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Everything Flashcards

1
Q

Formation of Contracts

Common Law vs. UCC

A
  • UCC applies when the transaction at issue is a sale of goods which generally includes tangible personal property.
  • When a transaction involves both the sale of goods and the rendering of services, one must apply the “predominant purpose” test to determine which law applies.
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2
Q

Formation of Contracts

Generally

A

Rule: Under Ohio contract law, a binding contract is formed through the process of mutual assent (i.e., offer and acceptance) and consideration where no valid defenses exist.

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3
Q

Formation of Contracts

Mutal Assent

Generally

A

Rule: Under Ohio contract law, mutual assent occurs upon acceptance of a valid offer to contract.

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4
Q

Formation of Contracts

Mutual Assent

Objective Theory of Contracts

A

Rule: Under the objective theory of contracts, whether a partys intended ot enter into a contract is judged by outward objective facts as interpreted by a reasonable person.

Ex: may include what party said when entering into k, way the party acted or appreared at the time, and circumstances surrounding the transaction.

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5
Q

Formation of Contracts

Mutual Assent

Offer & Acceptance

Offer

  1. Intent
A

Rule: Under Ohio contract law, an offer is an objective manifestiation of a willingness to enter into an agreement that creates the power of acceptance with the offeree.

  1. Intent - based on objective theory of contracts; statement is offer if person to whom it is communicated could reasonably interpret it as an offer; must express present intent
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6
Q

Formation of Contracts

Mutual Assent

Offer & Acceptance

Offer

  1. Knowledge
A

Rule: Under Ohio contract law, an offer is an objective manifestiation of a willingness to enter into an agreement that creates the power of acceptance with the offeree.

  1. Knowledge by the Offeree - offeree must have knowledge of the offer in order to accept the offer
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7
Q

Formation of Contracts

Mutual Assent

Offer & Acceptance

Offer

  1. Terms
A

Rule: Under Ohio contract law, an offer is an objective manifestiation of a willingness to enter into an agreement that creates the power of acceptance with the offeree.

Terms

CL - all essential terms (parties, subject matter, price, quantity) must be covered

UCC - if both parties intend to contract and reasonable certain basis for giving remedy, then UCC fill the gaps

a) Duration Term - if missing, then courts imply reasonable period of time
b) Employment K - if no duration, then there is a rebuttable presumption that emplyment is “at will” and either party can terminate at any time; if permanent employment, then too vauge and considered “at will”
c) Missing Terms - k may still be formed so long as there is an objective standard for the court to reference
d) Vauge Terms - if terms of contract are vague, the same presumption cannot be made because the manifested intent cannot be determined

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8
Q

Formation of Contracts

Mutual Assent

Offer & Acceptance

Offer

  1. Language
A

Rule: Under Ohio contract law, an offer is an objective manifestiation of a willingness to enter into an agreement that creates the power of acceptance with the offeree.

  1. Language - must contain words of promise, undertaking, or commitment; must be targeted to number of peope who could actually accept

* Bilateral - if return promise is requested

* Unilateral - if act is requested

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9
Q

Formation of Contracts

Mutual Assent

Offer & Acceptance

Offer

  1. Invitation to Deal
A

Rule: Under Ohio contract law, an offer is an objective manifestiation of a willingness to enter into an agreement that creates the power of acceptance with the offeree.

  1. Invitation to Deal - mere inquires and invitations to deal to not amount to offers

* Advertisements - generally considered as invitations to receive offers unless stated rewards; specific and limiting as to who may accept is an offer (e.g., “used car for sale for $5k, first come first served.”

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10
Q

Formation of Contracts

Mutual Assent

Offer & Acceptance

Terminations of Offers

  1. Lapse; 2. Death; 3. Destruction
A

Under Ohio contract law, an offer can be accepted if it is still outstanding and is not termintated via lapes of time in offer, death or mental incapcity, destruction or illegality, revocation, or rejection.

  1. Lapse of Time in Offer - if offer specifies a date on which offer terminates, the offer terminates at midnight on that date; if no time limit is set then power of acceptance terminates at end of a reasonable period of time.
  2. Death or Mental Incapacity - offer terminates upon death or mental incapacity of the offeror EXCEPT for offer that is an option because consideration was paid to keep option open
  3. Destruction or Illegality - if subject matter is destroyed then terminated; if offer becomes illegal then terminated.
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11
Q

Formation of Contracts

Mutual Assent

Offer & Acceptance

Terminations of Offers

  1. Revocation
A

Under Ohio contract law, an offer can be accepted if it is still outstanding and is not termintated via lapes of time in offer, death or mental incapcity, destruction or illegality, revocation, or rejection.

  1. Revocation - offer can be revoked by offeror any time prior to acceptance, even if offer states that it will remain openfor x amount of time; may be made in any reasonable manner and means; not effective until received; if offeree acquires info that offeror has taken definitive action inconsistent with offer, then revoked.
    a) Option - option is independent promise to keepoffer open allowing offeree power to accept; must typically give separate consideration; if option within existing k, the no separate consideration is required

UCC - promise to keep offer open does not need consideration if in writing and signed

b) Promissory Estoppel - if offerree detrimentally relies on offeror’s proimse, the reliance was reasonable foreseeable to imply the existence of an option k then offeror liable to extent necessary to avoid injustice.
c) Partial Performance - if offer is unilateral, then offeror cannot revoke the offer once the offeree has begun performance; offeree must have had knowledge of offer when she began performance
d) UCC Firm Offer Rule - offer irrevocable if offeror is merchant, language assures offer is to remain open, and assurance is in writing;

* Time - if no time limit, then reasonable time; irrevocability cannot exceed 90 days even if agreed to unless consideration given

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12
Q

Formation of Contracts

Mutual Assent

Offer & Acceptance

Terminations of Offers

  1. Revocation of General Offers
A

Under Ohio contract law, an offer can be accepted if it is still outstanding and is not termintated via lapes of time in offer, death or mental incapcity, destruction or illegality, revocation, or rejection.

  1. Revocation of General Offers - general offer can be revoked only by notice that is given to same level of publicity as offer; general offer = offer made to large number of people
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13
Q

Formation of Contracts

Mutual Assent

Offer & Acceptance

Terminations of Offers

  1. Rejection by Offeree
A

Under Ohio contract law, an offer can be accepted if it is still outstanding and is not termintated via lapes of time in offer, death or mental incapcity, destruction or illegality, revocation, or rejection.

  1. Rejection by Offeree - offer is terminated by rejection; a rejection is usually effective upon receipt; a counteroffer acts as a rejection; EXCEPT an option holder has right to make counteroffers during the option period without terminating the original offer
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14
Q

Formation of Contracts

Mutual Assent

Offer & Acceptance

Terminations of Offers

  1. Revival of Offer
A

Under Ohio contract law, an offer can be accepted if it is still outstanding and is not termintated via lapes of time in offer, death or mental incapcity, destruction or illegality, revocation, or rejection.

