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244 Cards in this Set
- Front
- Back
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Sales of Goods Are governed by |
Article 2 of the UCC |
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All contracts other than those for the sale of goods are governed by
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The Common Law
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Which law applies to a mixed contract for sale of goods and services?
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Which item (goods or services) is the primary purpose of the contract. If it is the goods, and the services are supplemental/incindental, UCC applies, and Vice versa |
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Governing Law for New York Bar Exam
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1) Article 2: Sale of Goods |
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Lease of a vehicle is governed by what law on the MBE
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The common law |
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Lease of a vehicle is governed by what law on the NY Bar
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Article 2A
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Contract: Definition
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A legally enforceable agreement
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Express Contract: Definition
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A contract created by the parties' words (oral or written)
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Implied in Fact Contract: Defintion
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Contract created by the parties conduct |
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Restitution/Quasi Contract: Definition
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Court ordered remedy protecting against unjust enrichment when contract law yields an unfair result (remedy of last resort)
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What is a party entitled to in restitution
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The reasonable vale of the benefit conferred. NOT the contract price.
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Bilateral Contract: How offer may be accepted
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in any reasonable way: Flexible standard |
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Unilateral Contract: How offer may be accepted
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Only by performance: Look for an offer which expressly states it can be accepted only by performance or a reward, contest, or prize |
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Steps of Agreement Process
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1) Was there an offer?
2) Was the offer terminated 3) Was the offer accepted? |
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Offer: Definition
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Manifestation of an intent to be bound
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Are advertisements offers?
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Generally no, UNLESS there's a quantity |
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Effect of indefiniteness
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If too indefinite to be enforced, no offer
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Is an open price term too indefinite? |
NO, court will read in a "reasonable" price EXCEPT in a contract for real property |
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Indefinteness: Requirement Contracts |
Are acceptable, despite the uncertainty of quantity, but the buyer cannot take the seller by surprise, cannot make a massive jump in demand. |
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Lapse: When occurs |
A offer lapses after a stated term, or after a reasonable time has passed |
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Revocation: When occurs |
an offer terminates when the offeror revokes the offer. |
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Revocation: General Rule |
An offer can be revoked at any time before acceptance. Can be done through direct revocation, or indirect revocation |
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Direct Revocation: Defined |
The offeror indicates directly tot he offeree that he has changed his mind -(but the words revoke, or revocation are not necessary) |
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Indirect Revocation, Defined: |
the offerer engages in conduct that indicates he's changed his mind AND the offeror is aware of the conduct |
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Excpetions to the revocability of offers: |
1) Option 2) Firm Offer 3)Foreseeable Reliance Before acceptance 4) Starting to perform in a Unilateral Contract |
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Option: Defined |
An option is a proise to keep the offer open that is paid for. |
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Options in writing without consideration: is the offer revocable? |
On MBE - YES - need consideration in NY - NO - a signed, written promise not to revoke in enforceable, even without payment |
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Firm Offer: Defined |
Article 2: In a sale of goods if a MERCHANT promises in a SIGNED WRITING to keep an offer open, the offer is irrevocable. Both merchant and signed are broadly defined in Article 2. |
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time limit of irrevocability of firm offers: |
3 Months |
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Foreseeable reliance before acceptance: when available |
very rare, usually in the contractor, subcontractor setting. the reliance must have been foreseeable. (Custom made frame being made for painting I have offered to sell you, is not foreseeable reliance) |
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Starting to Perform in a unliateral contract: When available |
On the MBE - when a party begins performance of a unilateral contract (i.e. begins the action which constitutes acceptance, the offer can no longer be revoked. in NY - The offer can be revoked until performance is COMPLETED |
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Starting to perform in a unilateral contract: when not available |
When all that is doen is "mere preparation" (buying the pain, but not starting the painting) also, NY |
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When revocation effective: |
When it is recieved. an offer cannot be revoked after acceptance. |
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Rejection: effect |
