MBE Contracts & Sales 15-21

Question 1

dying extinguishes ___, but not ___

Answer 1

offers, but not established contractual liabilities

Question 2

performance turns out to be more expensive than expected - will this excuse performance?

Answer 2

no

Question 3

general definition of excuse defense to performance

Answer 3

1. impossibility or impracticability
2. death after a contract (making performance nonsensical)
3. frustration of purpose (something happened to undermine entire reason for contract creation)
4. initial K modified or canceled

Question 4

both parties may agree to walk away from a contract, as long as ____

Answer 4

there is some performance remaining from each side (otherwise, no consideration for the modification)

Question 5

accord and satisfaction

Answer 5

when parties to earlier K agree that performance will be satisfied instead by completion of different performance

Question 6

if accord / new agreed-upon performance is not performed, the other side can sue for…

Answer 6

either the original obligation, OR the new promise

Question 7

what is the difference between a modification and an accord?

Answer 7

if party to perform has an option to satisfy a contract ob by doing something else, it’s an accord and satis;
in mod, performance ob has CHANGED (not optional election to do something else)

Question 8

novation

Answer 8

when both parties agree that substitute person will take over contractual obligations (not just one party delegating)
excuses original promisor from performance - new person is the one obligated

Question 9

question at issue in anticipatory repudiation

Answer 9

what are your remedies when the other side says they are not going to perform on the K (repudiation) before performance is due?

if clearly and unequivocally repudiates, performance excused

Question 10

if party clearly and unequivocally repudiates, nonbreaching party has two options (2):

Answer 10

1. treat repudiation as a breach and sue immediately for damages (but cannot sue early if finished and just waiting for payment)
2. ignore repudiation, demand performance, and see what happens

Question 11

can a party retract a repudiation? under what circumstances?

Answer 11

yes, as long as other side has not:
1. commenced a lawsuit; or
2. acted in reliance on repudiation (by materially changing their position / doing something very different)

Question 12

if you are uncertain whether other party has repudiated, what doctrine may you assess the hypothetical repudiation under the UCC?

Answer 12

if you have reasonable grounds for insecurity about other side’s performance, you can demand an adequate assurance

if party fails to respond w/in reasonable time, you can treat this as repudiation

Question 13

standard way of calculating damages in Ks

Answer 13

expectation damages

Question 14

goal of expectation damages

Answer 14

to put party in same economic position it would be in if the K had been performed as promised

Question 15

how are expectation damages usually calculated?

Answer 15

comparing value of performance w/o breach to value of performance with the breach (what position in now, and what position would they have been in?)

Question 16

three major limits on calculation of expectation damages

Answer 16

1. must be proven with reasonable certainty (such as with consistent sales track record)
2. unforeseeable conseq damages - not recoverable unless breaching party had some reason to know about poss of these special damages at time of K (Hadley rule)
3. mitigation (breached against party must take reasonable steps to reduce damages from breach)

Question 17

an anticipatory repudiation may be retracted unless… (2)

Answer 17

1. other party has commenced a lawsuit OR
2. has acted in reliance on repudiation by materially changing its position

Question 18

general damages vs. consequential damages

Answer 18

gen: type of loss almost anyone would incur from breach (includes incidental damages, e.g. cost of storing rj goods or finding new buyer/ replacement vendor)

conseq: unique or special to this P

Question 19

if breached-against party fails to mitigate, how are damages calculated?

Answer 19

as if they did mitigate. defendant must bear burden of showing mitigation failure

Question 20

what is lost volume profits and how does it affect damages recovery?

Answer 20

if buyer breaches by not paying, normally seller must mitigate by reselling to another person; however, if retailer who sells this all. the time, seller can argue they have abundant supply of the goods and insufficient buyers to take them all - would’ve done second sale anyway

Question 21

if paying party breaches in a partially completed building K, can the builder continue to work on the job?

Answer 21

no. if you’re building house for someone who said they won’t pay you, you’re running up the bill - you need to mitigate as soon as you find out

Question 22

formula for expectation damages recovery when performance is incomplete, b/c learned payer won’t pay

Answer 22

expectation damages = contract price/amt - amount already paid - amount that would be needed to finish the job

Question 23

diminution in market value damages

Answer 23

what you get when cost to complete damages seem to overcompensate (like slightly diff marble color)
how much lower is market value of what you got vs. what you wanted?

breaching party must normally have acted in an innocent and unintentional manner in order to obtain DMV damages (often 0 if equivalent)

Question 24

what standard is applied to the proof of expectation damages?

