Contracts

Question 1

Place for Delivery of Goods

Answer 1

Unless otherwise agreed,
1. Seller’s place of business (residence if doesn’t have one).
2. If goods known to be elsewhere at time of contracting, that location.

Question 2

Course of Performance

Answer 2

Sequence of conduct between parties to a particular transaction that exists if:
1. Transaction involves repeated occasions for performance by party; AND
2. Other party, with knowledge of nature of performance and opportunity to object, accepts performance or acquiesces without objection.

Can alter default delivery of goods rules.

Question 3

Course of Dealing

Answer 3

Sequence of conduct concerning previous transactions between parties.

Can alter default delivery of goods rules.

Question 4

Usage of Trade

Answer 4

Any practice/method of dealing used so regularly in place, vocation, or trade as to justify expectation it will be observed with respect to transaction in question.

Can alter default delivery of goods rules.

Question 5

Implied Warranty of Fitness for Particular Purpose

Answer 5

Seller knows/has reason to know of Buyer’s particular purpose
AND
Buyer relies on Seller’s skill/judgment to select/furnish suitable goods.

If not fit for purpose, Seller breached.

Question 6

Disclaim Implied Warranty of Fitness for Particular Purpose

Answer 6

1. Conspicuous writing
2. “As is” language
3. Waiver if certain defects can be reasonably discovered on inspection.
   OR
4. Course of dealing or performance, or usage of trade

Question 7

Gratuitous Assignment

Answer 7

Can be revoked unless:
- Assignor delivers document to Assignee symbolizing rights assigned
- Assignee detrimentally relied on assignment
- Obligor performs or pays Assignee (payment or performance is irrevocable)
OR
- Assignor puts assignment in writing and delivers to Assignee

Question 8

Multiple Assignments

Answer 8

Gratuitous assignees = last assignee prevails (unless irrevocable)

Assignment with compensation = first assignee prevails unless:
- Latter has no notice of earlier assignment
AND
- Latter is first to (1) be paid, (2) obtain judgment, (3) obtains new contract from obligor by notation (agreement of all parties), OR (4) there is indicia of ownership.

Question 9

Limits on consequential damages

Answer 9

May be limited or excluded by agreement unless limitation/exclusion is unconscionable.

Question 10

Punitive damages

Answer 10

Punish wrong-doing party

Generally not available for breach; may be awarded if corresponding tort claim that allows such damages (e.g. fraud).

Question 11

Incidental Damages

Answer 11

Any commercially reasonable costs incurred resulting from breach of contract.

Question 12

Replevy by unpaid seller

Answer 12

Seller may repossess if:
- Buyer was insolvent when received goods;
- Seller makes demand w/in 10 days; and
- Goods not sold to good faith purchaser for value.

If misrepresentation of solvency in writing w/in 3 months before delivery, demand w/in 10 days no longer applies.

Question 13

UCC Buyer’s Remedies

Answer 13

If:
- never received goods;
- rightfully rejected non-conforming goods; or
- justifiably revoked acceptance

Then may:
- cancel;
- refund (even if buyer didn’t cancel K);
- get cover OR market damages; and
- get incidental and consequential damages.

Question 14

Damages for Contractor’s Incomplete or Defective Performance

Answer 14

Usual damages: expectation damages (reasonable cost of replacement or completion)

If cost of completion is wasteful, may apply waste doctrine.

Question 15

Can party recover expectation and restitution damages?

Answer 15

No.

Question 16

Mitigation of Damages

Answer 16

Cannot recover if breach could be avoided. Therefore must take reasonable steps to mitigate damage. If not, courts will reduce total damages by amount that could have been avoided.

Affirmative steps not required if undue risk, burden, or humiliation.

Question 17

Formula for Expectation Damages

Answer 17

Compensatory (direct loss)
+
Consequential and Incidental (indirect/other)
-
Costs or Loss Avoided (for not having to perform)

Question 18

Reliance Damages

Answer 18

Expenditures made in reliance on K. Meant to put non-breaching party in position as if K never existed.

May be awarded if Expectation damages too speculative.

Question 19

Liquidated Damages

Answer 19

Clause will be enforced if
1. Damages were difficult to estimate at K formation
AND
2. Amount is reasonable to actual damages suffered.

