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160 Cards in this Set
- Front
- Back
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PAROLE EVIDENCE RULE (DEFINITION) |
Prior written or oral, and contemporaneous oral expressions that contradict, modify or vary contractual terms are inadmissible if the written contract is intended as as complete and final expression.
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WHAT IS A GOOD WAY TO HAVE COMPLETE AND FINAL EXPRESSION?
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The presence of a merger clause strengthens the presumption that the written document is final.
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NAME EXAMPLE OF A MERGER CLAUSE?
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There are no promises, verbal understandings or otherwise of any kind other than the ones specified herein.
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HOW CAN YOU TEST FOR COMPLETE AND FINAL EXPRESSION?
WHAT DOES IT NOT APPLY TO? |
If the parties would have normally included a provision, BUT didn't then it will NOT become part of the contract
- Subsequent dealings modifications |
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WHAT ARE THE MANY EXCEPTIONS TO THE PAROLE EVIDENCE RULE ?
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a. ambiguity - can bring in evidence
b. Fraud/misrepresentation, duress, mistake, illegality, incapacity c. legal condition precedent to the contract d. May be explained through course of dealing, usage of trade or by course of performance |
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WHAT ARE EFFECTIVE WAYS TO KEEP COSTS FIXED?
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Requirement and Output contracts
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REQUIREMENT CONTRACTS (DEFINITION)
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Agreements by one party to supply all that is required by the other party
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OUTPUT CONTRACTS (DEFINITION)
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Agreements by one party to buy all that the other party produces
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WHAT ISSUES ARISE FROM THESE CONTRACTS AND HOW ARE THEY RESOLVED?
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a. Definite and certain terms - UCC gap fillers
b. Binding obligation - not illusory as parties are required to perform in good faith |
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WHERE ARE THERE LIMITATIONS IN REQUIREMENT AND OUTPUT CONTRACTS?
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Limit on MAXIMUM to require or output. No unreasonable quantity of prior output or requirement. - Usually no more than 20-30% higher
(NO LIMITS ON MINIMUM AND CAN BE BROUGHT DOWN TO ZERO) |
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IN ANALYZING CONTRACT CONSTRUCTION, WHAT ORDER IS APPLIED?
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OACCCWG
1. Ordinary language 2. Agreement - the bargain by language or implied 3. Custom/Usage of trade - practice or method having regularity in the trade 4. Course of dealing - sequence of previous conduct 5. Course of performance - repeated occasions of performance already accepted 6. When not consistent with each other - conflicts are resolved through express terms, COP, COD and CAU UCC 2-15 (in that order 7. Gap Fillers - Court will fill in the gaps (Common law - reasonable terms) (UCC - price, delivery, time, payment, warranty etc... |
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DO MODIFICATIONS VIOLATE THE PAROLE EVIDENCE RULE?
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NO
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MODIFICATION (DEFINITION)
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A valid contract exists but the parties wish to change the terms of the existing contract.
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WHAT DOES A VALID MODIFICATION REQUIRE?
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a. Mutual assent to the terms of the modification
b. Consideration c. The modification MAY need to satisfy the SOF unless waiver and estoppel have occurred (If signed by both parties - enforceable UNLESS waiver and estoppel have occurred UCC 2-209 governs modifications for sale of goods) |
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WAIVER + RELIANCE =....
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ESTOPPEL
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A WAIVER MAY APPLY IF NOT IN WRITING, BUT...
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May be retracted if detrimentally relied upon
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PRIVITY (Definition)
Who can enforce it? |
The relationship that empowers contracting parties to enforce the contractual obligations
- Only the party that is in privity of the contract can enforce it |
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WHAT ARE THE EXCEPTIONS TO PRIVITY?
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a. Third party beneficiaries
b. Assignment c. Delegation |
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THIRD PARTY BENEFICIARIES (TPB) - Definition
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Where that parties at the time of contracting, contemplate performance to be rendered to a third, non contracting party.
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WHICH TPB HAVE RIGHTS AND WHAT ARE THEY USUALLY?