An offer terminates when the offeree rejects it (by innapropriate response.) |
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Effect of a counteroffer: |
A counter offer acts as a rejection: Mere bargaining does not. Distinguish: I will only pay XYZ, from will you take XYZ |
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Conditional Acceptance |
Is not acceptance. |
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Acceptance varying offer: Common Law Rule |
Acceptance must exactly match the offer (Mirror Image Rule). Adding or changing a term operates as a rejection and a counteroffer |
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Acceptance varying offer: Article 2 |
Acceptance does not have to mirror the offer. Adding or changing a term does NOT prevent acceptance under article 2. |
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When is an offeree's additional or changed term in the acceptance intergrated into teh contract? |
When 1) both parties are merchants, 2) the change is not material, and 3) there is no objection within a reasonable time |
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Material Change preventing incorporation: Defined |
One likely to cause hardship or surprise to the offeror. If the term is standard in the industry, it is NOT material. |
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Effect of Death on an offer |
Death of either party before acceptance terminates a revocable offer |
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How to tell if the offer has been accepted: |
language of the offer controls: unless acceptance complies with the method prescribed by the offer, it is not valid |
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Acceptance: Starting Performance in a Bilateral Contract: |
Starting performance in a bilateral contract is acceptance, and also carries an implies promise to finish the job |
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Acceptance: Starting performance in a Unilateral Contract: |
Starting performance is NOT acceptance (so no obligation to finish the job) COMPLETING perforance is acceptance |
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Acceptance: Improper Performance at common law |
Equals both acceptance and breach. |
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Acceptance: Improper Performance under Article 2 |
Equals both acceptance and breach unless the seller is sending the goods as an accomodation |
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Accommodation: |
A shipment to a buyer of non-conforming goods accompanied by a note that the goods are offered as an accomodation - Does not constitute acceptance |
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Effect of offeree silence |
Silence is NOT acceptance |
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Timing of Acceptance: general rule |
Acceptance is effective when mailed. This is true even if lost in the mail - the risk of loss lies with the offeror |
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Timing of Acceptance: exceptions to the mailbox rule |
1) When the offer states otherwise 2) When there was an irrevocable offer 3) When the rejection was sent first |
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When the offer states otherwise |
If the offer states a time by when the acceptance must be recieved, the acceptance must be actually received by the offeror on that date, not just sent |
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Timing of Acceptance: Irrevocable offer exception |
The mailbox rule does NOT apply to irrevocable offers, for irrevocable offers, the acceptance is only effective upon reciept |
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Timing of Acceptance: when the rejection sent first. |
It is a race - whichever arrives first will be effective. |
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Defenses against formation |
1) Lack of capacity 2) Economic Duress 3) Misrepresentation/Non-Disclosure of a material fact 4) Ambiguity/Misunderstanding 5) Mistake about a Material Fact 6) No consideration 7) Public Policy 8) Unconscionability |
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Lack of Capacity: Categories |
1) Minors (under 18) 2) Intoxicated 3) Mentally incompetent |
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Lack of capacity: general rule: |
An incapacitated defendant may disaffirm the contract. But can enforce it against teh non-incapacitated party. |
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Lack of Capacity: implied affirmation |
An incapacitated defendant who retains the benefit after (re)gaining capacity will lose the ability to disaffirm it after a reasonable time |
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Lack of Capacity: exception: |
An incapacited party may still be held liable for necessaires (food, shelter, clothing, medical care) but only for the reasonable value of the goods and services, not the contract price. |
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Economic Duress |
Rarely a succesulf defense against formation. can be foudn when 1) there is a threat to break an existing contract 2) the only reason for agreement was to get the already agreed upon deal, and 3) there is no reasonable alternative available |
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Misrepresentation/Non-Disclosure of a material fact |
A contract is not binding if it is premised upon a misrepresentation or nondisclosure, even an honest one, as long as it is material. |
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Ambiguity/Misunderstaning as a defense to contract formation: |
(the Peerless case) it is not defense unless one party knew or had reason to know of the ambiguity - then the knowledgable party bears responsibility |
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Mistake about a Material Fact as a Defense to Contract Formation: Mutual Mistake |
A mutual mistake as to a something which is inherent to the agreement will render the contract unenforceable (Painting destroyed by fire unbeknowst to either party, Painting by another artist than believed) NOTE: Mistake as to value is insufficient - not generally considered material
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Mistake about a material fact as a defense to contract formation: unilateral mistake |
One parties mistake is not a fatal flaw UNLESS, the other party knew or had reason to know of the mistake |
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No Consideration: defined |
Consideration= a bargained for legal detriment/benefit. A person can bargain for a promise, performance, or forbearance. Without consideration there is no contract |
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Past Consideration: Validity for contract formation |
