Contracts and Sales Flashcards
Effetcs of Anticpatory Repudiation
Nonrepudiating party has 4 alternatives:
1) Treat the AP as a total repudiation and SUE IMMEDIATELY
2) Suspend his own performance and WAIT TO SUE until the performance date
3) Treat the repudiation as an offer to rescind and TREAT THE K AS DISCHARGED: or
4) Ignor the repudiation and URGE THE PROMISOR TO PERFORM
Under article 2, a buyer accepts when:
1) After a reasonable opportunity to inspect the goods, she indicates to the seller that they conform to requirements or that she will keep them even thouth they fail to conform;
2) She fails to reject within a reasonable time afetr tender or deilvery of the goods or fails to saeasonable notify the seller of her rejection; or
3) She does any act inconsistent with the seller’s ownership.
Ways to accept an offer to buy goods for current or prompt shipment.
(1) a promise to ship or
(2) current or prompt shipment constitutes an acceptance (does not matter whether the goods are conforming or non)
Always make this distinction, may do both, but promising to ship is the acceptance and shipment of nonconforming goods constitutes a breach if the acceptance is the promise to ship!!!
Disclaimer of Warranty of Merchantability
Only be mentioning merchanability. In a writing it must be conspicuous.
Dishcharge by Illegality
Often referred to as “supervening illegality”
New law saying subject matter of the K has become illegal (synthetic drug sales)
Wisconsin Specific Promises under Seal
Affixation of a seal on an executory K creates presumption of consideration
Rights of the 3rd Party and the Promisee
Beneficiary may sue the promisor on the K. In an absolute promise situation; promisor cannot assert the Promisee’s defenses. If it is not absolute the promisor can assert the promises defenses.
Promissory Estoppel Elements
1) Promise 2) Reliancs that is reasonable; detrimental; and foreseeable; and 3) Enforcment necessary to avoid injustice
Minor Breach
If the obligee gains the substantial benefit of her bargain despite the obligor’s defective performance.
Does not relieve the aggrieved party of her futy under the K, just a right to damages
Avoidable Damages (Mitigation)
1) Employment K a. Employer breach is the Employee must use reasonable care in finding a position of the same kind 2) Manufacturing Ks a. Is person for whom the goods are being manufacture breaches; manufacturer must mitigate by not continuing work. Only if costs will increase if work continues. 3) Construction K a. Builder has a duty to mitigate by not continuing work after breach. Only if costs will increase if work continues.
When is payment and delivery due? Carrier vs Noncarrier?
Noncarrier = price due concurrently with tender of delivery
Carrier = Shipment and Destination
Shipment = Price due when goods are int he hand of hte carrier
Destination = Price due when reached the destination
Conditions that may be waived
ABSENT CONSIDERATION Condition waived needs to be ancillary or collateral to the main subject and purpose of the K
Contracts to Build.
Tornado comes through and tears down partially built house. Discharge by impossibility?
NO!! However, may be excused from the original deadline
Buyer’s Resonsibility for Goods After Rejection - Perfect Tender Rule
Buyer has obligation to hold rejected goods with reasonable care at the seller’s disposition and to obey any reasonable instructions as to the rejected goods.
If seller gives no instructions within a reasonable time, the buyer may:
1) Reship the goods to the seller
2) Store them for the seller’s account; or
3) Resell them for the seller’s account. If Buyer resells she is entitles to recover her expenses and a reasonable commission.
Duress
VOIDABLE
May be rescinded as long as not affirmed
Common types of duress: threats
Withholding something someone wants/needs will be duress if: (1) The party threatens to commit a wrongful act that would seriously threaten the other contracting party’s property or finances, or (2) there are no adequate means available to prevent the threatened loss
Timeliness of Performance
Timelieness doesn not generally a matericla breach if performance is rendered within a reasonable time.
Legal Incapacity to K
1) K of infants - minors lack the capacity to enter into a K binding on themselves, however the inverse are binding on the adult - May affirm the K once reach majority age (may be done by failing to disaffirm the K w/in a reasonabel time after reaching majority
2) Mental incapacity - K is VOIDABLE
3) Intoxicated Persons - Voidable K if the other party has reasont o know of the intoxication
CAN ALWAYS AFFIRM K ONCE REACHING CAPACITY
Disclaiming express warranties
VERY DIFFICULT TO DO
Elements of Undue Influence
VOIDABLE
1) Undue susceptibility to pressure by one party; and
2) excessive pressure by the other party
Common situations: Dominant party is in a confidential or caregiver role
Ways to excuse conditions
1) Excuse of condition by Hinderance or Failure to Cooperate
2) Excuse of condition by Actual Breach (at common law must be material breach to excuse counterperformance)
3) Excuse of Condition by Anticpatory Repudiation
4) Excuse of COndition by prosepctive inability or unwillingness to perform
5) Excuse of condition by substantial performance
Excuse of condition by “Divisibility” of K
6) Excuse of condition by Waiver or Estoppel
7) Excuse of Condition by Impossibility, Impractibility, or Frustration
Mutual mistake as to the Existing Facts
1) The mistake concerns a basic assumption on which the K is made
2) The mistake has a material effect on the agreed-upon exhange
3) The party seeking avoidance did not assume the risk of the mistake
Mistake in value is generally not a defense if BOTH parties misakened the value
Remedies if the K is w/in the SoF?
