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Contracts > Performance, Modification, & Excuse > Flashcards

Performance, Modification, & Excuse Flashcards

1
Q

Buyer and Seller’s obligation under UCC

A

to transfer and deliver, and the buyer’s obligation is to accept and pay in accordance w/the k

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2
Q

Seller’s Obligation - non-carrier cases

A

Seller has an obligation to tender delivery at a reasonable hour. The goods must be kept available for the period reasonably necessary to enable the buyer to take possession.

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3
Q

Seller’s Obligation - Carrier Cases

A

Carrier Cases are contracts in which, due to the express terms or due to the circumstances, it appears that the parties intend for the goods to be moved by a common carrier.

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4
Q

Carrier Cases - Shipment K

A

absent some other agreement, there is a presumption that the k is a shipment k, under which the seller is not obligated to deliver at a named destination, and bear the concurrent risk of loss until arrival, unless he has specifically agreed to do so or the commercial understanding of the terms used by the parties contemplates such delivery.

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5
Q

Shipment K - what does the seller need to do?

A

put the goods in the possession of a carrier and make appropriate arrangements for them to be sent to the buyer, provide the buyer with any document necessary to enable him to obtain possession, and promptly notify the buyer of shipment

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6
Q

Destination K

A

Requires the seller to tender delivery of the goods at a particular destination and put and hold conforming goods at the buyer’s disposition. notice of tender is necessary.

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7
Q

Free On Board

A
  1. FOB seller’s place of shipment - seller need only, at his expense and risk, put the goods in the possession of the carrier
  2. FOB Destination - seller must, at his expense and risk, tender delivery of the goods at the destination location
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8
Q

Buyer’s Obligations

A
  1. tender payment

2. Inspect the goods

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9
Q

Buyer’s Obligation - Inspection of the Goods

A

Generally, unless otherwise agreed to, the buyer has a right to inspect the goods upon tender or delivery before making payment or acceptance.

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10
Q

Inspection of the Goods - K requires pmt before inspection

A

Then nonconformity of the goods will not excuse the buyer from making pmt unless:

  1. nonconformity appears w/o inspection
  2. or despite tender of the req’d docs, the docs are forged or materially fraudulent
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11
Q

Risk of Loss

A
  1. Shipment Ks - risk shifts to buyer when seller delivers to the carrier
  2. Destination Ks - risk shifts to buyer when seller tenders the goods at the destination where buyer can take possession
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12
Q

Effect of Breach of Risk of Loss

A
  1. If seller breaches by nonconforming tender or delivery - risk of loss remains on the seller until cure or acceptance
  2. if buyer revokes acceptance, buyer may treat the risk of loss as having been on the seller from the beginning
  3. If the buyer breaches before risk of loss passes to the buyer, the seller may treat the risk of loss as resting on the buyer for a commercially reasonable time
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13
Q

Modification at CL - Preexisting Duty Rule

A

A promisor cannot provide consideration where that considerations is a duty the promisor is already obligated to perform. It is not consideration b/c the promisor must already perform that duty on the basis of the original k.

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14
Q

Exceptions to Preexisting Duty Rule (PDR)

A
  1. Mutual Modification

2. Unforeseen Circumstances

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15
Q

Mutual Modification

A

A promise to increase compensation under an existing K is enforceable if:

  1. both parties agree to a performance that is different from the one required by the original k
  2. the difference is not a mere pretense of a newly formed bargain
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16
Q

Unforeseen Circumstances

A

Where a promise of increased compensation is given in exchange for a performance, and that performance is rendered substantially more burdensome than reasonably anticipated by the parties when they entered the k, then preexisting duty rule DNA

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17
Q

Modification and the UCC

A

An agreement modifying an existing k for the sale of goods needs no consideration, but must meet the Good Faith Test. GF is required even if there is consideration. Furthermore, a bargained-for modification is unenforceable if it is a pretext to hide bad faith change in terms

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18
Q

Duress and Midterm Modifications

A

A party who agrees to a contractual modification in commercially extortionate circumstances may also be able to raise the defense of duress. Available at CL and under the UCC

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19
Q

Excusing Performance - Mistake (generally)

A

Mistake regarding the facts that exist at the time of contracting will excuse performance only where the mistaken facts are material to that contract. This requires that the mistaken facts will significant impact the value of the transaction to one or both parties. Available at CL & UCC

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20
Q

Unilateral Mistake

A

A party operating under a faulty assumption about material facts as they exist at the time of contracting is not excused from his contractual performance unless:

  1. the other party knew or head reason to know of the mistake
  2. or the mistake was based on a clerical error (except extreme negligence in making the error or where other relied on error)
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21
Q

Mutual Mistake

A

The k will be voidable by the disadvantaged party where:

  1. the fact about which the parties were mistaken is essential
  2. both parties were mistaken; and
  3. the disadvantaged party did not bear the risk of mistake under the parties’ agreement (B bought A’s barren cow and told him he was going to try to breed it)
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22
Q

Impossibility

A

Excuses both parties from their obligations under a k if the performance has been rendered impossible by events occurring after the k was formed.

