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Business Law I > CH18 & 19 Business Law by Beatty Samuelson Abril 8th Edition > Flashcards

CH18 & 19 Business Law by Beatty Samuelson Abril 8th Edition Flashcards

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1
Q

CH18 What is discharge?

A

The party is finished and has no more duties under a contract.

P 430

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2
Q

CH18 What is Commercial Impracticability?

A

The UCC may excuse contract performance when an unforeseen, external event disrupts the contract relationship.

Definition P G3

Chapter discussion P 430

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3
Q

CH18 What is a condition (in regards to a contract)?

A

A condition is an event that must occur before a party becomes obligated under a contract.

P 430

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4
Q

CH18 What does condition failed mean?

A

A contractual condition has not been met.

P 430

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5
Q

CH18 Is special contractual language is necessary to create a condition?

A

No. As long as the contract language reflects that the parties intended to create a condition, the court will enforce it.

P 431

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6
Q

CH18 What is an implied condition?

A

An implied condition is a condition that is not stated explicitly in writing in the contract.
It is, however, clear from the agreement that they have implied a condition.

P 431

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7
Q

CH18 Name 3 categories of conditions.

A

Condition Precedent, Condition Subsequent and Concurrent Conditions.

P 432-433

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8
Q

CH18 What is do the following have in common? Condition Precedent, Condition Subsequent and Concurrent Conditions.

A

The key to all conditional clauses is: If the condition does not occur, one party will probably be discharged without having to perform his obligations under a contract.

P 432

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9
Q

CH18 What is Condition Precedent?

A

This type of condition must occur after a particular duty arises. If the condition does not occur, the duty is discharged.

The defendant must prove that the condition occurred, relieving him or her of the duty.

P 432

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10
Q

CH18 What are Concurrent Conditions?

A

Both parties must perform simultaneously.

P 433

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11
Q

CH18 what is strict Performance?

A

A party must strictly perform their obligations.

A party is generally not required to render strict performance unless the contract expressly demands it and such a demand is reasonable.

P 434-5

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12
Q

CH18 What is Substantial Performance?

A

The obligation(s) of the contract must be performed in substance, but not necessarily in entirety.

Courts rely heavily on substantial performance doctrine, in particular for services.

The party that substantially performs its duties will generally receive the full contract price,
minus the value of any defects.

The party that fails substantially receives nothing on the contract itself and will recover only the value of the work, if any.

P 435

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13
Q

CH18 When is performance substantial? (4 conditions)

A

How much benefit has the promisee received?

If it is a construction contract, can the owner use the thing for its intended purpose?

Can the promisee be compensated with money damages for any defects?

Did the promisor act in good faith?

P 435

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14
Q

CH18 What is a Personal Satisfaction contract?

A

The promisee makes a personal, subjective evaluation of the promisor’s performance.

P 436

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15
Q

CH18 When is it fair for the promisee to claim that she is not satisfied ?

A

A court applies a subjective standard only if assessing the work involves personal feelings, taste, or judgment and the contract explicitly demanded personal satisfaction.

P 436

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16
Q

CH18 What does the promisee have to show in a personal satisfaction contract? (2)

A

The promisee has to show that:

assessing the work involves their personal judgment and

their contract explicitly demands personal satisfaction.

P 436

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17
Q

CH18 What if the court finds that personal judgment or the contract failed to explicitly demand personal satisfaction?

How will the court judge the case?

A

The court will use the objective standard rather than the subjective standard.

P 436

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18
Q

CH18 What is good faith?

A

An honest effort to meet the spirit and the letter of the contract.

P G6

P 437-8

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19
Q

CH18 What is a morality clause?

A

A morality clause allows one party to terminate the agreement if the other breaks the law, does something offensive, or otherwise behaves badly.

P 437

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20
Q

CH18 What is a Time of the Essence clause?

A

A Time of the Essence clause makes contract deadlines strictly enforceable.

Merel including a date for performance does not make time of the essence.

If it is not specified clearly that prompt performance is essential, then both are entitled to reasonable delays.

P 439

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21
Q

CH18 What is a Breach?

A

Nonperformance. When one party breaches a contract, the other party is discharged, and without obligation.

P 439

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22
Q

Ch18 What is a Material Breach?

A

A material breach is one that substantially harms the innocent party and for which it would be hard to compensate without discharging the contract.

P 439

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23
Q

CH18 Under what conditions will a court discharge a contract?

A

Only if a party committed a material breach. A material breach is one that substantially harms the innocent party and for which it would be had to compensate without discharging the contract.

P 439

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24
Q

CH18 What is Anticipatory Breach?

A

An anticipatory breach can be made by making it unmistakably clear that it will not honor the contract.
where the party is either directly notified that the contract will not be honored or information can be released where the innocent party will see it illustrating that the contract will not be honored.

P 441

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25
Q

CH18 What is a Statute of Limitations?

A

A statute of limitations begins to run at the time of injury and will limit the time within which the injured party may file suit.

This sets a time limit for filing lawsuits.

P 441

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26
Q

CH18 What is Impossibility?

