Contracts Flashcards
Requirements to form a valid K
(1) Mutual Assent i.e. a meeting of the minds
- offer
- valid acceptance
- objective manifestations of assent
(2) Consideration
- a bargained-for exchange of legal value
(3) No defenses
- valid defense to enforcement or formation leads to either:
(a) Void (i.e. never legal effect);
(b) Voidable (i.e. either party can elect to void); or
(c) Unenforceable (i.e. otherwise valid K where defense bars enforcement)
Bilateral K
Exchange of mutual promises where each party is both a promisor and a promise
e.g. A offers to sell his car to B for 5000 and B promises to purchase A’s car for that price
Unilateral K
offer requires performance as the manner of acceptance
Offeror-promisor agrees to pay upon completion of the act requested by the promise; once act is completed, K is formed.
e.g. A promises to pay B 100 if B paints A’s fence; B is not obligated to paint A’s fence, but if B does, K is formed and A must pay B $100
Quasi-K
not a K, but rather a restitution remedy designed to prevent unjust enrichment
an implied in law K arises when there is an unenforceable or non-existent agreement but one side has realized a benefit
Look for
(1) P has conferred a benefit to D;
(2) P reasonable expects payment:
(3) D knowingly accepted the benefit; and
(4) D will be unjustly enriched if P is not compensated
Common Law of K
Applies to most K EXCEPT for the Sale of Goods
UCC Article 2
Governs the sale of goods
If both parties to a K are merchants, the UCC has additional special rules (e.g. acceptance with additional terms)
Mixed K Applicable Law
predominant purpose of K dictates applicable law
EXCEPT - If K terms divide payment between the goods and the services, apply UCC to goods portion and common law to remainder.
Duty of Good Faith
obligation on the performance and enforcement of a K (applies to both UCC and Common Law)
Offer
An objective manifestation of a present intent to contract.
This can be demonstrated by
(1) a promise, undertaking, or commitment;
(2) definite and certain terms; and
(3) communication to an offeree
Objective Manifestation of Intent
offer must give offeree a reasonable expectation that offeror is willing to enter into a K
reasonable person standard
Definite and Certain Terms
Terms included must be sufficient to allow a court to enforce the K (e.g. quantity, time for performance, price, etc)
Communication to an identified offeree
Offeree must know of the offer and have the power to accept it.
Advertisements are generally not offers unless unless highly specific as to quantify and clearly indicate who may accept.
UCC Offers
Quantity must be certain or capable of being made certain.
Missing terms OK, particularly price, if parties clearly intended to make a K and there is a reasonable certain basis for giving a remedy.
Requirements / Outputs K
no unreasonable disproportionate increase in quantity allowed
Termination of Offer
An offer may be terminated by an act of a party or by operation of law
Act of parties:
(1) Revocation by offeror
(2) Rejection by offeree
(3) Lapse of time
- Offeror can set a time limit for acceptance
Operation of law:
(1) Death or insanity of either party
(2) Destruction of proposed K’s subject matter
(3) Supervening illegality
Revoking Offers
An offeror may revoke her offer, which effectively terminates the offer and the offeree’s power of acceptance
Methods:
(1) Unambiguous statement by the offeror to the offeree
(2) Offeree becomes aware of offeror’s unambiguous conduct or statement indicating an unwillingness or inability to contract
Limitations on Revocation of OFfers
(1) Revocations are only effective upon receipt by offeree
(2) Offer cannot be revoked once it has been accepted
(3) In the case of a Unilateral K start of performance makes the offer irrevocable for a reasonable time to complete performance.
- start of performance must go beyond mere preparation
Irrevocable Offers
An offer is irrevocable if:
(1) Option K - promise to keep the offer open
- consideration required at CL and for UCC when firm offer does not apply
(2) UCC Firm Offers - a merchant’s offer made in a signed writing that assures the offer will be held open is irrevocable from the time stated (no consideration required)
(3) Detrimental reliance by offeree - reliance must be reasonable
Rejection of Offer
Rejection by offeree terminates the offer and the offeree’s power of acceptance
Methods
(1) Express - effective when received
(2) Counteroffer - becomes a new offer thereby terminating the original
(3) Conditional acceptance - effectively a counteroffer
- exception for when the condition would be included anyways
(4) Acceptance w/ additional terms
- Common law says acceptance must mirror the offer otherwise its a counter offer
- UCC depends on whether both parties are merchans.
