Contract Modification: under PELD

Question 1

What are the five types of enforceable contract modifications?

Answer 1

1. Additional or Different Type of Consideration
2. Settlement of an Honest Dispute
3. Accord and Satisfaction
4. Mutual Recission
5. Novation

Question 2

Under contract modification, what is Additional/ Different Type of Consideration?

Answer 2

If an obligee accepts in satisfaction of the obligor’s duty a performance offered by the obligor that differs from what is due, the duty is discharged. Ex: performing an additional duty, change in timing, change in type of consideration

Question 3

Under contract modification, what is Settlement of an Honest Dispute?

Answer 3

(1) Forbearance to assert or the surrender of a claim or defense
which proves to be invalid is not consideration unless:
(a) the claim or defense is in fact doubtful because of
uncertainty as to the facts or the law, or
(b) the forbearing or surrendering party believes that the
claim or defense may be fairly determined to be valid.
If the two parties settle the dispute, then the settlement is consideration for the modification.

Question 4

Under contract modification, what is Mutual Recission?

Answer 4

Where the parties exchange promises to forgo their original contractual rights. Promises must be executory, at least to some extent.

Question 5

Under contract modification, what is Novation?

Answer 5

A substituted contract that includes as a party one who was neither the obligor nor the obligee of the original duty.

Question 6

Under contract modification, what is Novation?

Answer 6

A substituted contract that includes as a party one who was neither the obligor nor the obligee of the original duty.

Question 7

Under contract modification, what is Accord and Satisfaction?

Answer 7

An accord and satisfaction is the common law term for a special type of settlement agreement. The accord is a new agreement (a separate contract with an exchange of promises) in which an obligee agrees to accept some sort of different performance than was originally promised in the original contract. One typical example occurs when one of the parties (the obligee) has already performed but the other party (the obligor) alleges that the performance was faulty and refuses to pay the full original contract price. As a new contract, the accord “suspends” the duty owed under the original contract. The satisfaction is the actual performance of the accord. The satisfaction discharges both the duties under the original contract and the duties under the accord.

Question 8

What is required for UCC Contract Modification?

Answer 8

1. No consideration to be binding
2. Good faith requirement (“Good faith” refers to “honesty in fact and the observance of reasonable commercial standards of fair dealing.”)

Question 9

How do you decided the Choice of Law in UCC Contract Modification?

Answer 9

Understand the statutory language of “sale” (A “sale” consists in the passing of title from the seller to the buyer for a price. . . . -)

“goods” (“Goods” means all things (including specially manufactured
goods) which are movable at the time of identification to the
contract for sale other than the money in which the price is to
be paid, investment securities (Article 8) and things in action.
“Goods” also includes the unborn young of animals and
growing crops and other identified things attached to realty)

and “goods to be severed from realty” ((1) A contract for the sale of minerals or the like (including oil and gas) or a
structure or its materials to be removed from realty is a contract for the sale of
goods within this Article if they are to be severed by the seller. . . .
(2) A contract for the sale apart from the land of growing crops or other things
attached to realty and capable of severance without material harm thereto but
not described in subsection (1) or of timber to be cut is a contract for the sale of
goods . . . whether the subject matter is to be severed by the buyer or by the
seller. . . . )

Question 10

Under UCC, how do you decide Choice of Law if there are mixed goods and services?

Answer 10

To determine whether to apply the UCC Article 2; courts have developed the predominant purpose test (also known as the predominant factor test). Three factors:

1. The language of the contract. Does the language emphasize goods over services or vice versa? What was the underlying purpose of the contract?
2. The nature of the business of the supplier of goods and services. Does the supplier primarily sell goods, or does the supplier provide a service?
3. The intrinsic value of the goods vs. the cost of the service. Under the terms of the contract, which costs more—i.e., goods or the service?

Question 11

Under UCC what is the minority jurisdiction test for Choice of Law for mixed goods and services?

Answer 11

The Gravamen test. It focuses on the nature of the complaint rather than the character of the transaction. The test asks, “Did the essence of the complaint arise from the performance of services or from the goods sold?”