  1. Revival of Offer - a terminated offer may be revived by the offeror; ex: A offers to paint B for $5k, B rejects, A revives by stating offer remains open
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15
Q

Formation of Contracts

Mutual Assent

Offer & Acceptance

Acceptance

Generally

A

Under Ohio contract law, a party to whom an offer is extended may accept via a objective manifestation to be bound by the terms of the offer.

* Knowledge - offeree must know of the offer for acceptance to be valid; must communicate the acceptance to the offeror

* Bilateral - commencement of performance acts as promise to render complete performance.

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16
Q

Formation of Contracts

Mutual Assent

Offer & Acceptance

Acceptance

Methods of Acceptance

A

Under Ohio contract law, a party to whom an offer is extended may accept via a objective manifestation to be bound by the terms of the offer.
* Bilateral - promise exchanged for promise - exchange of promises is enforceable; offer requiring proimse to accept can be accpted either with return promise or performance; performance operates as promise to render complete performance

* Unilateral - promise for action - offeree promise to perform is insufficient; must perform; if requires complete performance than beginning performance is not enough to accept but will make offer irrevocable for reasonableperiod to allow complete performance

* Notice of Acceptance - offeree of unilateral is required to give notice only if offeree has reason to know offeror would not learnof requested performance with reasonable certainty and promptness

* Nonconforming Goods - if seller ships nonconforming goods, this is an acceptance of offer and breach of k; if seller shipsnonconforming goods as accomodation then treat as counteroffer that buyer can accept or reject

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17
Q

Formation of Contracts

Mutual Assent

Offer & Acceptance

Acceptance

Methods of Acceptance

Mailbox Rule

A

Under Ohio contract law, an acceptance that is mailed within the allotted response time is effective upon posting (not upon receipt) if it is properly addressed and postage.

  1. Rejection Following Acceptance - if rejection sent after acceptance, then acceptance controls; if rejection received before acceptance and offeror detrimentally reliens on rejection, then offeree is estopped from enforcing k.
  2. Acceptance Following Rejection - first one to be received will prevail; offeror need not actually read the communication in order for it to prevail
  3. Revocation Effective Upon Receipt - ffers revoked by offeror are effective upon receipt
  4. Irrevocable Offer - does not apply to irrevocable offers such as option k
  5. Medium - if acceptance is via “instantaneous 2-way communication” (i.e., fax, telephone) then treated as if the parties were in each other’s presence.
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18
Q

Formation of Contracts

Mutual Assent

Offer & Acceptance

Acceptance

Methods of Acceptance

Means

A

Under Ohio contract law, the offeror is master of the offer and may dictate themannerand means by which an offer may be accepted.

* No Specific Requirements - if none exist, the offeree may accept in any reasonable manner by any reasonable means.

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19
Q

Formation of Contracts

Mutual Assent

Offer & Acceptance

Acceptance

Silence

A

Under Ohio contract law, silence does not operate as an acceptance of an offer unless:

i) offeree has reason to believe that the offer could be accepted by silence, was silent, and intended to accept by silence; or
ii) because of previous dealings, it is reasonable to believe that the oferee must notify the offferor if the oferee intents to reject the offer.

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20
Q

Formation of Contracts

Mutual Assent

Offer & Acceptance

Acceptance

Notice

A

Under Ohio contract law, where the subject matter is bilateral contract, the offeree must give notice of acceptance

Under Ohio contract law, where the subject matter is unilateral contract, the offeree is required to provide notice of acceptance when the offeror is unlikelyto become aware that the act is being performed or if the offeror requests such notice.

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21
Q

Formation of Contracts

Mutual Assent

Offer & Acceptance

Counteroffers and Mirror-Image Rule

Common Law

A

Under Ohio contract law, acceptance must mirror the terms of the offer. Any modification of the terms of the offer, or the addition of another term not found in the offer, acts as a rejection of the original offer and as a new counteroffer.

* Suggestions / Inquiries - these including requests for clarification or statements of intent do not constitute as counteroffers; conditional acceptance terminates the offers and acts as a new offer

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22
Q

Formation of Contracts

Mutual Assent

Offer & Acceptance

Counteroffers and Mirror-Image Rule

UCC

A

Under Ohio contract law, for a sale of goods, an acceptance that contains additional terms or modifications to the terms in the offer is nevertheless treated as an acceptance rather than a rejection and a counteroffer. EXCEPT, when the acceptance is expressly conditioned on assent to the additional or different terms, in which case the acceptance is a counteroffer.

a) Both Parties =/ Merchants - definite seasonable acceptance sent within reasonable time operates as acceptance and additional terms are treated as proposals for addition to the k that must be separately accepted UNLESS expressly conditional.
b) Both Parties = Merchant - Battle of Forms & Last Shot - K exists under terms of acceptance unless (i) terms materially alter agreement, (ii) offer expressly limits the terms, (iii) offeror objects to new terms within a reasonable time – then offeror original temrs control.

* Ex of Meterially Alteration - warranty disclaimer, clause that flies in the face of trade usage with regard to quality, requirement that complaints be made in an unreasonably short time.

* Ex of Non-Materially Altering - fixing reaosnable time to bring complaint, setting reasonable interest for ooverdue invoices, reasonably limiting remedies.

* Knock Out Rule - some jurisidcitions hold different terms in offer and acceptance nullify each other and are knocked out and use article 2 gap fillers

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23
Q

Formation of Contracts

Mutual Assent

Offer & Acceptance

Auction Contracts

A

UCC

  1. Goods Auctioned in Lots - goods in an auction sale are offered in lots, each lot represents a separate sale
  2. Completion of Sale - auction sale completes when auctioneer announces its end such as fall of hammer; auctioneer has discretion to allow contemperaneous bid to continue bidding process
  3. Reserve / Non Auction - auction is with reserve unless specifically announced as a non reserve auction; auctioneer may withdraw the goods any time before she announces completion
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24
Q

Formation of Contracts

Consideration

Generally

A

Under Ohio contract law, valuable consideration is required for an agreement to be enforceable.

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25
Q

Formation of Contracts

Consideration

Bargain & Exchange

A

Under Ohio contract law, valuable consideration is required for an agreement to be enforceable and must be in the form of a benefit to the promisor or a detriment to the promisee.

* Consideration - evidence bya bargained for change in legal position; most courts hold consideration exists if there is a detriment to the promisee, irrespective of benefit to promisor

a. Legal Detriment & Bargain-For Exchange - for legal detriment to constitute sufficient consideration, it must be bargained for in exchange for a promise; promise must induce the detriment

Ex: return promise to do something; return promise to refrain from doing something legally permitted; actual performance of some act; refraining from doing some act

b. Gift Distinguished - promise to make a gift does not involve bargained for consideration; test is whether offeree could have reasonably believed that the intent of the offeror was to unduce the action.

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26
Q

Formation of Contracts

Consideration

Adequacy of Consideration

A

Under Ohio contract law, valuable consideration is required for an agreement to be enforceable.