- If non-merchant the K is formed but additional terms are excluded and are considered proposals for additional terms
- if merchants additional terms become a part of the K
Acceptance
Acceptance arises upon offeree’s clear expression of assent to the terms of the offer
Offeror can dictate the manner by which the offer is to be accepted
Mirror Image rule
At common law acceptance must mirror the offer’s terms; it cannot add, omit or change a single term of the offer
UCC Acceptance w/ Additional Terms
Ask - are both parties merchants?
(1) If YES - K is formed w/ the additional terms UNLESS:
(a) they materially change the offer
(b) offer expressly limited acceptance to the offer’s terms, or
(c) offeror objects w/in a reasonable time
(2) if NO - K is formed but without the additional terms
UCC Acceptance by Shipment
a merchant may accept an offer to buy goods by either:
(1) providing a promise to ship goods (usually written), or
(2) Promptly shipping conforming goods
Shipment of non-conforming goods acts as an acceptance but may give rise to breach
Mailbox Rule
Offers and acceptances transmitted via mail become effective upon either dispatch or receipt
Offers, Counteroffers, Rejections, and Revocations are effective upon receipt.
Acceptance is effective upon dispatch.
Unless otherwise provided, offers invite acceptance in any reasonable manner given the circumstances.
Limitations:
(1) If the offer stipulates acceptance is not effective until received the offer controls
(2) If both a rejection and acceptance are sent then first to arrive controls
(3) In the case of Option Ks acceptance is effective upon receipt
Acceptance by Performance
Unless acceptance is limited by terms of the offer, offeree may accept by partial performance (for bilateral K) or complete performance (for unilateral K)
Note that an offer requiring acceptance by promise can still be accepted by performance IF:
(1) Offeree begins to perform; and
(2) Offeror knows offeree has begun and acquiesces
Acceptance by Performance (Unilateral)
Complete performance is required
(1) Offeree is not obligated to start or complete performance
(2) Failure to perform does not give rise to breach b/c no K is formed absent complete performance
(3) Offer may be irrevocable upon the start of performance until completion
(4) Offeree is not required to give notice upon start of performance but must notify offeror within a reasonable time upon completion
Acceptance by Performance (bilateral K)
Partial performance gives rise to acceptance.
Offeree must make offeror aware of acceptance.
Consideration
Consideration is a bargained-for-exchange of legal value between parties;
there must be a benefit to promisor or detriment to promisee.
Bargained-for-exchange
the promsie must induce the detriment and the detriment must induce the promise
Detriment = an obligation to do or refrain from doing something one would otherwise not be obligated to do or refrain from doing
A promise to perform a pre-existing duty or obligation generally is not consideration
Invalid Consideration
Promises of gifts or conditional gifts
Illusory promises - a promise where there is no obligation to perform (e.g. A promises to do B’s chores if he has time)
Promissory Estoppel
courts may enforce a promise if:
(1) Promisor reasonable expects reliance by promises;
(2) Promise acts or refrains from acting in detrimental reliance; and
(3) Injustice will occur without enforcement of the promise
Defenses to K formation
If established a court may choose not to enforce an otherwise valid K or it may be void/voidable by parties.
(1) Incapacity
(2) Statues of Frauds
(3) Illegality
(4) Misrepresentation / Fraud
(5) Duress
(6) Unconscionability
(7) Misunderstanding
(8) Mistake
Incapacity
Infants and mentally incompetent persons lack the capacity to contract. (Intoxicated IF other party has reasons to know they are intoxicated)
Right to disaffirm - person who lacks capacity to contract may disaffirm which renders it void.
