Contracts 2

Question 1

Equitable Defenses

Answer 1

1. Unclean Hands
   
   • other party is guilty of wronddoing in the same transaction
2. Laches
   
   • delay has prejudiced the defendant
3. Sale to a BFP

Question 2

Art 2 on Place of Delivery

Answer 2

if place of delivery is not specified, the place is usually seller’s place of business (if he doesn’t have one, then his home)

Question 3

Art 2 on Time for Shipment or Delivery

Answer 3

if time not specified, then reasonable time

Question 4

Art 2 on time of payment

Answer 4

time and place at which the buyer is to recieve the goods, if time isnt specified

Question 5

Art 2 on Assortment

Answer 5

If k provides for an addortment to be delivered and doesn’t specify which party is to choose, then it is at the buyers option

Question 6

Art 2 on Noncarrier case

Answer 6

This is where parties did not intend to use a common carrier for delivery.

In such case, if the seller is a merchant, risk of loss passes to the buyer when he takes physical possession of the goods.

If the seller is not a merchant, risk of loss passes on tender of delivery.

Question 7

Art 2 on Carrier Case - Shipment K

Answer 7

Risk of loss passes when delivered to carrier

Question 8

Art 2 on Carrier Case - Destination K

Answer 8

Risk of loss passes when tendered to the buyer at the destination

Question 9

F.O.B.

Answer 9

Free on Board

Risk of loss passes to buyer at the named location.

If a K is silent to this term, then it is a shipment K.

Question 10

F.A.S.

Answer 10

Free Alongside

Term usually used for goods shipped via boat.

Risk of loss passes once goods are delivered to buyer at the dock.

Question 11

Risk of Loss on Sale or Return K

Answer 11

If goods are returned, risk of loss remains with the buyer

Question 12

Risk of Loss on Sale on Approval Ks

Answer 12

doesn’t pass to buyer till she accepts

Question 13

Insurable interest and identification

Answer 13

Art 2 gives buyer a special interest in identified goods. This is insurable

Question 14

Warranties

Answer 14

1. Warranty of Title
2. Warranty Against Infringment
3. Implied Warranty of MerchantabilityImplied Warranty of Fitness for a PArticular Purpose
4. Express Warranties

Question 15

“Clickwrap”

Answer 15

Computer software comes with terms at installation process, and purchaser must click agree.

These disclaimers are typically upheld on the rationale that the purchaser can return if the software if he disagrees with the conditions.

Question 16

Damages for Breach of Warranty

Answer 16

Generally difference between value of goods accepted and the value of goods warranted, measured at the time of acceptance.

Question 17

Performance at Common Law

Answer 17

Substantial Performance

Question 18

Performance under Article 2

Answer 18

Perfect Tender

Also requires all parties to act in Good Faith

Question 19

Art 2 - Noncarrier cases - Tender of Delivery

Answer 19

Seller must give the buyer notice reasonably necessary to enable her to take possession of the goods.

The tender must be at a reasonable hour at the seller’s place of business (or home)

Question 20

Buyer’s Obligation to Pay: Carrier v Noncarrier

Answer 20

Carrier

• price is due only when buyer recieves good

Noncarrier:

• price due concurrently with tender of delivery

Question 21

Failure of Condition v Breach of K

Answer 21

Failure of a K provision that is only a condition is not a breach of K, but it discharges the liability of the promisor whose obligations on the conditional promise never mature

Question 22

Anticipatory Repudiation & its requirements

Answer 22

Occurs if a promisor, prior to time set for performance, indicates he will not perform when the time occurs.

Requirements:

1. Only applies to bilateral K with executory unperformed duties on both sides
2. the repudiation must be unequivocal
   
   • prospective inability or unwillingness to perform is not anticipatory repudiation because it is not unequivocal

Question 23

In the case of anticipatory repudiation, nonrepudiating party has 4 alternatives:

Answer 23

1. treat the repudiation as total repudiation and sue immedietly;
2. suspend his own performance and wait to sue until performance date;
3. treat the repudiation as an offer to rescind and treat the K as discharged; or
4. ignore the repudiation and urge the promisor to perform

Question 24

Retraction of Repudiation

Answer 24

May withdraw unless other party has cancelled or materially changed her position in reliance. Then the repudiation is finaal

Question 25

Conditions may be exucsed by:

Answer 25

1. impossibility 2. impracticability 3. frustration

Question 26

Test for Impracticability

Answer 26

1. extreme/unreasonable difficulty and/or expense; and 2. its nonoccurance was a basic assumption of the parties

Question 27

Contracts for Sale of Goods - Events sufficient for discharge

Answer 27

Shortage of raw materials or inability to achieve because of war, etc. Increase in costs are not sufficient unless they change nature of the K.