Party can sue for reasonable value of the services or part performance rendered, or the restitution of any other benefit that has been conferred
Termination of an offer by Operation of law
Death or insanity of either party (need not be communciated to either party)
Destruction of the subject matter
Supervening Illegality
If a K is missing terms what is necessary to form a K?
It mus appear that the parties intended to make a K and there is a reasonably certain basis for giving a remedy.
Merchants - Confirmatory Memo Rule
In K between merchants, in one party, w/in a reasonable time after an oral agreement has been made sends to the other party a written condirmation of the understanding that is sufficient under SoF to beind the sender and will also bind the recepient if (1) he has reason to knwo fo the confirmation’s conteset and 2) he does not object to it in writing within 1- days of receipt
Assignment of Rights and Delegation of Duties
ll contractual rights may be assigned; excluding 1) An assignment that would substantially change the obligor’s duty or risk 2) An assignment of future right to arise from future Ks; and 3) An assignment prohibited by law
Temporary Impossibility
Temporary Impossibility SUSPENDS duties, it does not discharge them. Once performance is possible, the duty springs back into existence unless duty woudl be subtantially increased or different from that originally contemplated
Elements of consideration
1) Bargained for exchange
2) That which is bargained for must be considered of legal value or, as it is traditionally stated, it must constitute a benefit to the promisor or a detriment to the promisee
Article 2 Buyer’s Damages
1) Seller does not deliver or buyer rejects goods or revokes acceptance – difference between the K price and either: 1) market price or 2) The cost of buying replacement goods + incidentals a. Market price at time the seller learns of the breach b. Replacement Goods must be a reasonable K in good faith without unreasonable delay 2) Seller Delivers nonconforming goods that the Buyer Accepts a. Warranty Damages i. Difference of Value of goods as delivers and the value they would have had if they had been according to the K ii. Must notify seller of the defect within a reasonable time 3) Seller Anticipatorily breach K a. Difference between market price at the time the buyer learned of the breach and the K price 4) Consequential Damages a. Seller is liable for these if i. He had reason to know of the buyer’s general or particular requirements; and ii. The subsequent loss resulting from those needs could not reasonably be prevent by cover.
Defenses to Reformation
General equitable defenses; existence of a BFP
Exceptions to the Perfect Tender Rule - Seller’s Right to Cure in a Single Delivery K
1) Seller can Cure by Notice and New Tender within time for performance
2) Seller’s Right to cure beyond original K time - Generally the seller has no right to cure beyond the original K time, however if the buyer rejects a tender of nonconforming goods that the seller reasonbaly believed would be acceptable “with or without money allowance” the seller, upon a reasonable notification to the buyer, has a further reasonable time beyond the original K time within which to make a conforming tender.
A seller will be found to have had reasonable cause to believe that the tender would be acceptable if the seller can show that (1) trade practices or prior dealings with the buyer led the seller to believe that the goods would be acceptable, or (2) the seller could not have known of the defect despite proper business conduct
Intended beneficiary?
1) Identified in K? 2) Receives performance directly from the promisor; or 3) Has some relationship with the promise to indicate intent to benefit
No K Involved – Restitution - Quasi-K remedy
May be available if: 1) Plaintiff has conferred a benefit on the D by rendering services or expending properties 2) P conferred the benefit with the reasonable expectation of being compensated for its value 3) D knew or had reason to know of the P’s expectation; and 4) D would be unjustly enriched if he were allowed to retain the benefit without compensating P
When is a writing signed by the party to be charged not required for a sale of goods?
Specifically made goods
Written confirmation by a Merchant
- *A**dmission in Court
- *P**erformance
Partial Discharge by modification of K
If K is subsequently modified by the parties, it will discharge those terms of the original K that are subject to the modification. WILL NOT discharge the entire K. Requirements:
1) Mutual Assent
2) Consideration (exceptions: merely to corrent an error, Sale of Goods)
Restitution when k is breached
Losing K – When actual value of the services or goods to be provided under the k is higher than the K price
Three Forms of conduct in this order of importance
1) Course of Performance (same people and K) 2) Course of dealing (same people; diff K) 3) Custom and Usage (similar people and K0
Unilateral Recission
Party desiring recission must have adequate legal grounds:
Mistake, Misrepresentation, duress, and failure of consideration.
Compensatory Damages
Expectation Damages – Sufficient damages for party to buy a substitute performance Reliance Damages – Used when expectation is too speculative – puts party in the position she would have been in had the K never been formed Consequential Damages – reasonable person would have foresee would occur from a breach at time of entry into K (article 2 is limited to Buyer) Incidental Damages Plaintiff must prove damages were certain in their nature and not speculative.
Restitution When K is unenforceable – Quasi-K remedy
K was made but is unenforceable and unjust enrichment would result
Recission in Unilateral K
Cannot arise where one party still has a duty to perform.
