Contracts Continued

Front 1

LATER EVENTS: Main topics

Back 1

1. Other party's breach
2. Anticipatory repudiation
3. Failure to give adequate assurance
4. Later agreement
5. Impossibility
6. Frustration of buyer's primary purpose
7. Failure of express condition

Front 2

LATER EVENTS: Other party's breach

Back 2

1. In sale of goods, non-perfect tender by seller allows buyer to accept, reject, goods as it sees fit, and still get damages
2. At common law, damages for any breach, but only material breach excuses performance
3. Under divisible contract where payment on unit basis, breaching party can get contract price for any units it substantially performed

Front 3

LATER EVENTS: Anticipatory repudiation

Back 3

1. If party repudiates agreement before performance is due, injured party can stop performance and sue so long as ready, willing and able to completely perform
2. Anticipatory repudiation can be taken back so long as other party has not relied

Front 4

LATER EVENTS: Failure to give adequate assurance

Back 4

Party with reasonable grounds for being insecure about other party's performance can request in writing adequate assurance that other party will perform in accordance with contract

Front 5

LATER EVENTS: Later agreement: Rescission

Back 5

If parties to K mutually agree to rescind contract, there can be no liability under former contract

Front 6

LATER EVENTS: Later agreement: Modification

Back 6

This is where parties agree to replace existing contract with new one, effective immediately. Parties can only breach under new, modified contract

Front 7

LATER EVENTS: Later agreement: Accord and satisfaction

Back 7

Parties to a contract agree that some kind of performance will work to extinguish an existing duty; until performance complete, parties can sue under either arrangement

Front 8

LATER EVENTS: Later agreement: Novation

Back 8

-- Agreement so substitute existing party with a new one
-- Must be agreed to by parties to existing contract and substitute party

Front 9

LATER EVENTS:
Impossibility:
Destruction of something necessary for performance

Back 9

At CL: destruction an excuse for non-performance
At Sale of goods: generally an excuse, BUT:
-- seller bearing ROL when goods destroyed is excused by impracticability
-- seller can only be excused if goods identified to the contract

Front 10

LATER EVENTS:
Impossibility
Death/incapacity of essential person

Back 10

Excuse if services cannot be reasonably performed by sustitute

Front 11

LATER EVENTS:
Impossibility:
Supervening governmental regulation

Back 11

This is an excuse

Front 12

LATER EVENTS:
Impossibility
Increase in cost of seller's performance

Back 12

Significant and unforeseeable increase is an excuse

Front 13

LATER EVENTS
Frustration of buyer's primary purpose

Back 13

An excuse for performance if seller was aware of buyer's primary purpose when contract formed

Front 14

LATER EVENTS
Failure of an express condition
Definition

Back 14

Limits obligation created by other contract language; strict compliance is required

Front 15

LATER EVENTS
Failure of an express condition
Satisfaction clauses

Back 15

Going to be judged by a reasonable person standard, unless dealing with art or matters of personal taste, in which case it is a subjective standard

Front 16

LATER EVENTS
Failure of an express condition
Types of express conditions

Back 16

Precedent: A will happen IF B happens
Subsequent: A will happen UNTIL B happens

Front 17

LATER EVENTS
Failure of an express condition
Excusing a condition

Back 17

Occurrence excused if person protected by condition:
1. Fails to cooperate
2. Voluntarily waives

Front 18

REMEDIES
Types

Back 18

Non-monetary
Monetary

Front 19

REMEDIES
Non-monetary
Types

Back 19

Specific performance
Unpaid seller's right to reclaim goods

Front 20

REMEDIES
Non-monetary
Specific performance

Back 20

1. The norm if dealing in real property
2. Available for sales of goods only if goods are unique or other proper circumstances occur (such as inability to buy substitutes)
3. Not available in service contracts, but can get injunctive relief

Front 21

REMEDIES
Non-monetary
Unpaid seller's right to reclaim goods

Back 21

1. Not available under UCC 2, UNLESS:
- buyer insolvent at time of receipt of goods and seller makes reclamation demand within ten days
- buyer misrepresents solvency in writing within three months before delivery

Front 22

REMEDIES
Monetary
Types

Back 22

1. Punitive damages
2. Liquidated damages
3. Expectation damages
4. Incidental damages
5. Consequential damages
6. Avoidable damages

Front 23

REMEDIES
Monetary
Punitive damages

Back 23

Not allowed for breach of contract, as contract damages are meant to compensate, not punish

