Performance of the K

Question 1

Next big question following contract formation is whether the contract has been performed. What are the four main topics here?

Answer 1

1. Parole Evidence Rule
2. Warranties
3. Conditions
4. Excuse of performance obligation

Pizza With Crawling Escargot

Question 2

What is the parole evidence rule

Answer 2

If the parties have reduced their agreement to a comprehensive writing, then earlier statements or writings relating to that transaction are not part of the agreement.

If there is a written contract, the court finds that it is the final agreement, and there are also earlier verbal or written statements about the same deal, think about the PER.

Question 3

Does the PER apply to later written or verbal statements about the deal?

Answer 3

No, that’s a modification

Question 4

Does the PER apply to earlier written documents?

Answer 4

Yes

Question 5

What is the Gateway Inquiry for PER?

Answer 5

Have the parties created an integrated writing? A full and final expression of the partie’s agreement

A court may decide that the writing is partially integrated or completely integrated.

Partial integration: there is a written and final writing, but some terms are not included.
Complete integration: the K expresses akll terms of the agreement

Question 6

How do we distinguish between an agreement that is not integrated from one that is fully or partially integrated?

Answer 6

1. One powerful piece of evidence is whether the writing contains a merger clause
2. Presumption under the UCC—a writing is, at most, only a partial integration, unless the parties would have “certainly” included the disputed term in the writing.

Question 7

Situations where the PER does not apply (3)

Answer 7

1. Defenses to contract formation
2. second-separate deals
3. Completely integrated writing but ambiguous term needs to be interpreted

Question 8

When to think SoF and when to think PER?

Answer 8

If the question does not have a signed writing think SOF.

If the question does have a signed writing, along with an earlier discussion of the deal, think PER

Question 9

What is a warranty?

Answer 9

A warranty is a promise about a term of the K that explicitly shifts risk to the party making the promise.

Question 10

What are the four warranties at issue in UCC land?

Answer 10

1. Warranty of Title
2. Express warranty
3. Implied Warranty of Merchantability
4. Implied Warranty of Fitness for a Particular Purpose

Question 11

What is warranty of title?

Answer 11

All sellers warrant that title is good and that the transfer is rightful

Question 12

What is an express warranty

Answer 12

• A promise affirming or describing the goods that is part of the basis of the bargain is an express warranty, unless it is merely the seller’s opinion.
• The use of a sample or model creates an express warranty that the goods sold will be like the sample.

Question 13

What is Implied Warranty of Merchantability? How can it be disclaimed?

Answer 13

• Warrants that the goods are going to be fit for ordinary commercial purposes
• only triggered when the seller is a merchanty dealing in the goods at issue

It can be disclaimed if by very conspicuous language. For example, it uses the merchantability language, and it must use that language if done orally, or it says “as is” or “with all its faults” if in writing etc.

Question 14

What is the implied warranty of fitness for a particular purpose and can it be disclaimed?

Answer 14

Triggered when a buyer relied on a seller’s expertise (merchant or not) to select a special type of good that will be used for a special purpose. Warrants that the goods will satisfy the special purpose.

Disclaimer must be **conspicuous **and in writing.

Question 15

SELLER’S PERFORMANCE OBLIGATIONS

The UCC requires perfect…

Answer 15

Tender, which means perfect goods and perfect delivery.

exceptions: K explicitly changes the default rule; installment contracts

Question 16

SELLER’S PERFORMANCE OBLIGATIONS

To properly reject the goods, the buyer must:

Answer 16

1. Notify the seller of the rejection within a reasonable time;
2. Notify the seller of the particular defect which is ascertainable by reasonable inspection
3. Hold the goods for a reasonable time with reasonable care so the seller can get them back

Question 17

If the goods are rightfully rejected and the buyer has paid some or all of the purchase price, then she will have a ____________ in the rejected goods

Answer 17

security interest

Question 18

If the seller fails to give reasonable instructions once the bad goods have been delivered, the buyer has three options:

Answer 18

1. Store the goods on the seller’s account;
2. reship them to the seller; OR
3. resell them for the seller’s account

Question 19

What can the buyer do when the Goods seem good at first but then an underlying defect is discovered within a reasonable time? Seller’s rights?

Answer 19

Revoke acceptance of the goods

BUT, If the seller fails to tender perfect goods and time is left on the K or the seller had reasonable grounds to believe that the buyer would accept a replacement, then the buyer must give the seller a chance to cure the deficiency.

Question 20

What is the default method of delivery under the UCC? But what does the UCC allow?

Answer 20

1. One delivery
2. installment contracts

Question 21

With an installment contract, the buyer can only reject a specific delivery that is not perfect when there is …

Answer 21

substantial impairment in the installment that cannot be cured

Question 22

What are the three forms of tender/delivery?

