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1L > Contracts Midterm II > Flashcards

Contracts Midterm II Flashcards

1
Q

What is a condition?

A

§ 224 - A condition is an event that is uncertain to occur which must occur unless its nonoccurrence is excused before performance under a contract becomes due

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2
Q

Is the passage of time a condition?

A

§ 224 (b) - the passage of time is not a condition since there is no uncertainty that that will occur

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3
Q

Will a court read a contract to include a duty or a condition given ambiguous language?

A

§ 227 a court will interpret unclear language to create a duty rather than a condition

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4
Q

What is the condition implied in every contract?

A

§ 205 - Every contract imposes upon each party a duty of good faith and fair dealing in its performance and its enforcement

UCC § 1-304 - Every contract or duty within the UCC imposes an obligation of good faith in its performance and enforcement.

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5
Q

What are the two kinds of express conditions?

A

Condition precedent - a condition which must be met in order to trigger a duty

Condition subsequent - now called termination (§ 230), failure to meet the condition extinguishes a duty after performance has become due (along with any claim for breach)

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6
Q

What is the effect of an express condition?

A

When the condition is met, the performance is due

A party’s breach excuses the other party’s performance if the non-breaching party’s obligations were dependent on the breaching party’s obligations. (Kingston v. Preston, § 224)

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7
Q

What is the purpose of an express condition?

A

They are meant to mitigate the risk of the obligor

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8
Q

How are express conditions enforced?

A

Express conditions are strictly enforced

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9
Q

How are express conditions waived?

A
  1. Volitionally waived

2. Implicitly waived through prevention or inaction

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10
Q

When are express conditions excused?

A
  • When they are prevented (§ 245 Prevention - When a party’s breach by non-performance contributes materially to the non-occurrence of a condition of his duties, the non-occurrence is excused)
  • When they result in unjust forfeiture (§ 229 Forfeiture - If nonoccurrence of a condition causes disproportionate forfeiture, a court may excuse the nonoccurrence, unless its occurrence is material to the contract.)
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11
Q

What is prevention?

A

§ 245 - When a party’s breach by non-performance contributes materially to the non-occurrence of a condition of his duties, the non-occurrence is excused.

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12
Q

Can an express condition be prevented?

A

Yes, inhibiting the ability to progress or failing to take reasonable action will qualify as prevention.

Reasonable steps are required, but a party need not incur extraordinary expense to establish reasonableness or good faith

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13
Q

How is an express condition of satisfaction measured?

A

§ 228 If satisfaction is a condition that must be met before the other party has to perform, a reasonable person’s opinion of satisfaction (if practicable) will be used to determine if the act satisfied the condition. If it is not practicable, then a subjective standard will be used. It is a breach if you say something is unsatisfactory in bad faith.

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14
Q

How is a deadline considered as an express condition?

A

§ 242(d) “time is of the essence” is not sufficient to create a time condition and a specific date for performance does not necessarily meant that performance by that date is of the essence of the contract.

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15
Q

What are the mitigating doctrines for express conditions?

A 
Waiver
Estoppel
Election
Unjust forfeiture 
Prevention
Good faith requirement
Reasonable person standard
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16
Q

What is the waiver doctrine with relation to express conditions?

A

A party that has waived without consideration a condition within the other party’s control before the time for occurrence of the condition can retract the waiver and reinstate the requirement that the condition occur unless the other party has relied on it such that it would be unjust

This can be undermined by an anti-waiver clause

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17
Q

When does an obligor’s continued acceptance constitute waiver?

A

§ 246 - An obligor’s acceptance (or retention for an unreasonable time of the obligee’s performance) with knowledge of or reason to know of the non-occurrence of a condition of the obligor’s duty, operates as a promise to perform in spite of that non-occurrence

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18
Q

What is the effect of an obligor’s acceptance of part performance constitute?

A

§ 247 - Acceptance of part performance that is nonconforming operates as a promise to perform despite subsequent nonconformity of that same element

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19
Q

What is estoppel?

A

A party that has (without consideration) waived a condition that is within the other party’s control before the time for occurrence of the condition, can retract the waiver and reinstate the requirement that the condition occur UNLESS the other party has relied to such an extent that retraction would be unjust

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20
Q

What is election?

A

When the time for occurrence of a condition has expired, the party whose duty is conditional has a choice between taking advantage of the nonoccurrence of the condition and treating the duty as discharged OR disregarding the nonoccurrence of the condition and treating the duty as unconditional

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21
Q

What is the rule from Luttinger v. Rosen?

