Contracts 2 Flashcards
In a non-carrier contract, where is the tender of delivery, unless expressly different?
In non-carrier cases, the tender of delivery is at the seller’s place of business unless otherwise agreed.
The seller must give reasonable notice of tender to buyer.
In a shipment contract, what tender obligations does the seller have?
In a shipment case, the seller must:
Put goods to a reasonable carrier and make reasonable contract for shipment;
Obtain and tender any documents necessary for buyer to take possession;
Promptly notify buyer of shipment.
In a destination contract, what are the seller’s tender obligations?
The seller must put and hold goods at the destination, give seller reasonable notice of tender, and provide title documents.
Unless otherwise agreed, when does buyer’s obligation to pay for goods under Article 2 occur?
Buyer is obligated to pay at tender of goods.
This can be concurrent with delivery (non-carrier or destination contracts) or with shipment (shipment contracts).
How is a promise distinguished from a condition?
A promise is a commitment to do or refrain from something.
A condition creates or releases the duty to perform the promise. Conditions in effect, shift the risk of performance.
Distinguish a condition precedent and a condition subsequent.
A condition precedent is an instance which must occur before an absolute duty arises.
A condition subsequent is an instance that removes the absolute duty to perform.
Failure of a condition is not a breach, but rather discharges liability from obligation.
What is a satisfaction clause?
A satisfaction clause is an express condition that forgives one’s duty to perform absent his subjective satisfaction with the product/subject matter.
Generally, manufacturing/commercial satisfaction clauses are held to an objective standard based on the trade.
Who can waive a condition?
The person receiving the benefit of the condition can waive a condition. A waiver given prior to time for performance can be retracted, unless the other has relied on the waiver.
Does difficulty of performance create an excuse to a condition?
Mere difficulty of performance does not excuse a condition, however if the party to perform a condition is hindered from performing by the intentional effort of the other, this excuses the condition.
What major factor determines if a party may terminate performance for a breach?
A party may terminate her performance under a contract for a material breach.
If the breach is not material, then it is considered a partial breach. Damages may be available, but performance must continue.
Under common law, how is materiality determined?
The Restatements have 6 considerations in determining if a breach is material:
1) The greater the benefit received…
2) The greater chance of adequate compensation to the injured…
3) The greater performance completed…
4) The greater the hardship to the breaching party…
5) The less willful or negligent the breaching behavior…
6) The greater the likelihood of full performance…
then. .. the less likely a material breach.
In order for an innocent party to bring a claim for breach, he must be ___________________ to perform.
In order for an innocent party to bring a claim for breach, he must be willing and able to perform.
In order to determine if a term of a contract is divisible, the court will consider what 3-part test?
In order to decide if a part of a contract is divisible, the following 3-part test must be satisfied concurrently:
1) The performance is divided into 2 or more parts;
2) Each party has equal parts due to the other; AND
3) Each performance is a quid pro quo of the other.
How is substantial performance viewed under the UCC?
Substantial performance is not considered under the UCC, rather the UCC follows the Perfect Tender Rule.
If the goods or delivery of the goods fail to conform to the contract, what options are available to the buyer?
If goods or delivery fail to conform, the buyer may:
Reject all goods,
Accept all goods,
Accept any of the goods and reject remaining.
When does the buyer’s right to reject nonconforming goods end?
Under the UCC, the right to reject ends with acceptance.
Acceptance is established when the buyer:
Indicates he will keep the goods;
Fails to reject in a reasonable time;
Fails to seasonably notify the seller of rejection;
Does any other act inconsistent with the seller’s ownership of the goods.
What is required in a notice of rejection?
The buyer must notify the seller of a rejection of goods. He must state a particular defect to justify the rejection if:
The seller could have cured the nonconformity, or
The seller has requested written defects (if btwn merchants).
What is the difference in a rejection and a revocation of goods?
A rejection denies acceptance.
A revocation occurs after acceptance and the buyer finds a substantially impaired value &:
1) has a reasonable belief the defect would be cured and it wasn’t, or
2) defect was difficult to discover or the buyer relies on the seller’s assurance.
When must a revocation be made?
A buyer can revoke acceptance within a reasonable time after discovered, or should have been discovered.
A buyer must revoke prior to any substantial change is made to the goods.