On the MBE, past consideration is no consideration = no contract. Can't bargain for something already done In NY: Past consideration IS consideration IF expressly stated in a signed writing, and can be proven |
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Adequacy of consideration: |
Irrelevant if there is a bargain - the court will nto inquire into the adequacy of the bargain |
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Illusory Promise as consideration |
Illusory Promises are unenforceable. Promise to buy as many widgets "as I want" is an illusory promise - could not wany any, so not really promising anything |
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Requirement of Consideration: Contract Modification - Common Law |
New Consideration is required to modify a contract. Performing a pre-existing duty is insufficient to be consideration for the modificaiton. ("Pre-existing duty rule") |
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Effect of writing on prmise to pay additional consideration for a pre-existing duty |
on MBE - no consideration if there is no new consdieration by the other party In NY - no need for consideration for the modification if the modification is in a signed writing |
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Pre-existing duty rule: third parties does not apply to third parties who make the offer of extra consideration b/c there was no duty originally owed to them. |
third parties does not apply to third parties who make the offer of extra consideration b/c there was no duty originally owed to them. |
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Requirement of Consideration: Contract Modification - Article 2 |
Consideration is NOT required to modify a contract, but you must show good faith. |
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Adequacy of consideration: partial payment of a debt |
If a debt is due and undisputed, the creditors offer to accept less than owed is non-binding b/c there was no consideration for the agreement. |
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Agreement for partial payment of a debt: effect of writing on consideration requirement |
On the MBE it is not good, still need consderation even with a writing. IN NY - there is no need for consideration if the promise to modify is in a signed writing. |
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Partial Payment of a debt: effect of early payment of payment of a disputed amount |
This is adequate consideration - either by paying before you are required, or by paying an amount to whcih there is a dispute. |
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Adequacy of Consideration: Time barred debts |
A written promise to pay a debt, collection of which is barred by the statute of limitations, is enforceable even absent consideration. On both the MBE and NYBE, the signed writing is a substitution for consideration. |
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Adequacy of Consideration: Promissor Estoppel |
Promissor Estoppel will excuse a lack of consideration - acts as a substitute. Foreseeable reliance by the promisee may make a promise enforceable even without consideration. |
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Public Policy Defense |
A defense to the formation of the contract on the grounds that it is contrary to public policy. Typically tested in the covenant not to compete context.
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Covenant not to Compete: Validity |
A court will invalidate a covenant not to compete that operates as a restraint of trade. |
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test for analyzing a convenant not to compete |
1) The scope fo the covenant (must be reasonable in duration and geography) AND 2) The Need for the conevant: Consider the uniqueness of the service (more likely to enforce against a chef than a busboy |
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Eculpatory Clauses: Validity |
An exculpatory clause may eliminate negligence for negligence but NOT gross negligence, or intentional torts. |
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Defense of Unconscionability: availablity |
Generally NOT a vaild defense against enforcement.
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Types of Unconscionability |
Substantive: The terms are unfair Procedural: the agreement process was unfair |
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The Statute of Frauds |
Statutory requirement for certain contracts to be in writing to be enforceable. Most oral contracts are enforceable - only certain kinds need ot be in writing to be enforced |
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Contracts that fall within the statute of Frauds |
1) Transfer of an interest in real property 2) Performace that CANNOT be completed within a year 3) Sale of goods for $500 or more (Article 2) 4) Lease of Goods for $1,000.00 or more (Article 2A) (NY Only) 5) Suretyships 6) Contract Modifications 7) NY: Assignment of an insurance policy 8) Promise to pay a discharged debt 9) Agreement to pay a finders fee or broker's commission except to an attorney, auctioneer or licensed real estate agent |
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Transfer of an interst in real property |
Includes sale, lease, easement, mortgage. An AGENT's authority concerning real property MUST be in writing under the "equal dignities rule |
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The Equal Dignities Rule: |
An AGENT's authority concerning real property MUST be in writing |
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Performance that cannot be completed within a year: Rule |
Only applies when there is NO WAY performance could be completed within a year. Performance that happens to take more than a year need not be in writing - if full performance is theoretically possible within a year, then no writing is required |
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Lifetime Contracts - Statute of Frauds |
On the MBE - no writing required - employee could die tommorow IN NY - a writing is required for lifetime contracts |
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When the clock starts for measuring a year. |
When the agreement is reached - not when performance begins. an employment contract for a year starting in a week cannot be done within a year - writing required. |
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Sale of Goods for 500 dollars or more |
applies to Any contract for the sale of goods for more than 499.99 |
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Lease of goods for $1,000 or more (Article 2A) |
Make sure to look at value over the full time period - 300 a month for a year = 3600 so is within statute |
