MBE Contracts & Sales 15-21 Flashcards
dying extinguishes ___, but not ___
offers, but not established contractual liabilities
performance turns out to be more expensive than expected - will this excuse performance?
no
general definition of excuse defense to performance
- impossibility or impracticability
- death after a contract (making performance nonsensical)
- frustration of purpose (something happened to undermine entire reason for contract creation)
- initial K modified or canceled
both parties may agree to walk away from a contract, as long as ____
there is some performance remaining from each side (otherwise, no consideration for the modification)
accord and satisfaction
when parties to earlier K agree that performance will be satisfied instead by completion of different performance
if accord / new agreed-upon performance is not performed, the other side can sue for…
either the original obligation, OR the new promise
what is the difference between a modification and an accord?
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)
novation
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 at issue in anticipatory repudiation
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
if party clearly and unequivocally repudiates, nonbreaching party has two options (2):
- treat repudiation as a breach and sue immediately for damages (but cannot sue early if finished and just waiting for payment)
- ignore repudiation, demand performance, and see what happens
can a party retract a repudiation? under what circumstances?
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)
if you are uncertain whether other party has repudiated, what doctrine may you assess the hypothetical repudiation under the UCC?
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
standard way of calculating damages in Ks
expectation damages
goal of expectation damages
to put party in same economic position it would be in if the K had been performed as promised
how are expectation damages usually calculated?
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?)
three major limits on calculation of expectation damages
- must be proven with reasonable certainty (such as with consistent sales track record)
- 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)
- mitigation (breached against party must take reasonable steps to reduce damages from breach)
an anticipatory repudiation may be retracted unless… (2)
- other party has commenced a lawsuit OR
- has acted in reliance on repudiation by materially changing its position
general damages vs. consequential damages
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
if breached-against party fails to mitigate, how are damages calculated?
as if they did mitigate. defendant must bear burden of showing mitigation failure
what is lost volume profits and how does it affect damages recovery?
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
if paying party breaches in a partially completed building K, can the builder continue to work on the job?
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
formula for expectation damages recovery when performance is incomplete, b/c learned payer won’t pay
expectation damages = contract price/amt - amount already paid - amount that would be needed to finish the job
diminution in market value damages
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)
what standard is applied to the proof of expectation damages?
reasonable certainty
when calculating reliance damages, what is the goal? what q should you ask?
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?
difference between expec damages and reliance
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)
restitution damages - goal?
to give P amount equal to econ benefit that P conferred on defendant
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)?
- 50k, benefit conferred upon Dr
- 70k
- (uncertain total) value of perfect nose - nose he got; what he would have gotten vs. where he is now
goal of liquidated damages?
liquidated damages are a set / exact amount of money or formula used to calculate the amount of money owed in breach
courts are wary about awarding liquidated damages and will do so only if (3)
- the amount of liquidated damages was reasonable at the time of K, and
- actual damages from breach would be uncertain in amount and difficult to prove
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
got it
how often do we see equitable relief (in form of injunctions) in K law?
only when monetary damages are considered inadequate for some reason
when is specific performance presumptively available?
for real estate contracts; real estate parcels considered so unique that damages can’t accurately determineis
is specific performance available when land already transferred to another bona fide purchaser?
no
specific performance is presumptively not avialble for Ks of…
personal service (weird for courts to compel)
lumley doctrine
court might grant injunction prohibiting a breaching party from perofrming similar services for a competitor for a reasonable period of time/place
when is specific performance available under the UCC?
only for unique goods, like art or custom-made items
when does the right of reclamation arise? (gen + rq to assert)
arises when an unpaid seller tries to reclaim goods that were sold on credit when the buyer is insolvent
- buyer is insolvent at time of receipt of goods
- 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
- buyer still has the goods
main q contemplated in third party beneficiary contracts
whether third party can sue to enforce a K made by two other people
three roles to ID in 3rd party beneficiary Ks
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
if you see three parties to a K, what analysis should that trigger?
third party beneficiaries
two subtypes of third party beneficiary
intended - have right to sue
incidental - does not have right to sue
creditor beneficiary
intended beneficiary; when promisee strikes deal w promisor in order to repay some earlier debt to third party
donee beneficiary
when there is no preexisting obligation but promisee clearly intends to confer a gift of enforcement on a third party (type of intended beneficiary)
if orig parties try to modify/revoke third parties rights, ask whether:
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
3 facts that can lead a third party beneficiary’s right to vest
- benef detrimentally relies on the rights
- beneficiary manifest assent to the contract
- beneficiary has filed a lawsuit to enforce the K
can the promisor assert any K defense against a third party benef that he would be entitled to assert against the promisee?
yes
what is assignment?
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
what is delegation?
the transfer of duties under a K
assignments vs. third party beneficiary
assignment has two steps - formation + transfer of benefits
3rd party usually at same time
can you assign an OFFER?
NO! offer must be directed at specific person.
only a contracts benefit
if a K states that rights are not assignable, you must determine whether
the K prohibits assignments or invalidates assignments
what does it mean for a K to prohibit assignments?
assigning party has breached when he makes the assignment, but the 3rd party can still recover from the guarantor
what does it mean for a K to invalidate assignments?
3rd party can’t recover because there is no power or right to assign
a gratuitous assignment (assignment w/o consideration) is generally revocable, but can’t be revoked if (3)
- obligor has already performed
- promissory estoppel applies
- document evidencing the assigned R or a written assignment signed by assignor was delivered to assignee
how to adjudicate rightsholder when someone assigns same rights twice
- if Rs assigned w/o consideration, generally revocable (unless 3 exceptions apply).
- 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)
delegation; what does it mean, and when is it generally acceptable?
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
is a delegatee generally liable for breach?
no, unless she receives consideration from the delegating party
RETURN: * invalidates vs. prohibits assignments
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)
if you delegate a duty, does the person you delegated to have a right to collect if the obligee doesn’t pay?
no - your duty was outsourced, but the right was not
*obligee vs. obligor RETURN
novation vs. delegation
novation: both of initial parties agree subst party will be put in to perform. in delegation, initial obligated party will remain on the hook
void vs. voidable K
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
what is fraud in the inducement and its effect on K?
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
fraud in the factum - definition and effects
when fraudulent misrep prevents party from knowing character or essential terms of transaction
effect: no K is formed and apparent K is void
if express K terms are inconsistent with course of performance or trade usage, how is priority allocated?
express terms prioritized
expectation damages formula
expec damages = loss in value + other loss - cost avoided - loss avoided
SoL for breach of sales K or warranty
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)
if a minor makes a contract, when are they permitted to disaffirm it?
before they reach age of majority or w/in reasonable time after
under the UCC, when does a seller have a right to reclaim goods when buyer paid by credit?
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
who bears the risk of loss between a seller and a buyer when it involves specific/identified goods? what recovery owed to nonbreacher?
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