Infancy Exceptions (Incapacity)
Ks involving minors may be enforced or otherwise recognized where:
(1) Implied Affirmation:
(a) Agreement entered before capacity
(b) Capacity since gained; and
(c) Benefits retained
(2) Infant liability for necessities - infants are legally obligated to pay for necessities (food/clothing/medical)
- quasi-K so infant cannot be sued for breach
Statute of Frauds
Contracts subject to the Statute of Frauds (“SoF”) require special proof of their existence
1) Signed writing—a writing containing the signature of the party to be charged (i.e., the party asserting the SoF defense)
UCC exception—signed writing not required if:
i. Both parties are merchants; and
ii. The party asserting SoF defense received a signed writing memorializing the agreement and its essential terms and failed to respond within 10 days of receipt
2) Performance—may satisfy SoF
Service K—only full performance satisfies SoF
Sale of goods K—delivery and acceptance of goods satisfies SoF to extent of goods delivered and accepted
Custom-made goods—SoF satisfied once seller makes a substantial beginning toward performance
Real Estate K (SoF)
Part Performance by the buyer satisfies SoF if buyer has done two of the follow three:
(1) Full or part payment
(2) Possession of property
(3) Improvements to property
Contracts within SoF
If a contract is within the SoF it must satisfy the SoF requirements to be valid
(1) Marriage K - promises made in consideration of marriage
(2) Service Ks incapable of being performed within 1 year (does not apply to lifelong deals that say nothing about time for performance because can technically be done tmrw)
(3) Land-related K (includes leases >1 year)
(4) Executor promises - promises by executors/administrators to personally answer for the debts of the decedant’s estate
(5) Guarantees - promises to pay debt of another (SURETY)
(6) Sales of Goods >=500
Illegality Defense
Illegal subject matter and/or purpose for K makes K unenforceable.
If the subject matter is LEGAL but made for an ILLEGAL PURPOSE then the party who was unaware of the illegal purpose can enforce.
Based on law at time of formation.
To avoid frustrating public policy, a K may be enforced if its terms violate a policy intended to benefit a party seeking relief
Fraud/Misrepresentation Defense
False assertions, concealment, or misstatements about a material fact before K formation or performance
K is VOIDABLE if a party detrimentally relies on the misrep.
Undue Influence Defense
K entered into under excessive pressure by someone unduly susceptible to pressure is voidable.
Duress Defense
wrongful act or threat that overcomes a party’s free will
Physical = void
Non-physical = voidable by coerced party
Unconscionability Defense
Courts may refuse to enforce all or part of a K that is unfair or oppressive to one party based on bargaining or terms
Adhesion Ks, exculpatory clauses for intentional acts, etc.
Look for the absence of meaningful choice by the disadvantaged party.
Misunderstanding
ambiguity concerning terms of the K
(1) If neither party is aware of the ambiguity - no K is formed unless both parties intended the same meaning
(2) If one party is aware of the ambiguity - K is formed and enforced according to intention of the unaware party
(3) Both aware of the ambiguity - no K is formed unless both intended the same meaning
Mutual Mistake
both parties are mistaken about an underlying factual assumption at the time of K formation
K is voidable by an adversely affected party if:
(1) both parties are mistaken concerning a basic assumption of fact;
(2) mistake materially affects the agreed-upon exchange; and
(3) Adversely affected party did not assume risk of the mistake
Unilateral Mistake
one party makes a mistake concerning facts of an agreement; usually arises with computational errors
(1) Unilateral mistake will not prevent K formation
(2) Exxception - mistaken party may void K if mistake is material and non-mistaken party knew or should have known of the mistake
Parol Evidence Rule
Evidence that is extrinsic to a written K is inadmissible to supplement or contradict the written K
Applies if K is a complete integration - parties must intend the K to express their full final agreement. Merger clause a fact but is not dispositive
Evidence barred by the PER
Negotiations and agreements before K becomes integrated
Extrinsic Evidence allowed if either:
(1) K was only partially integrated, or
(2) Additional terms would ordinarily be in a separate agreement
Delivery & Risk of Loss (Shipment by carrier)
Under UCC Ks, risk of loss issues arises when goods are lost/destroyed
(1) Shipment Ks - seller only obligated to ship goods to buyer
- ROL passes to buyer when seller delivers goods to carrier
- If K otherwise silent on shipment terms, shipment K is presumed if K requires shipment by this party carrier
(2) Destination Ks - seller obligated to ensure goods reach buyer
- ROL passes to buyer only when the buyer takes delivery
Evidence allowed by PER
(1) Mistake in the process of reducing an agreement to writing
(2) Misrep, fraud, duress, or illegality
(3) Condition precedent to the agreement becoming effective