What is a seller’s response to a rejection or revocation?
To avoid a breach, a seller has the right to cure nonconforming goods by giving notice of cure and a new tender within a reasonable time.
What is the effect if the subject matter or consideration is or becomes illegal?
Illegality of consideration or subject matter generally renders an agreement void and unenforceable.
A contract can be legal but for an illegal purpose (Cheese additive case, Blossom Farm v Kasson) and if so then unenforceable.
What are limitations of an Illegality defense?
If the plaintiff is unaware of illegality, an innocent party may recover.
If plaintiff has unclean hands (in pari delicto) then no recovery
Is bribery a defense to contract enforcement?
Bribery can be a public policy defense. There must be a direct connection between the bribe and the obligation to be excused.
When is a operating without a proper license a defense to contract enforcement?
When a license is required for public welfare, it can be a defense against the party without a license.
Generally, if the license requirement is strictly for generating revenue, it is not a public policy defense.
What is another term for a Restraint of Trade agreement & what are the parameters?
A restraint of trade agreement is known as a Non-Complete agreement.
Non-competes must be reasonable in duration and geography and not harmful to the public.
What claims may a terminated at-will employee have under Contract law?
Under contract law, at-will employees have no claim for termination. A claim may exist under tort law based on statute or public policy.
Attorneys are considered at-will employees.
When are prenuptial agreements enforceable?
Prenuptial agreements are subject to the same defenses as other contracts- fraud, duress, incapacity, etc.
Under the Geyer standard, a full and fair disclosure is required.
Are surrogacy contracts enforceable?
Surrogacy contracts are generally invalid as against public policy if they dismiss parental rights prior to birth.
Surrogate contracts can be valid if voluntary and no money.
All or part of a contract that is “absent meaningful choice, coupled with unreasonable favorable terms” may be invalid on what grounds?
Unconscionability- An agreement that “no one in senses would make, no fair, honest would accept”
Are contracts when one party makes unusually high profit unconscionable?
Not generally. Business-people contracting are arm’s length establish valid agreements.
The bargaining power and sophistication of the parties will be considered.
A “take it or leave it” contract is also known as what?
A contract of adhesion, where one side drafts the entire contract without negotiation or input from the other.
Enforcing Adhesion Contracts-
Generally enforceable, if not oppressive and within reasonable expectations. When questioned, interpreted against the drafter.
Can’t forgive intentional wrongs, and must be conspicuous.
Is an unconscionable term more procedural or substantive in nature?
Unconscionability requires some degree of procedural and substantive unconscionability.
Procedural is the manner of negotiations, unfair surprise. Substantive is found in the fairness of the terms.
Does an unconscionable term void a contract?
Not always, unconscionable terms can be severed by the court.
When is good faith required?
Good faith is always required. Common law good faith is implied on every contract, that neither shall destroy or injure a right of the other.
How does the UCC define Good Faith?
Good Faith in UCC is “honesty in fact and observance of reasonable commercial standards of fair dealing in trade”
Is specific performance a remedy for lack of Good Faith?
Not generally. Relief is ensuring a good faith performance. (SAT didn’t review evidence of scores, crt ordered review but not acceptance, Dalton v. ETS)
What is a Force Majeure clause?
Force Majeure is an escape clause, excusing performance for unforeseen, unpredictable events.
When is a contract excusable for impracticability?
Impracticability is established when the performance can only be done at an unreasonable and excessive cost, effort, or burden. However, high cost alone is not enough to render impracticable.
What is a three step test to check impossibility?
1) Did an unexpected contingency (supervening event) occur?
2) Was the risk of the event allocated, by contract or custom?
3) Did the event make performance literally impossible?
Impossibility is considered subjectively or objectively?
Impossibility must be from an objective standard. If one party can’t perform but another could, not impossible.
What is the Ejusdem Generis doctrine?
In force majeure clause, a list of excusable events summarized by “other circumstances”- Other circumstances must be of the same kind as the list.
When a material part of a contract or performance is destroyed, what is the effect?
When performance depends on a thing and that thing ceases to exist, at no fault of either, performance excused.
What is the result from a casualty of goods of a contract?
If at no fault of either, &-
the goods are fully destroyed, the contract is avoided.;
the goods are partially destroyed, the buyer’s option to void all or part of contract.