* Substance - basic concept of legal detriment is that there must be something of substance, either an act or an promise, which is given in exchange.

a. Subjective Value - benefit to promisor does not need ot have an economic value; as long as promisor wants it, the giving of it will constitute adequate considerationl objective value does not matter
b. Preexisting Duty Rule - promise to perform a preexisting legal duty does not qualify as considerationbecause the promise is already bound to perform; if promisor gives something in additgion to what is already owed or varies preexisting duty in some way, most courts find consideration;

* Partial payment of liquidated debt is invalid for lack of consideration unless compromise of a cliam disputed in good faith; third party offers a promise contingent upon performance then there is sufficient consideration

c. Past Consideration - something given in the past is typically not adequate consideration (e.g., promising to give $500 for man who saved drowning)

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27
Q

Formation of Contracts

Consideration

Adequacy of Consideration

Modification

A

Under Ohio contract law, valuable consideration is required for an agreement to be enforceable.

Common Law - modicication of existing K must be supported by consideration and are enforcemable where there are new obligations on both sides

UCC - no consideration needed but must be in good faith; good faith requires honesty in fact and fair dealing

a. Statute of Frauds - k as modified must fall within SoF must generally be in writing
b. Prohibition of Oral Modification - provision requiring all modifications be made in writing is valid and binding

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28
Q

Formation of Contracts

Consideration

Adequacy of Consideration

Accord and Satisfaction

A

Under Ohio contract law, valuable consideration is required for an agreement to be enforceable.

* Accord K - party agrees to accept different performance from other party than what was promised; generally requires consideration

* Creditor/Debtor - when creditor agrees to accept lesser amount in full satisfaction, original debt discharged only when there is some dispute as to the validity of the debt or when the payment is of a different type than called for under the orginal k

* Satisfaction - perforamcne of the accord agreement; will discharge original k and accord k; not discharged until satisfaction complete; can sue under original or accord if failure

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29
Q

Formation of Contracts

Consideration

Adequacy of Consideration

Illusory, Requirements, Outputs, Settlement

A

Under Ohio contract law, valuable consideration is required for an agreement to be enforceable.

  1. Illusory Promise - essentially pledges nothing because it is vague or because promisor can shose whether or not to honor it; promise to purchage goods upon promisor’s satisfaction is not illusory because thepromisoris required to act in good faith
  2. Requirements K - buyer agrees to buy all that he will require of a product form the other party
  3. Output K - seller agrees to sell all that she manufactures of a product to a buyer

* UCC - quantities may not be unreasonably disproportionate to any stated estimates; requirement of good faith

  1. Settlement of Legal Claim - promise not to bring legal action or assert a claim/defense can serve as considedration; need not be one that is certain to succeed; must only have honest belief as to the validity of the claim and must be a reasonable basis for that belief
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30
Q

Formation of Contracts

Promises Binding WIthout Consideration

A

Under Ohio contract law, there are four ways in which a promise will be enforceable despite the fact that it is not supported by consideration.

  1. Debt Barred by SoL - new promise to pay debt after SoL has run is enforceable
  2. Voidable Duty - a new promise to peform a duty that is voidable is enforceable (e.g., 15 year olds k that is voidable due to infancy, makes new promise once 18)
  3. Material Benefit Rule - party performs an unrequested service for another party that constitutes a material benefit, the modern trend permits the performing party to enforce a promise of payment made by the other party after the service is rendered; not enforceable when there was no expectation of compensation (see notes for example)
  4. Promisorry Estoppel - i) promisor should reasonably expect to induce reliance on promise ii) promise induces such reliance iii) injustice can be only avoided by enforcemant

* Charties/Institutions need not show they actually relied on promise; subcontractor promise not to revoke sub-bid offer is enforceable under promissory estoppel

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31
Q

Formation of Contracts

Enforceability

A
  1. Void - void contract results in the entire transaction being regarded as a nullity, as if no contract existed between the parties.
  2. Voidable - voidable contract operates as a valid contract, unless and until one of the parties takes steps to avoid it.
  3. Unenforceable - unenforceable contract is a valid contract that cannot be enforced if one of the parties refuses to carry out its terms.
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32
Q

Formation of Contracts

Defenses to Formation

A

Under Ohio contract law, a person who is asserted to be in breach of a contract can defend the action by showing that there has not been a valid offer and acceptance or that valid consideration was not exchanged.

Moreover, they may show that there was no “meeting of the minds” due to mistake, misunderstanding, misrepresentation, fraud, undue influence, durress, or lack of capcity.

33
Q

Formation of Contracts

Defenses to Formation

Mistake

A

Under Ohio contract law, a mistake is a belief that is not in accord with the facts as to a basic assumption on which the contract was made that materially affects performance.

* Present - must be in re existing fact, no something that will happen in the future.

a. Unilateral Mistake - when one party is mistaken, either party can generally enforce the k BUT mistaken party can void the k if they did not bear risk of the mistake and either i) mistake would make enforcement unconscionable or ii) non-mistaken party knew of mistake and did not disclose or caused the istake.

* In order to form basis of rescission, unilateral mistake must have an absence of serios prejudice to the other party.

b. Mutual Mistake - when both parties are mistaken as to an essential element of k; must be a substantial difference between what was intended and was was actual and no intent by the parties to take a reisk on that element;

* Voidable by party that was adversely effected by the mistake

* Conscious Ignorance - party may bear risk of mistake at time of k formation is aware they have only a limited knowledge of the facts

* Mistaken Party’s Ability to Void - if mistake attributable to party’s failure to know/discover facts, as long as in god faith, may assert mistake

c. Reformation for Mistake - may reform written agreement if i) prior agreement (oral or writen) between parties ii) agreement to put that prior agreement into writing and iii) as a result of a mistake, there is a difference between the agreement and the writing

34
Q

Formation of Contracts

Defenses to Formation

Misunderstanding

A

Under Ohio contract law, misunderstanding occurs when both parties believe that they are agreeing to the same material terms but in fact are agreeing to different terms.

  1. Neither Party Knows (nor should have)– if misunderstanding of material term, and neither party knew or should have known, then no k.
  2. One Party Knows (or should have) – if term is ambiguous, and one party knows or should have known the other party has a different understanding, then k formed based on meaning of unknowing party.
35
Q

Formation of Contracts

Defenses to Formation

Misrepresentation, Nondisclosure, Fraud

A

Under Ohio contract law, a misrepresentation is an assertion that is contrary to the existing facts.

  • Fraudulent misrepresentation need not be material; unintentional misrepresentation is required to be material.
  1. Fraud – i) representation made ii) that was false iii) that was known to be false iv) that was made with the intention that the Π rely on it v) that the Π did rely on it vi) Π suffered damages (NEED TO CHECK THIS)
  2. Nondisclosure – nondisclosure is equivalent to an assertion that the fact does not exist if party who does not disclosure the fact knows i) disclosure would right a previous misrepresentation ii) disclosure would correct other party as to a basic assumption iii) disclosure would correct mistake as to the contents or effect of a writing iv) other party is entitled to know the fact
  3. Effect – 1) Fraud in the Factum = void = misrepresentation prevent party from knowing character or essential term of transaction 2) Fraud in Inducement = voidable = misrepresentation used to induce another to enter into contract.
  4. Non-fraudulent Misrep – voidable if material
  5. Cure of Misrep – if cured before avoided then no longer voidable
  6. Avoidance or Reformation for Misrep – unknowing party may avoid or reform k to include misrepresented info
36
Q

Formation of Contracts

Defenses to Formation

Undue Influence

A

Under Ohio contract law, a party to a contract who is a victim of undue influence can void the contract.