(4) Modifications (oral or written) made after the writing
(5) Meanings parties intended to give to particular terms in the writing
(6) UCC - a written K’s terms may be explained or supplemented by evidence of a course of dealing, performance or trade
(7) A parties customs take precedence over industry custom
Delivery and Risk of Loss (Non-carrier delivery)
Under UCC Ks, risk of loss issues arise when goods are lost or destroyed
Merchant Seller - ROL passes to the buyer when he takes physical possession
Non-Merchant Seller - ROL passes to the buyer upon tender of delivery
Goods destroyed before ROL passes
K is voided if no party at fault
FOB [Location] K (Delivery/ROL)
Seller bears risk and expense of getting goods to the named location at which point risk passes to buyer
Breach and ROL
if buyer rejects defective goods or revokes acceptance, ROL does not pass to buyer until defects are cursed or she accepts
Express Warranty
Warranty = promise regarding K
An Express Warranty is a promise about the quality or feature of a product that can be breached if it does not meet that warranty
Implied Warranty of Merchantability
Merchant seller automatically warrants goods are fit for their ordinary purpose
Implied Warranty of Fitness for a Particular purpose
seller (whether or not a merchant) warrants that goods are fit for buyer’s purpose if:
(1) Buyer has a particular purpose;
(2) Buyer relies on seller to select suitable goods; and
(3) Seller has reasons to know buyer’s purpose and reliance on seller
Limited warranty liability
K can limit liability for warranties
(1) Disclaimer - limits liability for implied warranties (e.g. as-is/with al faults language)
(2) Remedy limitation - limits recovery upon breach of warranty
Perfect Tender Rule
Under UCC Ks, seller’s performance must be perfect with respect to the goods delivered and the manner of delivery
Imperfect tender = seller sends defective/nonconforming goods
Buyers Options upon Seller’s Imperfect Tender
(1) Keep - retain and sue for damages, or
(2) Reject - reject some or all and sue for damages
(a) Must notify seller of rejection in rxnable time
(b) Hold the rejected goods using reasonable care; and
(c) Give seller rxnable time to arrange for removal of goods
If Seller gives no information regarding removal, buyer can return goods to seller, store the goods or resell on behalf of seller (i.e. for seller’s profit)
Rejection of Goods - Installment Ks
Where delivery of goods occurs in separate lots
(1) Rejection - buyer can only reject a delivery/installment if
(a) defect substantially impairs the installment; and
(b) defect cannot be cured
(2) Rejection is limited to defective installment not entire K
(3) Buyer can only cancel entire K due to a defective installment if the installment substantially impairs entire K value
Seller of imperfect goods may be able to cure
Perfect Tender & Acceptance of Goods
Under UCC Ks, buyer does not officialy accept until goods are delivered and she has an opportunity to inspect and/or notify seller
Acceptance occurs if either:
(1) Buyer confirms acceptance - after rxnable opp to inspect, the buyer indicates that sellers goods conform or that she will keep them despite nonconformance
- payment without an opportunity to inspect is not acceptance
- if buyer accepts goods, she cannot later reject
(2) Buyer is silent - buyer fails to reject or notify seller of rejection within a reasonable time
Perfect Tender & Revoking Acceptance
buyer cannot reject after acceptance unless she discovers a defect
Requirements:
(1) Defect substantially impairs the good’s value and either
(a) Buyer accepted goods on the reasonable belief that defect would be cursed and it has not been, or
(b) buyer was excusable ignorant of defect or reasonably relief on seller’s assurances that goods conformed
Perfect Tender & Seller’s Ability to Cure
If buyer has notified seller of imperfect tender (i.e. delivery of nonconforming goods), seller may have an opportunity to cure
Seller can cure if:
(1) Seller gives buyer notice of intent to cure and time for performance has not yet expired
(2) Seller had reasonable grounds to believe nonconforming goods sent would be acceptable
- reasonableness usually determined by prior dealings with buyer
- seller will have additional reasonable time period to tender conforming goods
Buyer cannot compel seller to cure
Substantial Performance
Under a common law K, if one party has substantially performed the other party is obligated to perform and complete performance
“Substantial is usually considered at least halfway complete
- less than perfect performance by one party does not excuse the other from obligations
- Substantial performance by A obligates B to perform, but B may seek money damages for the difference between performance rendered and expected
Material Breach
Material Breach occurs when one party’s failure to perform under the K substantially deprives the other party of the benefit they bargained for
Common Law Rules:
(1) Material Breach by A excuses performance by B
(2) Materiality is a question of fact
(3) Exception - “time is of the essence clauses” which makes timely performance essential at set dates
Note: Does not apply to UCC.