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Suretyship: Defintion |
A promise to answer for the debt of another: Must be for the debt of another, not just a promise to pay instead fo the other. A agrees to pay if B won't, not A promises to pay for a service rendered to B. |
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Comtract Modifications in writing: Rule |
A Modificaiton to a contract must in writing ONLY if the contract as modified (not the original contract) is within the statute of frauds |
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Effect of a prohibition on Oral modificaiton in a contract: Article 2 |
Modificaitons have to be in writing: Article 2 lets parties create their own private statute of frauds |
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Effect of a prohibtion on Oral modifcaiton in a contract: Common Law |
Clauses prohibiting oral modification are not enforceable under the common law - you can always modify a contract orally under common law, even if you have agreed not to. |
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What Constitutes a "Satisfactory Writing" for the purspose of the Statute of Frauds: Sale of Goods (Article 2) |
Must contain a quantity term, and be signed by the party to be charged with breach of the contract |
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What Constitutes a "Satisfactory Writing" for the purpose of the Statute of Frauds: Article 2A |
The writing must state it's a lease, include the quantity, duration and rental payments and be signed by the defendant. |
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What Constitutes a "Satisfactory Writing" for the purspose of the Statute of Frauds: Contracts not within Article 2 or 2A |
The writing must contain all material terms (who, what) an be signed by the defendant. If only one party signs, it can only beenofrced against that party. |
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Exceptions to the Statute of Frauds: Real Property |
1) Lease of one year or less 2) Part performance |
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Requirement for real property part performance exception to statute of frauds: |
2 out of three things must exist: 1) buyer is in possession 2) buyer made some payment 3) buyer made improvements |
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Exceptions to the Statute of Frauds: One Year Full Performance |
If a party udnertakes full performance of a contract lasting more than a year, it is taken out of the statute of frauds an may be enforceable. e.g. party works for two years of two year employement contract - Statute of Frauds no longer a defense to its enforcement Part performance does NOT satisfy the exception - can recover in restitution rather than for breach |
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Exceptions to the Statute of Frauds: Sale of Goods for $500.00 or more |
1) Goods accepted or paid for by the buyer 2) Custom Made Goods 3) Judicial Admission 4) Merchants Confirmatory Memo |
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Goods accepted or paid for by buyer exception: |
Applies ONLY to the goods accepted or paid for, not the whole contract - unless the goods can;t be apportioned (down payment on a boat will take whole contract for boat out of Statute of frauds |
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Custum Made goods exception: |
Two requirements: the seller must have made a substantial start, and the goods must not be suitable for sale to others |
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Judicial admission exception: |
If a charged party admits to the existence of the contract in testimony, deposition, etc, it will take contract out of Statute of Frauds |
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Merchants Confirmatory Memo Exception: Rule |
One party can use its won signed writing to satisfy the statute of frauds against another party if: 1) both parties are merchants 2) the writing claims agreement/has quantity AND 3) There is now written objection within 10 days |
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Main Purpose Exception: Suretyship contracts - Rule |
No need for a writing when the main purpose of the suretyship is to secure a benefit to the guarantor. MBE ONLY - NY does nto recognize the exception Example: Buy paint on credit to paint A's house, and A guarantees payment to paint store - main purpose is to obtain a benefit for herself |
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Parol Evidence Rule: |
Evidence of a prior or contemporaneous agreement between the parties, either oral or written, that contradicts a later writing will be excluded. |
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Exceptions to the Parol Evidence Rule: |
1) To correct a clerical error (typo) 2) To establish a defense against formation 3) to interpret a vague or ambiguous term 4) To add to a partially integrated writing. |
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Partially Integrated Writing: Definition |
A final statement of the terms included, but not a complete statement of all the terms agreed to. |
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Effect of Merger Clause |
Writing is complete and cannot be supplemented - purports to merge in all prior agreements |
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Paril Evidence Rule: Effect on Subsequent developments |
The Parol evidence rule has no relevance to what happens after an agreement is reduced to writing. |
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Conduct of the Parties: Rule |
The conduct of the parties can explain terms or fill in the gaps in the contract. |
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Sources of Conduct to interpret contract |
1) Course of Performance 2) Course of Dealing 3) Usage of Trade |
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Course of performance: definition |
What the parties did under this contract - best evidence of what the parties intended |
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Course of Dealing: definition |
What the parties did under prior contracts with each other |
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Usage of Trade: Definition |
What others in the same trade do in similar contracts |
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Contract Terms: Sellers Warrant of Quality in a sale of goods (Article 2) - express warranty |
Seller is liable for breach of an express warranty |
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Express warranty: Defined |
A statement of fact, promise, description of the goods, and the use of a sample = express warranty. An opinion is NOT an express warranty. it must be the basis of the bargain |
