Performance Obligation

Question 1

In non-carrier cases, who has obligation to tender delivery?

Answer 1

Seller

Question 2

What is the contract presumption in carrier cases?

Answer 2

That the contract is a shipment contract

Seller generally only needs to put the goods in the possession of a carrier and make appropriate arrangements for them to be sent to buyer

Question 3

What is the performance obligation in a destination contract?

Answer 3

Seller agrees to tender the goods at a particular destination

Question 4

F.O.B.

Answer 4

Free On Board is the delivery point

FOB sellers location = shipment contract

FOB buyer’s location = distination contract

Question 5

Risk of Loss – Carrier Cases

Answer 5

Risk of loss shifts to buyer when seller has completed delivery

Question 6

Risk of Loss – Non-Carrier Cases

Answer 6

If seller is a merchant, sellers bears the risk of loss until buyer takes possession

If seller is not a merchant, seller bears risk of loss until buyer tenders the goods (makes them available)

Question 7

Pre-Existing Duty Rule

Answer 7

Promisor cannot provide consideration where that consideration is a duty that promisor is already obligated to perform

Question 8

What is a unilateral mistake?

Answer 8

• When one party to the contract operates under a faulty assumption about material facts
• The mistaken party’s obligation to perform is not excused, UNLESS,
  
  • the other party knew or had reason to know of the party’s mistake, or
  • the mistake was based on a clerical error

Question 9

What is a mutual mistake?

Answer 9

When both parties have labored under a common faulty assumption regarding the present facts

The contract is voidable by the disadvantaged party

Question 10

Doctrine of Impossibility

Answer 10

RULE: excuses both parties from their obligations under a contract if the per- formance has been rendered impossible by events occurring after the contract was formed.

Question 11

Doctrine of impossibility requirements:

Answer 11

1. objectively impossible performance; and
2. the occurrence of the contingency must not be known to the parties at the time of contracting

Question 12

Two types of impossibility

Answer 12

1. objective impossibility
2. Subjective impossibility

Question 13

When does objective impossibility occur?

Answer 13

When the performance under the contract becomes literally impossible because of circumstances beyond the control of the parties

Question 14

When does subjective impossibility occur?

Answer 14

when the performance under the contract becomes impossible because of some failure or fault on the part of the performing party. Under those circumstances, the performance obligation is not excused and will be considered as a breach of the contract

Question 15

When does doctrine of impossiblity not apply?

Answer 15

1. Where the parties have allocated the risk of the contingency and provided remedial measures in the event of its occurrence; or
2. Where events render performance only temporarily impossible (this will typically only suspend the obligations of the parties until the impossibility ends).

Question 16

Categories of Impossibility

Answer 16

1. destruction of the subject matter of the contract;
2. death or incapacity; and
3. illegality.

Question 17

Doctrine of Impracticability

Answer 17

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

Question 18

Requirements for showing that a contract is impractiable:

Answer 18

1. the impracticability of the performance was caused by some unforeseen contingency;
2. the risk was neither assumed nor allocated by the parties; and
3. the increase in the cost of performance would be far beyond what either party anticipated.

Question 19

Frustration of Purpose Elements

Answer 19

1. the party’s principal purpose in entering the contract is frustrated;
2. there is substantial frustration; and
3. non-occurrence of the event precipitating frustration was a basic assumption of the contract.

Question 20

What is an accord?

Answer 20

a contract under which the obligee promises to accept substituted performance in satisfaction of the obligor’s existing duty.

Question 21

What is satisfaction?

Answer 21

performance of the accord—will discharge the original duty.

Question 22

What happens if accord is breached?

Answer 22

If the obligee breaches the accord, the original duty is not discharged, but the obligor can seek specific performance of the accord (in addition to damages for partial breach).

Question 23

When does Anticipatory repudiation occur?

Answer 23

when, prior to the time that performance is due under the contract, a party announces his intention not to perform, or circumstances make such an intention reasonably clear to the aggrieved party.

Question 24

How is anticipatory repudiation established?

Answer 24

1. a party’s definitive statement indicating that he will commit a breach of contract; or
2. party’s voluntary or affirmative act that renders the party unable to perform or apparently unable to perform (e.g., the sale of the contracted-for item to a third party).