Contracts - Performance, Modification & Excuse Flashcards
What is the seller’s obligation under the UCC?
To transfer and deliver the goods
What is the buyer’s obligation under the UCC?
To pay for the goods
What is the difference between carrier-cases and non-carrier cases?
Under the UCCF:
Carrier cases is where the pays to a sales of goods K agree to a common carrier
Non-carrier cases are where the pays to a sale of goods K do not agree to use a common carrier
When does the risk of loss transfer in non-carrier cases?
UCC - Depends if seller is a merchant:
Seller a merchant - passes to the buyer only when the goods are physically the buyer’s possession
Not a merchant - transfers upon tender of delivery
How is the risk of loss determined in a carrier case?
It depends on whether the contract is a shipment contract or a destination contract
What is a shipment contract?
A contract where the seller promises to turn the goods over to the carrier (that is the end for the seller)
What is a destination contract
A contract where the seller promises to tender delivery at a particular destination point
When does the risk of loss transfer in carrier cases?***
Shipment Contract
FOB Seller - risk passes to the buyer when the goods are delivered to the carrier
Destination Contract
FOB Buyer - risk passes to the buyer when the goods are tendered @ the destination point specified in the contract
What is the default rule in a carrier case if the type of contract is silent?
The contract will be deemed a shipment contract
What is the rule for a contract modification under the common law?
Preexisting Duty Rule
A promise to increase compensation for duties already owed under an existing contract is an unenforceable modification b/c there is no consideration offered for the modification
(cannot modify in this way)
What are the exceptions to the pre-existing rule?
Mutual Modification
Unforeseen Circumstances
What is mutual modification?
A promise to increase compensation under an existing K requires (to be enforceable):
both ptys to agree to a performance that is different from the one required by the original K AND
the difference in performance is not a mere pretense of a newly formed bargain
What are unforeseen circumstances
The preexisting duty does not apply when:
A promise of increase compensation is given in exchange for a promised performance that has been rendered substantially more burdensome than reasonably anticipated by the ptys
How is a contract modified under the UCC?
An agreement to modify an existing K for the sale of goods need no consideration as long as there is good faith
NOTE - even if consideration is offered, it will be unenforceable if it is just a pretext to hide a bad faith change of terms
How can performance be excused?
By faulty assumptions of present facts: Mistake By faulty assumption regarding future facts: Impossibility Impracticability Frustration of Purpose By agreement of the ptys: Rescission Accord & Satisfaction Anticipatory Repudiation
When is a mistake sufficient to be excused?
The mistaken fact must significantly impact the value of the transaction to one or both ptys (materiality)
How is performance excused under mistake?
Unilateral Mistake (only one pty operating under a faulty assumption of a material fact)
Single pty will not be excused
EXCEPTION
1. Other pty knew or had reason to know of that pity’s mistake
2. Where there has been a serious or unconscionable clerical error
unless the error was caused by extreme negligence & other pty relied on it
(minority rule)
Mutual Mistake
The contract will be voidable by the disadvantage pty if:
1. the mistaken assumption must relate to a material fact
2. mistake must be made by both pays
3. the disadvantaged pty did not bare the risk of mistake under the pays agreement
How is performance excused under Impossibility?
The doctrine excuses both pays from their obligation if performance has been rendered impossible by events occurring after the K was formed
What are the requirements for impossibility?**
- Impossibility must be objective
2. The contingency that created the impossibility was not known to the pays at the time of making the K
What is the difference between objective & subjective impossibility?
Objective Impossibility
When the performance under the K becomes literally impossible for anyone b/c of circumstances beyond the control of both ptys
Examples of objective impossibility:
- When the subject matter of the K is destroyed
- in a personal service K where the performing pty has died/incapacitated
- When supervening law has rendered performance legally impossible
Subjective impossibility
When the performance under the K becomes impossible b/c of some failure or fault on the part of the performing pty
How is performance excused by the doctrine of impracticability?
A promisor may be excused from performance where the following two elements are proven:
- the contingency causing the impracticability was unforeseen
- the increase cost is far beyond what either pty anticipated
- risk neither assumed or allocated by either pty
How is the doctrine of impracticability treated under the UCC?
Increase in cost alone or a rise/collapse of the market is not considered impracticable
HOWEVER, it is impracticable where shortage is caused by:
1. war or embargo
2. local crop failure or
3. unforeseen shutdown of major sources of supply through natural disaster, etc.
How is performance excused under frustration of purpose?
It is where a contingency occurs that dramatically reduces the value of performance to the receiving party
NOTE - Unavailable as an excuse if it is contractually allocated risk
What is the modern test under frustration of purpose?
A pty’s contractual obligation will be discharged when three requirements are met:
- The pity’s principle purpose for the K is frustrated
- The frustration was substantial in nature
- The nonoccurrence of the event (precipitating frustration) must have been a basic assumption of the K (something we could never think or dream could happen)
