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Contracts > Breach > Flashcards

Breach Flashcards

1
Q

When does “breach” occur?

A
  1. party is under absolute duty to perform;
  2. duty has not been discharged

(other party must be willing and able to perform but for breaching party’s failure)

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2
Q

What are the four issues that arise with breach under common law?

A
  1. minor breach
  2. material breach
  3. minor breach + anticipatory repudiation
  4. material breach of divisible K
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3
Q

What is a material breach?

What is a minor breach?

With regards to common law, what are the 6 factors that determine “materiality” of breach?

A

“material breach” - party does not get substantial benefit of the bargain

“minor breach” - party still gets substantial benefit of the bargain

  1. amount of BENEFIT received by non-breaching party;
  2. adequacy of COMPENSATION for damages to injured party;
  3. extent of PART PERFORMANCE by breaching party;
  4. hardship to breaching party
  5. negligent or willful behavior of breaching party
  6. likelihood that breaching party will perform remainder of K
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4
Q

Under common law, what is effect of “minor breach”?

A
  1. non-breaching party’s performance is NOT excused (ie…they must still perform)
  2. injured party = entitled to damages for breach
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5
Q

Under common law, what is effect of “material breach”?

A
  1. non-breaching party’s performance IS discharged;

2. non-breaching party has immediate right to all remedies for breach of K

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6
Q

Under common law, what is effect of “minor breach + anticipatory repudiation” ?

A
  • May be treated by non-breaching party as material breach.
  • Aggrieved party must not continue on, so as to mitigate damages
    EXCEPTION –> if SOG, manufacturer may continue manufacturing goods so as not to be forced to sell them at a loss for salvage value
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7
Q

Under common law, what is the rule re: “material breach of divisible K” ?

A

In divisible K –> recovery is available for “substantial performance” of a divisible part, even though there has been a material breach of the entire K

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8
Q

Is failure to perform in a timely manner a material breach?

A

IF “time is of the essence” –> YES

Otherwise –> NO, provided it’s performed in a reasonable time

NOTE: the mere existence of date for performance does NOT make time of the essence

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9
Q

What is the general rule re: breach and UCC art 2?

A

For SOG, do not follow “substantial performance” doctrine. Instead, follow “perfect tender rule”

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10
Q

What is the “perfect tender rule”?

A

For SOG –>

If goods or delivery fail to conform to contract in any way, buyer may:

  1. accept all
  2. reject all
  3. accept conforming units, and reject rest
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11
Q

Under “perfect tender rule” - when is the effect of buyer’s acceptance?

A

In general –> Buyer’s right to reject terminates upon acceptance

(But see exceptions)

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12
Q

With regards to “perfect tender rule”, what qualifies as “acceptance”?

A

Buyer accepts when:

  1. After reasonable opportunity to inspect goods, she INDICATES to seller that they conform OR that she will keep them despite non-conformance; OR
  2. She FAILS to reject within reasonable time, or to NOTIFY seller of rejection within reasonable time; OR
  3. She does ANY ACT INCONSISTENT with seller’s ownership
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13
Q

Under UCC, What is buyer’s responsibility for goods after rejection?

A
  • obligation to hold goods with reasonable care at seller’s disposition, and to obey seller’s reasonable instructions (Example –> to reship goods)
  • If seller gives no instructions within reasonable time –> Buyer may:
    1. reship goods to seller
    2. store them for seller
    3. resell them for seller. If buyer resells, she is entitled to costs and a reasonable commission
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14
Q

Under UCC, under what circumstances does buyer have the right to revoke acceptance?

A

General rule –> once goods are accepted, buyer’s right to reject terminates

Exceptions –> Buyer may revoke IF goods have a defect that SUBSTANTIALLY impairs VALUE AND:

  1. she accepted them on REASONABLE BELIEF that defect would be CURED and it has not been; OR
  2. She accepted them bc DIFFICULTY of DISCOVERING DEFECT or ASSURANCES of seller that they were conforming
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15
Q

Under UCC, when must revocation of acceptance occur?

A

Revocation of acceptance must occur:

  1. within reasonable time of when defect was discovered or should have been discovered by Buyer; AND
  2. before any substantial changes occur to goods that are not the result of defect
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16
Q

Under UCC, what are the two exceptions to the perfect tender rule?

A
  1. Installment Contracts

2. Seller’s Right to Cure

17
Q

Under UCC, what is the rule re: rejection in an installment contract?

A

Installment –> can be rejected ONLY if:

  1. non-conformity substantially impairs value of installment; AND
  2. cannot be cured

Whole contract –> breached ONLY if:
- non-conformity substantially impairs value of ENTIRE contract

18
Q

Under UCC, in a single delivery contract, what is Seller’s right to cure WITHIN time originally provided for performance?

A

If buyer has rejected goods bc of defects, seller may, within time originally provided for performance, “cure” by:

  1. giving reasonable notice of intention to cure; AND
  2. tendering conforming goods

In this case, buyer MUST accept

19
Q

Under UCC, in a single delivery contract, what is Seller’s right to cure PAST time originally provided for performance?

A

General Rule –> seller has no right to cure past time for performance

HOWEVER –> if Buyer rejects tender of non-conforming goods that Seller REASONABLY BELIEVED would be acceptable “with or without money allowance,” then Seller, upon REASONABLE NOTIFICATION to Buyer, has FURTHER REASONABLE TIME to make conforming tender

EXAMPLES of reasonable cause:

  1. prior trade practices/dealings led seller to believe they would be accepted;
  2. seller could not have known of defect despite proper business practices (for example, seller is re-selling packaged goods with no ability to inspect
20
Q

Under UCC, what is Seller’s right to cure with regards to shipment in an installment contract?

A

A defective shipment in an installment K CANNOT be rejected IF the defect can be cured

21
Q

What is the rule re: “anticipatory repudiation” ?

A
  • an anticipatory repudiation may be treated as an immediate breach of contract
22
Q

What is the rule re: “breach of warranty”?

A
  • Sellers give warranties as to the condition of the goods that apply even after acceptance.
  • Failure to live up to these warranties constitutes a breach of warranty, for which a remedy is available.

Contracts (25 decks)

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