Performance, modification, and excuse Flashcards
UCC - risk of loss rules
Carrier cases: ROL transfers when goods transferred to carrier (shipment contract - “FOB Seller” or contract silent) or when they arrive at destination (destination contract - “FOB buyer”)
Non-carrier cases: ROL transfers when goods made available (seller NOT merchant) or when goods physically in buyer’s possession (seller IS merchant)
Modification
Common law: preexisting duty rule. If duty already owed, promise of extra compensation not valid without more consideration
Exceptions:
- mutual modification valid if both parties agree to different performance (i.e. DUTY
changes in addition to compensation)
- unforeseen circumstances - preexisting duty law not applicable if the new compensation
is because promised performance is now substantially more burdensome than anticipated
UCC rule: modifications don’t need extra consideration as long as made in good faith
Mistake
Mistake
- unilateral mistake only excused if other party had reason to know
- bilateral mistake voidable by disadvantaged party if all three:
- mistake about material facts, by both parties, and disadvantaged party didn’t bear risk of
mistake under the contract
Faulty assumptions re: future facts (3)
Impossibility: both parties excused if performance becomes impossible after formation
- objective impossibility for literally anyone
- contingency creating impossibility was not known at time of contract
Impracticability: courts reluctant. need both:
- contingency causing impracticability was unforeseen and
- increased burden would be FAR BEYOND what either party anticipated
Under UCC: price changes/market collapse are business risks. Look for: war, embargo, crop failure, natural disaster
Frustration of purpose: when contingency dramatically reduces value of performance to receiving party. 3 part test
- principal purpose SUBSTANTIALLY frustrated
- frustration is substantial in nature
- non-occurrence of frustration was basic assumption of contract
Excuse by agreement
Recission: both parties have remaining performance due, reciprocal discharge creates consideration
Accord and satisfaction: when one party has performed and is waiting for the other
- Accord: obligee promises to accept substituted performance in satisfaction of the
obligor’s existing duty. Once obligor completes the NEW duty, the OLD duty is satisfied.
If the obligor never completes the NEW duty, the OLD duty continues!
- Need consideration! satisfied by substantially different new task or good faith dispute
about amount owed
Anticipatory repudiation
Established one of two ways:
- party’s definitive statement that it will breach
- party’s voluntary act that renders them unable to perform
If AR can’t be established, but there’s reasonable grounds for insecurity, insecure party can make demand for ADEQUATE ASSURANCE. Failure to respond with assurance within a reasonable time (30 days under UCC) or in way that assures counts as repudiation
Rights of aggrieved party: terminate contract, bring action for damages/specific performance, or ignore repudiation
Can retract an AR unless other party acts in reliance, accepts, or commences suit
Express conditions
Some contracts place a condition on the obligation to perform
Any failure of an express condition discharges the party’s obligations
Conditions can be excused:
- voluntarily, if intended for sole benefit of excusor
- when bad faith is present
Implied conditions: material breach and substantial performance
When breach is not addressed by express conditions, it’s still a breach. Court can address two ways:
Material breaches are like breaching express conditions. aggrieved party discharged from obligations
If breach is not very serious, court will treat as substantial performance, and aggrieved party not discharged
When breached conditions can’t be excused
Divisibility of the contract: can the contract be divided such that only one portion has been materially breached? If so, breaching party is only liable for the portion breached
e.g. one year cleaning contract paid monthly. counterexample: building a house paid monthly
Quantum meruit: breaching party can still recover the reasonable value of what they did manage to confer, minus damages caused by breach. this is basically an unjust enrichment counterclaim
failure of condition under the UCC
Under perfect tender rule, seller is in breach if the goods fail to conform in ANY respect
If perfect tender fails, buyer has 3 options:
REJECT (in reasonable time, w notice). can then sue
ACCEPT (after reasonable time to inspect, explicitly or implicitly signifies accepting)
- must pay contract price, but can seek damages if seller notified
- can revoke acceptance if unaware, or seller assures and then fails cure
PART ACCEPT AND PART REJECT (only in commercial units of goods)
Curing a breach by seller
Seller has right to cure breach:
BEFORE DEADLINE
must give reasonable notice, and must make conforming delivery before contract deadline
AFTER DEADLINE
need REASON TO BELIEVE delivery was acceptable
- buyer’s express assurance, trade usage, course of dealing, or course of performance
if reason exists, must give reasonable notice and deliver in reasonable time
