Contracts and Sales Flashcards
Formation of Contracts: Mutual Assent
There must be a valid offer and acceptance. The owner’s revocation is too late if it happens after the other party mails an acceptance. Lack of intent is not a defense if the offeree can reasonably interpret the communication as an offer.
Conditions and Performance: Disputes about Performance
Even a party who materially breaches may be entitled to restitution damages. Expectancy or reliance damages are recoverable to a party under a non-UCC K, like a construction K, when the breach is not material.
Breach of Contract and Remedies: Remedies Under the UCC
Generally, where the seller of goods is a merchant, the risk of loss remains with the seller until the goods are delivered to the buyer. However, when goods have been identified at the time that the contract is entered into and the buyer subsequently repudiates the contract, the seller may treat the risk of loss as resting on the buyer to the extent of any deficiency in the seller’s insurance coverage with respect to the goods for a commercially reasonable time.
With regard to a nonperishable item a commercially reasonable time would likely extend well beyond a week.
Breach of Contract and Remedies: Anticipatory Repudiation
Anticipatory repudiation occurs when there has been an unequivocal refusal of the buyer or seller to perform, or when reasonable grounds for insecurity arise with respect to the performance of either party, and the other party fails to provide adequate assurances within a reasonable time (not to exceed 30 days under the UCC).
When the nonbreaching party is the buyer, the buyer may seek a replacement performance from another seller (cover) and sue the breaching seller for damages. The nonbreaching party does not have to wait until the time for performance has passed before bringing suit against the party who has anticpatorily breached the contract.
Formation of Contracts: Warranties in Sale-of-Goods Contracts
Although most statements made by a seller to a buyer about goods will create an express warranty, the statement must be a promise or an affirmative of fact. A statement of opinion or puffery, however, is not treated as creating an express warranty.
A general disclaimer of all warranties is insufficient to disclaim an express warranty. Under Article 2, words or conduct relevant to the creation of an express warranty and words or conduct tending to negate or limit warranty are construed as consistent with each other, but negation or limitation is inoperative to the extent such construction is unreasonable. Therefore, disclaimer clauses that conflict with the express warranties are ignored.
Breach of Contract and Remedies: Remedies Under the UCC
When a buyer receives goods on credit, and the seller learns the buyer is insolvent, the seller may reclaim the goods, provided a demand is made within 10 days after the buyer’s receipt of the goods. Although this 10-day limit does not apply if the seller receives assurances of the buyer’s insolvency within 3 months before the delivery of the goods, such assurances must be in writing.
Breach of Contract and Remedies: Remedies Under the UCC
Generally, a buyer’s primary remedy is expectation damages. A buyer may gain possession of goods under K that are in the seller’s procession through an action such as replevin, but in order to do so the goods must be identified.
Alternatively, a buyer can seek to compel the seller to supply the goods under an action for specific performance, but generally the goods must be unique, and there must be an inability to cover.
Seeking adequate assurance is not a prerequisite for pursuing other remedies.
Parole Evidence Rule: When It’s Inapplicable
PRE prevents a party to a written K from presenting prior extrinsic evidence of negotiations between the parties, so long as the K is a total integration of the parties’ agreement, whether that evidence is consistent with or contrary to the written agreement.
The PRE doesn’t apply to extrinsic evidence of a condition precedent to the existence of the K.
Third-Party Beneficiary Contracts: Intended and Incidental Beneficiaries
A 3P may recover on a K if that 3P is an intended beneficiary of the agreement. For a 3P to be an intended beneficiary, there must be a K between a promisee and another party, with the clear intent that the K directly benefit the 3P, a breach by either party to the K, and damages sustained by the 3P.
Formation of Contracts: Consideration
Under the UCC, a clause in a written K that prohibits oral modification of the K is enforceable.
Formation of Contracts: Consideration
A promise to make a gift as consideration is unenforceable.
Formation of Contracts: Mutual Assent
A bid is treated as having been rejected by an auctioneer’s acknowledgement of a higher bid. The withdrawal of a higher bid does not automatically reinstate the next lower bid.
An auction held without reserve means that the auctioneer must accept whatever is bid for the item being auctioned.
Assignment of Rights and Delegation of Rights: Assignment of Rights
The right to receive payment for services rendered may be assigned. This assignment may be made even before the services are rendered.
An assignment is not subject to the S.O.F. Consideration is not necessary to make a valid assignment; the presence of consideration affects only the revocability of the assignment.