Must arise where the offeree has already performed, and must be supported by one of the following:
1) An offer of new consideration by the nonperforming party
2) Elements of promissory estopperl, i.e. detrimental reliance; or
3) Manifestation of an intent by the original offeree to make a gift of the obligation owed her.
Damages for Breach of Warranty - Generally
Generally - Difference between the value fo the goods accepted and the value fo the goods as warranted, measured at the time of the acceptance.
Death or Physical Incapacity
Not discharged if the services can be delegated. If they cant (famous artist painting your portrait) still have a K duty
Buyer’s Right to Replevy Identified Goods – Article 2
If Buyer has made at least partial payment and seller has not delivered the goods; buyer may replevy the goods from the seller in two circumstances: 1) Seller becomes insolvent within 10 days after receiving the buyer’s first payment; or 2) The goods were purchased for personal; family; or household purposes. BUYER MUST TENDER ANY UNPAID POSTION OF THE PURCHASE PRICE TO SELLER
Third Party Beneficiaries in K
A contracts with B that B will render some performance to C
Performance of K Common law
Substantially perform all that is called for in the K
Equitable Defenses under specific performance
1) Laches – A claim the P has delayed bringing the action and that the delay has prejudiced the D 2) Unclean Hands – Party seeking specific performance is guilty of wrongdoing in the transaction being sued upon 3) Sale to a BFP – a claim that the subject matter has been sold to a person who purchased for value and in good faith
Knock out rule in BoF
If acceptance contains DIFFERENT terms instead of additonal terms, conflicing terms in the offer and acceptance are knocked out of the K
Excuse of condition by prospective inability or unwillingess to perform
Merely raising doubts - NOT UNEQUIVOCAL
Innocent party can suspend further performance on ehr side until she receives ADEQUATE ASSURANCES that performance will be forthcoming.
Excuse of Condition by Anticipatory Repudiation
Only applies in a Bilateral K with executory duties on both sides
Anticpatory Repudiation must be unequivocal
SoF Writing - Article 2 Requirements
Sig of D and QUANTITY SOLD
PER - Corbin Test
Majority of courts
Takes into account the specific circumstances of hte transaction involved;
Asks whether parties like these, situated as they are, would naturally and normally include int heir writing the extrinsicnmatter that is sought to be introduced.
If people under these circumstance would normally include the extrinisic matter in their writing, it will be excluded under the PER rule. Otherwise the evidence is admissible
Noncarrier Case
Parties did not intend that the goods would be moved by a common carrier,
and seller is a merchant, risk of loss passes to buyer when she take physcial possession of the goods.
If seller is not a merchant, risk loss passes to buyer upon tender of delivery
Satisfaction
Performance of the accord agreement. Dischagred both the original K and the Accord K
3rd Party vs Promisee
Creditor beneficiary can sue the promise on the existing obligation between them. Can also sue the promisor but may only obtain one satisfaction.
Wisconsin specific restrictive covenants in Employment K
A noncompete is lawful and enforceable only if the restrictions imposed are reasonably necessary for the protection of the employer. Burden of proof is on the employer to show the noncompete is reasonably necessary. Must have a territorial restriction and time limit; not be harsh or oppressive as to the employee; not contrary to public policy. These covenats are divisible amongst others in same instrument.
When is acceptance effective?
Mailbox Rule = the moment of DISPATCH
Limitations:
1) Stipulates that acceptance is not effective until received
2) Option Contract
3) Sends a rejection 1st then an acceptance (whichever arrives first is effective)
4) Sends an acceptance 1st then a rejection, acceptance is effective unless the rejection arrives first and the offeror detrimentally relies on it
Ambiguous K Language
Ifthe K included a term w/ at least two possible meanings:
Neither party were aware - No K unless both parties intended the same meaning
Both Parties aware - No K unless both aprties intended the same meaning
One party aware - Bing K based on what the ignorant party reasonably believed to be the meaning of ambiguous words
What makes a Misrepresentation Material?
1) The information asserted would induce a reasonable person to agree
2) The maker of the misrepresentation knew the information asserted would cause a particular person to agree
Prodecural Unconscionability
Unfairness in the bargaining process
Common Instances:
1) Inconspicuous Risk-Shifitng Provisions
2) K of adhesion (take it or leave it)
3) Exculpatory Clauses - Only applies to intential wrongful acts of the person offering the clause
4) Limitations of Remedies - limits a party to a certain remedy that fails of its essential purpose
Effect of Breach of Accord Agreement before Satisfaction
Breach by Debtor - creditor can sure on either Accord K or original K
Breach by creditor - (sues on original K) Debtor has two courses of action: 1) Raise the accord agreement as an equitable defense and and ask that the K action be dismissed; or 2) Wait until she is damaged (creditor successful in his action on the original K) then bring an action at law for damages for breach fo the Accord
Effect of noncompliance with the SoF
Renders the K unenforceable t the optionf ot he party to be charged. If statute is not raised as a defense it is waived.
Conspicuous
“So written, displayed, or presendted that a reasonable person agaisnt whom it is to operate ought to have noticed it.”
Language in a body of writing: 1) it is in larger typer than surrounding text; 2) it is in a contrasting type, font, or color; or 3) it is set off from the text by marks that call attention to it.