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Basis of the bargain: Defined |
if the buyer could have relied on the express warranty, it was the basis of the bargain |
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Contract Terms: Sellers Warrant of Quality in a sale of goods (Article 2) - Implied Warranties |
1) Implied Warranty of Merchantability 2) Implied Warranty of Fitness for a Particular Purpose |
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Implied Warranty of Merchantability: Definition & elements |
1) The goods are fit for their ordinary purpose 2) The seller must be a merchant who deals in goods fo the kind (a dealer) who has specialized knowledge about the particular goods involved in the transaction (Foot locker selling shoes v. foot locker selling delivery van) |
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Implied Warranty of Fitness for a particular purpose: Defintion & elements |
1) the goods are fit for the buyers particular purpose 2) the seller knows the buyer has a special use for the goods and is relying on the seller to pick out goods suitable for that use - DOES NOT HAVE TO BE MERCHANT |
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Lessor's Warranty in a Lease of Goods (Article 2A): Rule |
Same warranties apply to leased goods as to sales of goods under Article 2 |
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Exception to Warranties of Leased Goods |
The Finance Lease: A bank which leases a good it has bought does not make an implied warranty of merchantability - only the original seller does. |
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Limitations on Warranty liability: Disclaimers |
A Seller can disclaim implied, but not express warranties |
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Magic Phrases disclaiming implied warranties |
1) As is 2) with all faults |
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What is necessary to disclaim implied warranties absent a magic phrase: |
the disclaimer must be conspicuous, and must use the word merchantability if the seller wants to disclaim that warranty. |
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Limitation of Buyers Remedies: General Rule |
A Seller can limit a buyers remedies for breach of any warranty, express or implied, if the limitation is not unconscionable. |
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Limitation of Buyers Remedies for Personal Injury: Rule |
Limiting a buyers remedies for personal injury in the case of consumer goods is presumed unconscionable. |
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Effect of failure of a limtied remedy: |
If a limited remedy "fails of its essential purpose" the remedy provisions of article 2 apply. |
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Risk of Loss in Sales of Goods: Article 2 - How to determine |
Look for the following four things, in this order 1) The agreement between the parties 2) Breach - who is the breaching party - they will bear the ROL, even if the loss is unrelated to teh breach 3) Delivery by common carrier 4) Non-Carrier cases |
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Who bears the Risk of Loss: Deliver by Common Carrier |
The Risk of Loss shifts to the buyer when the seller completes its delivery obligations |
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Shipment Contract: Obligaiton of Seller |
Seller must get the goods to a common carrier, make delivery arrangements, and notify the buyer. Risk of Loss then passes to Buyer (Shipment contracts presumed unless K states otherwise) |
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Destination Contract: Obligation of Seller |
Seller must get the goods to a specified destination before risk of loss passes to buyer |
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FOB (free on board) contract |
Risk of loss passes at the named location. If the named location is where the seller is located it is a shipment contract. if it is anywhere else, it is a destination contract. |
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Non-carrier contracts: defined |
A contract where the buyer will pick up or the seller will deliver |
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Who bears the risk of loss in a non carrier case: Merchant Seller |
Seller bears the ROL untile the buyer takes possession |
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Who bears the risk of loss in a non carrier case: NON-Merchant Seller |
Risk of loss passes to the buyer once the seller "tenders" the goods (makes them available to the buyer |
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Risk of Loss in a Lease of Goods (Article 2A): General Rule |
Risk of Loss is on the Lessor |
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Exception to Lessor Risk of loss in a Lease of Goods |
Finance leases - if gods are leased from a bank, the lessee bears the Risk of Loss |
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The Perfect Tender Rule (Article 2) |
If tender is not perfect, the buyer may reject the goods. Doesn't have to. |
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Perfect Tender: Option to Cure |
A seller who fails to make perfect tender may have an option to cure. Usually depends on whether the time for performance has expired.
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Option to Cure: when available |
1) When time for performance has not expired 2) when time for performance has expired IF the prior dealings of the parties show that the buyer has accepted non-conforming goods in the past. |
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Installment Contract: Definition |
A contract which requires or authorizes delivery in separate installments in the contract |
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Installment Contracts: Applicability of Perfect Tender Rule |
The Perfect Tender Rule does not apply to installment contracts - so it is harder to reject goods. Buyer may reject only for substantial impairment. (can;t reject either installment or contract based on imperfect tender unless there is a substantial impairment to performence) |
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Buyers Acceptance of Goods: Consequences |
A buyer who accepts goods cannot then reject them, BUT they may still be able to recover for damages. |
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Implied Acceptance of goods: |
Occurs when the buyer keeps the goods after having an opportunity to inspect them, regardless of whether or not buyer actually did so. |
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Buyer's revocation of acceptance of goods: general rule |
A buyer cannot revoke acceptance of goods. UNLESS the non-conformity susbtanitally impairs the value of the goods, AND was difficult to discover (a latent defect) May then revoke acceptance a reaosnable time after discovery. |
