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
Article 2 Damages for Total breach