Front 24

REMEDIES
Monetary
Liquidated damages

Back 24

1. Generally contracted-for clause that lays out how damages for breach will be paid
2. Execution of clause upheld IF:
-- difficult to estimate damages at time of contracting
-- clause makes a reasonable forecast of probable damages at time of contract
-- does not operate as a penalty
3. Per unit clauses usually OK, lump sums usually not
4. If LDC struck down, resort to regular damage remedies

Front 25

REMEDIES
Monetary
Expectation damages
Common law

Back 25

General rule at common law, idea is to put injured party in as good a position as if there had been full performance

Front 26

REMEDIES
Monetary
Expectations damages
Sale of Goods
Buyer's damages

Back 26

Buyer has three options:
1. IF GOOD FAITH COVER, gets cover damages
Cover price - contract price
2. IF BAD FAITH/NO COVER, gets market damages
Market price - contract price
3. IF KEEPS NON-CONFORMING GOODS, gets loss in value
Value as promised - value delivered

Front 27

REMEDIES
Monetary
Expectation damages
Sale of goods
Seller's damages

Back 27

Four options:
1. IF GOOD FAITH RESALE, gets resale damages
Contract price - resale price
2. IF NO/BAD FAITH RESALE, gets market damages
Contract price - market price
3. IF SELLER A LOST VOLUME DEALER, gets lost profit
Profit if sale had gone through, even if successful resale
4. IF SELLER CAN'T RESELL, gets contract price

Front 28

REMEDIES
Monetary
Incidental damages

Back 28

Damages to injured buyer or seller for:
1. Transporting/caring for goods
2. Arranging a substitute transaction

Front 29

REMEDIES
Monetary
Consequential damages

Back 29

Damages that are
1. Special to this plaintiff
2. Reasonably foreseeable to breaching party at the time of contract
-- NOTE: not available to seller under Article 2

Front 30

REMEDIES
Monetary
Avoidable damages

Back 30

injured party can't recover damages he could have avoided with reasonable effort

Front 31

THIRD PARTY PROBLEMS
Main issues

Back 31

1. Entrustment
2. Third party beneficiary
3. Delegation of duites
4. Assignment of rights

Front 32

TPPs
Entrustment

Back 32

If owner entrusts goods to merchant who deals in goods of the kind, no rights against a bona fide purchaser

Front 33

TPPs
TPBs
General set-up

Back 33

Promisee contracts for performance by promisor on behalf of intended third party beneficiary, who could be a donee (getting performance as a gift) or creditor (getting performance as payment of debt) beneficiary

Front 34

TPP
TPBs
Rescission and modification

Back 34

1. Promisee/or can rescind/modify freely until TPB rights vest
2. TPB rights vest when TPB is aware of and relies on contract
3. Once TPB rights vest, her consent needed to change K
4. Contrary language in contract can overcome TPB consent

Front 35

TPP
TPBs
Liability

Back 35

1. Promisor IS liable to third party beneficiary, provided vesting of rights, but ONLY to extent promisor would otherwise be liable to promisee
2. Promisor IS liable to promisee
3. Promisee liable to TPB ONLY if a creditor beneficiary

Front 36

TPP
Delegation of duties
Generally

Back 36

Contractual duties can be delegated without consent of party to whom performance is owed (obligee)

Front 37

TPP
Delegation of duties
Exceptions

Back 37

1. Contract language controls--prohibitions of delegation OR assignment
2. Special skill or reputation--if basis of bargain, can't delegate to another

Front 38

TPP
Delegation of duties
Rights of the obligee

Back 38

1. Can still sue delegating party
2. Can only sue delegate if he received consideration in exchange for delegation

Front 39

TPP
Assignment of rights
Generally

Back 39

Two parties make contract. Later, one (assignor) assigns rights under contract to a 3P (assignee), with duty being owed by obligor

Front 40

TPP
Assignment of rights
Necessary language

Back 40

Must be "I assign," not "I will assign" OR "I promise to assign"

Front 41

TPP
Assignment of rights
Consideration

Back 41

Not required to make assignment, gift assignments OK, but easily revoked

Front 42

TPP
Assignment of rights
Restrictions

Back 42

1. Contract language controls: prohibition of assignments makes assignment a breach; invalidation of assignment means assignment is automatically void
2. Assignment cannot substantially change duties of obligor

Front 43

TPP
Assignment of rights
Obligor liable to assignee

Back 43

Obligor liable to assignee insofar as:
1. Obligor would otherwise be liable to assignor
2. Obligor is made aware of assignment

Front 44

TPP
Assignment of rights
Multiple assignments

Back 44

1. Gift assignments: Later over former
2. Assignments for consideration:
-- First over subsequent assignees and prior gift assignees, UNLESS
-- Later assignee for consideration unaware of earlier assignments and is the first to get payment or judgment from obligor