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23
Q

Impossibility - Elements

A
  1. Objectively impossible performance - circumstances beyond the control of the parties; and
  2. the occurrence of the contingency must not be known at the time of k.
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24
Q

Exceptions to Impossibility

A

Impossibility DNA when:

  1. the parties have allocated the risk of the contingency and provided remedial measures in the event of its occurrence
  2. there is temporary impossibility; obligations only suspended until impossibility ends
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25
Q

Impossibility - 3 main categories

A
  1. Destruction of the subject matter of the k (if it’s not the party’s fault)
  2. death or incapacity of a person necessary for performance (i.e., like a painter to pain a portrait dies)
  3. Illegality - if the performance becomes illegal
26
Q

Impracticability - Generally

A

a promisor may be excused from performance where unforeseen difficulties have made performance prohibitively expensive or otherwise extremely burdensome

27
Q

Impracticability - Elements

A
  1. impracticability of performance was caused by some unforeseen contingency
  2. risk was neither assumed nor allocated
  3. increase in cost of performance would be far beyond what either anticipated (this alone is not enough)
28
Q

Impracticability under the UCC

A

Where there is a severe shortage of raw materials or supplies that caused a marked increased in cost or prevents the seller from securing the supplies necessary, then impracticability is available.
think: war, embargo, local crop failure, unforeseen shutdown of supplies sources

29
Q

Frustration of Purpose

A

A party’s contractual obligations may be discharged when:

  1. the party’s principal purpose in entering the k is frustrated (materiality)
  2. there is substantial frustration; and
  3. non-occurrence of the event precipitating frustration was a basic assumption of the k
  4. no allocation of risk
30
Q

Excusing Performance by Agreement of the Parties (RAA)

A
  1. rescission
  2. accord and satisfaction
  3. anticipatory repudiation
31
Q

Rescission

A

the parties may agree to discharge each other’s remaining duties of performance under an existing k that is at least partly executory on each side. SOF will prevent enforcement of an oral rescission of transfer of property.

32
Q

Accord and Satisfaction

A

A k under which the obligee promises to accept substitute performance in satisfaction of the obligor’s existing duty. The accord suspends the obligor’s duty until the obligor has chance to make the substituted performance.

33
Q

Accord and Satisfaction - Breach

A
  1. breach of accord by obligor - obligee is no longer bound under the accord and may choose b/w enforcing original or substituted duty
  2. breach of accord by obligee - then the original duty is not discharged, but the obligor can seek specific performance of the accord
34
Q

Validity of Accord

A

Consideration is required. Consideration may be enough if substituted performance differs significantly from original performance, or its obligation was doubtful

35
Q

Anticipatory repudiation - Elements

A

AR may be established by:
1. party’s definitive statement indicating he will breach the k; or
2. party’s voluntary or affirmative act that renders the party unable to perform
The aggrieved party is given the option to immediately treat the AR as a breach of k and to be entitled to the same rights and remedies.

36
Q

Adequate Assurances of Performancee

A

If anticipatory repudiation cannot be established but there are reasonable grounds for insecurity, the insecure party may make a demand for adequate assurance of performance

37
Q

Adequate Assurance - Requirements

A

Adequate assurance of performance must be provided in the following forms:

  1. UCC requires that a demand for adequate assurances on a sale of goods k be made in writing
  2. RST requires an adequate assurance of performance to be made orally or in writing.
38
Q

Adequate Assurances - Suspension of Performance by Insecure Party

A
  1. once demand for adequate assurance is made, insecure party can suspend performance if commercially reasonable and if he has not received the agreed upon return for performance
  2. if demand was made for no response w/in a reasonable time (30 days under UCC) or does not provide an ADEQUATE assurance
  3. failure to respond w/reasonable assurance = repudiation by non-responding party
39
Q

Rights of the Aggrieved party upon repudiation

A

the aggrieved party’s rights upon this anticipatory breach:

  1. cancellation of the k and terminate all the rights and obligations under it
  2. bring an action for damages or specific performance
  3. can ignore the repudiation and continue under the k
40
Q

Retraction of Repudiation

A

a party who has made an anticipatory repudiation to the other party may retract the repudiation unless and until the other party:

  1. acts in reliance on the repudiation; or
  2. accepts the repudiation by signaling this to the breaching party; or
  3. commencing a suit for damages or specific performance
41
Q

Conditions - Generally

A

law re conditions governs two distinct issues:

  1. order of parties’ performance; and
  2. remedies where conditions have failed
42
Q