A

If performing a contract was truly impossible a court will discharge the agreement. But if it was simply a financial burden, the court will enforce the contract.

P 441

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27
Q

CH18 What is True Impossibility?

A

True Impossibility means that something has happened making it literally impossible to do what the promisor said he would do.

P 441

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28
Q

CH18 What are the three general causes of True Impossibility?

A

Destruction of Subject Matter.

Death of the Promisor in a Personal Services Contract.

Illegality.

P 442

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29
Q

CH18 What is Commercial Impracticability?

A

Commercial impracticability means that some event has occurred that neither party anticipated and fulfilling the contract would now be extraordinarily difficult and unfair to one party.

P 442

30
Q

CH18 What is Frustration of Purpose?

A

Frustration of purpose means that some event has occurred that neither party anticipated and the contract will now have no value for one party.

P 442

31
Q

CH18 What are the 4 factors in deciding impracticability and frustration claims?

A

Mere financial difficulties will never suffice to discharge a contract.

The event must have been truly unexpected.

If the promisor must use a different means to accomplish the task, at a greatly increased cost, they probably do have a valid claim of impracticability.

A force majeure clause is significant but not necessarily dispositive.

P 443

32
Q

CH19 What is an interest in a contract.

A

An interest in a contract is a legal right in something.

P 452

33
Q

CH19 What is a Remedy?

A

A remedy is the method a court uses to compensate an injured party.

P 452

34
Q

CH19 What are the four principal contract interests that a court may seek to protect?

A

Expectation interest. What someone reasonably thought.

Reliance interest. If they can prove they spent money in reliance.

Restitution interest. A benefit may have been conferred on the other party.

Equitable interest. Something more is needed such as an order for the breaching party to perform (Specific Performance)
or an order forcing it to stop doing something. (Injunction)

P 452

35
Q

CH19 What is Expectation Interest?

A

The expectation interest is designed to put the injured party in the position she would have been in had both sides fully performed their obligations.

P 453

36
Q

CH19 What are the three parts that expectation damages are divided into in a case?

A

1 - Direct (or compensatory damages, representing harm that flowed directly from the contract’s breach

2 - Consequential or special damages which represent harm caused by the injured party’s unique situation

3 - incidental damages - minor costs such as storing or returning defective goods, advertising for alternative goods, etc.

Note the lack of punitive damages.

P 454

37
Q

CH19 What are Direct Damages?

A

Direct damages are those that flow directly from the contract.

These are the most common monetary award for the expectation of interest.

These are damages that inevitably result from the breach.

P 454

38
Q

CH19 What is the golden rule in contracts cases?

A

The golden rule in contracts cases is to give successful plaintiffs the benefit of the bargain and not to punish defendants.

P 454

39
Q

CH19 What are Consequential Damages, also known as Special Damages?

A

Consequential damages reimburse for that results from the particular circumstances of the plaintiff.

They are only available if they are a foreseeable consequence of the breach.

This comes from an 1854 case Hadley v Baxendale.

P 455

40
Q

CH19 The injured party may recover consequential damages only if:

A

the breaching party should have foreseen them when they two sides formed the contract.

P 456

41
Q

CH19 What are the two rules in trying to recover lost profits?

A

1 - if the lost profits were foreseeable and

2 - the plaintiff provides enough information so that the fact finder can reasonably estimate a fair amount.

The calculation need not be done with mathematical precision.

P 456

42
Q

CH19 What are incidental damages?

A

Incidental damages are the relatively minor costs that the injured party suffers when responding to the breach.

P 457

43
Q

CH19 The UCC and damages: What are Seller’s Remedies?

A

If a buyer breaches a sale of goods contract, the seller generally has at least two remedies:

1 - The seller may resell the goods elsewhere and if acting in good faith, will be awarded the difference between the original contract price and the price she was able to obtain in the open market.

2 - the buyer may choose to not resell and settle for the difference between the contract price and the market value of the goods.

They are also entitled to incidental damages, such as storage and advertising.

Under the UCC: Most courts will hold that the seller of goods is not entitled to consequential damages.

44
Q

CH19 The UCC and damages: What are Buyer’s Remedies?

A

1 - The buyer may “cover,” or make a good faith purchase of substitute goods. The buyer may then obtain the difference between the original contract price and her cover price.

2 - alternatively, if the buyer chooses not to cover, she is entitled to the difference between the original contract price and the market value of the goods.

P 458

45
Q

CH19 Under the UCC: is the buyer entitled to consequential damages?

Is the buyer entitled to incidental damages?

A

Yes and yes.

P 458

46
Q

CH19 The plaintiff may sometimes recover damages based on promissory estoppel even when there is no valid contract.

What must be shown?

A

The plaintiff must show that defendant made a promise knowing that the plaintiff would likely rely on it, that the plaintiff did rely and that the only way to avoid injustice is to enforce the promise.

P 459

Refresh on Promissory Estoppel: pages 269, 289-91, 337-358, 334, 392.

47
Q

CH19 What are Reliance Damages?