  1. Unfair Persuasion – undue influence is the unfair persuasion of a party to assent to a contract.
  • Ex: one party justifiably assumes the other will not act in a manner that is inconsistent with their welfare; relationship of dominance of one over the other; lack of expertise or experience by one; diminished mental capacity, etc.
  • Key – could party exercise free and competent judgement or if persusion seriously impaired that judgment.
  1. Confidential Relationship – when confidential relationship between parties, burden of proving fair is upon dominant party
  2. Third Party Undue Influence – if influence caused by third party, victim may void UNLESS non-victim party acted in good faith and without reason to know of influence
  3. Damages – restitution damages
37
Q

Formation of Contracts

Defenses to Formation

Duress

A

Under Ohio contract law, a party to contract that suffers duress in the form of an improper threat that deprives the party of a meaningful choice may void the agreement.

a. Improper Threat – duress is an improper threat that deprives a party of meaningful choice; includes threat of a crime, tort, criminal prosecution, civil litigation (when in bad faith)
* Legal Action – may never threaten criminal, but may threaten civil if in good faith
b. Meaningful Choice - a person is deprived of a meaningful choice when he does not have a reasonable alternative to succumbing to the threat; subjective evaluation
c. Effect on K – physical compulsion = void; less duress = voidable

38
Q

Formation of Contracts

Defenses to Formation

Capacity to Contract

A

Under Ohio contract law, parties must be competent where incompetency arises from infancy, mental illness or defect, guardianship, intoxication, and corporate incapacity.

a. Infancy = voidable – if under the age of 18, then do not have capacity to contract; if k not disaffirmed within a reasonable time after infant reaches majority, then ratified the k
b. Mental Illness – void if individual is adjudicated as mentally incompetent; voidable if unable to understand the nature and consequences of transaction or unable to act in a reasonable manner with regard to the k and the other party has reason to know of it.
c. Guardianship = void – if individual’s property is under guardianship by adjudication
d. Intoxication = voidable – if under effect of drugs or alcohol and was unable to understand the nature and consequences of the transaction and the other party has reason to know of it
e. Corporate Incapacity = voidable – if corporation acts outside of its powers

39
Q

Formation of Contracts

Defenses to Enforcement

Illegality

A

Under Ohio contract law, if the consideration or performance that is to occur is illegal, then the contract is illegal and unenforceable and void.

a. Effect – void; no remedy is available for partial performance
b. Exceptions:
i) Ignorance – if party is justifiably ignorant of facts that make contract illegal, then may recover if other party knew of illegality;
ii) Lack of Illegal Purpose – if other party did not know of illegal purpose, then may recover; ex: seller of gambling equip;
iii) Divisible K – if disable, may recover on legal portions;
iv) Licensing – if party can’t perform because failed to comply with licensing/registration, then other party cannot be held to complete their portion of k
v) Restitution – neither party is typically entitled to restitution unless one withdraws before improper purpose has been achieved
* Ohio: no person can knowingly enter into an agreement to abandon a pending criminal prosecution (except theft, bad check, credit card fraud so long as Δ paid full restitution to the victim); non-compete clauses are enforceable as long as they do not violate public policy.

40
Q

Formation of Contracts

Defenses to Enforcement

Unconscionability; Public Policy

A

Under the UCC, a contract may be modified or voided if it is unconscionable that it is so unfair to one party that no reasonable person in the position of the parties would have agreed to it.

  • May be used to prevent unfair surprise; boilerplate contract provisions that are inconspicuous, hidden, or difficult for a party to understand are sometimes unconscionable

Under Ohio contract law, a contract may be voided if it violates a significant public policy such as contracts in restraint of a marriage.

41
Q

Formation of Contracts

Implied-in-Fact Contracts and Quasi-Contracts

Implied in Fact; Implied in Law

A
  • Implied in Fact – when conduct indicates assent or agreement
  • Implied in Law – Quasi Contract – when Π confers a benefit on a Δ and that Π has a reasonable expectation of compensation
42
Q

Formation of Contracts

Warranties in Sale-of-Goods Contracts

A
  1. Express Warranty – any promise, affirmation, description, or sample that is part of the basis of the bargain is an express warranty unless it is merely the seller’s opinion
  2. Implied Warranty of Merchantability – implied whenever the seller is a merchant and the goods must be fit for their ordinary purpose
    * Warranty can be disclaimed by use of “As is” or “with all faults” and may be made orally but writing must be conspicuous
  3. Implied Warranty of Fitness for a Particular Purpose – warranty that the goods are fit for a particular purpose is implied whenever the seller has reason to know that the buyer has a particular use for the goods
  4. May use as is but must be conspicuous
43
Q

Discharge

Impracticability

A

Under the UCC, a party may be discharged of their duty if i) performance would be illegal, ii) the subject matter has been destroyed, or iii) performance has become impracticable.

Under Ohio contract law, a party may be discharged of their duty if i) an unforeseeable event occurs ii) whose non-occurrence of the event was a basic assumption of the contract and iii) the party seeking discharge is not at fault.

  1. Other Event Sufficient – natural disasters, military embargo
  2. Assumption of the Risk – if party assumes risk of event happening that makes performance impracticable, then cannot use defense
  3. Partial Impracticability – if some of goods unable to be delivered, supplier must divide goods among buyers with whom he’s contracted; buyer may refuse and cancel k.
44
Q

Discharge

Frustration of Purpose; Rescission; Release; Destruction

A

Under Ohio contract law, when unexpected events arise that destroy one party’s purpose in entering into the contract, then the frustrated party may rescind.

  • Need not be completely unforeseeable but however must be unexpected and not a realistic prospect

Under Ohio contract law, rescission is the cancelling of a contract so as to restore the parties to their positions before the contract was made.

  • Party may seek to rescind for many things including mutual mistake, fraud, unilateral mistake, default, mutual agreement.

Under Ohio contract law, a release is a writing that manifests intent to discharge another party from an existing duty and must be supported by consideration.

  • UCC does not require consideration for release

Under Ohio contract law, if goods are destroyed without the fault of either party before the risk of loss passes to the buyer, then the contract is avoided and both parties are discharged.

45
Q

Third Party Beneficiary Contracts

Creditor and Donee Beneficiaries

A

Under Ohio contract law, a creditor beneficiary of a debt has the right to sue either the promisor or the promise to enforce the contract.

  • Ex: A agrees to paint B’s house in return for B’s promise to pay $500 to C because A owes C $500. C is an intended beneficiary and can recover the $500 from B.

Under Ohio contract law, a done beneficiary has the right to sue the promisor.

