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84 Cards in this Set
- Front
- Back
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UCC Applies 2-102?
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Article 2 of the UCC applies to transactions in goods.
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Goods 2-105?
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Goods are all things moveable at the time of identification to the K other than the money in which the price is to be paid, investment securities, and things in action, but including the unborn young of animals, growing crops, and other things attached to realty to be severed.
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Severed Goods 2-107?
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A K for the sale of minerals (incl oil & gas) or a structure or its materials to be removed from realty is a sale of goods if severed by the seller. Growing crops and timber to be cut, apart from the land, are goods regardless of who severs them.
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Bonebrake
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Where a K involves a mixture of goods and non-goods, majority jurisdictions will apply the “predominant factor” test to determine which aspect represents the predominant objective of the K. Where the goods aspect predominates, the UCC will apply. Where the non-goods aspect predominates, C/L will apply. Minority jurisdictions will attempt to sever the K into goods and non-goods portions and apply the corresponding law to each.
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Merchant 2-104?
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A merchant is one who deals in goods of the kind or otherwise by his occupation holds himself out as having knowledge or skill peculiar to the practices or goods involved in the transaction or to whom such knowledge or skill may be attributed because of his employment of such a person. This definition is relevant because some special UCC rules apply only to merchants.
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Common Law Applies?
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C/L (cases and statutes other than the UCC) applies to K’s for services, real property, and other non-goods transactions.
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Offer §24?
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An offer is a manifestation of willingness to enter into a bargain, so made as to justify another in believing his assent is invited and if given will conclude it
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Objective Standard?
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This is an objective standard, reflecting whether a reasonable person in the offeree's position would see the expression as an offer.
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Sufficient Certainty 2-204 and §33:
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Even though one or more terms are left open a K does not fail for indefiniteness if the parties have intended to make a K and there is a reasonably certain basis for determining breach and giving an appropriate remedy. The more terms the parties leave open, the less likely it is that they have intended to conclude a binding agreement
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Normally, an offer for the sale of goods must ....
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identify at least the parties, goods, quantity, and price.
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Normally, an offer for services or real property must . . .
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identify the parties and the consideration.
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Missing Terms 2-208:
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In the absence of express terms in the K, provisions may be supplemented by course of performance (of the current K prior to the dispute), course of dealing (prior K’s btw the parties), or usage of trade (customary practices in the industry), in that order.
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Gap Fillers:
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After that to various specific “gap filler” provisions of the UCC (2-305 to 2-310)
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Missing Price 2-305:
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If no price is given it will be a reasonable price at the time of delivery
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Missing Delivery 2-308:
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If no place of delivery is specified, it is at the seller’s place of business
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Circulars and Advertisements:
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circulars and advertisements generally are recognized as invitations to bid rather than offers, unless they are written in such a way as to indicate to a reasonable person that they should be regarded as offers (e.g., an offer to pay a reward or other unilateral contract offer addressed to the public at large).
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Mystery BARF:
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An offer is freely revocable by the offeror at any time prior to the offeree’s acceptance unless made irrevocable as an option or firm offer, even if it indicates that it will not be revoked.
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Direct Revocation §42:
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A revocation terminates the offeree’s power of acceptance when the offeree receives from the offeror a manifestation of an intention not to enter into the proposed K. Any subsequently attempted acceptance will not result in a K.
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Indirect Revocation §43:
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Conduct by the offeror inconsistent with the offer remaining open, plus communication of that fact to the offeree by a reliable source
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Counteroffer:
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A counteroffer rejects (and thereby terminates) the original offer and replaces it with a new offer. This terminates the original offeree’s power of acceptance and gives that power instead to the offeror.
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Lapse of Time §41:
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A revocable offer that has not been terminated by some other event eventually will expire by lapse of time. If the offer states no duration it will lapse after a reasonable time, depending on the relevant circumstances.