Judge’s determination
Warranty against infringement
A merchant seller regularly dealing in goods automatically warrants that the goods are deliveerd free of any patent, trademark, copyright, or similar claims.
Exception: When a buyer furnishes specification for the goods to the seller, must hold the seller harmless against such claims
Employment K
1) Breach by Employer a. Employee’s damages is the full K price 2) Breach by Employee a. Costs to replace the employee – amounts owed to employee for work done
Cancellation – Article 2
Buyer rightfully rejects goods because they do not conform to the K; one of her options is simply to cancel the K
When do Rights of the Beneficiary vest?
Beneficiary can only enforce a K if his right have vested: 1) Manifests assent to a promise in the manner requested by the parties; 2) Brings a suit to enforce the promise; or 3) Materially changes position in justifiable reliance on the promise. Before vesting; promisor and promise can modify K however! Even deleting the beneficiary.
SoF - Service K not capable of being performed with a year from the time of the K
1) Specific time period is longer than a year; or 2) There is more than a year from the date of the contract (MUST HAVE TIME ON IT SOMEWHERE)
Disclaimer of Warranty of Title
Can be disclaimed or modified only by specific langugae or by circumstance that give the buyer notice that the seller does not claim title or that he is selling only such rights as he or a 3rd party may have.
Ways to terminate an offer for a K
Revocation - By the offeror
Rejection - By the offeree
Termination by Operation of Law - (death, insanity, destruction of the subject matter, supervening illegality)
Consideration Bar Exam Walkthrough
1) Who is the promise breaker? 2) Did that person ask for something in return for their promise? What legal detriment did the person who is trying to enforce the promise sustain?
Discharge by Cancellation
Tearing up a contract, surrendering K = Not Enough for discharge
However, if the parties manifest their intent for those actions to dishcarge, good as along as there is consideration or one of its alternatives
Article 2 - Impossibility and Impracticability
Seller will be discharged to the extent of the impossibility or impracticability
Generally, seller assumes risk of the occurrence of such unforeseem events and must continue to perform. Extraordinary occurence = seller is dischagred
Shortage of raw materials or the inabilityn to convert them into the seller’s product (war, embargo, unforseen shutdown of a major supplier) catastrophic local crop failure = sufficient for discharge
Warranty of Title
Any seller of goods warrants that the title transferred is good.
Modification of a written agreement
Can be modified orally
If for sale of goods, Mod must be in writing if the K as modified falls within the SoF (ex $500 or more) WHOLE K valuation not the mod
Common Law - Provisions prohibtiing oral mods is not effective
UCC - No-mod clause is effective, but provision requires non-merchant’s signature
Article 2 Damages for Total breach
Seller’s Damages
1) Where Buyer Repudiated or Refuses to Accept Conforming Goods a. Recover difference between the market price (at the time and place of the delivery) and the K price b. Resell the goods and recover difference between the K price and the resale price; or c. Lost profits is the difference between the K price and the cost to the seller. (lost volume seller) Look at seller’s supply; if unlimited then lost profits; if limited other measure 2) Where Buyer Accepted Goods – Action for Price a. If Buyer accepted the goods and has not paid; or has not accepted the goods and the seller is unable to resell at reasonable price; seller gets full K price
Agreements Covered by the SoF
MY LEGS
Marriage, Promises in consideration of marriage
Year, Performance not within one year
Land, Interest in land
Executor or administrator promises to Pay Estate Debts
Goods Prices at $500 or more
Surety, Promises to pay the debt of another (suretyship promises)
Performacne not within one year - SoF
Date of effectiveness runs fromt he date of the agreement not from the date of performance
Construction K
Breached by owner is the Builder entitles to profits that would have resulted from the K plus any costs expended. (if after construction is completed then full K price plus interest) Breached by Builder is the Owner entitles to the cost of completion plus reasonable compensation for the delay.
Distinguish Uses of Defenses of Impossibility/Impracticability and Frustration
Impossibility or Impracticability = Defense that discharges performance
Frustration = raised by someone who is supposed to pay as a defense dischargering performance.
PAYING MONEY IS NEVER IMPRACTICABLE
Performance under the UCC
Art 2 usually requires a perfect tender - exactly as promised in the K
Restitution
Also is a remedy when Ks are unenforceable. Or sometimes when no relationship exists at all. Implied-in-law K or Quasi-k Measured by the value of the benefit conferred. (may be value of detriment suffered by plaintiff if benefits are difficult to measure or would achieve unfair result)
Implied Warranty fo Merchantability
Sale by merchant who deals in goods of the kind sold
Includes serving of food or drink
Goods must at least be “fit for the ordinary purposes for which such goods are used”
Waiver in Installment K
If a waiver is not supported by consideration, the beneficiary of the waived condition can insist on strict complaince with the terms of the K for future installments (so long as there has been no detrmiental reliance on the waiver) by giving notice he is revoking the waiver
Excuse of Condition by Waiver or Estoppel
Party who has the benefit of the condition under a K may indicate by WORDS OR CONDUCT that she will not insist on condition being met.
Consideration not required for waiver
What is the Battle fo the Forms?