Question 28

Discharge from Frustration & Test:

Answer 28

When the purpose of the K has become valueless b/c of something intervening, some courts will discharge. Must show: 1. superveining act 2. did not reasonably foresee 3. purpose of the K has been almost/completely destroyed 4. purpose of K was realized by both parties

Question 29

Relationship of assignment and delegation:

Answer 29

Assignment is the transfer by a party to a contract of his rights or benefits under the contract to a third party who was not a party to the contract. Delegation is the transfer by a party to a contract of his duties or burdens under the contract to a third party who was not a party to the contract. Often a contracting party makes both an assignment and a delegation of his rights and duties under the contract to a third party. Often multistate examiners use the term “assignment” in a problem involving an assignment and a delegation and even in a problem involving only a delegation.

Question 30

Delegations are permitted unless either

Answer 30

(1) contract prohibits delegations or prohibits assignments or (2) “personal services contract” that calls for VERY SPECIAL skills.

Question 31

What if, after delegation, the third-party delegatee does not perform?

Answer 31

1. Delegating party always remains liable. 2. Delegatee liable only if she receives consideration from delegating party.

Question 32

Formalities for a Delegation?

Answer 32

None required

Question 33

What is a novation?

Answer 33

A novation is an agreement between BOTH parties to an existing contract to the substitution of a new party, i.e., same performance, different party.

Question 34

Who is liable after novation?

Answer 34

Novation excuses the contracted for performance of the party who is substituted for or replaced.

Question 35

How is delegation different from novation?

Answer 35

Novation requires the agreement of BOTH parties to the original contract, and excuses the person replaced from any liability for nonperformance. Delegation does not require the agreement of both parties and does not excuse.

Question 36

Specific performance/injunction:

Answer 36

Equitable remedy: Look for adequacy of remedy at law or unclean hands, or other parties’ equities. 1. Contracts for sale of real estate - except if BFP 2. Contract for sale of goods: Unique goods: antiques, art, custommade or other appropriate circumstances. 3. Contract for services: No specific performance, possible injunctive relief.

Question 37

Seller’s reclamation from an insolvent buyer of goods:

Answer 37

Right of an unpaid seller to get its goods back. Key facts are that: 1. the buyer must have been insolvent at the time that it received the goods, and 2. the seller demands return of goods within 10 days of receipt (this “10- day rule” becomes a “reasonable time rule” if, before delivery, there had been an express representation of solvency by the buyer), and 3. the buyer still has goods at time of demand.

Question 38

Entrustment

Answer 38

Entrusting goods to a merchant who deals in goods of that kind gives him the power to transfer all rights of the entruster to a buyer in the ordinary course of business.

Question 39

Policy for money damages

Answer 39

Compensate plaintiff, not punish defendant. To make whole again

Question 40

Measure of damages: General approach – protection of expectation:

Answer 40

Expectation simply means that people who contract expect that the other person will not breach. Expectation damages protect that expectation. Accordingly, (1) look to facts for dollar value of performance without breach, (2) look to facts for dollar value of performance with breach, and (3) compare the two to determine the amount of damages.

Question 41

Art 2 - Seller breaches, buyer keeps the goods

Answer 41

[Fair market value if perfect – fair market value as delivered] or [cost of repair].

Question 42

Art 2: Seller breaches, seller has the goods:

Answer 42

[market price at time of discovery of the breach – contract price] or [reasonable replacement price – contract price] whichever is greater.

Question 43

Art 2 Buyer breaches, buyer keeps the goods

Answer 43

Contract Price

Question 44

Art 2 Buyer breaches, seller has the goods:

Answer 44

[contract price – resale unless seller cannot resell in which case the seller can recover the contract price and in some situations provable lost profits].

Question 45

[Lost profits for lost volume seller]. S&M Leather contracts to sell leather clothing to Conviser for $1,000. (Assume that Conviser is buying goods that are part of S&M’s regular inventory – “off the rack” so to speak.) Conviser breaches. S&M sells the very same items to Christian Grey for $1,000. Can S&M recover any damages from Conviser? And if so, how much?

Answer 45

Yes Lost Profit, because its regular inventory

Question 46

INCIDENTAL damages:

Answer 46

Costs incurred in dealing with the breach such as costs of storing rejected goods in a sale of goods or finding a replacement in a services contract – always recoverable.

Question 47

CONSEQUENTIAL (special) damages:

Answer 47

Consequential damages does not mean all damages caused as a consequence of the breach. Rather think of damages as being either (1) general damages, i.e., kind of loss that any person would sustain or (2) consequential damages, i.e., kind of loss that is special to this plaintiff. Consequential damages are limited to damages arising from P’s special circumstances and recovery of consequential damages is limited to situations in which D had reason to know of these special circumstances at the time of the contract.

Question 48

Less AVOIDABLE damages:

Answer 48

No recovery for damages that could have been avoided without undue burden on plaintiff. Burdens of pleading and proof on defendant.

Question 49

Liquidated Damages

Answer 49

Look for contract provision fixing amount of damages. Issue will be validity: concern is whether provision is too high – a penalty. Tests are: (1) damages were difficult to forecast at time contract was made and (2) provision is a reasonable forecast.