Contracts - Performance, Modification & Excuse

Question 1

What is the seller’s obligation under the UCC?

Answer 1

To transfer and deliver the goods

Question 2

What is the buyer’s obligation under the UCC?

Answer 2

To pay for the goods

Question 3

What is the difference between carrier-cases and non-carrier cases?

Answer 3

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

Question 4

When does the risk of loss transfer in non-carrier cases?

Answer 4

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

Question 5

How is the risk of loss determined in a carrier case?

Answer 5

It depends on whether the contract is a shipment contract or a destination contract

Question 6

What is a shipment contract?

Answer 6

A contract where the seller promises to turn the goods over to the carrier (that is the end for the seller)

Question 7

What is a destination contract

Answer 7

A contract where the seller promises to tender delivery at a particular destination point

Question 8

When does the risk of loss transfer in carrier cases?***

Answer 8

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

Question 9

What is the default rule in a carrier case if the type of contract is silent?

Answer 9

The contract will be deemed a shipment contract

Question 10

What is the rule for a contract modification under the common law?

Answer 10

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)

Question 11

What are the exceptions to the pre-existing rule?

Answer 11

Mutual Modification

Unforeseen Circumstances

Question 12

What is mutual modification?

Answer 12

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

Question 13

What are unforeseen circumstances

Answer 13

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

Question 14

How is a contract modified under the UCC?

Answer 14

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

Question 15

How can performance be excused?

Answer 15

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

Question 16

When is a mistake sufficient to be excused?

Answer 16

The mistaken fact must significantly impact the value of the transaction to one or both ptys (materiality)

Question 17

How is performance excused under mistake?

Answer 17

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

Question 18

How is performance excused under Impossibility?

Answer 18

The doctrine excuses both pays from their obligation if performance has been rendered impossible by events occurring after the K was formed

Question 19

What are the requirements for impossibility?**

Answer 19

1. Impossibility must be objective

2. The contingency that created the impossibility was not known to the pays at the time of making the K

Question 20

What is the difference between objective & subjective impossibility?

Answer 20

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

Question 21

How is performance excused by the doctrine of impracticability?

Answer 21

A promisor may be excused from performance where the following two elements are proven:

1. the contingency causing the impracticability was unforeseen
2. the increase cost is far beyond what either pty anticipated
3. risk neither assumed or allocated by either pty

Question 22

How is the doctrine of impracticability treated under the UCC?

Answer 22

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.

Question 23

How is performance excused under frustration of purpose?

Answer 23

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

Question 24

What is the modern test under frustration of purpose?

Answer 24

A pty’s contractual obligation will be discharged when three requirements are met:

1. The pity’s principle purpose for the K is frustrated
2. The frustration was substantial in nature
3. 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)

Question 25

How is performance excused by rescission?

Answer 25

There needs to be a mutual agreement of both ptys in mid-performance to discharge the other of their duty

NOTE - SOF __________________

Question 26

How is performance excused under accord & satisfaction?

Answer 26

This is where one pty has performed & the other hasn’t
An accord is a K in which the obligee promises to accept substitute performance in satisfaction of the obligor’s existing duty.

It satisfies the obligor’s original duty
Only suspends the original duty

Question 27

Is consideration needed for an accord?

Answer 27

Generally yes:

Involves an agreement for partial or substituted performance:
the substituted performance differs significantly from the original performance or its obligation is doubtful

Involves an agreement for partial payment:
there must be good faith or bona fide dispute about amount owed

Question 28

How is performance excused by Anticipatory repudiation?

Answer 28

a