A

A condition precedent must be met before performance by the parties is required under a contract, and the contract will not be enforced if the condition is not met.

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22
Q

What is the rule from Internatio-Rotterdam v. River Rice Brand?

A

If a contract indicates that time is of the essence, then strict compliance with the timing of performance is required to avoid a breach of the contract.

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23
Q

What is the rule from Gibson v. Cranage?

A

If an express contract between seller and purchaser requires that the article to be purchased meet the unqualified approval of the purchaser, such approval is a condition precedent to the purchaser’s obligation to pay.

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24
Q

What is the rule from McKenna v. Vernon?

A

A party that repeatedly, albeit, passively waives a provision in a contract that is for his own benefit, may not later seek to enforce that provision.

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25
Q

What is a constructive condition?

A

A party’s failure to render or offer a performance is a possible excuse for the non-performance of a duty undertaken by the other party when the commitments are dependent covenants

Any such excuse is subject to the interpretation of the court to determine the justness of such an interpretation

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26
Q

What Restatement forms the basis of constructive conditions?

A

§ 234 - The doing comes before the paying

  1. Where all or part of the performances to be exchanged under an exchange of promises can be rendered simultaneously, they are due simultaneously, unless language/circumstances indicate contrary
  2. Except in (1), where performance of only one party under an exchange requires a period of time, his performance is due at an earlier time than that of the other party, unless language or circumstances indicate contrary
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27
Q

What is the effect of an uncured material failure?

A

§ 237 - If there is an uncured material failure then further performance is excused

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28
Q

What do constructive conditions look like under the UCC?

A

UCC § 2-507 - Tender of delivery is a condition to the buyer’s duty to accept the goods and to pay for them

UCC § 2-511 - Tender of payment is a condition to the seller’s duty to tender and complete any delivery

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29
Q

How are strictly are constructive conditions enforced?

A

Less strictly than express conditions

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30
Q

What are the mitigating doctrines of constructive conditions?

A

In order of preference:

  • Substantial performance
  • Divisibility
  • Restitution
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31
Q

What is the rule from Kingston v. Preston?

A

When one party’s performance under a contract is dependent on the prior performance of the other party, the other party’s performance is a condition precedent and performance will be excused unless the condition is satisfied.
(Constructive condition)

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32
Q

What is the rule from Stewart v. Newbury?

A

Where a contract requiring performance of work does not specify the timing of payment, then the work must be substantially performed before payment is required.
(Constructive condition)

33
Q

What is substantial performance?

A

Performance of the constructive condition has been sufficiently completed such that the court will deem that it should be treated as full performance of the condition. If substantial performance is found, then the performance of the other party is triggered, though a suit for damages on the breach is still feasible.

34
Q

Does substantial performance apply to express conditions?

A

No, it only applies to constructive conditions.

35
Q

Does substantial performance exist under the UCC?

A

No, a sale of goods must comply with perfect tender.

36
Q

When is substantial performance said to have occurred?

A

When an unintentional, immaterial breach occurs

37
Q

What actions will preclude a finding of substantial performance?

A

A willful deviation from the terms of the contract will always preclude a finding of substantial performance. (§ 241 (e) - behavior must comport with the standards of good faith and fair dealing)

Or if there are structural defects or if defects exceed a certain percentage of the contract price.

38
Q

Who determines whether or not substantial performance has occurred?

A

It is a question for the jury

39
Q

What is the rule from Jacobs & Young v. Kent?

A

If a party substantially performs its obligations under a contract, that party will not be forced to bear the replacement cost needed to fully comply with the agreement but instead will owe the non-breaching party the difference in value between full performance and the performance received.

40
Q

What is divisibility/severability?

A

§ 240 - If the performances to be exchanged can be apportioned into corresponding pairs of part performances so that the parts of each pair are properly regarded as agreed equivalents, a party’s performance of that part of the contract triggers the other party’s duty to perform as if it were its own contract.

41
Q

What are examples of things that do not qualify as divisible?

A
  • Progress payments

- An itemized list

42
Q

How is an entire contract enforced?

A

If a contract is entire – full performance is a condition precedent to payment. The obligation to pay comes after delivery and delivery is a constructive condition so the obligee could end up suffering forfeiture.

43
Q

What is the rule from Gill v. Johnstown Lumber Co.?

A

When parties agree that payment for delivered goods will be made on a per-unit basis, the performance of that obligation is severable and compensation can be had for units that are delivered, even if full performance is not accomplished.

