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47 Cards in this Set

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  • Back
Misunderstanding or ambiguity in words of agreement
there will be no contract for ambiguity if:
1. Parties use a material term that is open to more than 1 interpretation
2. each party attaches a different meaning to the term
3. neither party knows or has reason to know of the possibility of more than 1 interpretation
Mutual mistake of material fact
there will be no contract where:
1. both parties are mistaken
2. as to a basic assumption of fact - as to what the contract is dealing with, not the value
3. that materially affects the agreed exchange
4. and not a risk that either party bears
facts that trigger parol evidence rule
writing that is intended to be the final interpretation of the contract AND earlier statements made by the parties about the contract (or statement made when contract is signed)
factor that determines when parol evidence is admissible
purpose of the extrinsic evidence
4 situtations where parol evidence is at issue
even if the agreement is partial (same rules apply except for #4)
1. Contradicting the written deal - generally inadmissible
but, mistaken integration - b/c of a clerical error is admissible (THIS IS WHERE REFORMATION IS POSSIBLE)
2. Getting out of the written deal - generally inadmissible unless evidence is of a defense to formation(ie. fraud, duress, misrepresentation)(THIS IS WHERE D IS SEEKING RESCISSION)
3. Explaining the terms in the deal - evidence admissible to explain ambiguous terms of the deal
4. Adding to the written deal - generally inadmissible unless the agreement is only partially integrated or additional terms would ordinarily be in a separate agreement
parol evidence vs. SOF (when triggered)
i. triggered parol evidence – where there is a written agreement
ii. SOF triggered by – the absence of a written agreement
SOurces of contract terms
1. express words of parties
Then (in order)
2. course of performance - parties conduct under the contract at issue
3. course of dealing - what parties have done under earlier contracts
4. custom/usage - what other parties have done in the industry under similar contracts

UCC - Default terms
UCC Default terms
1. delivery obligations of seller
2. risk of loss
3. warranties of quality
4. limitations to warranties
Delivery obligations of seller
1. default = sellers place of business unless parties know of more appropriate place
2. common carrier -
- Shipment contract - seller completes delivery obligation before delivery completed – all that is required
1. seller obligated to:
a. get goods to common carrier
b. make reasonable arrangement for delivery
c. notify the buyer
- Destination contract
seller does not complete delivery until goods arrive to where the buyer is
Is it a delivery or shipping contract? what to look for
FOB – is always followed by name of city – either the city where the seller and the goods are located – this is a shipment contract
Or some other city – this will be a destination contract
Risk of loss problems implicated where
1. goods are damaged or destroyed
2. after the contract has been formed
3. but before buyer gets goods
4. with no fault to the parties

ISSUE - who bears the loss
Who bears the risk of loss
1. Agreement - agreement of the parties expressly placing risk of loss on party will control
2. Breach - whoever breached bears the risk
3. if shipment contract with common carrier - risk of loss shifts from the seller to the buyer at the time seller completes all delivery obligations ( 3 requirements)
4. where none of the above - if seller is merchant (ie. amazon) - risk of loss is on the seller until buyer receives the goods
or - if seller is not a merchant, until seller tenders (makes goods available to buyer)

Lease - risk of loss is on lessor
Only time merchant is limited to one who is in the business of buying/selling goods of that kind
implied warranty of merchantability
triggering facts for implied warranty of fitness for a particular purpose
buyer has a particular purpose, buyer is relying on seller to select suitable goods, seller has reason to know of purpose and reliance
Requirements of performance for sale of goods:
1. perfect tender rule
If tender of goods is not perfect buyer may:
1. reject the goods
2. accept all goods and sue for damages
3. accept conforming goods and sue for damages
When buyer can not reject the goods
1. Cure
2. Installment contract
- unless acceptance is revoked
When can the seller cure:
1. sellers reasonable ground to believe improper tender would be ok (ie. reasonable grounds based on prior transactions making sellers belief reasonable)
2. when time for performance not yet expired (if can cure before delivery date)