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Mailbox Rule §63(a):
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An acceptance is deemed effective on dispatch (“as soon as put out of the offeree’s possession”)
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CA Mailbox Rule (minority):
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All communications are effective on dispatch
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Option §25:
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An option is a separate agreement under which the offeror promises not to revoke for a specified or implied period of time in return for some consideration given by the offeree. The offeree is free to negotiate and make counter-proposals throughout the paid option period without losing the benefits of the option.
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Paid Consideration:
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In majority jurisdictions, the stated consideration must actually be paid. If not, the offer remains freely revocable at any time prior to acceptance. In minority jurisdictions, an option exists as soon as the option K reciting the consideration is signed, even if the option $ has not been paid.
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EXCEPTIONS TO Paid Consideration:
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There are a few exceptions to the consideration requirement:
Commencement of Performance §45: Firm Offer 2-205 Promissory Estoppel §87(2): |
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Commencement of Performance §45:
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Courts recognize an option upon the offeree’s commencement of performance under a unilateral K offer. Offer cannot be accepted until the completion of performance, an offeror still could revoke the offer while the offeree is in the process of performing. The option created, makes the offer irrevocable until the offeree has been given a reasonable time to complete performance of the K. Whichever way it is explained, no separate promise or payment of consideration is required for the creation of this kind of option.
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Promissory Estoppel §87(2):
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Promissory estoppel - offeror makes an offer under circumstances where it is reasonably foreseeable that the offer will induce action or forbearance on the part of the promisee (detrimental reliance) and where such action or forbearance actually occurs. Can apply either to unilateral or bilateral K offers; it can be used anywhere an attempted revocation. W/ a unilateral offer, preparations for performance will be sufficient . An option created will last time needed to complete performance.
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Firm Offer 2-205:
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A firm offer is a signed written offer by a merchant to buy or sell goods which gives assurance that it will be held open. Although not supported by consideration, a firm offer is an irrevocable option for the time stated, up to a max of 3 months. If no time is stated, it is irrevocable for a reasonable time, up to a max of 3 months.
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Acceptance §50:
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Acceptance is a manifestation of assent to the proposed K in a manner invited or required by the offer.
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Objective Standard:
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Like an offer, this is an objective standard, reflecting whether a reasonable person in the offeror's position would see the expression as an acceptance.
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Form of Acceptance Invited §30:
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The offeror can dictate a reasonable mode and means of acceptance. If the offeror does not, the offeree may accept by any medium reasonable in the circumstances.
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Bilateral and unilateral K’s are defined by?
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the method of acceptance required by the offer, not by the content of the agreement.
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Bilateral:
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A bilateral K offer requires acceptance by a communication from the offeree agreeing (promising) to perform the K as proposed in the offer. Once the offeree’s promise is made, the K becomes immediately binding on each party and a subsequent failure to perform by either of them would constitute a breach of K.
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Unilateral:
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A unilateral K offer is one that can be accepted only by performing in full the task described by the offeror. The offer itself seeks a reply by performance rather than a promise. The offeree is free to abandon performance at any time w/o liability, however, upon completion the offeror becomes obligated to provide consideration was promised. If offeror would not actually see the commencement of performance, the C/L rule requires the offeree to provide seasonable notice of commencement.
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Ambiguity §32:
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Where the method of acceptance is ambiguous, the C/L interprets the offer in accordance with the offeree’s own belief as to what was required, as evidenced by the manner in which the offeree actually attempted acceptance, thus construing the ambiguity most strictly against the party who created it
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Prompt & Current Shipment 2-206:
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An order or other offer seeking prompt or current shipment may be accepted either by prompt shipment or by a prompt promise to ship either conforming or non-conforming goods. Acceptance by shipment requires seasonable notice, or the offeror may treat the offer as lapsed. Shipment of non-conforming goods is not an acceptance if the seller provides notice that the goods are being shipped as an accommodation to the buyer. However, if no notice, shipment of non-conforming goods is a simultaneous acceptance and breach.
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Mirror Image Rule:
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Under C/L rules, an acceptance must be the “mirror image” of the offer, such that anything other than an unequivocal and unqualified acceptance will not be sufficient to form a K.