Only applies to a sale for goods (article 2)
The proposal of additional or different terms by the offeree in a definite and timely acceptance does not constitute a rejection and counteroffer, but rather is effective as an acceptance, unless the acceptance is expressly made conditional on assent to the additional or different terms.
(Express conditional acceptance = rejection of initial offer)
Breach of Warranty - Perfect Tender Rule
Sellers give warranties as to the condition of the goods that apply even after acceptance. Failure to live up to these warranties constituted a breach fo warranty, for which a remedy is available.
Defenses to the formation of a K
1) absence of mutual assent
2) Absence of consideration
3) Illegality
Battle of the Forms - When both parties are merchants when will additional terms in the acceptance not be included in the K?
1) They materially alter the original terms of the offer (change a parties risk or available remedies)
2) The offer expressly limits acceptance to the terms of the offer
3) Offeror has already objected to the aprticular terms, or objects within a reasonable time after notice of them is recieved
Discharge by Impracticability
Test:
The party to perform has encountered:
a) Extreme and unreasonable difficluty and/or expense; and
b) Its nonoccurrence was a basic assumption of the parties
Interests in land covered by SoF
1) Leases >1 yr
2) Easements >1yr
3) Fixtures
4) Minerals (or the like) or structures if they are to be severed by the buyer
5) Mortgages and most other security liens
Defenses based on lack of capacity
1) Legal incapacity to K
2) Duress and Undue Influence
Discharge by Impossibility
Impossibility must be objective and must arise after the K was entered into.
Each party is excused from their duties in the K and either may sue for recisiion and receive restitution for any goods delivered, payments made, etc.
Express Contractual Provisions against Assignment
Clause prohibiting assignment of “the K” will be construed as barring only delegation of the assignors duties. Clause prohibiting assignment of contractual rights generally does not bar assignment; but merely give the obligor the right to sue for damages K provides that attempts to assign will be void; parties can bar assignment.
Can you provide evidence of earlier words for the limited purpose of determining whether there is a defesne to the enforcement of the k?
YES - Exception to the PER
When does a Breach of K occur?
When:
1) The promisor is under an absolute duty to perform, and
2) This absolute duty of performance has nto been dischagred, then this failure to perform in accordance with K terms will amount to a Breach of the K.
The nonbreaching party who sues for breach of K must show that she is willing and able to perform but for the breaching party’s failure to perform.
When will courts grant an order of specific performance to enforce Covenant Not to Compete?
1) The services to be performed are unique (making money damages inadequate); and 2) The covenant is reasonable a. Reasonably Necessary to protect a legitimate interest of the person benefited by the covenant b. Reasonable as to its geographic scope and duration c. Must not harm the public
Types of rejection by the Offeree
Express
Counteroffer (distinguish with a mere inquiry)
Material Breach
If the obligee does not receive the substantial benefit of her bargain, the breach is considered material.
If material, nonbreaching party:
1) May treat the K as at an end (discharges all her duties to perform); and
2) Will haev an immediate right to all remedies for Breach of the ENTIRE K, including total damages
What duties may be delegated?
Generally all; exceptions 1) Duties involve personal judgment and skill 2) Delegation would change the obligee’s expectancy 3) A special trust was reposed in the delegator by the other party to the K; and 4) There is a contractual restriction on delegation
What is the key to forming a K for the sale of goods?
Quantity Term
Right to recover shipped or stored goods from bailee
1) On Buyer’s Insolvency – Seller may stop delivery if buyer insolvent. Must deliver if cash is tendered. 2) On Buyer’s Breach a. Seller may stop delivery of carload; truckload; planeload; or larger shipment of goods if buyer breaches K
Partial Impossibility vs Past Performance Prior to Impossibility
Duty may be discharged only the the extent of the partial impossibility.
Remainder of the performance may be required
If past performance before impossibility, party will have a right to recover in “quasi-K” at the K rate or for the reasonable value of their performance if that is more convenient
Assignee vs Assignor
Three warranties can the assignee sue under 1) Assignor has not made a prior assignment of the same right 2) The right exists and is not subject to any undisclosed defenses; and 3) He will do nothing to interfere with the assigned right.
UCC General disclaimer methods
Implied warranties can be disclaimed by “as is” or “with all faults” or of the similar
Buyer examines or refuses to examine so that she could have discovered defects
Course of dealing - Usage of trade
What is necessary for an effective assignment?
Assignor must manifest an intent to immediately and completely transfer her rights.
Extrinisic evidence outside the scope of the PER
1) Attacking validity - Formation Defects or Consitions Precedent
2) Interpretation - only when meaning of terms is not plain
3) Showing of True Consideration
4) Reformation
What is necessary for effective delegation?
Delegator must manifest a present intention to make a delegation. Delagator remains liable on the K
To Whom do warranties extend?
Seller’s warranty liability extends to any natural person who is in the family or household of the buyer or who is aguest in the buyer’s home it if it is reasonable to expect that the person may use, consume, or be affected byt he goods and that person suffer peraonl injury due to the breach.
Wisconsin sepcific Consideation Rule
Benefit to the promisor OR a dteriment to the promisee
What is Specific Performance usually limited to
Always for land sale K. Goods that are rare or unique at the time performance is due. NEVER SERVICES!