  • Ex: A pays B to build a house for C. C is a donee beneficiary of the contract between A and B.
46
Q

Third Party Beneficiary Contracts

Intended and Incidental Beneficiary

A

Under Ohio contract law, an intended beneficiary of a gift promise has the right to sue the promisor to enforce the contract.

  • Ex: A agrees to paint B’s house in return for B’s promise to pay $500 to C because A owes C $500. C is an intended beneficiary and can recover the $500 from B.
  • Promise must wish to make a gift of the promised performance or to satisfy an obligation to pay money owed by the promisee to the beneficiary.

Under Ohio contract law, an incidental beneficiary has no right to sue to enforce a contract.

  • Ex: A promises to buy B a car manufactured by C. Here, C is an incidental beneficiary with no grounds upon which to recover if A reneged on the promise.
47
Q

Third Party Beneficiary Contracts

Defenses

A
  • Promisor can raise any defense against the third-party beneficiary that the promisor had against the original promise.
  • Ex: A agrees to paint B’s house in return for B’s promise to pay $500 to C, to whom A owes $500. If the statute of limitations (or any other contractual defense) precludes A (the promisee) from recovering against B (the promisor), then it will also preclude C (the intended creditor beneficiary) from recovering against B on the contract.
  • The promisor may not assert any defenses that the promisee would have had against the intended beneficiary.
  • Ex: In the example above, if the statute of limitations precluded C from recovering against A on the debt that A owed to C, then B’s obligation to C would not be affected.
48
Q

Assignment of Rights and Delegation of Duties

Assignment of Rights

I THINK I MISSED DELEGATION PORTION.. GO BACK AND CHECK

A

Under Ohio contract law, obligations under a contract can be delegated unless the other party has a substantial interest in having the delegating individual perform.

  • The other party can recover from the delegator if the delegatee does not perform

Under Ohio contract law, a party may substitute a new contract for an old one if the obligor repudiates liability to the original promise and the oblige accepts performance of the agreement from the delagatee without reserving rights against the obligor.

  • UCC – any delegation is considered reasonable grounds for insecurity and the other party may request assurances from the delagatee.
49
Q

Statute of Frauds

Writing Required

MIGHT HAVE MISSED STUFF, GO BACK AND CHECK

A

Under Ohio contract law, contracts regarding ____ must be evidenced by a writing

  • Marriage – contract made upon consideration of marriage
  • Suretyship – contract to answer for the debt or duty of another
  • One Year – contract that cannot be performed within one year from its making
  • UCC – contract for the sale of goods for a price of $500 or more
  • Real Property – contract for the sale of an interest in real property

(Skipped over a bunch because likely useless)

50
Q

Parol Evidence Rule

Integration

A
  • PER prevents a party to a written contract from presenting prior extrinsic evidence that contradicts the terms of the contract as written.
  • 1st Question – is agreement integrate? Did the parties intend it to be their final agreement? If not integrated, then PER does not apply
  • 2nd Question – total or partial integration?

  1. Total – completely expresses all the terms of the parties’ agreement and no extrinsic evidence;
  2. Partial – sets forth agreement re some terms and not others then extrinsic evidence of other terms as long as evidence is consistent with the writing, but not if it contradicts the terms of the writing
  3. Intent of the Parties

  • CL – 4 Corners – court only permitted to look at writing itself for evidence of intent of final and complete expression of agreement; if looks detailed, the final and totally integrated; especially evidence if there is a merger clause
  • R2d – if under the circumstances an extrinsic term of an agreement would “naturally be omitted” from a writing, then the term can be introduced so long as it does not contradict the writing (ARE WE TO USE CL or R2D?)
  • UCC – assumes partially integrated and lets in any outside terms unless court concludes that they certainly would have been included in the written k; high threshold, therefore extrinsic usually permitted
51
Q

Parole Evidence Rule

When PER is Inapplicable

General

A
  • Generally, PER does not apply to communications that occur after the execution of the written k; applies to before or contemporaneously

  1. Raising an Excuse – PER does not apply when party is raising an excuse, such as mistake, misunderstanding, misreprestation.
  2. Establishing a Defense – PER does not apply to evidence offered to establish a defense such as incompetence, illegality, duress, or lack of consideration.
  3. Separate Deal – even if fully integrated, evidence may be offered if it represents a distinct and separate contract
  4. Condition Precedent – parol evidence may be admitted to prove a condition precedent
  5. Ambiguity & Interpretation – evidence permitted to interpret or clarify an ambiguity such as trade usage or local custom; courts look to plain meaning and context
  6. Subsequent Agreement – PER does not apply to evidence of agreements between the parties subsequent to execution
  7. UCC – even if appears to be unambiguous, party may explain by evidence of course of performance (current), course of dealing (past), and trade usage.
52
Q

Conditions and Performance

Generally

A

Under Ohio contract law, a condition is a future and uncertain event that must take place before a party’s contractual rights or obligations are created, destroyed, or enlarged.

  • Ex: A buyer and seller enter into a contract for the sale of a house if the buyer can obtain a loan. Under the contract, the seller has promised to sell the house to the buyer, and the buyer has correspondingly promised to buy the house. However, both promises are conditioned on the buyer obtaining a loan.
  • Failure of a condition relieves party of the obligation; failure of a party to perform a promise constitutes a breach; when ambiguous, courts tend to resolve in favor of a promise over a condition
53
Q

Conditions and Performance

Types of Conditions

A

Under Ohio contract law, an express condition are ones expressed in the contract and must be complied with fully and substantial performance will not suffice.

Under Ohio contract law, an implied condition are those deemed to be part of the contract because of the nature of the agreement suggests that the parties truly intended the condition but failed to include it.

  • Constructive Condition – fairness requires including the condition to prevent an unjust result
54
Q

Conditions and Performance

Timing of Conditions

A

Under Ohio contract law, a condition precedent are conditions that precede the obligation to perform.

  • Burden – if Δ duty is CP, the Π has burden of proving that the condition occurred in order to recover

Under Ohio contract law, a condition subsequent are conditions that may excuse the duty to perform after a particular event occurs.

  • Burden – if Δ duty is CS, then Δ must prove the happening of the condition to avoid liability.
  • Ex: A agrees to hire B if B passes the bar exam. B agrees to work as a clerk for C until B passes the bar exam. B’s passing of the bar exam is a condition precedent to being hired by A, and a condition subsequent to B’s employment with C.
55
Q

Conditions and Performance

Satisfaction of Conditions

A

Under Ohio contract law, conditions not involving aesthetics are examined against a reasonable person standard.

  • Satisfaction Clause – when aesthetic taste is a condition, and that person in good faith determines that the work is not satisfactory, then that person is not liable
  • Time of Payment Clause – clause making payment conditioned on the occurrence of an event is usually construed as a mere guide as to time for payment rather than an absolute condition that must occur before payment is due
56
Q

Conditions and Performance

Disputes about Performance

Substantial Performance

A

Under Ohio contract law, a party to a contract cannot recover until performance of an express condition is tendered but performance of an implied or constructive condition may be met with substantial performance.