Answer 24

reasonable certainty

Question 25

when calculating reliance damages, what is the goal? what q should you ask?

Answer 25

to put the harmed party in the same economic position that it would be in if the K had never been

ask: what loss has the P incurred that would not have taken place, BUT FOR the breached K?

Question 26

difference between expec damages and reliance

Answer 26

expec: forward looking; what was it fair to think you were gonna get from this valid agreement?; can be too speculative

reliance: backwards looking; restore to position as if never K at all (e.g. b/c, acted in reliance, so in equity, fix acknowl no K at all)

(cant get both)

Question 26

restitution damages - goal?

Answer 26

to give P amount equal to econ benefit that P conferred on defendant

Question 27

Owen Wilson pays $50,000 to Dr. Plastic, a famous surgeon who promises to “make Wilson’s nose perfect.” Wilson also incurs $20,000 in hospital costs related to this procedure. Dr. Plastic botches the job. what does he owe in restitution, reliance, or expectation damages (how calc)?

Answer 27

1. 50k, benefit conferred upon Dr
2. 70k
3. (uncertain total) value of perfect nose - nose he got; what he would have gotten vs. where he is now

Question 28

goal of liquidated damages?

Answer 28

liquidated damages are a set / exact amount of money or formula used to calculate the amount of money owed in breach

Question 29

courts are wary about awarding liquidated damages and will do so only if (3)

Answer 29

1. the amount of liquidated damages was reasonable at the time of K, and
2. actual damages from breach would be uncertain in amount and difficult to prove

Question 30

dont worry about punitive damages unless you see breach that also seems like a tort (fraud or some other extreme situation); almost never allowed in K law

Answer 30

got it

Question 31

how often do we see equitable relief (in form of injunctions) in K law?

Answer 31

only when monetary damages are considered inadequate for some reason

Question 32

when is specific performance presumptively available?

Answer 32

for real estate contracts; real estate parcels considered so unique that damages can’t accurately determineis

Question 33

is specific performance available when land already transferred to another bona fide purchaser?

Answer 33

no

Question 34

specific performance is presumptively not avialble for Ks of…

Answer 34

personal service (weird for courts to compel)

Question 35

lumley doctrine

Answer 35

court might grant injunction prohibiting a breaching party from perofrming similar services for a competitor for a reasonable period of time/place

Question 36

when is specific performance available under the UCC?

Answer 36

only for unique goods, like art or custom-made items

Question 37

when does the right of reclamation arise? (gen + rq to assert)

Answer 37

arises when an unpaid seller tries to reclaim goods that were sold on credit when the buyer is insolvent

1. buyer is insolvent at time of receipt of goods
2. seller must demand return of goods w/in 10 days of receipt (or w/in reas time if buyer misrep his solvency to seller in writing w/in 3 months before deliv), and
3. buyer still has the goods

Question 38

main q contemplated in third party beneficiary contracts

Answer 38

whether third party can sue to enforce a K made by two other people

Question 39

three roles to ID in 3rd party beneficiary Ks

Answer 39

promisor - person making promise that outsider is trying to enforce
promisee - contractual counterparty to promise; could presumably enforce the K, but isn’t
third party beneficiary - outsider suing the promisor for breach

Question 40

if you see three parties to a K, what analysis should that trigger?

Answer 40

third party beneficiaries

Question 41

two subtypes of third party beneficiary

Answer 41

intended - have right to sue
incidental - does not have right to sue

Question 42

creditor beneficiary

Answer 42

intended beneficiary; when promisee strikes deal w promisor in order to repay some earlier debt to third party

Question 43

donee beneficiary

Answer 43

when there is no preexisting obligation but promisee clearly intends to confer a gift of enforcement on a third party (type of intended beneficiary)

Question 44

if orig parties try to modify/revoke third parties rights, ask whether:

Answer 44

third party knows about promise, AND
has changed position in reasonable reliance on promise
- if so, third party may be able to make out a claim under promissory estoppel

and ask if something has caused right to vest in third p

Question 45

3 facts that can lead a third party beneficiary’s right to vest

Answer 45

1. benef detrimentally relies on the rights
2. beneficiary manifest assent to the contract
3. beneficiary has filed a lawsuit to enforce the K

Question 46

can the promisor assert any K defense against a third party benef that he would be entitled to assert against the promisee?