44
Q

What is the perfect tender rule?

A

UCC 2-601 - if the goods or tender of delivery fail in any respect to conform to the contract the buyer may:

  1. Reject the whole
  2. Accept the whole
  3. Accept any amount and reject the rest
45
Q

What are the requirements of rejection?

A

UCC § 2-602 - Rejection must occur within a reasonable time after delivery or tender. It is ineffective unless the buyer seasonably notifies the seller.

2-602 (2)(a) - any exercise of ownership by the buyer after rejection is wrong

2-602 (2)(b) - If the buyer has taken possession of the goods, he is under a duty to hold them with reasonable care

2-602 (2)(c) - the buyer has no duty beyond that

46
Q

What constitutes acceptance?

A

UCC 2-606

1(a) - after a reasonable opportunity to inspect the goods, the buyer signifies that they are conforming or that he will accept them despite nonconformity or

1(b) - the buyer fails to make an effective rejection after having time to inspect the goods by not notifying within a reasonable time

1(c) - when the buyer acts inconsistent with the seller’s ownership and that act is ratified by the seller

47
Q

When can revocation of acceptance occur?

A

UCC § 2-608 - The buyer may revoke acceptance even after accepting the goods if the buyer:

  1. reasonably assumed the nonconformity would be cured but it has not been seasonably cured or
  2. without discovering nonconformity if his acceptance was reasonably induced by the difficulty of discovery or by the seller’s assurances

Revocation must happen within a reasonable amount of time after the buyer did or should have discovered the grounds for revocation and before the goods have been substantially altered

A buyer who revokes has the same duties as if he had rejected (must handle them with reasonable care)

48
Q

How does the perfect tender rule affect installment contracts?

A

UCC § 2-612 (2) - any installment that in non-conforming can be rejected, unless it can be cured and the seller gives adequate assurance of intent to cure then it must be accepted

UCC § 2-612 (3) - If nonconformity of an installment substantially impairs the value of the whole contract there is a breach of the whole. But if the aggrieved party accepts the nonconforming installment without seasonably notifying of cancellation, then the contract is reinstated

49
Q

Can a seller cure?

A

UCC § 2-508 -

Where the goods have been rejected but the time of performance has not yet expired, a seller may seasonably notify the buyer of his intention to cure and may then within the contract time make a conforming delivery

When the buyer rejects the goods but the seller had reasonable ground to believe the goods would be acceptable, the seller may have a reasonable amount of time to substitute conforming tender.

50
Q

Does the perfect tender rule exist outside of a sale of goods?

A

No it only applies to the sale of goods.

51
Q

What is the rule from Bartus v. Riccardi?

A

Unless a seller and buyer have agreed to strict performance, the seller’s delivery of a nonconforming article to the buyer may be remedied by the seller if the seller reasonably believed that the buyer would accept the nonconforming good and the seller seasonably notifies the buyer of the seller’s intent to substitute a conforming good.

52
Q

What are the elements of procedurally and substantive proper rejection?

A
  1. First, the buyer must not have accepted the goods, for acceptance precludes rejection
  2. Second, the goods or their tender must not conform to the contract
  3. Third, the seller must either have no cure right or must not have exercised it effectively and rightfully
  4. AND even with all 3, buyer still must reject goods in a procedurally proper way under 2-602 (reasonable time + seasonably notify)
53
Q

What are the four possible types of rejection?

A

Substantively proper rejection – rightful

Substantively improper rejection – wrongful

Procedurally proper rejection – effective

Procedurally improper rejection – ineffective

54
Q

What is the effect of a rightful ineffective rejection?

A

No rejection at all

Buyer will, by passage of time, be deemed to have accepted the goods, and its rights will at most be revocation under 2-608 – a considerably narrower option

55
Q

What is the effect of a wrongful effective rejection?

A

Real rejection, ending buyer’s obligation to pay

But since the rejection was wrongful, buyer will be in breach and subject to damages

56
Q

What are the damages for a total breach?

A

§ 236 (1) - a claim for damages for total breach is one for damages based on all of the injured party’s remaining rights to performance

57
Q

What are the damages for a partial breach?

A

§ 236 (2) - a claim for partial breach is one for damages based on only part of the injured party’s remaining rights to performance

58
Q

Who determines whether a breach is partial or total?

A

An injured party decides whether to treat the breach as partial or total

59
Q

What are the elements that affect the materiality of a breach?