Conditions
Conditions are agreed upon limitations on performance in a K
(1) Performance is contingent on the occurrence of some event
(2) Indicated by words such as “if”, “provided that”, “subject to”, etc.
(3) Conditions vs. promise - failure of a promise leads to a breach; failure of a condition relieves a party’s performance obligation
Condition Precedent
condition must occur before performance due; non-occurrence excuses performance
Condition Subsequent
condition that occurs after performance has begun and excuses duty to perform
Condition Purpose Controls
Substantial performance of a condition may suffice if it fulfills the conditions purpose
if a condition is clearly designed to protect one party, it will be interpreted consistently with that intent. That party can waive.
Condition Excuse
conditions may be legally excused by breach, repudiation, etc.
A party whose performance is subject to a condition cannot prevent or hinder the condition’s occurrence; will result in excuse of condition
Insecurity
Arises when a party to a K has reasonable grounds to believe the other party will be unwilling or unable to perform under the K
Insecure party may demand adequate assurances the other party will perform and suspend performance in the meantime
Arises out of the UCC but is applied to non-UCC in many states
Adequate Assurances
Commercially reasonable commitment from a party that it will perform under the K
If not provided, insecure party may treat K as repudiated (must be a reasonable demand)
If adequate assurances are provided, the formerly insecure party must perform; failure to do so would constitute breach.
Demand for Adequate Assurance
must be made in writing based on reasonable and justified grounds for insecurity
(1) No response required if demand is unjustified or unreasonable (i.e. party seeking adequate assurances is unreasonably insecure)
(2) Suspension of performance - a justifiably insecure party may suspend performance until adequate assurances are provided
Insecurity v. Anticipatory Repudiation
insecurity involves uncertainty regarding the other party’s performance whereas anticipatory repudiation involves a clear indication the other party will not perform
Anticipatory Repudiation
Arises when one party to a K makes it clear that he will not perform under the K effectually excusing the other party from performance
Requirements:
(1) Unambiguous Act
(2) Prior to full performance
(3) Indicating Non-Performance
Repudiation can be withdrawn unless the other party has either:
(1) Materially changed position in reliance on the repudiation
(2) Cancelled the K in response to repudiation, or
(3) Indicated they consider the repudiation to be final
Non-Repudiating Party’s options
(1) Treat the anticipatory repudiation as a totla repudiation and sue
(2) Suspend performance until performance date is due and wait to sue
(3) Treat repudiation as an offer to rescind and treat K as discharged
(4) Ignore repudiation and urge the promisor to perform
Impossibility and Impracticability
if an unforeseen event occurs after K formation but before performance is complete, performance may be excused as impossible or impracticable
Requirements:
(1) Performance is objectively impossible due to unforeseen event
or
(2) Performance is only possible with extreme and unreasonable difficulty and expense due to unforeseen event
Common Unforeseen Events (Impossibility)
(1) Substantial damage or destruction to K’s subject matter that was neither parties fault
(2) Death - K obligations generally survive the death of a party unless deceased party K’s obligations are non-delegable
(3) Subsequent law or regulation (e..g supervening illegality)
Frustration of Purpose
A party’s duty to perform under a K may be discharged if an unforeseen event occurs that undermines one of both party’s principal purpose for entering the K
Requirements:
