Contracts 2 Flashcards
Equitable Defenses
- Unclean Hands
- other party is guilty of wronddoing in the same transaction
- Laches
- delay has prejudiced the defendant
- Sale to a BFP
Art 2 on Place of Delivery
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)
Art 2 on Time for Shipment or Delivery
if time not specified, then reasonable time
Art 2 on time of payment
time and place at which the buyer is to recieve the goods, if time isnt specified
Art 2 on Assortment
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
Art 2 on Noncarrier case
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.
Art 2 on Carrier Case - Shipment K
Risk of loss passes when delivered to carrier
Art 2 on Carrier Case - Destination K
Risk of loss passes when tendered to the buyer at the destination
F.O.B.
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.
F.A.S.
Free Alongside
Term usually used for goods shipped via boat.
Risk of loss passes once goods are delivered to buyer at the dock.
Risk of Loss on Sale or Return K
If goods are returned, risk of loss remains with the buyer
Risk of Loss on Sale on Approval Ks
doesn’t pass to buyer till she accepts
Insurable interest and identification
Art 2 gives buyer a special interest in identified goods. This is insurable
Warranties
- Warranty of Title
- Warranty Against Infringment
- Implied Warranty of MerchantabilityImplied Warranty of Fitness for a PArticular Purpose
- Express Warranties
“Clickwrap”
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.
Damages for Breach of Warranty
Generally difference between value of goods accepted and the value of goods warranted, measured at the time of acceptance.
Performance at Common Law
Substantial Performance
Performance under Article 2
Perfect Tender
Also requires all parties to act in Good Faith
Art 2 - Noncarrier cases - Tender of Delivery
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)
Buyer’s Obligation to Pay: Carrier v Noncarrier
Carrier
- price is due only when buyer recieves good
Noncarrier:
- price due concurrently with tender of delivery
Failure of Condition v Breach of K
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
Anticipatory Repudiation & its requirements
Occurs if a promisor, prior to time set for performance, indicates he will not perform when the time occurs.
Requirements:
- Only applies to bilateral K with executory unperformed duties on both sides
- the repudiation must be unequivocal
- prospective inability or unwillingness to perform is not anticipatory repudiation because it is not unequivocal
In the case of anticipatory repudiation, nonrepudiating party has 4 alternatives:
- treat the repudiation as total repudiation and sue immedietly;
- suspend his own performance and wait to sue until performance date;
- treat the repudiation as an offer to rescind and treat the K as discharged; or
- ignore the repudiation and urge the promisor to perform
Retraction of Repudiation
May withdraw unless other party has cancelled or materially changed her position in reliance. Then the repudiation is finaal
Conditions may be exucsed by:
- impossibility
- impracticability
- frustration
Test for Impracticability
- extreme/unreasonable difficulty and/or expense; and
- its nonoccurance was a basic assumption of the parties
Contracts for Sale of Goods - Events sufficient for discharge
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.
Discharge from Frustration & Test:
When the purpose of the K has become valueless b/c of something intervening, some courts will discharge. Must show:
- superveining act
- did not reasonably foresee
- purpose of the K has been almost/completely destroyed
- purpose of K was realized by both parties
Relationship of assignment and delegation:
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.
Delegations are permitted unless either
(1) contract prohibits delegations or prohibits assignments or
(2) “personal services contract” that calls for VERY SPECIAL skills.
What if, after delegation, the third-party delegatee does not perform?
- Delegating party always remains liable.
- Delegatee liable only if she receives consideration from delegating party.
Formalities for a Delegation?
None required
What is a novation?
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.
Who is liable after novation?
Novation excuses the contracted for performance of the party who is substituted for or replaced.
How is delegation different from novation?
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.
Specific performance/injunction:
Equitable remedy: Look for adequacy of remedy at law or unclean hands, or other parties’ equities.
- Contracts for sale of real estate - except if BFP
- Contract for sale of goods: Unique goods: antiques, art, custommade or other appropriate circumstances.
- Contract for services: No specific performance, possible injunctive relief.
Seller’s reclamation from an insolvent buyer of goods:
Right of an unpaid seller to get its goods back. Key facts are that:
- the buyer must have been insolvent at the time that it received the goods, and
- 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
- the buyer still has goods at time of demand.
Entrustment
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.
Policy for money damages
Compensate plaintiff, not punish defendant.
To make whole again
Measure of damages:
General approach – protection of expectation:
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.
Art 2 - Seller breaches, buyer keeps the goods
[Fair market value if perfect – fair market value as delivered] or [cost of repair].
Art 2: Seller breaches, seller has the goods:
[market price at time of discovery of the breach – contract price] or [reasonable replacement price – contract price] whichever is greater.
Art 2 Buyer breaches, buyer keeps the goods
Contract Price
Art 2 Buyer breaches, seller has the goods:
[contract price – resale unless seller cannot resell in
which case the seller can recover the contract price
and in some situations provable lost profits].
[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?
Yes
Lost Profit, because its regular inventory
INCIDENTAL damages:
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.
CONSEQUENTIAL (special) damages:
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.
Less AVOIDABLE damages:
No recovery for damages that could have been avoided without undue burden on plaintiff. Burdens of pleading and proof on defendant.
Liquidated Damages
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.