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Result of Rejection/Revocation fo Acceptance |
1) Return: Buyer can return the goods at the sellers expense 2) Refund: Buyer can get back any money the buyer has paid for the goods 3) Buyer can get damages from teh seller for breach of contract |
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Buyers Obligaiton to Pay |
Can pay by check, but seller is entitled to refuse it and demand cash. If so, buyer has a reasonable time to get cash even if deadline has passed. |
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Common Law Contracts: Performance Rule |
Performance does NOT have to be perfect. Just need Substantial Performance (party can commit a MATERIAL Breach |
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Possible excuses from performance based on later events: |
1) Other parties breach 2) Anticipatory Repudiation 3) Failure to Give Adequate Assurance (article 2) 4) A Later Agreement 5) Impossibility 6) Frustration of Buyers Primary Purpose 7) Failure of an Express Condition |
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Other Parties Breach: Excusal Rule |
May provide an excuse for non-performance - depends on the nature fo the contract |
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Effect Other Parties Breach in a Article 2 Sale of Goods Contract |
If sellers perfromance is not perfect in every way (perfect tender) Buyer has three options 1) reject entire shipment 2) Accept entire shipment 3) Accept some of goods, reject reaminder Buyer can get damages for breach no matter which option chosen |
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Effect of other parties breach in Common Law Contracts |
1) Injured party can revocer damages for any breach of contract, whether material or not 2) Can be excused if the breach was material If there is a material breach of a divisible contract (payment is to be made in a per unit basis, then breaching party can still recieve full contract price for unit completed, but not full contract price. |
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Anticipatory Repudiation: Defintion |
A statement by one paty before the time that performance is due they they will not perform under the contract (I'm not gonna pay you)
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Anticipatory Repudiation: Remedy |
Non-repudiating party can stop performaance and sue for damages, as long as they were ready, willing and able to perform. Same effect as a material breach BUT Can call back a repudiation (ok, I'll pay you after all) - so long as the other party has not acted in reliance on the repudiaiton. |
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Failure to Give adequate Assurance: Definition |
A party with reasonable groudns for being insecure about the other party's performance may request in writing adequate assurance that the other party will perform in accordance iwht the contract. If the party fails to do so, it is treated as a Anticipatory repudiation |
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In the event of a failure to give adequate assurance, may a party request different performance terms (cash instead of credit)? |
NO - cannot use the rule to reqrite the contract - can only demand assurance - not a specific type. |
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Later Agreements Affecting Performance: |
1) Recission 2) Modificaitons 3) Accord and Satisfaction 4) Novation |
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Recission: defintion |
An agreement to cancel the contract - if there is an effective recission, neither party can sue for breach |
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Requirement for recission to be effective: |
Each party must have some performance remaining. |
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Modificaiton: Defintion |
An agreement to replace an existing contract with a new one. Modifications take effect immediately. pre-existing duty cannot be sued upon after the new agreement is made - only the modified contract
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Accord and Satisfaction: definition |
An accord is an agreemetn to accept performance in future satisfaction of an existing duty. Satisfaction is performance of he accord. The existing duty is not extinguished until the accord is satsified. Can sue on either the orginal duty or the accord if the accord is not accomplished |
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How to distinguish between accord and modification |
When does the change take effect: now or later? |
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Novation: Definition: |
An agreement to substitute a new party for an existing one. |
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Effect of novation: |
Original party who is out can no longer be sued. All parties agreed he was out |
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Difference between Novation and Delegation of duties |
Consent of the htird party - if the party not gettin gout or coming in consents, it is a novation, other wise it is a delegation and the person seeking to get out remains liable. |
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Impossibility: Definition |
A Later unforeseen event that makes performance impossible may provide SELLER with an excuse. (Called Impracticability under Article 2. |
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Things potentially causing impossibility/impracticability |
1) Destruction of something necessary for performance 2) Death/incapacity of an Essential person 3) Supervening governmental regulation 4) Increase int eh cost of seller's performance
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Impossibility: Destruction of something necessary for performance: Common Law Rule: |
Destruction provides an excuse for non-performance (concert hall burns down) |
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Impossiblity: Destruction of something necessary for performance: Article 2 |
Follows common law rule, BUT 1) a seller who bore the ROL at the time the goods were damaged or destroyed is excused by impracticability 2) Selller is excused ONLY if the goods that were damaged or destroyed were identified to the contract |
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Impossibility: Death/Incapacity of an Essential Person: Rule |
If a person essential to the contract becomes incapacitated or dies, they/their estate are excused from performance. NOTE - only a person with special talent or unique skill is excused by death or incapacity (Van gogh painting a portrait, but NOT van gogh painting a barn.) ANYONE CAN PAY MONEY |
