Performance, Modification, and Excuse Flashcards
Under the UCC, what if something happens to the goods before the buyer receives them?
If seller bears the ROL = seller provide replacement goods
If buyer bears ROL = buyer must pay the price regardless
What is a carrier case?
parties to a sale of goods K agree to use common carrier (trucking firm, train, etc.)
What is a non-carrier case?
parties to a sale of goods K do not agree to use a common carrier
In a non-carrier case, when does the ROL transfer to the buyer?
If seller isn’t a merchant = as soon as goods are made available to him (tendered)
If seller is a merchant = once goods are physically in buyer’s possession
In a carrier case, when does ROL transfer?
Shipment contract = ROL passes to buyer when goods are delivered to the carrier
Destination contract = ROL passes to buyer when goods are tendered at the destination point specified in the K
What is a shipment contract?
ROL passes to buyer when goods are delivered to the carrier.
Identified as “FOB Seller” or K is silent (default rule)
Buyer bears ROL if goods are damaged in transit
What is a destination contract?
ROL passes to buyer when goods are tendered at the destination point specified in the K
Identified as “FOB Buyer”
Seller bears the ROL if the goods are damaged in transit
What is the common law preexisting duty rule?
a promise to increase compensation for duties already owed is unenforceable b/c there’s no consideration for the modification
What are exceptions to the preexisting duty rule?
(1) mutual modification
(2) unforeseen circumstances
What is the mutual modification exception to the preexisting duty rule?
Mutual Modification of an existing K is enforceable if both parties agree to different performance from what was originally required by the original K
What is the unforeseen circumstances exception to the preexisting duty rule?
Preexisting duty rule not applicable if increased compensation is given in exchange for a promised performance that has been rendered substantially more burdensome than reasonably anticipated when K formed
How can K’s be modified under the UCC?
Agreement modifying an existing K needs no consideration to be enforceable as long as made in good faith
How can K’s be modified under the common law?
Must have consideration to modify
Under what 4 doctrines can K performance be excused due to faulty assumptions?
(1) mistake
(2) impossibility
(3) impracticability
(4) frustration of purpose
What is a unilateral mistake?
1 party’s mistake about present material fact(s) is NOT excused UNLESS the other party knew/had reason to know of the party’s mistake
What is a mutual mistake?
A mutual mistake is voidable by the disadvantaged party when all three are met:
(1) mistaken assumption relates to material facts (not just value)
(2) mistake made by both parties; and
(3) disadvantaged party didn’t bear the risk of mistake under the K
What is the impossibility doctrine?
Both parties are excused if performance has been rendered impossible by events occurring after K formed
What are the requirements for the impossibility doctrine?
(1) impossibility must be OBJECTIVE: when performance is literally impossible for anyone due to circumstances beyond the control of the parties
(2) the contingency that creates the impossibility wasn’t known to the parties at the time the K was made; it happened after and was unanticipated
In what circumstances is impossibility likely to be obejctive?
(1) when the subject matter of the K is DESTROYED
(2) when there’s a personal services K and the performing party has DIED or become INCAPACITATED
(3) when supervening law or legal developments have rendered performance LEGALLY IMPERMISSIBLE
What is the impracticability doctrine?
A promisor may be excused from performance where the following two elements are proven:
(1) contingency causing impracticability was unforeseen; and
(2) increased cost/burden of performance would be far beyond what either party anticipated
What is the frustration of purpose doctrine?
Where a contingency occurs that dramatically reduces the value of performance to the receiving party
What are the three requirements for frustration of purpose?
(1) the principal purpose in entering the K is substantially frustrated;
(2) frustration was substantial in nature; and
(3) non-occurrence of the event that caused frustration was a basic assumption of the K
When is rescission permissible?
permissible where both parties to a K have remaining performance due. Consideration is provided by each party’s discharge of the other’s duties.
What is accord and satisfaction?
The parties may make an accord, which is permissible when one party has already performed and is waiting on the other party to finish performing.
What is accord?
obligee promises to accept substituted performance in satisfaction of the obligor’s existing duty
What is the legal effect of accord and satisfaction?
Satisfies the obligor’s obligation
The accord alone doesn’t discharge the obligor’s duty; it only suspends the obligor’s duty
Where will there be sufficient consideration for accord and satisfcation?
(1) where the accord involves an agreement for partial or substituted performance, the substituted performance differs significantly from the original performance, or its obligation is doubtful
(2) where the accord involves an agreement for partial payment, there is a good-faith or bona fide doubt about the amount owed
What are the two ways anticipatory retaliation can be established?
(1) party’s definitive statement that it will breach; or
(2) party’s voluntary act that renders party unable to perform its contractual obligations
What is adequate assurance of performance?
If anticipatory repudiation can’t be established but there are reasonable grounds for insecurity, the insecure party may make a demand for adequate assurance of performance
What happens when a party fails to respond to a demand for adequate assurance?
Repudiation
What are the two ways to fail to respond to a demand for adequate assurance?
(1) not responding within a reasonable time (30 days under the UCC); or
(2) doesn’t respond in a way that provides reasonable assurances
What are the rights of an aggrieved party upon repudiation?
(1) cancel K and terminate all rights/obligations
(2) bring action for damages or specific performance
(3) ignore the repudiation and continue under the K
A party who has made an anticipatory repudiation to the other party may retract unless/until the other party:
(1) acts in reliance on repudiation;
(2) accepts repudiation by signaling this to the breaching party; or
(3) commences suit for damages/specific performance
What happens when a party fails to comply with an express condition?
discharges the party’s obligation to perform
What are the two situations where the failed express condition can be excused?
(1) waiver
(2) bad faith conduct
For an implied condition, the failure to comply is still a breach and will be treated in one of two ways:
(1) material breach
(2) substantial performance
When a condition has failed and can’t be excused, what are the two methods of enforcement?
(1) divisibility of the contract
(2) quantum meruit
When a condition has failed and can’t be excused, what is divisibility of the K?
Breaching party can argue the K is divisible and only part of the K has been materially breached.
Divisibility test = is it easily apportioned into agreed equivalents?
What is quantum meruit?
Where a party failed to fulfill an express condition or is in material breach, breaching party may still recover reasonable value of benefits conferred (but recovery is reduced by damages from breach)
What is the perfect tender rule under the UCC?
Terms of a K for sale of goods are enforced EXACTLY, every K term treated as an express condition. The seller breached is the goods fail in any way to conform to the K
What are the buyer’s 3 options if the seller fails to make perfect tender?
(1) reject the goods in a reasonable time and notify seller
(2) accept the goods
(3) accept part and reject part (only in terms of commercial until of those goods - i.e. can’t accept half a loaf of bread)
What is the seller’s right to cure BEFORE the K deadline?
If the seller makes non-conforming tender but the time for performance has not passed, then the seller may substitute conforming goods. Two requirements:
(1) seller must give reasonable notice of intent to cure; and
(2) seller must make conforming delivery by K deadline
What is the seller’s right to cure AFTER the K deadline?
(1) reasonable grounds to believe that delivery was acceptable based on the buyer’s express assurances, trade usage, course of dealing, or course of performance; and
(2) seller must give the buyer reasonable notice that they want to cure AND make conforming delivery w/in a reasonable time
Does the perfect tender rule apply to installment K’s?
Nope. The buyer must generally give the seller an opportunity to cure any defects in the installment deliveries, unless the seller “substantially impairs” the value of the entire K