  • Application – substantial performance does not apply to express conditions nor sale of goods under the UCC
    a. Meaning – party who substantially performs can recover on the contract though full performance not tendered; if failure of constructive condition is minor, then ok; if failure of constructive condition is material, then not ok
    b. Willful Failure – no recovery allowed for a willful failure or attempt to cheat other party by intentionally providing less than called for
    c. Damages – party who substantially performed may recover contract price minus amount it will cost other party to obtain full performance
57
Q

Conditions and Performance

Disputes about Performance

Strict Performance under the UCC

Transferring Ownership & Tendering Goods

A

Under the UCC, the seller must transfer ownership of the goods to the buyer and to perfectly tender the goods conforming to the warranty obligations while substantial performance will not suffice.

  • Cure – if buyer rejects goods as nonconforming, and time still remains to perform, seller has right to cure
    a. Transferring Ownership – UCC implies a warranty of title in all sales contracts; actual knowledge by buyer of a security interests on the goods nullifies the warranty; disclaimer is permitted buy must be conspicuous and specific
    b. Tendering Goods – must tender goods in accordance with contract or with UCC if contract is silent
  • Time – in absence of specific time, then must be tendered within a reasonable time
  • Manner of Tender – in absence of manner, the goods are to be delivered in one delivery
  • Place of Tender – in absence of location, then must be tendered at seller’s place of business unless both parties know they are at some other location
  • Method of Transfer – there are four methods
58
Q

Conditions and Performance

Disputes about Performance

Strict Performance under the UCC

Tendering Goods

Method of Tender

A

Under the UCC, the seller must transfer ownership of the goods to the buyer and to perfectly tender the goods conforming to the warranty obligations while substantial performance will not suffice.

  • Method of Tender – there are four methods:
    a. Seller POB – if tendered at Seller POB, then seller must place goods at disposition of buyer and give buyer notice;
    b. Shipment K – if k is a shipment k (identified by “free on board (FOB) sellers place of business”) then seller must i) deliver goods to carrier, ii) make k for their shipment, iii) obtain and deliver all docs necessary for buyer to obtain possession, iv) give buyer notice the goods were shipped; assumed if silent as to
    c. Destination K – if k is destination k (identified by “free on board (FOB) buyer’s place of business”) then seller must i) deliver the goods to the particular place and ii) tender them there by holding the goods at the buyer’s disposition and iii) give buyer notice
    d. Goods possessed by Bailee – seller must bargain for a negotiable document of title or obtain acknowledgement from the bailee of the buyer’s rights in the goods
    e. CIF v. CF – cost, insurance, freight – if CIF k, the price includes the cost of the goods, transportation, and insurance; if CF k, the price includes cost of goods and transportation
    f. FAS – free alongside ship – seller obligated to deliver the goods alongside a designated vessel in ordinary course of business
59
Q

Conditions and Performance

Disputes about Performance

Strict Performance under the UCC

Buyer’s Obligations

A

Under the UCC, when a conforming tender is made the buyer is obligated to accept and pay the price under the contract while rejection amounts to a breach of contract.

  • Definiteness – k that is sufficiently definite will not be invalidated merely because it omits details regarding performance; UCC implies an obligation of good faith within a parameter of commercial reasonableness
  • Good Details – if k fails to specify goods, duty on buyer to specify; if buyer fails to do so, seller can treat as breach if the buyer’s failure materially impacts the seller’s performance
  • Shipment Details – if k fails to specify shipment details, duty on seller to specify
  1. Carrier vs Non-carrier Cases – unless otherwise specified, if used carrier then payment due at moment buyer receives goods; if non-carrier used, payment due upon tender of delivery by seller
  2. Shipment Under Reservation – if k does not specify the method or form of payment, seller may send under reservation, meaning that carrier will hold goods until buyer pays
  3. Tender of Payment – three situations:
  • Delivery & Tender Concurrent Conditions – unless otherwise agreed, tender of payment is condition to seller’s duty to tender and complete delivery
  • Sufficiency of Tender of Payment – any means sufficient or is within oridinary course of business; seller may demand payment in legal tender but must give reasonable extension of time
  • Payment by Check – if payment made by check, payment is conditional until the check is paid or dishonored
60
Q

Conditions and Performance

Disputes about Performance

Strict Performance under the UCC

Buyer’s Right to Inspect

A

Under the UCC, buyer has a right to inspect goods that are tendered, delivered, or identified to the contract for sale, unless the contract provides otherwise.

  1. Prior to Payment – buyer’s right to inspect is a condition to payment; may occur at any reasonable time, place, and manner; may occur when held under reservation; parties can agree to particular time, form, place
  2. When Not Entitled – if cash on deliver (COD) or other terms such as course of dealing or useage of trade preclude inspection before payment.
  3. Expenses of Inspection – paid by buyer, but may be recovered from seller if goods to not conform and are rejected.
61
Q

Conditions and Performance

Disputes about Performance

Divisible or Installment Contracts

A

Under Ohio contract law, a divisible or installment contract is one in which the various units of performance are divisible into distinct party and recover is limited to the amount promised for the segment of the contract performed.

  • Damages – recoverable for breach of the other segments

Under the UCC, an installment contract is one in which the goods are to be delivered in multiple shipments and each shipment is to be separately accepted by the buyer.

  • Payment – due upon each delivery
    2. Nonconforming Segment – if goods are nonconforming, buyer can only reject that shipment if nonconformity substantially impairs value of the shipment and cannot be cure BUT if seller makes adequate assurances that he can cure nonconformity, then buyer must accept the shipment.
    3. Remaining Segment – if goods are nonconforming, buyer may cancel the k only if nonconformity substantially impairs the value of the entire k.
62
Q

Conditions and Performance

Suspension or Excuse of Conditions

A

Under Ohio contract law, if a condition is suspended then the condition is restored upon expiration of the suspension.

Under Ohio contract law, if a condition is excused, then the party having the benefit of the condition can never raise it as a defense.

  1. Waiver – party whose duty is subject to the condition can waive by words or conduct; courts will find waiver if the condition is not a material part of the agreement
    * Reinstatement – may be reinstated if i) waiving party communicates a retraction of the waiver before the condition is due to occur and ii) the other party has not already suffered detrimental reliance.
  2. Wrongful Interference – good faith and fair dealing implied into all contracts; duty not to hinder other party’s performance and duty to cooperate or else the condition is excused.
  3. Election – party who chooses to continue k after condition broken then waives that condition
  4. Estoppel – party who indicates that a condition will not be enforced may be estopped from using as a defense if other party reasonably relied on waiver.
63
Q

Breach of Contract & Remedies

Breach of Contract

CL & UCC

A

Under Ohio contract law, once a duty to perform exists, nonperformance is a breach of a contract unless the duty is discharged (by agreement, statute, inability to perform, waiver, etc.).

Under Ohio contract law, a material breach of contract occurs when the non-breaching party does not receive the substantial benefit of its bargain which allows the non-breaching party to withhold promised performance and to pursue remedies for the breach, including damages.