(1) An unexpected event destroys one or both party’s purpose for entering the K
(2) The unforeseen event is not the fault of the frustrated party; and
(3) The non-occurrence of the event was a basic assumption of the K (does not need to be stated)
Frustration of Purpose v. Impossibility
Distinction is that impossibility concerns duties specificed in the K, whereas frustration of purpose concerns the reasons a party entered into the K
e.g. a landlord rents space to B to open ice cream parlor; if property is destroyed by an earthquake, they are excused from performing due to impossibility
However if the city passes an ordinance banning the sale of sweetened food, the K’s purpose is frustrated b/c they landlord knew B intended to open an Ice cream parlor
Rescission
Recision of a K serves to discharge duties under the K
- occurs when parties agree to rescind their K
- agreement to rescind is itself a new, binding K supported by consideration except in at-will employment
Limitations
(1) mutual recession may be made orally
(2) exception - writing required if K to be rescinded is subject to the SoF and/or UCC
(3) Parties cannot rescind a K if the rights of a third-party beneficiary have vested
Unilateral Rescission
When only one party wants to rescind the K
Usually only granted where there is a defense to K enforcement or formation (e.g. mistake, misrep, duress, fraud, etc)
i.e. as distinguished from mutual rescission, whereby parties agree to rescind a K, unilateral rescission often occurs as a court-ordered remedy where there is a valid defense to K enforcement or formatin
Modification
Modifcation occurs when parties change terms of the original K
Parties agree to discharge original K terms in favor of new ones
Requirements:
(1) Mutual Asset of the parties nad
(2) Consideration
Modern law generally allows mods if it is fair and due to circumstances unanticipated when K was made
UCC - no consideration required for good-fait modification (but must be in writing if it now falls into SOF)
Parol Evidence is allowed to show subsequent mods to K
Novation
parties agree to substitute a new party to perform
Parties create a new K substituting new party who gets benefits and assumes duties of the K
Requirements:
(1) a previous valid K
(2) all parties including the new agree to new K
(3) new K extinguishes K duties between original parties and
($) the new K is valid and enforceable
Accord and Satisfaction
In an afford and satisfaction parties to an existing K agree to accept different performances in satisfaction of the original existing obligation
(1) Accord - new agreement to accept alternative performance in lieu of the original performance
- consideration required (ok if lesser value or different)
(2) Satisfaction - performance of the accord agreement
Third party beneficiaries
Intended TPBs - parties to the K intended for TPB to benefit from K
- TPB has rights under K
Incidential TPBs - stands to benefit although not by intention of the parties
- TPB has no rights under the K
Question of Fact:
(1) Is TPB expressly designated in K?
(2) Does TPB directly benefit from some performance under K?
(3) Does TPB have rights under K?
(4) Does TPB stand in such a relationship to the promise under the K that an intent to benefit the third party can be inferred?
Characteristics:
(1) Not parties to K
(2) Intended to have right to sue for breach
(3) Creditor TPBs
(4) Donee TPBs
Rights of TPB
Rights must VEST.
Vesting of Rights occurs when:
(1) Accepts the benefits in the manner requested by K
(2) Sue to enforce K
(3) Detrimentally relies on the K
Enforcement
(1) Sue promisor
(2) Promisee can sue promsior at law and in equity for S.P.
(3) Credtior beneficiary can sue promises on existing obligation between them
(4) Donee beneficiary may only sue promises if detrimental reliance exists
Assignment
An assignment is a transfer of rights under a K to a third party after the K is formed.