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Impossibility: Supervening Governmental Regulation - Rule |
If the government passes a law preventing performance of the contract the party is excused - doesn't have to break the law or be in breach, |
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Impossibilty: Increase in the cost of seller's performance - MBE rule |
An increase in cost almost never excuses a seller (this is the risk of entering a fixed price K) |
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Impossibilty: Increase in the cost of seller's performance - NY rule |
A seller MAY be excused by an increase in cost - look at 1) dollar amount increase, and 2) percentage increase |
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Frustration of Buyer's Primary Purpose: Rule |
if the buyer's primary purpose for entering into the contract is furstrated/become impossible, he may be excused, IF the seller knew of the buyers purpose. |
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Excuse b/c of Failure of an Express Condition: Definition |
Limits obligations created by other contract language; does not create an indepedent obligaiton - look for words like, if, as long as, when, provided that, on condition that, unless
Strict Compliance is required |
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Satisfaction Clauses - Validuty: Rule |
Satisfaction is measured by a reasonable person standard UNLESS the contract deals with art or matters of personal taste |
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Types of Express Conditions |
Precedent and Subsequent |
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Condition Precedent: Definition |
An event that must occur before performance is due |
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Condition Subsequent: |
An even that cuts off an existing duty |
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Excusing a condition: general rule |
Occurence of a condition may be excused byt he later action or inaction of the person who is protected by the condition. Ask 1) Who does the condtion protect? 2) did he do anything to lose the protection? |
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Excusing a conditon: Failure to cooperate |
if you fail to pursue the satisfaction of a condition designed to protect you, you lose its protection. |
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Excusing a conditon: Waiver |
May forfeit the protection of a condition by waiver. A waiver can be retracted even if given for a specific act or time, provided the other party has not relied upon the waiver |
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Remedies available for Breach of K |
1) Equitable Remedies 2) Monetary Remedies |
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Equitable remedies: |
1) Specific Performance 2) Unpaid Sellers right to reclaim goods |
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Specific Performance: When available |
Only when monetary damages are inadequate to compensate the injured party. Availability depends on the nature of the contract |
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Specific Performance: Real Property |
Usual remedy b/c real property always considered unique (even identical subdivisions)
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Specific Performance: Sale of goods |
Available only if the goods are unique or there are "proper other circumstances" e.g. an inability to buy substitute goods in the market Generally applies to Anitques, Art & Custom Made goods |
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Specific Performance: Service Contracts |
NOT available (violative of constitutional prohibition on indentured servitude) but injunctive relief may be ( can't force you to work for this guy, but may be able to prevent you from working for that guy) |
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Unpaid Seller's right to reclaim goods: general rule |
Not available under Article 2 (maybe under federal bankruptcy law |
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Exception to prohibition on sellers reclaiming goods |
If 1) a buyer is insolvent when it recieved the goods AND 2) seller makes a demand within ten days after the buyer recieved them OR Seller can reclaim goods at any time if 1) the buyer misrepresented its solvency to seller 2) in writing 3) within three months before delivery |
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Effect of sale of goods which seller has a right to reclaim to third party |
Seller has no right to reclaim the goods from an innocent third party. |
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Monetary Remedies (Damages) |
1) Punitive Damages - Not available 2) Liquidated Damages - May be available 3) Expectation Damages - May be available 4) Incidental Damages - May be available 5) Consequential Damages - May be available 6) Avoidable Damages - Not available |
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Liquidated Damages: When upheld |
Upheld if damages were 1) difficult to estimate at the time fo the contract AND 2) are a reasonable forecast of probable damages but CANNOT operate as a penalty. |
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Reasonableness of liquidated clause: Common law |
had to be reasonable at the time of contract formation |
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Reasonableness of liquidated clause: Article 2 |
Can be enforced if reasonableness EITHER at formation OR at the time of the breach |
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Effect of invalifidty of liquidated damegs clause |
No liquidated damages, but still entitled to actual damages. |
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Expectation Damages: Definition |
The compensation necessary to put an injured party in as good a position as full performance - the general rule. (benefit of the bargain) |
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Buyers Expectation at Common Law |
Difference between what expected to pay under contract, and what had to pay as a result of breach |
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Sellers expectation at Common Law |
Cost of performance thus far plus the profit expected to be made. |
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Buyers Expectation Damages options under Article 2 |
1) Cover Damages 2) Market Damages 3) Loss in Value |
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Cover Damages: Defined |
The cover price (cost of acquiring replacement goods) - the contract price (cover price can exceed market price, privided it is in good faith |
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Market Damages: Defined |
Market price - contract price: applies if buyer 1) doesn't cover, or 2) doesn't cover in good faith.