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Purported Acceptance Which Adds Qualifications §59:
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A purported acceptance that varies, adds to, or subtracts from the terms of an offer constitutes a rejection, and likely a counteroffer if it returns the power of acceptance to the original offeror and otherwise fits the legal definition of an offer
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Sale by Auction 2-328:
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Unless otherwise stated, an auction is presumed to be conducted with reserve. This means that the auctioneer is, in essence, an offeree who solicits bids from offerors but reserves the right to reject all bids and refuse to sell any given item or lot. If an auction is conducted without reserve, the auctioneer must sell to the highest bidder.
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The terms of sale at an auction include ?
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any terms published in circulars or advertisements prior to the sale, as well as any terms posted or distributed at the sale or announced by the auctioneer at the time of the sale. This is, in essence, an invitation to bid on advertised terms; each bid/offer is deemed to include the previously published and announced terms.
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Auction: The terms "minimum" and "reserve" ?
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Minimum and reserve are not synonymous. A sale with no minimum means only that the bidding may begin with any bid, but unless the auction also is conducted "without reserve," the auctioneer may still refuse to sell if the bidding does not go high enough.
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Acution: The sale is complete?
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when the auctioneer so announces by the fall of the hammer or in other customary manner. This means that the fall of the hammer signifies acceptance of the last stated offer, thus forming a K.
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If the auctioneer knowingly receives a bid on the seller’s behalf or the seller makes or procures such a bid, and notice has not been given that liberty for such bidding is reserved, the buyer may?
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The buyer at his option avoid the sale or take the goods at the last good faith bid prior to the completion of the sale.
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Consideration:
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Consideration can be the payment of any thing or sum of money, no matter how small, as long as it is freely bargained for. This includes any act or forbearance not otherwise legally required of a person.
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Duress:
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A party giving consent to provide consideration only because of an “improper threat.” The threat must come from or be created by the other party to the K. (e.g.threat to commit a crime or begin litigation in bad faith). Duress vitiates consideration by establishing the involuntary nature of a party’s assent. Courts generally reject attempts to avoid a K on the ground of “economic duress” when a party contends that bad financial circumstances forced it to agree to a contract.
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Extortion:
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One party threatens to suspend performance or walk out unless granted a favorable modification, under circumstances when time or money pressures make it impossible for the other party to refuse. UCC: extortion violates the good faith requirement . Under C/L, the extortion vitiates consideration by establishing that it was not freely bargained for. Would cause the “fair and equitable” requirement for the unforeseen circumstances exception to fail.
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Sham Consideration:
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A promise inserted into an alleged contract only to disguise what really is an unenforceable gratuitous promise
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Insufficiency of Consideration/Peppercorn Theory:
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Insufficiency of consideration is not a ground for avoiding a K. The so-called “peppercorn theory” reflects this approach: any amount of consideration, no matter how small, will be sufficient to support a contract, as long as it is freely bargained for.”
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Relinquishment of an Invalid Claim:
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A claim can be surrendered as a form of consideration even though it might turn out that the claimant would not have prevailed in litigation and the claim would have been proven worthless. The policy of the law is to promote legitimate, out-of-court settlements while also discouraging the use of knowingly false claims to extort settlement payments.
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Gratuitous Promise:
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Under the bargain theory of consideration, a gratuitous promise is unenforceable
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Output/Requirements 2-306:
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Promise is illusory when one promises to buy only such quantities as one wants. UCC 2-306 - btw buying all one wishes and all one requires. K obligates the buyer to purchase his good-faith requirements with the limitation on a qty that is unreasonably disproportionate to an estimate, and if no estimate, to historic requirements. Buyer is obligated to buy exclusively from seller, & seller bears risk of the buyer’s good faith needs falling short of estimated/ historic requirements, even if zero. Seller can refuse to supply a quantity as to be “unreasonably disproportionate” to estimated or historic req. of that buyer.