Answer 46

yes

Question 47

what is assignment?

Answer 47

the transfer of rights under a K
two steps:
1. formation of K
2. transfer of benefits of K from an original counterparty to some third party

Question 48

what is delegation?

Answer 48

the transfer of duties under a K

Question 49

assignments vs. third party beneficiary

Answer 49

assignment has two steps - formation + transfer of benefits

3rd party usually at same time

Question 50

can you assign an OFFER?

Answer 50

NO! offer must be directed at specific person.

only a contracts benefit

Question 51

if a K states that rights are not assignable, you must determine whether

Answer 51

the K prohibits assignments or invalidates assignments

Question 52

what does it mean for a K to prohibit assignments?

Answer 52

assigning party has breached when he makes the assignment, but the 3rd party can still recover from the guarantor

Question 53

what does it mean for a K to invalidate assignments?

Answer 53

3rd party can’t recover because there is no power or right to assign

Question 54

a gratuitous assignment (assignment w/o consideration) is generally revocable, but can’t be revoked if (3)

Answer 54

1. obligor has already performed
2. promissory estoppel applies
3. document evidencing the assigned R or a written assignment signed by assignor was delivered to assignee

Question 55

how to adjudicate rightsholder when someone assigns same rights twice

Answer 55

1. if Rs assigned w/o consideration, generally revocable (unless 3 exceptions apply).
2. if assigned for consid, then first assignment typically irrevocable and will hold. UNLESS - second assignee does not know of initial assignment and is the first to obtain payment or a judgment (i.e. bona fide purchaser for value w/o notice)

Question 56

delegation; what does it mean, and when is it generally acceptable?

Answer 56

occurs when party to K outsources duties under the K

generally acceptable as long as K doesn’t prohibit it, and other party does not have some special int in having a specific individual perform

Question 57

is a delegatee generally liable for breach?

Answer 57

no, unless she receives consideration from the delegating party

Question 58

RETURN: * invalidates vs. prohibits assignments

Answer 58

if contract prohibits assignment, assigning party has breached when making assignment, but third party can still recover from guarantor (rights still vested in 3rd party)

invalidates / void means there is no power, rather than dont exercise it (still transfers rights)

Question 59

if you delegate a duty, does the person you delegated to have a right to collect if the obligee doesn’t pay?

Answer 59

no - your duty was outsourced, but the right was not

Question 60

*obligee vs. obligor RETURN

Question 61

novation vs. delegation

Answer 61

novation: both of initial parties agree subst party will be put in to perform. in delegation, initial obligated party will remain on the hook

Question 62

void vs. voidable K

Answer 62

void K results in entire transaction being a nullity, as if no K existed; unenforceable

voidable: operates as valid unless and until one party takes step to avoid it

Question 63

what is fraud in the inducement and its effect on K?

Answer 63

when fraudulent misrep is used to induce another to enter into K

effect: K is VOIDABLE (can be voided) by adversely fxed party if she justifiably relied on misrep in entering agreement

Question 64

fraud in the factum - definition and effects

Answer 64

when fraudulent misrep prevents party from knowing character or essential terms of transaction

effect: no K is formed and apparent K is void

Question 65

if express K terms are inconsistent with course of performance or trade usage, how is priority allocated?

Answer 65

express terms prioritized

Question 66

expectation damages formula

Answer 66

expec damages = loss in value + other loss - cost avoided - loss avoided

Question 67

SoL for breach of sales K or warranty

Answer 67

four years after cause of action accrues (which is when breach occurs, regardless of whether aggrieved party knows - can reduce to not less than one year, but can’t extend)

Question 68

if a minor makes a contract, when are they permitted to disaffirm it?

Answer 68

before they reach age of majority or w/in reasonable time after

Question 69

under the UCC, when does a seller have a right to reclaim goods when buyer paid by credit?

Answer 69

when the 1. seller discovered that the buyer received the goods while insolvent, AND
2. the seller made the demand to reclaim w/in 10 days after delivery.

10 day limit does not apply if buyer misrepresented solvency in writing w/in 3 months before delivery

Question 70

who bears the risk of loss between a seller and a buyer when it involves specific/identified goods? what recovery owed to nonbreacher?

Answer 70

generally under UCC, risk of loss remains with seller until buyer receives goods
but in special case, risk of loss passes from seller to buyer when buyer REPUDIATES or breaches, allowing seller to recover deficiency between seller’s insurance coverage and K price - within commercially reasonable time