A

This involves the reliance interest, which is designed to put an injured party in the position he would have been in had the parties never entered into a contract. This remedy focuses on the time and money the injured party spent performing his part of the agreement. the focus is on time and money the injured party spent performing his part of the agreement. Reliance damages are from loss due to lack of performance in the contract.

P 459

48
Q

CH19 Why are Reliance Damages difficult to win?

A

They are hard to quantify. Courts prefer to compute damages using numbers provided in the contract.

P 459

49
Q

CH19 In Promissory Estoppel cases, what kind of damages will a court will generally award?

A

In Promissory Estoppel cases, a court will generally award reliance damages.

It would be unfair to give expectation damages for the full benefit of the bargain when, legally speaking, there has been no bargain.

P 460

50
Q

CH19 What is Restitution Interest?

A

Restitution interest is designed to return to the injured party a benefit that he has conferred on the other party, which would be unjust to leave with that person.

P 461

51
Q

CH19 In what three kinds of cases is restitution interest awarded?

A

1 - When a contract is breached or discharged. (lack of performance)

2 - Judges allow restitution when an injured party to a voidable contract rescinds the agreement.

3 - Restitution may be awarded in cases of a quasi-contract.

P 461

For a refreser on a quasi-contract: page 292

52
Q

CH19 When is a contract said to be discharged?

A

When it is terminated by the nonoccurrence of a condition, impossibility, or another excuse.

P 461

53
Q

What is Promissory Estoppel?

A

Even when there is no contract, a plaintiff may use promissory estoppel to enforce the defendant’s promise if it can be shown that:

1 - The defendant made a promise knowing that the plaintiff would likely rely on it.

2 - The plaintiff did rely on the promise and

3 - The only way to avoid injustice is to enforce the promise.

P 290

54
Q

CH 19 What is a Quasi Contract?

A

Even when there is no contract, the court may use a quasi-contract to compensate a plaintiff who can show that:

The plaintiff gave some benefit to the defendant.

2 - The plaintiff reasonably expected to be paid for the benefit and the defendant knew this, and

3 - The defendant would be unjustly enriched if he did not pay.

P 292

55
Q

Ch19 - When one party breaches a contract, the other party may be entitled to:

A

recoup what he put in.

See quasi-contract, page 292.

P 461

56
Q

CH19 Restitution is a common remedy in contracts involving what? (4)

A

Fraud

Misrepresentation

Mistake

Duress

These are voidable contracts.

P 463

57
Q

CH19 In contracts involving fraud, misrepresentation, mistake and duress, what often goes hand in hand with these cases?

A

Recission.

P 463

58
Q

CH19 What is recission?

A

Recission means to undo a contract and put the parties where they were before they made the agreement.

P 463

59
Q

CH19 When a quasi-contract exists, why might a court award restitution?

A

A court might award restitution even in the absence of a contract when one party has conferred a benefit on another

and it would be unjust for the other party to retain the benefit.

P 463

60
Q

CH19 What is Specific Performance? (2)`

A

1 - The remedy of specific performance forces the two parties to perform their contract.

2 - This is done only in cases that involve the sale of land or some other asset that is considered “unique.”

P 464

61
Q

CH19 What is always available in real estate contracts?

A

Specific Performance.

This is due to the fact that land is always unique.

P 464

62
Q

CH19 Aside of real estate, what other things are subject to specific performance?

A

Family heirlooms

Works of art

Secret formulas

patents

Shares in a closely held corporation

P 464

63
Q

CH19 What is an Injunction?

A

An injunction is a court order that requires someone to do or not do something.

P 465

64
Q

CH19 What is a Preliminary Injunction?

A

A preliminary injunction is an order issued early in a lawsuit prohibiting a party from doing something during the course of the lawsuit.

The court attempts to protect the interests of the plaintiff immediately.

P 465

65
Q

CH19 What is a Permanent Injunction?

A

After a trial if it appears that the plaintiff has been injured and is entitled to an injunction, the trial court will make its order a permanent injunction.

If it appears there should never have been an injuction, the court will terminate the order.

P 465

66
Q

CH19 What is reformation?

A

Reformation is the final remedy and is the least common.

It is the process in which the court will rewrite the contract.

The court may do this to correct a simple mistake, or to save a contract.

P 466

67
Q

What is is Mitigation of Damages?

A

A party injured by a breach of contract may not recover for damages that he could have avoided with reasonable efforts.

A party is expected to mitigate his damages, that is, to keep damages as low as they reasonably can. They must prevent unnecessary loss.

P 466

68
Q

CH19 What are Nominal Damages?

A

Nominal damages are a token sum, for example one dollar, given to the plaintiff who demonstrates that the defendant breached the contract but cannot prove serious injury.

P 467

69
Q

CH19 What are Liquidated Damages?

A

This is a provision that states in advance how much a party must pay if it breaches.

P 467

70
Q

CH19 When will a court generally enforce Liquidated Damages? (2)

A

1 - At the time of creating the contract, it was very difficult to estimate actual damages

2 - the liquidated amount is reasonable.

In any case, the liquidate damage will be considered a mere penalty and will prove unenforceable.

P 467

Business Law I (13 decks)

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