other party detrimentally relies on those words or conduct, the first party is

Answer 115

estopped from claiming a breach of that provision.

Question 116

When is a waiver binding without consideration?

Answer 116

1. If the condition was not material to the original bargain;
2. If a party indicates that he will waive a condition and the other party relies on that purported waiver; or
   3.) When a condition does not occur, if the party who owed the conditional duty ignores this fact and performs anyway

Question 117

Courts look beyond the words of a condition, and if it is clear that the intent of the condition was to benefit or protect one of the parties, the language of the condition will

Answer 117

be interpreted as if that intent had been clearly expressed in the contract terms. In this case, it is clear that the condition was intended for the benefit of the buyer as a condition to the buyer’s duty. The buyer’s waiver of the condition required the seller to perform despite the nonoccurrence of the condition.

Question 118

A waiver will be implied by:

Answer 118

1. The continuation of performance by the person who would have benefited from the conditions; and
2. The acceptance of benefits under the contract by that person.

Question 119

A condition will be excused on the basis of bad faith conduct by the beneficiary of the condition.
Bad faith conduct will excuse the condition when the benefitting party:

Answer 119

i.) interferes with the fulfillment of a contract; or
ii.) fails to take steps necessary for the condition’s fulfillment.

Question 120

In some situations, the fulfillment of a condition may result in a forfeiture or great loss to one of the parties. In those cases a court may excuse the condition to avoid forfeiture.
In deciding to excuse a condition, the court will consider:

Answer 120

1. whether the party favoring excuse will suffer a loss greatly disproportionate to the actual prejudice to the other party;
2. whether the failure of the condition is due to willfulness or serious neglect;
3. whether the other party played a role in bringing that failure about;
4. whether the condition relates to a minor term in the contract as opposed to a material one; and
5. whether the fulfillment of the condition has not failed completely but has merely been delayed.

Question 121

What is the doctrine of prevention?

Answer 121

A party must refrain from conduct that prevents or hinders the occurrence of a condition.

Question 122

What is a material breach?

Answer 122

If the breach is serious enough, the court will treat the breach in the same way it would treat a breach of an express condition (i.e., as relieving the aggrieved party of her own performance obligation).

The aggrieved party is free to walk away from her own obligations and sue the breaching party for damages

Question 123

What is substantial performance?

Answer 123

If the breach is less serious, the court will treat the party’s performance as “close enough,” meaning that the party has rendered substantial performance of the condition.

the aggrieved party will NOT be discharged of his performance obligation but still may sue for damages as remedy for the breach

Question 124

The standard of substantial performance is not met if there is

Answer 124

a material breach by either of the parties.

Question 125

Substantial performance is not applicable where performance is subject to

Answer 125

an express condition.

Question 126

What is total breach?

Answer 126

When a party who owes a present duty fails to perform that duty, resulting in a breach of the contract.

Question 127

What characterizes a partial breach?

Answer 127

A partial breach is not material and does not relieve the aggrieved party from continuing to perform under the contract.

When a party has committed only a partial (as opposed to a total) breach of a contract, the other party to the contract remains obligated to perform, and refusal to perform is a substantial breach and will give the partially-breaching party the right to either specific performance or money damages for total breach.

Question 128

What are the elements of a divisible contract?

Answer 128

• The contract divides each party’s performance into at least two parts
• Each party has the same number of parts to perform
• Each party’s performance on each part is agreed to be the equivalent of a corresponding part for the other party

Question 129

When one party performs a single unit under a divisible contract, he is entitled to recover the amount that ____

However, if the partially performing party does not then perform the remaining duties under the contract, he will be

Answer 129

was agreed upon or the equivalent even if he does not perform the other units or before the entire contract is performed.

subject to liability and the withholding of counter-performance for those units.

Question 130

No Divisible Contracts

Answer 130

In most construction contracts, the owner is required to make progress payments, but this does not normally mean that the contract is divisible into a number of components.

Question 131

Beaching Party to Recover under a Divisible Contract

a breaching party can recover for a portion properly performed when:

The breaching may recover

Answer 131

i.) the failed condition is NOT material to the contract itself; and
ii.) relates to a small portion of the contract performance in order for the contract to be severable into separate transactions.

recover the reasonable value of the benefits conferred under a theory of quantum meruit.
The reasonable value of the benefits conferred will be reduced by the damages suffered by the aggrieved party due to the breach.

Question 132

What is the perfect tender rule?

Answer 132

When a delivery under a contract for the sale of goods fails to conform in any respect to the contract, it is a breach by the seller.

Question 133

What three courses of action does a buyer have for seller’s imperfect tender?