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Modification and C/L Consideration Requirement:
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A C/L modification is a separate K where the parties agree to change the terms of an existing K. Like any other K, it must be supported by mutual consideration beyond what is included in the original K. The consideration must be genuine, reflecting an actual bargain freely made by both parties (peppercorn theory). No pre-existing duty. No sham consideration. No extortion.
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Pre-existing Duty Rule §73:
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A promise to do what one is already obligated to do cannot constitute consideration.
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Exceptions to Common Law Consideration Requirement §89:
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Three exceptions to the rule requiring additional consideration with a modification:
1.One party encounters unforeseen circumstances that would render performance substantially more difficult than anticipated & the parties agree to increase the consideration in a fair and equitable manner 2. Where permitted by statute (CA, NY, or UCC 2-209) 3. Where the promisee foreseeably and detrimentally relies on the offeror’s promise to modify (promissory estoppel) |
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Modification 2-209:
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UCC permits modification without additional consideration (unlike C/L) but still requires good faith. No extortion.
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Accord & Satisfaction:
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Regardless of the dispute, the rights of an alleged creditor may be resolved under an accord and satisfaction where the debt in question is either “unliquidated” (disagreement over amount) or “disputed” (disagreement over existence of any debt at all). The “accord” is an agreement by the creditor to accept as full payment less than the amount he believes is due. “Satisfaction” is the payment of the agreed amount. The debtor must tender the amount of the satisfaction in a way that indicates as full and final satisfaction of the debt. Creditor completes the satisfaction by usually by cashing the check.
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Promissory Estoppel §90:
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One makes a promise which can reasonably be expected to induce action or forbearance of a substantial nature by the promisee, and which in fact does induce such action or forbearance. A court may enforce the promise to the extent necessary to prevent injustice and may grant or limit the remedy as justice requires.
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Breach:
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A breach is a failure or refusal to perform under a binding K w/o a valid legal excuse
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Expectancy Interest:
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The standard remedy for breach of K is based on the Π’s expectancy interest, usually defined as damages sufficient to give the Π the benefit of his bargain by putting him in as good a position as if the K had been fully performed. By identifying the Π’s expected benefit, any expenses saved due to the breach are taken into account along with any form of consideration the Π would have received under the K.
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Where liability is based on breach of an option K, courts generally based the calculation of expectancy damages on?
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a breach of the underlying K. This approach is generally also taken for options formed without consideration by commencement under a unilateral offer; however, if an option is based on promissory estoppel, a court could, in its discretion, limit the damages (possibly to reliance damages) as justice requires.
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2-706: An aggrieved seller may recover resale damages
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where a resale of the goods has been made in good faith and in a commercially reasonable manner. The formula is K price minus resale price (less any savings due to the breach). If for any reason the seller is found not to qualify for resale damages he will be permitted to recover using the formula for market price damages.
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2-708(1): The standard measure of seller's damages is?
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the difference between the K price and the market price at the time of the breach (less any savings due to the breach). If for any reason the resale remedy is disallowed, the seller may still be entitled to this remedy.
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2-712: An aggrieved buyer may recover cover damages where?
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after the seller's breach, the buyer purchases substitute goods in good faith and without unreasonable delay. The formula is cover price minus contract price (less any savings due to the breach). If for any reason the buyer is found not to qualify for cover damages he will be permitted to recover using the formula for market price damages.
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2-713: The standard measure of buyer's damages is?
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the difference between the market price at the time the buyer learned of the breach and the K price (less any savings due to the breach). If for any reason the cover remedy is disallowed, the buyer may still be entitled to this remedy.
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2-710: An aggrieved seller is permitted to?
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recover as incidental damages commissions, transportation and storage costs, and other commercially reasonable charges or expenses incurred in close connection w/ the buyer’s breach. Incidental damages may be added to either of the above remedies.
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2-715: An aggrieved buyer is permitted to?
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recover as incidental damages commissions, transportation and storage costs, and other commercially reasonable charges or expenses incurred in close connection with the seller's breach. Expenses reasonably incurred in inspection, receipt, transportation and care of rejected goods are recoverable also. Incidental damages may be added to either of the above remedies.