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Loss in Value: defined |
Value as promised - Value delivered: applies if the buyer keeps non conforming goods |
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Seller's expectation damages options under Article 2 |
1) Resale damages 2) Market Damages 3) Lost Profit 4) Contract Price |
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Resale Damages: Defined |
Contract Price - resale price: applies if the seller resells in good faith |
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Market Damages: Defined |
Contract Price - market price: applies if seller does NOT resell, or does not resell in good faith |
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Lost Profit Damages: Defined |
Damages equals the amoutn of profit the seller lost my not making multiple sales: Applies if the seller is a lost volume dealer - look for an inventory where the seller could have made two sales if the party hadn't breached |
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Contract Price: Defined/Availability |
Seller is entitled to the full K price if the seller can't resell the goods. Analagous to imposing specific performance on the buyer. |
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Incidental Damages: Defined |
The cost to the injured buyer/seller of trasnporting/caring for goods after a breach and arranging a substitute transaction |
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Consequential Damages: Defined |
Damages that were special to this plaintiff that were reasonably foreseeable to the breaching party at the time of the contract Consequential Damages are NEVER available to a seller under Article 2 Miller case - didn;t have any way of knowing they did not have another shaft - it's not about causation - abotu foreseeability |
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Avoidable Damages/Duty to mitigate: Common Law Rule |
An innocent party has the duty to undertake reasonable efforts to mitigate her losses arising out of breach: usually arises in employment contracts - have to try and find a job - even if you don;t if the breaching party shows that one was available, your recovery is limited by what you could have made |
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Entrustment (Article 2):Rule |
An owner who enturst goods to a merchant who deals in goods of the kind (i.e. a dealer) has no rights against a bona fide purchaser - can only sue the merchant for conversion, not get the property back |
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Third Party Beneficiary: When occurs |
Two people enter into a contract intending to benefits a third party |
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Third Party Beneficiary: Definition |
A person who is not party to a contract but has rights because the contract was intended to benefit her |
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Promisor: definition |
The party who promises to perform for the TPB |
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Promisee: Definition |
The party who secures the promise |
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Intended Beneficiary: Definition |
The person to who performance is to be given under the contract - contrast with an incidental beneficiary who just happens to benefit Intended beneficiaries have legal rights, incidental ones do not |
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Donee Beneficiary: Definition |
A person who is getting the performance as a git. |
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Creditor Beneficiary: Definition |
A person who is getting the performance to repay a debt. |
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Recission and Modification of K's involving a TPB: General Rule |
The Promisor and promisee can rescind or modify the contrat until the rights of the TPB have vested |
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Methods of vesting TPB's rights |
1) knowledge and reliance 2) Assent 3) Suit |
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Exception to general rule allowing recission and modification of K's involving a TPB |
Contrary language allowing later modification or recission governs, even if the TPB's rights have vested |
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Liability of Promisor to TPB |
An intended TPB may hold the Promisor liable, even though there is no privity of K between them - limted by the remedies available to the promisee. I.e. if promisee breaches the TPB loses the right to sue the promisor b/c promisee has lost that right |
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Liability of Promisee to Creditor TPB |
A Promisee is liable to a a creditor beneficiary if the promisor does nto perform. |
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Liability of Promisor to promisee |
The promissor remains liable to the promisee for breach as in any other K |
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Delegation of Duties: Definition |
The transfer of the burdens under the contract. |
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Delegation of Duites: General Rule: |
Contractual duties may be delegated without the consent of the person to whom perforamce is owed. (the obligee) |
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Exceptions to permissible delegation |
1) Contrary Contractual Language - if K forbids delegation OR assignment, delegation is impermissible 2) Special Skill or reputation - if someone is chosen specifically b/c of who they are, they may not delegate. |
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Rights of the Obligee: |
1) Can still sue delegator (contrast with novation, where consent was given). 2) May be able to sue Delegate if delegate recieved consideration - makes the Obligee a TPB of K between delegator and delegate.
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Assignement of Rights: Definition |
Two people make a contract, later one (the assignor) transfers his rights to a third party (assignee) the party who owes the duty is the obligor |
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Difference between assignment and TPB cases |
In an assignment, two parties enter a K, and a third aprty appears later on. In a TPB situation all three parties are present from the beginning |
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Assignment: Requirements |
Language or PRESENT transfer. promise to assign no good, future assignment no good - Consideration is NOT required for a valid assignment |
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Restrictions on assignment: Contract language prohibits assignment |
Assignment still valid, but the assignor is liable for breach of contract |
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Restrictions on assignment: Contract language invalidates assignement (says they are void) |
Assignment not valid, no effect to assignment |
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Restrictions on assignment: Changing the duites of the obligor - general rule |
Cannot substantially change the duties of the obligor by the assignment |
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Liability of Obligor to Assignee: |
Obligor is liable to the assignee if obligor does not perform. - BUT, if assignor breaches, assignee cannot enforce against obligee - limited to the recovery available to the assignor. Also won;t be liable for failure to perform for the assignee instead of the assignor if the obligor is unaware of the assignemt |
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Gratuitous Assignments: |
Easily revocable - last gratuitous assignee prevails over earlier gratutitous assignees - later gift revokes earlier ones IN NY - gift assignment irrevocable if it is in a signed writing. |
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Assignements for consideration: General Rule |
the first assignee for consideration prevails over all prior gratuitous assigness, and any subsequent assignees. EXCEPTION: A later assignee for consideration prevails if he does not know about the earlier assignement AND is the first to get payment from, or a judgment against the obligor.
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Article 2 SOL for breach of express warranty |
4 years |
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When SOL for a breach of express warranty starts to run |
when the goods are deliverd |
