Performance Obligation Flashcards
In non-carrier cases, who has obligation to tender delivery?
Seller
What is the contract presumption in carrier cases?
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
What is the performance obligation in a destination contract?
Seller agrees to tender the goods at a particular destination
F.O.B.
Free On Board is the delivery point
FOB sellers location = shipment contract
FOB buyer’s location = distination contract
Risk of Loss – Carrier Cases
Risk of loss shifts to buyer when seller has completed delivery
Risk of Loss – Non-Carrier Cases
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)
Pre-Existing Duty Rule
Promisor cannot provide consideration where that consideration is a duty that promisor is already obligated to perform
What is a unilateral mistake?
- 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
What is a mutual mistake?
When both parties have labored under a common faulty assumption regarding the present facts
The contract is voidable by the disadvantaged party
Doctrine of Impossibility
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.
Doctrine of impossibility requirements:
- objectively impossible performance; and
- the occurrence of the contingency must not be known to the parties at the time of contracting
Two types of impossibility
- objective impossibility
- Subjective impossibility
When does objective impossibility occur?
When the performance under the contract becomes literally impossible because of circumstances beyond the control of the parties
When does subjective impossibility occur?
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
When does doctrine of impossiblity not apply?
- Where the parties have allocated the risk of the contingency and provided remedial measures in the event of its occurrence; or
- Where events render performance only temporarily impossible (this will typically only suspend the obligations of the parties until the impossibility ends).
Categories of Impossibility
- destruction of the subject matter of the contract;
- death or incapacity; and
- illegality.
Doctrine of Impracticability
RULE: a promisor may be excused from performance where unforeseen difficulties have made performance prohibitively expensive or otherwise extremely burdensome
Requirements for showing that a contract is impractiable:
- the impracticability of the performance was caused by some unforeseen contingency;
- the risk was neither assumed nor allocated by the parties; and
- the increase in the cost of performance would be far beyond what either party anticipated.
Frustration of Purpose Elements
- the party’s principal purpose in entering the contract is frustrated;
- there is substantial frustration; and
- non-occurrence of the event precipitating frustration was a basic assumption of the contract.
What is an accord?
a contract under which the obligee promises to accept substituted performance in satisfaction of the obligor’s existing duty.
What is satisfaction?
performance of the accord—will discharge the original duty.
What happens if accord is breached?
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).
When does Anticipatory repudiation occur?
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.
How is anticipatory repudiation established?
- a party’s definitive statement indicating that he will commit a breach of contract; or
- 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).