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Reliance Interest
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Where expectancy damages cannot be calculated with sufficient certainty to avoid speculation, or in cases involving promissory estoppel where a court believes expectancy damages exceed that which is necessary to accomplish justice, the Π might be given reliance damages. “Reliance interest” restores the plaintiff to his or her position had the K not been formed, but does not award the anticipated gains or profits. Accomplished by counting out-of-pocket expenditures and other losses that the Π would not have incurred if K never made.
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Non-conforming Goods
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2-601: A buyer who receives non-conforming goods has a right to reject all of them or, if he chooses, to accept all or any portion of them (in commercial units). This does not excuse the seller for breaching the K, but the buyer will have to pay the seller for any non-conforming goods accepted in this manner. [Official Comment 1 to this section indicates that the buyer does not lose his cause of action for breach by exercising his rights under 2-601.]
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2-603/2-604: The recipient of rightfully rejected goods must?
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follow any reasonable instruction from the seller as to disposition of the goods (especially if they are perishable). If seller provides no such instructions within a reasonable time after notification by buyer, buy may (among other options) store the goods for seller’s account (i.e., at seller’s expense.)
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1. Does the UCC or C/L apply?
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a. UCC applies (2-202)
Goods (2-105 and 2-107), Bonebrake (if mixed), Merchants (2-104) (only discuss merchant status of P who matter), C/L applies |
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2. K Formation
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Was there an offer?
Definition of offer (§24); Objective standard; Certainty (2-204 or §33); Missing provisions (2-208); Circulars & advertisements; Invitations to bid on advertised terms; Gap fillers (2-305 through 2-311); Implied terms |
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b. Was the offer terminated prior to attempted acceptance?
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Revocation (mystery BARF, §42)
Rejection; Counter offer, Death or incapacity of the offeror; Lapse of time (§41); Mailbox rule (§63a) |
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c. Was an option created?
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i. Definition of option (§25)
ii. Paid consideration iii. Option created by commencement of performance in unilateral K (§45) iv. Option created by promissory estoppel (§87(2)) v. Firm offer (2-205) |
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d. Was there acceptance?
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Definition of acceptance (§50)
Objective standard; Communication of acceptance; bilateral/unilateral ambiguity (§32); Offer that gives choice; Equitable options; Notice of acceptance; Acceptance of offer for prompt and current shipment (2-206); Simultaneous acceptance & breach by shipment of non-conforming goods (2-206); Mirror image rule; C/L rules for counter offer (§59) |
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f. Any issues involving consideration or modification?
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Duress or improper threat, Sham consideration, Insufficiency of consideration/peppercorn theory, Relinquishment of an invalid claim, Forbearance of a legal right, Gratuitous promise, Worthless consideration, Past consideration, Consideration for options, Output & Requirements K’s (2-306), Good faith, Implied “best efforts”, Employment K’s, Duty to not withhold approvals unreasonably, Modifications (pre-existing duty rule), Exceptions to C/L consideration requirement, Accord & satisfaction, Moral obligation, Promissory estoppel (§90)
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3. Breach
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a. Breach BARF
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4. Remedies
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a. Expectancy Interest
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b. UCC Remedies
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i. Seller’s Resale damages (2-706)
ii. Seller’s Market price damages (2-708(1)) iii. Buyer’s Cover damages (2-712) iv. Buyer’s Market price damages (2-713) |
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Incidental Damages
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Seller’s (2-710) and Buyer’s (2-715)
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1. Does the UCC or C/L apply?
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a. UCC applies (2-202)
b. C/L applies |
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2. K Formation
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Was there an offer?
Was the offer terminated prior to attempted acceptance? Was an option created? Was there acceptance? If no offer & acceptance, any other manifestation of mutual assent? f. Any issues involving consideration or modification? |
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3. Breach
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Breach BARF
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4. Remedies
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a. Expectancy Interest
b. UCC Remedies c. Incidental Damages d. Reliance Interest |