Buyer can not make the seller cure
When can revocation of acceptance be made?
a. when something really wrong with the goods
b. excusable ignorance - reason why buyer didnt reject immediately
c. must revoke within a reasonable time after discovery of nonconformity
Time limit for which implied acceptance becomes acceptance (where can no longer send goods back without acceptance) or where can no longer revoke acceptance after discovery of nonconformity
1 month
Non-monetary remedies for nonperformance
1. Specific performance/injunction
2. Reclamation
3. Rights of BFP in entrustment (this cuts off the rights of original owner against the party the good is entrusted to)
When is reclamation available:
(right of unpaid seller to get its goods back)
1. buyer must have been insolvent at the time it received the goods
2. seller must demand return in 10 days (timely)
a.from time goods received
3. and buyer must still have the goods at time of demand
- cant sell them to another
Damages under the UCC
- seller breaches, buyer keeps the goods
damages = take fair market value if perfect minus fair market value as delivered
Damages under the UCC
- Seller breaches, seller keeps the goods
Damages = Market price at time of discovery of breach or the replacement price minus the price of the contract
Damages under the UCC
- Buyer breaches, buyer has the goods
Damages = contract price
Damages under the UCC
- buyer breaches, seller has the goods
Damages = contract price minus market price at the time and place of delivery OR contract price minus resale price (in some situations provable lost profits)
Types of damages (monetary)
Common law -
a. Expectation interest
b. Restitution
c. Reliance

UCC damages

PLUS - Incidental damages
PLUS - Consequential damages (foreseeable)
LESS - avoidable damages

All subject to certainty limitation
when there is nonperformance of a contract and something happening after the contract - what is triggered
Excuse of nonperformance
Excuses for nonperformance
1. Where other party performs improperly
- where breach is material (half the contract if numerical)
- Article 2 - non perfect tender gives buyer option to reject

2. Excuse because of non-occurrence of a condition (does not amount to breach - just excuses performance)

3. anticipatory repudiation

4. insecurity

5. Excuse by reason of later contract

6. Excuse by reason of a later unforeseen event
When a later contract excuses performance
1. Rescission
- agreement of the parties to rescind excuses performance - requires executory contract (both parties still have to perform, at least in part)

2. Accord and Satisfation - later agreement to do something different (different manner of performance)

3. Modification

4. Novation
Accord vs. Modification
Accord - where "if" and "then" are used
- performance is not excused until accord is satisfied

Modification - no "if" and "then"
- performance is excused upon making of substitute contract (modification)
What does Excuse of performance by reason of a later unforeseen event include:
impossibility, impracticability or frustration of performance
Requirements for excuse of performance due to unforeseen events
i. Event occurs after formation, but before completion of performance
ii. That was unforeseen
iii. And that makes performance impossible or commercially impracticable or frustrates purpose of performance (determine if it is still possible to perform)
When performance is excusable due to impossibility, impracticability or frustration of purpose
1. Damage or destruction of subject matter after formation

2. Death after contract (generally no excuse unless special person)

3. Subsequent law or regulation either
- making performance of contrct illegal (excuse by impossibility) or
- making purpose illegal (excuse by frustration of purpose)
Who can sue whom on a 3rd party beneficiary contract
1. beneficiary can recover from promisor - promisor has all defenses available to him against promisee
2. promisee can recover from promisor
3. only one can recover (not both)
4. donee beneficiary can not recover from promisee but creditor beneficiary can recover from promisee on pre-existing debt (debt owed prior to this contract)
Can assignee recover from obligor
can assignor recover from obligor
Can obligor continue to pay to assignor after assignment?
Yes, payment is effective until obligor knows of assignment (same result for modification contracts)
What is required to be in an offer
No ambiguous or vague terms

Price - for common law (but not UCC)

Quantity - for UCC (unless requirements/output contract)- in line with prior demands

Look to Content and Context
When is an advertisement an offer
When it is specific as to the quantity of items available

And expressly indicates who can accept

Or, it is an award
Things that will terminate an offer
Lapse of time (reasonable time, or stated time limit)

words or conduct of the offeror (unambiguous - offer to another will not suffice) communicated to the offeree

words of conduct of the offeree

Death or incapacity of either party
4 irrevocable offers
Firm offer (UCC)
Part performance of a Unilateral contract
Detrimental reliance by the offeree (where reliance is reasonably foreseeable)
Requirements of an option contract
Promise to hold offer open
Accompanied by consideration
No writing required
Requirements of a firm offer
Must be for the sale of goods
From a merchant
in a signed writing
with promise to hold open
3 month limit
How long does a firm offer last
3 months (cant exceed)
Effect of Additional terms for contracts involving the sale of goods
Creates a contract (unlike common law)- unless expressly conditional

Are new terms included:
a Only if both parties are merchants,
b. And, new term is material (no rule on this, fact specific)- If one party is not a merchant, the new term is out (becomes a proposal – like a counteroffer)
c. Or the offeror objects to the change
If a rejection is sent (mailed) before acceptance what occurs - rejection then acceptance
Whatever is received first - mailbox rule does not apply