  • Substantial Performance – if breach minor, then non-breaching party is entitled to remedies that would apply to the nonmaterial breach.
  • Anticipatory – if minor breach is accompanied by anticipatory repudiation, then non-breaching party may treat the breach as material
  • Breaching Rights – materially breaching party is entitled to fair value of any benefit conferred but not to contract damages
  • NOTE – if minor breach, non-breaching party may be able to recover for damages but still must perform under the k; if material then need not perform

Under the UCC, the seller must strictly perform all obligations or be in breach UNLESS installment contract, whereby doctrine of material breach applies.

64
Q

Breach of Contract & Remedies

Anticipatory Repudiation

Generally

A

Under Ohio contract law, the doctrine of anticipatory repudiation applies when a party clearly and unequivocally repudiates, by action or words, a promise before the time for performance has elapse.

  • Non-breaching Party’s Options – upon repudiation, the promisee can treat the repudiation as a breach or ignore it and demand performance; if ignored, the promisee must suspend continued performance if it would increase the damages to the promisor.
  • Payment - if only performance left is payment, and date of performance has not passed, aggrieved must wait until performance due before filing suit
  • Retraction of Repudiation – may retract until promisee i) relies on repudiation, ii) accepts the repudiation, or iii) commences action for breach of k
  • Unilateral K – such repudiation does not apply to unilateral k’s and may not be used if promisee has completed performance prior to the repudiation

Under the UCC, anticipatory repudiation occurs when a party unequivocally refuses to perform or when a party creating reasonable grounds for insecurity fails to provide adequate assurance within 30 days after request.

  • Retraction – can be retracted if other party has not canceled the k or materially changed position
65
Q

Breach of Contract & Remedies

Anticipatory Repudiation

Prospective Inability to Perform

A

Under the UCC, a party may demand assurance of performance if there is reasonable grounds for insecurity about the other party’s ability or willingness to perform.

  • Time to Response – other party then has 30 days to provide adequate assurance; if none is received then treated as repudiation but can still retract such repudiation.
  • Std for Insecurity & Assurance – commercial standards
  • Effect of Acceptance – acceptance of improper delivery/payment does not preclude an aggrieved party from demanding adequate assurance
66
Q

Breach of Contract & Remedies

Remedies: Damages for Breach of K

Types & General

A
  • Remedies are meant to compensate the non-breaching party for actual economic losses.
    1. Expectation
    2. Consequential
    3. Liquidated
    4. Incidental
    5. Punitive
    6. Nominal
    7. Mitigating
67
Q

Breach of Contract & Remedies

Remedies: Damages for Breach of K

Expectation Damages

Generally; Partial Performance; Defective Performance; Waste

A

Under Ohio contract law, expectation damages are damages that arise naturally and obviously form the breach and are to put the injured party in the same position as if the contract had been performed.

  • Calculation = loss in value + other loss - cost avoided - loss avoided
  • Ex: B breaches a contract with A to fix A’s car for $500. A finds another mechanic, C, to fix A’s car for $700, which is the market value of performance. A can recover $200 from B.
  1. Construction K Calc - Contractor failure calc = cost of construction by another builder - k price + compensation for delay; Owner failure = profits that builder would have earned + cost incurred by builder - amount of any payments made - materials used by contract on another job
  2. Sale of Goods – market value of goods (cost to cover) - contract price
  3. Real Estate – market value - contract prince

Under Ohio contract law, a partially performing party can recover for work performed plus expectation damages for the work not yet performed.

  • Ex: B agrees to paint A’s house for $500, which covers $400 in supplies and labor and $100 in profit. After B paints half of the house and incurs $200 in costs, A breaches. B can recover the $200 for costs already incurred and the $100 of profit, but not the remaining $200 for costs not yet incurred.
  • Ex: A borrows $10,000 from B. The loan is to be paid back in monthly installments with interest over a one-year period of time. A fails to make the first installment payment and tells B that he will be unable to make the other payments as well. B has a claim for partial breach of the contract but cannot sue for a total breach of the contract. (Note: Lenders circumvent this rule by including in the loan agreement an acceleration clause)

Under Ohio contract law, in contracts for the sale of goods, damages for nonconformity are measured by the difference between the value of the goods and the actual value of the tendered nonconforming goods.

Under Ohio contract law, if the amount of damages is disproportional to the economic benefit or utility gained, the court may award damages equal to diminution in value UNLESS the breach is willful.

  • Ex: Landowner grants Mining Company a five-year license to remove coal from his property. In return for the license, Mining Company agreed to restore the property to its original state at the end of the five-year period. After five years, Mining Company refused to restore the land. The restoration work would cost $29,000, but, if completed, would result in only a $300 increase in the property’s value. The court may elect to award only $300 in damages, instead of the usual $29,000 expectation award.
68
Q

Breach of Contract & Remedies

Remedies: Damages for Breach of K

Consequential Damages & Foreseeability

A

Under Ohio contract law, consequential damages may be awarded for reasonably certain damages that are reasonably foreseeable to a nonbreaching party.

  • Foreseeability – natural, probable consequences; in the contemplation of the parties at the time of k formation
  • Causation – Δ may defend on grounds that losses would have occurred even if Δ had not breached
  • Reasonable Certainty – Π must prove dollar amount with reasonable certainty
  • UCC Breach of Warranty – generally may be limited/excluded; limitation/exclusion re consequential damages of damages for injury is unconscionable; loss of commercial value is not unconscionable
  • UCC Breach of Warrant Calc = value of goods – value they would have had if they had been as warranted
  • NOTE: courts hesitant to award damages for lost profit/opportunities; beware answers that conclude in absolute terms that such damages are recoverable
69
Q

Breach of Contract & Remedies

Remedies: Damages for Breach of K

Liquidated Damages & Penalties

A

Under Ohio contract law, liquidated damages may be awarded if i) the parties intended to agree to the damages that might arise from breach, ii) the amount of damages stipulated in the contract is reasonable in relation to either the actual damages suffered or the damages that might be anticipated at the time the contract was made, and iii) actual damages would be uncertain HOWEVER if unreasonably large then is considered a penalty and is unenforceable.

  • Uncertainty – look to time of contracting, not the time of breach
  • Specificity – must be for a specific amount for a specific breach
70
Q

Breach of Contract & Remedies

Remedies: Damages for Breach of K

Incidental; Punitive; Nominal; Mitigating

A

Under Ohio contract law, incidental damages may be awarded to the non-breaching party as compensation for commercially reasonable expenses incurred as a result of the breach.

  • Ex: cost of inspecting, transporting, caring for, maintaining custody over

Under Ohio contract law, punitive damages are not receoverable unless the conduct constituting the breach is also a tort for which punitive damages can be recovered.

  • Very rarely available; some statutes apply them to fraud, acts of bad faith, violation of fiduciary duty

Under Ohio contract law, nominal damages may be awarded if no damages are alleged or proved but the plaintiff is still entitled to judgment.

Under Ohio contract law, a party to a contract must take reasonable steps to avoid or mitigate damages to the extent possible by reducing undue risk, expense, or inconvenience.