Article 2 Rule for PER
Party may add consistent additonal terms unless:
1) there is a merger clause
2) the courts find from all of the circumstances that the writing was intended as a complete and exclusive statement of the terms of the agreement
Destination K
If K requires seller to deliver the goods at a particular destination, risk of loss passes to the buyer when the goods are tendered to the buyer at the destination
Misrepresentation types
1) Fradulent Misrepresentaion (Fraud in the inducement) - K Voidable by the innocent party if she justifiably relied on that misrep
2) Nonfraudulent Misrepresenation - K voidable if misrep was material and innocent party justifiably relied on that misrep
Exceptions to the Perfect Tender Rule - Installment K
Installment K - can only be rejected if the nonconformity substantially impairs the value of that installment and cannot be sured. In addition the whole K is breached only if the nonconformity substantially impairs the value of the entire K.
Excuse of condition by substantial performance
Arises where the condition of complete performance may be excused if the party has rendered substantial performance. In this case the other party’s duty of counterperformance becomes absolute!
This applies is the condition is IMPLIED (CONTSTRUCTIVE) ONLY.
If expressly stated the need for full performance, this excuse of condition is invalid
Rules for determining what is subtantil is the same for determining materiality of breach
If breach is willful, this excuse does not apply.
Inapplicable to K for sales of goods
Discharge by Account Stated
K between parties wherbey they agree to an amount as a FINAL BALANCE DUE from one to the other. Merges all transaction by discharging all the claimed owed.
Discharge by Release
Release and/or K not to sue will discharge K duties
Must be in writing and supported by new consideration or promissory estoppel elements
Determining the Materiality of the Breach
EXAM TIP
On the MBE you will not be asked to make a fact determination about whether a breach is material.
Courts look at:
1) The amount of benefit received by the nonbreaching party
2) The adequacy of compensation for damages to the injured party
3) The extent of part performance by the breaching party
4) Hardship to the breaching party
5) Negligent or willful behavior of the breaching party; and
6) The likelihood that the breaching party will perform the remainder of the K
The nonbreaching party must show that he was both able and willing to perform
Seller’s Right to Recover from buyer on Buyer’s insolvency
If Seller learns buyer has received goods on credit while insolvent; seller may reclaim goods upon demand made within 10 days of buyer’s receipt of the goods. Time limit does not apply to misrepresentation of solvency was made in writing within three months before delivery.
Right to Demand Assurances
If party reasonably fears that the other party will not perform; he may demand assurances that the performance will be forthcoming at the proper time. Until then he may suspend his own performance. If assurances not given within appropriate time; treat K as repudiated. Not to be confused with Anticpatory Repudiation
Discharge by Impossibiltiy, Impracticability, or Frustration of Purpose
Where hte nonoccurence of the event was a basic assumption of the parties in making the K and neither part has expressly or impliedly assumed the risk of the event occuring, K duties may be discharged
Discharge by Recission
Can be mutual or unilateral
Mutual = Express agreement between the parties
Duties must by executroy on BOTH sides
May be made orally even if K expressly says otherwise- Mutual
SoF - Needs to be Written
Sale of Goods - If K expressly says need writing, has to be written
If rights of 3rd party beneficiaries have already vested, the K may not be discharged by mutual recission
Defenses to Enforcement
1) Statute of Frauds
2) Unconscionability
Discharge by frustration
Elements necessary to establish frustration
1) There is some supervening act or event leading to the frustration;
2) At the time of entering into the K, the parties DID NOT REASONABLY FORESEE the act or event occurring
3) The PURPOSE of the K has been completely or almost completely DESTROYED by this act or event; and
4) The purpose of the K was realized by both parties at the time of making the K
Discharge by Substituted K
Parties enter into a new K that immediately revokes the first K either expressly or impliedly
Minor Breach Coupled with Anticipatory Repudiation
Nonbreaching party may treat it as a material breach
Aggrieved party must not go on (duty to mitigate)
UCC modifies this requirement to allow the manufacture of good to avoid having to seel an unfinished product
Defenses in a rescission action
Generally all equitable defensed are available. P’s negligence is not a defense.
Right to reject cut off by acceptance - Perfect tender rule
A buyer’s right to reject under the perfect tender doctrine generallyis cut off by acceptance.
Nonmonetary Remedies in K
1) Specific Performance – Common Law and Article 2 2) Injunction (Alternate remedy than Specific Performance) 3) Cancellation (Buyer – Article 2) 4) Buyer’s Right to Replevy Identified Goods (Buyer – Article 2) 5) Seller’s Right to Withhold Goods (Seller – Article 2) 6) Seller’s Right to Recover Goods (Seller Article 2)
Sof Writing - Who has to sign to satisfy SoF?
DEFENDANT!
Reformation
Original writing is reformed so that it conforms to the original intent of the parties. Usually based on mutual mistake Variance between the two agreements must be establish and clear and convincing evidence PER not apply; nor does SoF
What are the supplmental (Gap-Filler) terms under article 2?