A

§ 241 - the following are considerations in materiality of a breach:

  • Denial of bargained benefit for aggrieved party
  • Adequacy of monetary damages for the aggrieved party
  • Amount of forfeiture to be suffered by breaching party
  • Ability or likelihood of cure on the part of the breaching party
  • Good faith actions of the breaching party
60
Q

Who determines if there is a material breach?

A

The court

61
Q

When can a party suspend performance or terminate a contract?

A

When a total material breach has occurred (subject to considerations of § 241)

62
Q

Can you suspend or terminate if you experience a breach?

A

Treat as partial breach - continue performance

Treat as total breach - in suspending or terminating the contract, you risk being in breach yourself if the court does not find that the breach you suffered was in fact material.

63
Q

What happens if the breach is not a total material breach?

A

Then you must continue performing but you can pursue expectation damages for the specific loss of the partial breach

64
Q

What is the rule from K&G Construction v. Harris?

A

Unless the parties agree otherwise, a party’s promise to perform part of an installment contract is dependent on the other party’s fulfillment of its promise concerning that part.

65
Q

What is the rule from Walker & Co. v. Harrison?

A

A minor failure of performance is not a serious enough breach to justify repudiation of the entire contract.

66
Q

What is after-acquired evidence?

A

General rule: a party terminates a K without justification, but later discovers facts that, had they been known, would have justified termination, may use those facts to avoid liability

Can provide a complete defense

67
Q

What is required of a party in a contract?

A

A party must take affirmative steps to cooperate with the other party, even though the parties have not troubled to express such a duty in their agreement.

68
Q

What is the rule from Iron Trade v. Wilkoff?

A

That one party to a contract makes performance by the other party more difficult does not excuse the second party’s non-performance

69
Q

What is express anticipatory repudiation?

A

§ 250 (1) Express AR - A statement of intention to breach that may be treated as total breach by the injured party

70
Q

What is implied anticipatory repudiation?

A

§ 250 (2) Implicit AR - A voluntary affirmative action that renders the party unable to or apparently unable to perform

I.e. you sell to someone else or file for bankruptcy, etc

71
Q

Can a party demand assurance after implied repudiation?

A

§ 251 - When reasonable grounds arise to believe the obligor will commit a breach by non-performance the obligee may demand adequate assurance of due performance and may, if reasonable, suspend performance until assurance is received

§ 252 - If an obligor becomes insolvent such that breach is expected, the obligee may suspend performance until receipt of assurance

72
Q

What are the effects of repudiation?

A

§ 253 (1) - repudiation gives rise to a claim for total breach

§ 253 (2) - repudiation discharges the duty of the other

73
Q

Can a repudiation be retracted?

A

§ 256 (1) - a retraction and notification to the injured party must occur before the injured party materially changes his position in reliance on the repudiation or indicated that they considers the repudiation final

§ 256 (2) - a retraction may occur implicitly where the circumstances that formed the basis of the repudiation have ceased to occur and the injured party is aware

74
Q

Does the injured party lose their right to damages if they urge retraction?

A

§ 257 - the urging of the injured party does not change the effect of a repudiation.

75
Q

What options does an injured party have under anticipatory repudiation in a sale of goods?

A

UCC § 2-610 - the injured party may:

  1. Await performance for a commercially reasonable amount of time
  2. Resort to any remedy for breach even if performance is still awaited or retraction is urged
  3. Suspend performance or proceed despite repudiation
76
Q

Can an AR be retracted in a sale of goods?

A

UCC § 2-611 (1) - Until next performance is due, the repudiation can be rescinded unless the injured party has changed their position in reliance on the repudiation or notified the breaching party that they view the repudiation as final

UCC § 2-611 (2) - Retraction must be clearly indicated and include any assurance justifiably demanded

UCC § 2-611 (3) - Retraction reinstates rights of repudiating party

77
Q

What are the options available to a party who has experienced anticipatory repudiation?

A
  • They can treat it as total breach and view their duty as discharged
  • They can urge the rescission of the repudiation (but this does not affect their right to any remedy)
  • They can seek or accept alternate work
  • They can wait to see what happens
78
Q

What is the rule from Cosden Oil v. Helm?

A

Under the Uniform Commercial Code as enacted in Texas, a buyer’s damages for the seller’s anticipatory repudiation of a contract are to be measured a reasonable time after repudiation occurs.

79
Q

What is the rule from Hochster v. De La Tour?

A

When one party to an agreement is informed by another party to the agreement that the second party intends to breach the agreement, the first party has an option to file suit for damages immediately in anticipation of the breach, or to wait until the act was supposed to be done.

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