Assignor can assign rights under a K to a third party assignee who is now in a K with remaining party obligor
Consideration is not required but assignment without consideration is considered gratuitous
Limits on Assignment
Common law limitations—common law bars any assignment that substantially changes the duties of the obligor
Assignment of payment is not a substantial change
Assignment of rights fails if the obligor’s risk is substantially altered
K limitations on assignment are valid
- assignment of duties
- assignment of rights
- assignment as void
Revocability of Assignments
Gratuitous assignments may be revocable, however assignments made for consideration are irrevocable
A gratuitous assignment may be irrevocable if either:
(1) obligor has already performed
(2) Assignee has received a written claim or tangible object signifying a right to collect (e.g. stock certificate), or
(3) Detrimental reliance by assignee
Assignee right to sue
(1) Obligor - for non-performance; and obligor can raise any defense ot the K that he could have raised against assignor
(2) Assignor - for breach of any of the following implied warranties
(a) no prior assignment of the same right
(b) the right to assign was not subject to defenses
(c) no interference with the assigned right
Delegation v. Novation
novation arises when three parties agree that a substitute person will take over duties under the K whereas a delegation occurs when one party independently decides to delegate duties to a third party
Expected Damages
standard measure of money damages
Puts the parties in the economic position they would be in if the K had been performed
Reliance Damages
alternative measure used when expectation damages are too speculative
designed to compensate P based on the value of her performance and puts in the position they would have been in had the contract never been formed
Consequential damages
foreseeable losses indirectly resulting from a breach (e.g. lost profits); recoverable if:
(1) damages area foreseeable result of the breach; and
(2) When K was formed, D has reason to know P would suffer special, unpreventable, or unexpected damages in the event of a breach
UCC Ks - only buyer can recover
Incidental Damages
Commercially reasonable expenses incurred by the non-breaching party in UCC Ks (e.g. cost of inspecting, returning, storing, reselling goods)
Duty to mitigate
P cannot recover reasonably avoidable damages, but can recover for costs of avoiding further damage
Specific Performance
usually only available for Ks involving real estate or unique goods (e.g. antiques, art)
For service Ks, injunctions preventing breach may be available (e.g. injunction enforcing non-compete clause)
Rescission
cancellation of a K
Purpose is to restore parties to their positions before K was made
Often arises where there is mistake, misrep, duress, or some other defense to K enforcement for formation
Reformation
remedy whereby a K is changed so that it reflects parties’ original intent
Can arise where there is a mistake in K formation such that the final K caries from a prior written statement
Can also arise where K is inaccurate due to some mis rep
Reclamation
In UCC Ks; unpaid sellers may stop delivery or reclaim goods form an insolvent buyer
Unpaid seller generally cannot reclaim goods from subsequent buyers
Restitution
arises where a party has been unjustly enriched
Awarded based on value of the benefit wrongly conferred
Party cannot recover both expectation damages and restitution damages
Liquidated Damages
agreed-upon K provisions that stipulate specified damages upon the occurrence of a breach
Requirements:
(1) damages are difficult to project at time of K formation; and
(2) The provision is a reasonable estimate of actual damages
Duty to Mitigate
P cannot recover reasonably avoidable damages (i.e. P must refrain from incurring additional losses after receiving notice of breach )
P may recover for the cost of mitigation (i.e. cost to avoid incurring further damages)
Employment - P’s damages can be reduced if D can show a comparable job in the same locale was available to P
D bears the burden of showing P’s failure to mitigate
Breach by Seller & Buyer Keeps Goods (UCC)
depends on if buyer accepts:
(1) Non-acceptance - damages = FMV of perfectly-delivered goods minus FMV of the goods actually delivered
(2) Acceptance - damages = difference in value between the goods as delivered and the goods as ordered
If seller delivers non-conforming but superior goods, buyer is not responsible for increased value of superior goods
Breach by seller & seller keeps or buyer returns goods (UCC)
Damages = whichever of the following is higher
(1) FMV of goods at the time of breach minus K price, or
(2) Buyer’s costs of covering/replacing goods minus K price
Breach by buyer & Buyer has goods (UCC)
Damages = K price (arises if goods are kept by buyer, destroyed after ROL passes to buyer or returned and seller is unable to resell)
Breach by buyer & seller has goods (UCC):
EITHER:
(1) K price minus market price at time of delivery, or
(2) K price minus resale price plus provable lost profits
Damages for UCC Contracts Misc.
Conversion - FMV of goods at the time of conversion
Losses - buyers and sellers can also recover lost profits or damages for losses resulting from breach/nonconformance