Price - If, 1)nothing has been said to price, 2)price is left open to be agreed upon by the parties and they fail to agree; or 3) the price is to be fixed in terms of some standard that is set by a 3rd person or agency and ti is not sent, then price is REASONABLE AT TIME OF DELIVERY
Place of Delivery - Seller’s place of business, if not seller’s home
Time for Shipment or Delivery - Reasonable time
Time for Payment - Time and place at which the buyer is to receive the goods
Assortment - At the buyer’s option
Assignee vs Obligor
Assignee can sue obligor
Assignment for Value
1) Done for consideration; or 2) Taken as security for or payment of a preexisting debt NOT REVOCABLE
Accord
Accord = an agreemnt where one party to an existing K agrees to accept, in lieu of the performance that she is supposed to receive fromt he other party to the existing K, some other, different performance.
Needs Consideration - When consideration is of a lesser value than the original consideration, it will be sufficient if the new consideration is of a different type or if the claim is to be paid to a 3rd party
SoF - Signature requirement
Only signed by the party that is being sued, not necessarily both parties
PER - Is the writing an integration?
1) Is it intended to as the final expression? The more complete the agreement appears to be on its face, the more lilelyit is that is was intended as an integration
2) In the writing a complete or partial integration? If the agreement contains a merger clause (reciting that the agreement is complete on its face, this clause strengthens the presumption that all negotiations were merged into the written document.
Express Warranties
Warranty must be at the basis of the bargain.
It need only come at such time that buyer could have relied on it when she entere into the K
Parol Evidence Rule
When parties to a K express their agreement in a writing witht he intent that it embody the final expression of their bargain (writing is an integration), any other expressions, written or oral, amde prior to the writing, as well as any oral expressions contemporaneous with the writing, are inadmissible to vary the terms of the writing.
Shipment K
Risk of loss passes to the buyer when the goods are delivered to the carrier
Article 2 presumes this is the contract absent contrary agreement
Buyer’s Right to Revoke Acceptance - Perfect Tender Rule
When acceptance may be revoked:
The buyer may revoke acceptance if the goods have defect that substantially impairs their value at her and:
1) She accepted them on the reasonable belief that the defect would be cured and it has not been; or
2) She accepted them because of the difficulty of discovering defects or because of the seller’s assurance that the goods are conformed to the contract.
Revocation of acceptance must occur: 1) Within a reasonable time aftr the buyer discovers or should have discovered the defects; and 2) before any substntial change int he goods occurs that is nto caused by a defect present at the time the seller relinquished possession.
Absolute Promise vs Condition
Promise = a commitement to do or refrain from doning something.
Condition = 1) an event or state of the world that must occur or fail to occur before a party has a duty to perform; or 2) an event or state of the world the occurrence or nonoccurence of which releases a party from his duty to perform. AKA a “Promise modifier”
Presumption is Promise rather than condition
General rules of K Construction
1) K’s will be construed as a whole
2) Words constured to their ordinary meaning
3) Written or typed provisions will prevail over printed provisions
4) Custom and Usage of particular business and in particular locale where K is either made or performed
5) Courts will always try to find a K that is valid and enforceable
6) Ambiguities in K construed agaiuns the party preparing the K, absent evidence of the intention of the parties
Estoppel Waiver
If a party waives a condtion before it is to happen, the person who DETRIMENTALY RELIES on the waiver will be covered under a binding estoppel waiver.
Promise to waive a condition may be retracted at any time BEFORE the other party has changed his psotion to his detriment.
When is consideration nor necessary if the facts indicate that the promisor shouyld be estopped from not performing?
1) Promisor shoudl reasonably expect to induce action or forebearance
2) OF a definite and substantial character
3) And such action or forebearance is in fact induced
In a mixed deal between sales of goods and other; what governs which law to apply?
More Important Part; unless the payments are divided; then apply each to their respective law
Timing of unconscionability
At the time the K was formed
Implied warranty of fitness for a particular purpose
Sale of goods whenever:
1) ANY SELLER has reason to know the particular purpose for which the goods are to be used and that the buyer is relying on the seller’s skill and judgment to select suitable goods; and
2) The buyer in fact relies ont he seller’s skill or judgment
Disclaimer of Warranty of Fitness for a particular purpose
Conspicuous writing
“No warranties which extend beyond the description on the face hereof” - OK
Is an act or forebearance by the promisee sufficient to establish consideration?
YES but only if it benefits the promisor!
Perfect Tender Rule - Sale of Goods
If goods or their delivery fail to conform to the contract in any way, the buyer generally may reject all, accept all, or accept any commercial units and reject the rest.
Mistake by the intermediary (transmission)
Message as transmitted is operative unless the other party knew or should have known of the mistake
Rescission – K is voidable and rescinded. Grounds for which must occur before or at the time the K was entered into.
1) Mutual mistake of material fact 2) Unilateral mistake if the other party knew or should have known of the mistake 3) Unilateral mistake if hardship by the mistaken party is so extreme it outweighs the other party’s expectations under the K 4) Misrepresentation of fact or law by either party as to a material factor in the negotiations that was relied upon; and 5) Other grounds; duress; undue influence; illegality; lack of Capacity and failure of consideration.