Answer 22

1. Tender at Seller’s Place of Business
2. Shipment K (F.O.B. Seller’s place of business)
3. Destination K (F.O.B. buyers place of business)

Question 23

If goods are to be tendered at the seller’s place of business, then…

Answer 23

the seller just needs to give the goods to the buyer when the pick it up

Question 24

Perfect delivery for a Shipment K (FOB Seller’s place of business)?

Answer 24

1. get the goods to a common carrier
2. make arrangements for delivery; and
3. notify the buyer

Question 25

Perfect delivery for a Destination K (FOB buyers place of business):

Answer 25

seller must get the goods to the buyer’s business and notify the buyer.

Question 26

Risk of loss problem: who bears the risk under a goods K when there is damage or destruction of the goods before the buyer receives them?

Answer 26

1. Have they dealt with it in the K? K controls
2. if not , has either party breached (even if unrelated to delivery damages)? they bear the risk
3. If no breach, and goods are being shipped:
   (i) shipment K: buyer bears risk
   (ii) destination K: seller bears risk
4. in all other cases, ask whether the seller is a merchant:
   (i) if so, risk stays w/ seller until the buyer receives the goods
   (ii) if not, the risk moves to the buyer when the seller tenders the goods.

Question 27

When does a seller have an insurable interest versus a buyer?

Answer 27

• Seller: as long as she has title or a security interest
• Buyer: when the goods are specifically identified (K can set manner, but also see Section 8.2-501 of the VA Code

Question 28

Buyer’s Obligations

Payment is due…

Answer 28

upon delivery, unless altered by the K

Question 29

Buyer’s Obligations

The tender of payment is a ________________ to the seller’s duty to complete its obligations

Answer 29

condition

Question 30

Buyer’s Obligations

If the seller tenders delivery and sets up to delivery with a common carrier, he may ….. until the buyer pays

Answer 30

ship under reservation–reserves possession of the goods as security

Question 31

Buyer’s Obligations

Payment can be made in ….

Answer 31

Any reasonable manner, unless the seller demands payment in legal tender and gives any extension of time to procure it.

legal tender: includes U.S. coins, currency, Federal Reserve notes, and foreign currency, but not personal checks, credit cards, or other forms of noncash payments. In other words, CASH

Question 32

Buyer’s Obligations

Payment under installment contracts?

Answer 32

payment may be made or demanded with each installment, unless the
contract states otherwise.

Question 33

Buyer’s Obligations

Buyer enjoys the right to ________ the goods prior to payment unless….

Answer 33

1. inspect, at any reasonable time and place and in any reasonable manner (may even be after arrival)
2. Unless the K requires payment on delivery (“C.O.D.”)- then no right to inspect until payment

Question 34

Buyer’s Obligations

Who pays for the inspection?

Answer 34

The buyer, unless the goods do not conform and are rejected.

Question 35

Excuses

Impracticability

Answer 35

Means something hinders the ability to perform not just increasing the cost to perform.

“The occurrence of a contingency the nonoccurrence of which was a basic assumption on which the contract was made or by compliance in good faith with any applicable foreign or domestic governmental regulation or order whether or not it later proves to be invalid.”

Question 36

Excuses

Seller’s inability to perform due to supply deficiency __________ __________ fully excuse the seller from performing.

Answer 36

1. will not
2. Seller must allocate the available supply among customers in a fair and reasonable way

Question 37

Excuses

If the agreed-upon method of delivery becomes _______________ _______________ without the fault of either party, then…

Answer 37

1. commericially impracticable
2. then any commercially reasonable method of delivery must be tendered and accepted.

Question 38

Excuses: Destruction of Identified Goods (no fault)

First ask

Answer 38

whether the risk of loss has passed to the buyer

Question 39

Excuses: Destruction of Identified Goods (no fault)

Second ask

and if so…

Answer 39

whether there has been a total loss. If so then the contract is avoided. No party need perform

Question 40

Excuses: Destruction of Identified Goods (no fault)

If the goods are damaged but not destroyed, the contract is avoided unless…

Answer 40

the buyer wishes to take the damaged goods at a discounted price (with due allowance from the K price for the deterioration or the deficiency in quantity)

If so, buyer has no claim against seller

Question 41

What is an accord and satisfaction?

Answer 41

Parties to an earlier K agree that performance will be satisfied instead by completion of a different performance.

the new performance is the accord
excusal of the initial performance is called the satisfaction

if the accord is not performed, the other side can sue either on the original obligation or the accord.

different from modification b/c option to do one or the other

Question 42

What is a Novation?

Answer 42

both of the parties to a contract agree that a substitute person will take over the performance obligations

valid novation will excuse the original promisor from performance.

THEY MUST AGREE TO RELEASE THE DELEGATOR FROM LIABILITY