Answer 133

• Reject the Goods
• Accept the Goods
• Reject Part and Accept Part of the Goods

Question 134

What must a buyer do to effectively reject goods?

Answer 134

• Exercise the right of rejection within a reasonable time after delivery
• Notify the seller of the rejection within a reasonable period of time

Question 135

What remedies does a buyer have if they reject the goods?

Answer 135

• Bring an action for damages against the seller for imperfect tender
• Use reasonable care with respect to the rejected goods

Question 136

What must a buyer do to reject the goods?

Answer 136

The buyer must exercise the right of rejection within a reasonable time after delivery and notify the seller of the rejection within a reasonable period of time.

Question 137

If the seller gives no instructions within a reasonable time after notification of rejection, the buyer may:

Answer 137

i.) store the goods for the seller’s account;
ii.) reship them to the seller, or
iii.) resell them for the seller’s account.

Question 138

What remedies does a buyer have for a seller’s imperfect tender?

Answer 138

The buyer may:
* bring an action for damages against the seller for imperfect tender
* use reasonable care with respect to holding the goods for a time sufficient for the seller to remove them.

Question 139

What can a buyer do if the seller gives no instructions after rejection?

Answer 139

The buyer may:
* store the goods for the seller’s account
* reship them to the seller
* resell them for the seller’s account.

Question 140

What is required if the buyer is a merchant and the seller has no place of business?

Answer 140

The buyer must:
* follow any reasonable instructions received from the seller
* if none, make reasonable efforts to sell the goods if they are perishable or their value will decline quickly.

Question 141

What is the remedy for a merchant buyer who resells goods after a rightful rejection?

Answer 141

The merchant buyer is entitled to reimbursement for the reasonable expenses of caring for and selling the goods, not to exceed 10% of the proceeds.

Question 142

What happens if a buyer fails to state a particular defect when rejecting goods?

Answer 142

The buyer will be precluded from relying on the unstated defect to justify rejection if the defect is ascertainable by reasonable inspection.

Question 143

What constitutes a failed rejection?

Answer 143

A failed rejection will be deemed to be acceptance of the goods by the buyer.

Question 144

How can a buyer accept imperfect tender?

Answer 144

Acceptance occurs when the buyer has had a reasonable opportunity to inspect the goods and signifies acceptance by:
* stating the goods conform to the contract
* taking the goods despite their non-conformance
* failing to make an effective rejection
* taking any action inconsistent with the seller’s ownership.

Question 145

What are the buyer’s duties upon accepting imperfect tender?

Answer 145

The buyer must pay the contract price and may seek damages against the seller for nonconformity if:
* notified the seller of the nonconformity within a reasonable time
* the seller is not prejudiced by the lack of notice
* his rights would not be affected.

Question 146

Acceptance of the goods obligates the buyer to pay for those goods accepted, but DOES NOT prevent the buyer from

Answer 146

asserting their rights as to the goods that were not delivered.

Question 147

Under what conditions can a buyer revoke acceptance?

Answer 147

The buyer must revoke acceptance within a reasonable time after discovering the grounds for revocation and before any substantial change in the condition of the goods.

Question 148

What can a buyer do if they receive improper tender?

Answer 148

A buyer may accept some of the commercial tender and reject the rest.

Question 149

What are a buyer’s rights and duties when rejecting part of the goods?

Answer 149

The buyer will have the rights and duties of acceptance for the goods accepted and the rights and duties of rejection for the goods rejected.

Question 150

What can a seller do if they make a nonconforming tender before the time of performance expires?

Answer 150

The seller may substitute conforming goods if they give the buyer

i.) seasonable notice of their intention to substitute and
ii.) make conforming delivery within the time specified in the contract.

Question 151

What must a seller prove to show reasonable grounds for a nonconforming delivery?

Answer 151

The seller may prove reasonable grounds by showing:
* express assurances from the buyer
* trade usage, course of dealing, or course of performance evidence.

Question 152

What are installment contracts under the UCC?

Answer 152

Installment contracts are contracts that contemplate the delivery of goods in separate lots to be separately accepted by the buyer.

Question 153

What happens if a nonconforming installment substantially impairs the value of the whole contract?

Answer 153

There is a breach of the whole contract.

Question 154

When can a buyer reject a particular installment?

Answer 154

A buyer can reject an installment if:
* the nonconforming installment substantially impairs its value
* the nonconformity cannot be cured.

Question 155

When must a buyer accept a particular installment?

Answer 155

A buyer must accept an installment if:
* the nonconforming installment does not substantially impair the value of the contract as a whole
* the seller gives adequate assurance that they will cure.

Question 156

Does the perfect tender rule apply to installment contracts?

Answer 156

No, the perfect tender rule does not apply to installment contracts.