Excuse of condtion by “Divisibility” of K
If K is divisible and one party oerforms one of the units of the K, he is entitled to the agreed-on equivalent for that unit even if he fails to perform the other units.
ONLY AT COMMON LAW
UCC = Installment K
Dishcarge by Novation
New K substitutes a new party to receive benefits and assume duties that belonged to one of the original parties under the terms of the old K.
Elements:
1) A previoud Valid K
2) An agreement among all parties, including the new parties to the K
3) the immediate extingusihment of K duties as betweent he original parties; and
4) A valid and enforceable new K
Monetary damages
1) Compensatory Damages 2) Punitive Damages – generally not awarded in K cases 3) Nominal Damages 4) Liquidated Damages
Must acceptance by unequivocal
Common Law = Yes (mirror image rule)
Article 2 = Battle of the forms
Shipment K - Performance of the Seller
1) Put the goods in the hands of a reasonable carrier and make a reasonable K for their transport to buyer
2) Obtain and promptly tender any documents required by the K or usage of trade or otherwise necessary to enable t he buyer to take possession; and
3) Promptly notify buyer of shipment
Statute of Frauds - Writing Requirement
SoF does not require that a K be in writing; it only requires that there be one or more writings signed by the person sought to be held liable on the K that reflect the material terms of the K (email satisfies)
Under Article 2 what may a Ks terms be explained or supplemented by?
1) The parties course of dealing - previous transactions
2) A usage of trade
3) Course of performance
Liquidated Damages (stipulated damages to be paid in K) will be enforceable:
1) Damages for K breach must have been difficult to estimate or ascertain at the time the K was formed; and 2) The amount agreed on must have been a reasonable forecast of compensatory damages in the case of breach. a. Reasonableness is the comparison between amount of damages prospectively probable at K formation and the liquidated damages figure.
Statute of Limitations under UCC
Sales K – 4 years Parties may shorten period to no less than one year; and may not lengthen it. Runs when party can bring suit Warranty – runs when goods are delivered
Modification of Consideration
Common law - K can’t be modified unless mod is supported by new consideration
UCC - promises of new and differendt terms byt he parties to a sales K are valid w/out consideration
Right to Damage for Failure of Condition
Waiver of condition DOES NOT MEAN WAIVER OF DAMAGES
What is a “divisible” K?
Three CONCURRENT tests:
1) The PERFORMANCE OF EACH PARTY IS DIVIDED INTO TWO OR MORE PARTS under the K
2) The NUMBER OF PARTS DUE FROM EACH PARTY IS THE SAME; and
3) The PERFORMACE OF EACH PART BY ONE PARTY IS AGREED ON AS THE EQUIVALENT OF THE CORRESPONDING PART from the other party (quid pro quo)
Article 2 = Installment K
Ways to Discharge Duty to Perform
1) Performance or Tender of Performance
2) Occurence of Condition Subsequent
3) Illegality
4) Impossibility, Impracticability, or Frustration
5) Recission
6) Partial Discharge by Modification of K
7) Novation
8) Cancellation
9) Release
10) Substituted K
11) Accord and Satisfaction
12) Account Stated
13) Lapse
14) Running of Statute of Limitations
Statute of Limitations - Discharge K duties?
NO. It merely makes the K unenforceable, does not discharge a K duty.
Gratuitous Assignments
Revocable
3rd Party – Promisee vs Promisor
Promisee may sure the promisor both at law and in equity for specific performance if the promisor is not performing for the 3rd person
Discharge by Lapse
Condition concurrent and neither party fulfills their obligation or breach. If time is “of the essence” lapse will happen immediately.
Absence of mutual assent
1) Mutual mistake to existing facts
2) Mistake by the intermediary (transmission)
3) Ambiguous K Language
4) Misrepresentation
Limitation on revocation of an offer for a K
Options (O offers sale of Fam to A for $1 million and promises to keep offer open for 90 days if A pays $1,000 to keep the offer open)
Merchant’s Firm Offer under article 2 ((1) Merchant, (2) offers in a signed writing, and (3) give assurances it will be held open)) Limit is 3 months (differs from option K because of consideration)
Detrimental Reliance
Part Performance (once performance has begun)
Ks calling for Installment Payments
Aggrieved party limited to recovering only the missed payment. Look out for acceleration clauses.
Two types of intended beneficiaries
1) Creditor beneficiary – a person to whom a debt is owed by the promise; and 2) Donee beneficiary – a person whom the promise intends to benefit gratuitously
Seller’s Right to Withhold Goods
If buyer fails to make a payment due on or before delivery. Also if paid with credit card and finds the buyer insolvent before delivery. If buyer then tenders cash; must deliver goods.
Material Breach of a Divisible K
Recovery is available for substantial performance of a divisible part, event though ther eha sbeena meterial breach of the entire K.
Intended vs Incidental beneficiary
Intended beneficiaries have k rights; not incidental.
Disclaimers - Position on the product
ON THE OUTSIDE OF THE BOX
Discharge by Accord and Satisfaction
Need Both Accord and Satisfaction
Contract Formation Questions
1) Was there an offer? 2) Was the offer terminated? 3)Was the Offer Accepted
