K Terms and other performance Issues

Question 1

Conditions

Answer 1

A condition is an event that must occur before performance of the other party is due. If it does not occur, performance of the second party is excused. Conditions can be express or constructive.

Question 2

Express Condition

Answer 2

An express condition is created by the language of the parties demonstrating the intent to have a condition (e.g., “upon condition that”). Creates a condition precedent to performance. Strict compliance is required.

Question 3

Constructive condition

Answer 3

Constructive condition is one supplied by the court for fairness. Each parties’ performance is generally a constructive condition to the subsequent performance required by the other party. Only requires substantial performance.

Question 4

Condition for Mechanical Fitness, utility, or marketability

Answer 4

In Ks involving mechanical fitness, utility, or marketability, a condition of satisfaction is fulfilled by a performance that would satisfy a reasonable person. Doesn’t matter if the promisor wasn’t personally satisfied.

Question 5

Condition for Personal Taste or Judgment

Answer 5

If the K involves personal taste or judgment, a condition of satisfaction is fulfilled only if the promisor is personally satisfied. A promisor’s lack of satisfaction must be honest and in good faith.

Question 6

Waiver of Conditions

Answer 6

A requirement that a condition occur may be eliminated by an agreement between the parties. If waived, then the other party must perform. Waiver can occur by:

a. Receiving and keeping a benefit, or
b. Failure to insist on compliance can operate as a waiver.

A waiver can be retracted unless the other party detrimentally relied.

Question 7

Parol Evidence Rule (PER)

Answer 7

The PER limits the extent to which evidence of discussions or writings made prior to, or contemporaneous with, the signed written contract can be admitted and considered as part of the agreement. It depends on whether the writing is a total integration or partial integration. Cannot have a PER problem without a writing.

Question 8

Partial Integration

Answer 8

Partial integration is one intended to be the final expression of the agreement, but not intended to include all details of the parties’ agreement. PER is not allowed to contradict a term in the partial integration. PER is allowed to supplement a term in the partial integration.

Question 9

Total Integration

Answer 9

Total integration is one that not only is the final expression of the agreement, but is also intended to include all details of the agreement. PER is not allowed to contradict a term in the total integration. PER is not allowed to supplement a term in the total integration.

Question 10

Merger Clauses

Answer 10

A merger clause is persuasive evidence that the writing is complete and final but is not conclusive.

Question 11

Exception to PER-VACS

Answer 11

Validity Attacks-Formation defects and Conditions Precedent
Ambiguity
Collateral Agreement
Subsequent Modifactions

Question 12

Formation Defects

Answer 12

PER is admissible if fraud, accident, or mistake caused the omission of a term, or to prove a lack of consideration.

Question 13

Conditions Precedent

Answer 13

If a party asserts that there was an oral agreement that the written K would not become effective until a condition occurred, all evidence of the understanding may be offered and received.

Question 14

Ambiguity

Answer 14

If terms are ambiguous, the court will admit evidence to interpret the ambiguous terms.

Question 15

PER-UCC

Answer 15

Sometimes Contradictory PER is admissible, and sometimes supplemental PER is admissible

Question 16

Contradictory PER UCC

Answer 16

If the writing was intended as a final expression of the agreement, then contradictory PER is NOT admissible. A merger clause is evidence of the parties’ intent.

Question 17

Supplemental PER UCC

Answer 17

Consistent additional terms are admissible unless the court finds the writing to have been intended also as a complete and conclusive statement of the terms of the agreement. The terms in the writing can ALWAYS be supplemented by:

a. Course of Performance
b. Course of Dealing
c. Usage of Trade

Question 18

Course of Performance (UCC-PER)

Answer 18

Course of performance refers to evidence of the conduct of these parties regarding the contract at hand. (Best, if available.)

Question 19

Course of Dealing (UCC-PER)

Answer 19

Course of dealing refers to evidence of the conduct of these parties regarding past contracts between them. (Second best.)

Question 20

Usage of Trade (UCC-PER)

Answer 20

Usage of trade refers to evidence of the meaning others in the same industry and/ or locality would attach to a term. (Least persuasive.)

Question 21

Oral contract modifications

Answer 21

Oral contract modifications are generally allowed. a. Statute of Frauds (SOF): With an oral contract modification, if the contract as modified falls within the SOF, the modification must be in writing. Where the modification must be in writing and isn’t, the modification is unenforceable, and the original contract stands and is enforceable.

Question 22

Contract modification

Answer 22

Contract modification requirements differ depending on whether the contract is subject to the common law or the UCC. a. Common law: At common law, mutual assent and consideration is required. b. UCC: Under the UCC, mutual assent and good faith is required, but consideration is not required.

Question 23

Third-party beneficiary

Answer 23

Third-party beneficiary is a person whom the promisor intends to benefit by the contract but who is not already a party to the contract.

Question 24

Intended beneficiary

Answer 24

An intended beneficiary is one intended by the promisor to benefit from the contract. An intended third-party beneficiary can sue to enforce the contract. There are two types of intended beneficiaries:

1. Creditor beneficiary
2. Donee beneficiary

Question 25

Creditor beneficiary

Answer 25

This is a third party whom the promisor intends to benefit because the promisor owes him money.

Question 26

Donee beneficiary

Answer 26

This is a third-party beneficiary the promisor intends to give a gift.

Question 27

Incidental beneficiary

Answer 27

An incidental beneficiary is one who indirectly benefits from the contract, but that result is not the intent of the promisor. An incidental third-party beneficiary cannot sue to enforce a contract (e.g., an adjacent property owner to a large planned development is an incidental beneficiary).

Question 28

When do the Rights of a Beneficiary Vest?

Answer 28

A beneficiary can enforce the K only after his rights have vested. Prior to vesting, the promisee and promisor are free to modify or rescind the beneficiary’s rights under the K. Vesting occurs when the beneficiary:

1. Manifests assent to a promise in the manner requested by the parties (awareness of the K)
2. Brings suit to enforce the promise; or
3. Materially changes this position in justifiable reliance on the promise.

Question 29

Assignment

Answer 29

An assignment is when a party to an existing contract transfers her rights under the contract to a third person. The assignor assigns to the assignee the performance due under the contract from the obligor. The general rule is that all rights are assignable. No consideration is required. A gratuitous assignment (gift) is allowed. The assignee “stands in the shoes” of the assignor and takes subject to all defenses, set-offs, and counterclaims the assignor has. Exception: Can’t assign if material change in duty/ risk.

Question 30

Delegation

Answer 30

Delegation is when a party to an existing contract appoints to a third person the duties owed under the contract. The delegator appoints to the delegatee the performance due under the contract to the obligee. The general rule is that all duties can be delegated. 1. Delegator (party owing performance) remains liable. Exception: Can’t delegate duties of skill or judgment.

Question 31

Novation

Answer 31

A novation occurs when the obligee (the one receiving performance) expressly agrees to accept the performance of the delegatee (the new performer) instead of the delegator (the original performer). A novation terminates the liability of the delegator.

Question 32

Assignment for Value-Irrevocable

Answer 32

An assignment is for value if it is:

1. Done for consideration, or
2. Taken as security for or payment of a preexisting debt. Assignments for value cannot be revoked.

Question 33

Gratuitous Assignments-Freely Revocable

Answer 33

If no consideration, the assignment is freely revocable.