Valid clause = only that amount is valid.
Invalid clause = actual damages available.

Question 20

Restraint of Trade and Restrictive Covenants

Answer 20

Restraint on trade (restrictive covenant or non-compete) is enforceable if reasonable to protect party’s legitimate business interest - must be ancillary to otherwise valid business transaction/relationship.

Must be reasonable in time, geographic area, and scope of the activity limited. Will be granted to extent necessary to:
- prevent solicitation or disclosure of trade secrets;
- prevent release of confidential customer information; or
- where employee’s services to employer are deemed special or unique.

Most courts will enforce up to its reasonable limits, unless there is bad faith or deliberate overreach.

Question 21

Acceptance of Goods

Answer 21

Buyer:
- after reasonable opportunity to inspect, signifies that goods are conforming OR he will take/retain despite non-conformity;
- fails to reject goods after reasonable opportunity to inspect; or
- does any act inconsistent with seller’s ownership.

Acceptance of part of commercial unit is acceptance of entirety.

Buyer obligated to pay for purchase once accepted (unless later revokes).

Question 22

Common Law exceptions to Statute of Frauds

Answer 22

Full performance;
Partial performance in land K;
Judicial acknowledgement; or
Estoppel

Question 23

Can mutual assent by implied?

Answer 23

Yes. Implied-in-fact K is created by conduct of parties (without spoken/written words) if:
- conduct intentional;
and
- each party knows/has reason to know other party will interpret conduct as agreement to enter into K.

Question 24

Effects and limits of unilateral mistake

Answer 24

• K voidable by mistaken party if other knew/had reason to know first was mistaken;
  or
• Mistake makes enforcement unconscionable.

Mistake in price/value not material, so no recession/reformation based on unilateral mistake in price/value.

Question 25

What actions are available to a court if the contract is unconscionable?

Answer 25

• Refuse to enforce
• Enforce without unconscionable terms
• Limit application of such terms

Question 26

What is risk of loss, and who bears it in UCC contracts?

Answer 26

Who is responsible for goods lost/damaged during delivery. Usually governed by terms of contract. Otherwise:
* S bears risk until cure/acceptance if S breaches and B rejects/revokes.
* B bears risk for commercially reasonable time if B breaches/repudiates.

Question 27

What are the rules around common carriers and non-common carriers for shipping goods?

Answer 27

Common carrier is independent shipping co.

Shipment contract
- Presumptive type if K does not specify otherwise and shipment by common carrier.
- S arranges and delivers goods to carrier at S’s location, so S bears risk of loss until goods delivered to carrier.

Destination K
- Common carrier
- S ensures goods delivered safely to B, so S bears risk until delivery to B.

Merchant seller uses non-common carrier
- S bears risk until B receives goods.

Non-merchant uses non-common carrier
- S bears risk until tender delivery to carrier.

Question 28

Remedies for failure to satisfy an accord

Answer 28

If party fails to satisfy, the other may sue under either the original K or the accord terms.

Question 29

What is the effect of S disclaiming an express warranty?

Answer 29

Court will try to construe disclaimer language consistent with warranty, and will deem disclaimer invalid if it cannot so construe.

But if final written agreement expressly disclaims an express warranty (other than warranties in agreement), parole evidence rule precludes evidence of S’s prior/contemporaneous representations that otherwise create express warranty. Therefore, warranty does not exist.

Question 30

Limiting damages for breach of warranty

Answer 30

By agreement, S may limit B’s remedies for breach of a warranty so long as limit is not unconscionable at time of formation.

Exceptions:
- Limit on B’s remedies for person injuries for consumer goods is presumed unconscionable (though S can rebut at trial).
- If limited remedy “fails of its essential purpose,” court will set aside and use default remedy provision from Article 2.

Question 31

Specific performance - what is it and when is it not available?

Answer 31

Equitable remedy that is only available if monetary damages inadequate to compensate injured party.

Not available for employee/personal services contracts (injunctive relief may be awarded for such Ks).

Question 32

What is required for an option contract?

Answer 32

Consideration

Question 33

Assignee may sue obligor for…

Answer 33

• non-performance
• wrongful revocation of assignment
• breach of implied warranty