Performance:Excuse Flashcards
In the sale of GOODS (Art. 2/UCC), what is the perfect tender rule?
Perfect Tender Rule = if tender is NOT PERFECT, buyer may
1) reject some OR all goods
Consequences: can (i)return for refund; AND (ii) get damages
2) accept some OR all goods
Once there is an ACCEPTANCE of the goods (expressly or impliedly), there CANNOT be a rejection of the goods (but buyer can STILL get damages for breach)
Consequences: (i) obligation to pay seller; AND (ii) can seek damages
What is the substantial performancerule (under common law) AND how does it relate to excuse AND damages?
Substantial performance: Under the common law, performance DOESN’T have to be perfect; if there issubstantial performance then any breach is NOT material
Normally finishing late is NOT a material breach UNLESS the K or circumstances indicate that “time is of the essence”
Excuse: ONLY amaterial breach(insubstantial performance) provides an EXCUSE (non-breaching party doesn’t have to perform) IF it’s animmaterialbreach, non-breaching party MUST STILL performand then sue for damages
Damages to non-breaching party: the injured party can recover damages for ANY breach of K (whether it’s material or not)
Breaching party recovery:If material breach leads to excuse, the breaching party can recover the reasonable value any benefit conferred thru RESTITUTION
Divisible K: where pmt is to be made on PER UNIT basis, the breaching party can recover the K price for any unit for which he substantially performed
What is anticipatory repudiation AND how does it provide an excuse?
Anticipatory repudiation (AR)occurs IF a promisor, prior to the time set for performance, indicates (unequivocally)that he will NOT perform when the time comes
AR is a MATERIAL BREACH and serves as an excuse for the non-breaching party to end performance (AND sue the breaching party IMMEDIATELY)
A breaching party CAN retract a repudiation AS LONG AS the non-breaching party didn’t RELY on that AR in trying to cover
What is adequate assuranceAND how can it provide an excuse?
Adequate assurance: a party with reasonable grounds for being insecure about the OTHER party’s performance may request in WRITING adequate assurance that the other party will perform in accordance w/ the K
If the OTHER party fails to provide adequate assurances that performance will be forthcoming, the innocent party CAN treat the lack of response as a repudiation and is EXCUSED from performance
Retratction by violating party is possible IF communicated to innocent party
What are the 4 forms of later agmts that will excuse performance?
1) Recission: an agmt by BOTH sides to cancel the K, which COMPLETELY excuses performance on the original K by either side NOTE: for a recission to be effective, EACH party MUST have at least SOME performance remaining (to provide consideration)
2) Modification: An agmt to replace an existing K with a NEW ONE; modification takes place immediately
3) Accord and Satisfaction: An ACCORD is an agmt to accept performance in FUTURE satisfaction on an existing duty; SATISFACTION is performance of the accord
Modification vs. accord/satisfaction: the difference is WHEN the new agmt takes effect (now vs. in future). Accord, like a modification, req’s consideration (but it may be of lesser value that the original value SO LONG AS it’s a different obligation). Accord DOESN’T make the underlying obligation of original K go away; it just “suspends it” until a satisfaction. The existing duty is extinguished ONLY WHEN the accord is satisfied. A breach of an accord = can sue on EITHER original K OR the accord.
4) Novation: an agmt to substitute a NEW party for an EXISTING party. If NEW party doesn’t perform, CAN’T sue the old party (as they were excused)
NOTE: Compare to delegation of duties (i.e. where ONLY one of the existing parties agrees w/ a 3d party to take his place) whereREPLACED party can STILL be sued for non-performance
What is impossibility (impracticability)AND how can it provide an excuse to performance? NOTE: NY Distinction
Impossibility = a later UNFORSEEN event that makes performance IMPOSSIBLE may provide an excuse (i.e. the K is discharged)
Under Art. 2/UCC, known as impracticability
3 ways impossibility may provide excuse…
1) Destruction of something NECESSARY for performance
Common law: destruction PROVIDES an excuse for non-performance
Sale of goods (Art. 2/UCC): A SELLER(NOT the buyer) can be excused from performance ONLY IF: (i) the goods that were damaged/destroyed had been “identified in the K” (i.e. they were not fungible); AND (ii) the seller bore the ROL
2) Death/incapacity of an ESSENTIAL person (not just any person, but a “star employee”) NOTE: If the duty is delegable to a 3d party OR the incapacity is TEMPORARY, then it is NOT excused
3) Supervening GOVERNMENTAL regulation
4) Increase in Cost of Seller’s Performance
Usually NOT enough for impossibility NY DISTINCTION: there is more FLEXIBILITY for increases in costs depending on the absolute amt of increase and the % increase
What is frustration of primary purposeAND how can it provide an excuse to performance?
Frustration of primary purpose exists IF at time of K (i) BOTH parties know a specific purpose for K, which is(ii)then (unexpectedly)frustrated
This EXCUSESperformance even though performance is STILL possible
What is anexpress conditionAND how can it provide an excuse to performance?
An express condition ltds obligation created by OTHER K language (does NOT create an independent obligation)
STRICT COMPLIANCE with explicit condition is mandated, OTHERWISE performing party would have an EXCUSE
Satisfaction clauses: “satisfaction” is based on a REASONABLE person (objective), UNLESS the K involves artOR matters of personal taste where subjective std is allowed
Excusing a condition
1) Occurrence of a condition may be excused by (i) the later action; OR (ii) inaction of the person who is protected by the condition
2) Failure to cooperate: if the protectee does NOT cooperate in good faith, then the condition may be waived (e.g. good faith effort to obtain a mortgage in a house sale) 3) Waiver: by the protectee
What are a seller’s rights to cure under Article 2?
A seller who has failed to make perfect tender MAY have an option to cureIF (i) the time to perform has NOT expried (e.g. if seller tenders imperfectly EARLY, then he’d have opp to cure); OR (ii) past CONDUCT shows that buyer is flexible in taking imperfect goods (narrowly applied), in which case seller will have reasonable time to cure
Does the perfect tender rule apply to installment contracts?
Perfect Tender Rule does NOT apply to installment Ks (where K language requires or authorizes delivery in separate installments), so buyer CANNOT readily REJECT an installment. Buyer may ONLY reject an installment for substantial impairment.
What is an implied acceptance?
“Implied acceptance” = the buyer KEEPS the goods AFTER having an opportunity to inspect the goods (TIP: look for long delay b/t receipt and complaint…MAY be implied acceptance)
When may a buyer revoke acceptance of goods under Article 2?
Generally an acceptance CANNOT be revoked UNLESS the non-conformity(i) substantially impairs the value of the goods; AND (ii) the non-conformity was DIFFICULT to discover (i.e. it was a latent defect).
Must revoke w/in a reasonable time of discovery.
May a buyer pay with a check under Article 2?
A check is OK, but the seller CAN refuse it [NOTE: if check is refused, the buyer would have reasonable time to get cash if tender is at the deadline]