Promissory v. Pure Conditions

A
  1. Promissory Condition - where the k performance is conditioned on the occurrence of the promised performance by the other party
  2. Pure Condition - where k performance is conditioned on the occurrence of events beyond the control of either party
43
Q

Express v. Implied Conditions

A

Express - those which the parties expressly include

Implied - created under CL or the UCC to address order of performance and rights upon breach when the parties have not done so expressly

44
Q

Rules Governing the Failure of a Condition - CL: Express Condition

A

Where a party’s performance under the k is subject to an express condition, the failure of that condition will discharge the party’s obligation to perform

45
Q

Excusing Failed Express Conditions

A

Three situations in which the failure of the condition may be excused without discharging the bene’s performance obligation

  1. Waiver - then obligation becomes absolute
  2. Bad faith conduct - think of the financing example
  3. Avoiding Forfeiture - where fulfilling the condition results in great loss to one of the parties
46
Q

Rules Governing Failure of a Condition - CL: Implied Conditions

A

When the possibility of breach is not addressed by an express condition, it is still a breach; however, under the law of implied conditions, courts can treat that breach in one of two ways: either as a material breach or as substantial performance

47
Q

material breach

A

if the breach is serious enough, the court will treat the breach in the same way it would treat a breach of an express condition and the aggrieved party is free to walk away and sue for damages

48
Q

Substantial performance

A

In certain cases, if the breach is less serious, the court will treat the party’s performance as “close enough”, meaning that the party has rendered substantial performance of the condition. Aggrieved party cannot walk away. Apply to services k and construction ks

49
Q

UCC - Perfect Tender Rule

A

the terms of the k for the sale of goods are enforced exactly

50
Q

If seller fails to make perfect tender, the buyer has three courses available:

A
  1. reject the goods
  2. accept the goods
  3. reject part and accept part of the goods
51
Q

Failed condition that cannot be excused

A

there are other methods of enforcement available to mitigate the consequences for the breaching party:

  1. divisibility of the k - breaching party can argue this to get only partial breach (K must be easily apportioned)
  2. quantum meruit - breaching party may recover reasonable value of benefits conferred reduced by damages caused by k breach
52
Q

Reject the goods

A

Must reject in a reasonable time after delivery and notify seller of the rejection in a reasonable time. Buyer may then bring an action for damages for imperfect tender and the buyer must use reasonable care in holding the goods until seller is able to remove them.

53
Q

Reject the Goods - Failed rejection

A

Where rejection does not comply to the rules, it is a failed rejection and it will be deemed as an acceptance by the buyer

54
Q

Accept the Goods

A

Acceptance occurs when the buyer has had a reasonable opportunity to inspect the goods and signifies acceptance either through:

  1. stating to the seller that the goods conform to the k
  2. taking the goods despite their non-conformance
  3. failing to make an effective rejection of the goods; or
  4. taking any action that would be inconsistent with the seller’s ownership of the goods
55
Q

Accept the Goods - Buyers rights and obligations

A
  1. must pay the k price
  2. seek damages for any non-conformity so long as the seller has been seasonably notified
  3. buyer can revoke the acceptance if non-conformity substantially impairs the value of the goods and
    a. he did not initially know of the defect
    b. seller told buyer that non-conformity would be cured but no cure happened
56
Q

Reject Part and Accept Part of the Goods

A

Critical rule: buyer will then have the rights and duties of acceptance for the goods he accepted, and the rights and duties of rejection for goods rejected. Can only reject in commercial units.

57
Q

Seller’s ability to Cure - Before time of performance

A

Right to cure: the seller may substitute conforming goods for the nonconforming goods. Requirements:

  1. seller must give buyer notice of his intention to cure
  2. seller must make conforming delivery within the time specified in the k
58
Q

Seller’s ability to Cure - After deadline

A

if a seller makes a nonconforming delivery and had reasonable grounds to believe that delivery would be acceptable to the buyer, then he may substitute a conforming delivery if:

  1. seller gives buyer reasonable notice of intent to substitute
  2. seller makes conforming delivery within a reasonable time
59
Q

proof of reasonable grounds by seller

A

a seller may prove that he had reasonable grounds to believe that the buyer would accept nonconformity if he has E of:

  1. express assurances to that effect from the buyer; and
  2. trade usage, course of dealing and performance
60
Q

Imperfect Tenders in Installment Ks

A

when a particular installment occasions a non-conforming tender, there are 3 possibilities that the UCC deals with

  1. if the nonconforming tender substantially impairs the value of the whole k, there is a breach of the whole k and it can be cancelled
  2. if the nonconforming tender impairs the value only of this particular installment, the buyer can reject the installment but cannot cancel the entire k
  3. if the nonconforming tender does not even substantially impair the value of this particular installment, the buyer must simply allow the seller to cure the nonconformity within a reasonable time

Contracts (6 decks)

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