71
Q

Breach of Contract & Remedies

Restitution & Reliance Recoveries

A

Under Ohio contract law, when a breaching party is unjustly enriched by the nonbreaching party, the plaintiff may recover restitution for the benefit conferred and this benefit is measured by a reasonable value or the increase in the defendant’s wealth.

  • Available for non-performance total breach
  • Available for repudiation
  • Cannot seek restitution if nonbreaching party has completely performed and is only awaiting payment
  • If Π has not substantially performed and is in breach, then Π cannot recover under the contract, but if Δ has benefited from Π’s performance, then Π can recover in restitution for the benefit conferred less the defendants damages for the breach

Under Ohio contract law, when a non-breaching party incurs expenses in reasonable reliance upon the promise that the other party would perform, they may then recover reliance damages.

  • Party cannot recover both reliance and restitution damages
72
Q

Breach of Contract & Remedies

Specific Performance & Declaratory Judgment

A

Under Ohio contract law, when damages are an inadequate remedy, the non-breaching party may pursue equitable remedy for specific performance.

  1. Factors – when determing if legal remedy is adequate, courts will consider difficulty of proving damages with reasonable certainty, hardship to the Δ, balance of equities, practicality of enforcement, mutuality of the agreement
    * NOTE: look for problems involving land or unique goods
  2. Real Property – every parcel of real property is considered unique
  3. UCC – allows specific performance when goods are rare or unique; when requirements k, permitted when there is not another convenient supplier
  4. Limitations – SP will not be enforced if court cannot supervise enforcement
  5. Defenses – laches (prejudicial delay in bringing the action) or unclean hands

Under Ohio contract law, if there is an actual dispute regarding the rights and obligations of parties, and they are unclear, then either party may bring action for declaratory judgment.

73
Q

Breach of Contract & Remedies

UCC Remedies

Buyer’s Remedies

Seller Failure to Tender (breach by seller)

A

1.Damages – Under the UCC, buyer may recover the market price, where the market price is the price at the time of breach plus, plus incidental and consequential damages.

  • Incidental – damages that and incidental to seller’s failure to perform (e.g., warehousing, transportation);
  • Consequential – any losses resulting from general or particular requirements and needs which could not be reasonably prevented by purchasing substitute goods.
  1. Cover – Under the UCC, buyer may purchase similar goods elsewhere and recover the replacement price minus the contract price.
  2. Specific Performance – Under the UCC, buyer may demand specific performance for unique goods.
  3. Replevin – complicated and useless
74
Q

Breach of Contract & Remedies

UCC Remedies

Buyer’s Remedies

A

Seller Makes Nonconforming Tender (breach by seller) options:

Under the UCC, if either the tender or the goods are nonconforming, then the buyer has the right to accept, or reject all or party of the goods…

  • Inspect – the buyer has the right to inspect the goods before deciding whether to accept or reject; payment does not constitute acceptance if there is no right of inspection before payment

… Valid rejection requires the buyer give notice to the seller in a reasonable time before acceptance

  1. Retain – if buyer rejects, he must retain possession for a reasonable time until seller can reclaim
  2. Nonperishable – unless instructed by seller, may store, reship, or sell for the seller’s account
  3. Perishable – unless instructed by seller, buyer must sell goods on seller’s behalf
  4. Remedies – same remedies available after rejection as if no tender made (i.e., damages [including incidential & conseq], cover, specific performance, replevin)
  5. Notice – must notify seller of breach

… Buyer accepts goods by expressly stating acceptance, using the goods, or failing to reject the goods.

  • Buyer can revoke acceptance (which amounts to rejection) if acceptance was with a reasonable expectation that the seller would cure and they did not.
  • Revocation must occur within a reasonable time after the nonconformity or defect was or should have been discovered

1.Right to Cure – seller has a right to cure a defective tender if time for performance has not elapsed or seller had reasonable grounds to believe that buyer would accept despite the nonconformity

75
Q

Breach of Contract & Remedies

UCC Remedies

Seller’s Remedies

A

1.Price Upon Acceptance

Under the UCC, the price is due after the goods are physically delivered to the buyer and the buyer has an opportunity to inspect unless the contract provides otherwise.

  • If price missing, then UCC supplies a reasonable price at the time for delivery
    2. Right to Reclaim Goods

Under the UCC, when an insolvent buyer received goods on credit, and the seller learns that the buyer is insolvent, the seller may reclaim the goods, provided a demand is made within 10 days after receipt of the goods.

  • If COD, seller may reclaim goods if buyer’s check bounces
    3. Stoppage of Goods in Transit

Under the UCC, a seller can stop the goods in transit because of the buyer’s breach or insolvency.

4.Wrongful Rejection

Under the UCC, if the buyer wrongfully rejects the goods, then seller has three alternative remedies:

a. Collect Damages – contract price minus the market price plus incidental damages minus any expenses saved; if this calculation does not add up to a positive position, then measure shall be the profit
b. Resell Goods – may sell, but can only sell goods identified to the contract
c. Recover Price – seller can recover the price after rejection only if the goods are not sellable in seller’s ordinary course of business

76
Q

Breach of Contract & Remedies

UCC Remedies

Risk of Loss

A

Under the UCC, unless otherwise agreed, if goods are not identified and damaged or destroyed without the fault of either party, the risk of loss is generally on the seller until seller satisfies the contractual delivery obligation.

  • Shipment K – if k does not specify place of delivery, then it is a shipment k, and risk of loss passed to buyer when seller gives possession of goods to carrier and makes proper contract for their shipment
  • Destination K – if k does not specify delivery at particular location, it is a destination k, and risk of loss passes to buyer when seller tenders at the place specified
  • Ex: B orders a computer from S that is identical to a display model shown on the floor of S’s store. The contract specifies that the computer is to be tendered by S at B’s place of residence. In transit, the computer is destroyed by the shipping company through no fault of S. S is still required to perform the contract.
  • Identified Goods – if goods are identified (e.g., specific painting or specific items of inventory) and are totally destroyed, then seller is excused without fault; same but if damaged then contract is avoided unless buyer wants goods at reduced price
  • Breach – if seller or buyer breaches, then the risk of loss shifts to them
77
Q

Breach of Contract & Remedies

UCC Remedies

Insurable Interest in Goods

A
  • Seller Interest – seller retain an insurable interest in goods until title passes from seller to buyer, unless otherwise agreed
  • Byer Interest – buyer obtains an insurable interest in goods as soon as the goods are identified to the contract; identification can occur whenever agreed upon, or in the absence of an agreement, then at k formation
78
Q

Breach of Contract & Remedies

UCC Remedies

Statute of Limitations on Breach of Sales Contract

A

Under the UCC, an action for breach of contract must be commenced within four years after the cause of action accrues.

  • Accrual – occurs when breach occurs; breach of warranty accrues when goods delivered
  • Modification – may reduce SoL to minimum of 1 year, but cannot extend past 4.
79
Q
A

Contracts & Sales (1 decks)

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