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Intended TPB's
a. named in the contract b. Performance runs directly from promisor to TPB c. There is a relationship between the TPB and promisee |
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IF A TPB IS NOT INTENDED, WHAT ARE THEY?
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INCIDENTAL - Have no rights (mortgage lenders on your employment contract for example)
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NAME TWO EXAMPLES OF TPB'S
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Creditor TPB - to satisfy and underlying obligation
Donee TPB - The person becomes a TPB because of a gift from the promisee |
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WHEN CAN MODIFICATION NO LONGER HAPPEN WITH A TPB
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Once they are vested
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HOW DO TPB;s GET VESTED?
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a. TPB is asked to assent by the parties
b. TPB detrimentally relies on it or c. Brings a lawsuit to enforce |
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WHEN WILL TPB's NOT VEST?
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When the contract is formed or when they learn about the contract
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WHO CAN THE TPB SUE?
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a. The promisor for enforcement
b. The promisee on the underlying obligation IF the TPB is a creditor third party beneficiary |
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WHO CAN PROMISEE SUE?
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The promisor for specific performance to TPB
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What defenses can a promisor use against the TPB?
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Any defense that the promisor could have raised against the promisee
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WHAT ORDER IS CONTRACT CONSTRUCTION SOLVED BY IF THERE IS A CONFLICT?
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conflicts are resolved through express terms,
Course of Perf Course of Dealing Custom & Usage |
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ASSIGNMENT OF RIGHTS ( DEFINITION)
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Where the parties at the time of contracting, do not contemplate performance to a third non-contracting party, but subsequently, a party transfers rights under the contract to a third party.
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ASSIGNMENTS ARE GENERALLY VALID, UNLESS...
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a. They materially alter the obligor's duty or risk
i. Too personal (can't assign malpractice insurance) ii. Requirement and output contracts (everyones requirements and outputs are different) b. or the assignments are prohibited by law |
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ARE ASSIGNMENTS ALLOWED UNDER THE UCC AND COMMON LAW?
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Only under the UCC because of the good faith requirement
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HOW DO ASSIGNMENT OF RIGHTS GET PROPERLY ASSIGNED?
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a. Intent to assign by assignor
b. no particular language required c. MAY require a writing IF i. Wage assignment ii. Interests (options) in land iii. Choses of action over $5,000 iv. Security interests |
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WHAT HAPPENS IF THE RIGHT IS ASSIGNABLE AND PROPERLY ASSIGNED?
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a. the assignee becomes the real party in interest, and
b. once notice is given, the obligor must deal directly with assignee (if you don’t the assignee can sue) |
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WHO CAN THE ASSIGNEE SUE?
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6. The assignee may sue
a. the obligor under the contract; or b. the assignor under breach of warranty (1) Warranty not to interfere with assignment (2) Warranty that assigned right is not subject to defenses |
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WHAT DEFENSES CAN THE OBLIGOR USE AGAINST ASSIGNEE?
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Any defenses against assignee that the obligor could have used against assignor
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GRATUITOUS ASSIGNMENTS ARE GENERALLY REVOCABLE... WHEN DO THEY BECOME IRREVOCABLE?
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a. the assignee detrimentally relied upon it
b. The assignment is in writing (a gratuitous written assignment is irrevocable) c. the assignee receives a token chose; or d. the obligor has completely performed to the assignee |
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ARE ASSIGNMENTS FOR CONSIDERATION REVOCABLE?
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NO - IRREVOCABLE
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WHICH MULTIPLE ASSIGNMENTS ARE REVOCABLE AND IRREVOCABLE
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Revocable - revoked by subsequent assignments
Irrevocable - first in time, first in right UNLESS (1) subsequent assignee does not know of prior assignment(s) and (2) (JONEP) gets judgment, payment, token chose, obtains a novation or estoppel |
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WHAT IS AN ASSIGNMENT OF A CONTRACT AS FAR AS RIGHTS AND DUTIES?
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It is an assignment of rights and delegation of duties
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WHAT DOES A PROHIBITION OF ASSIGNMENT DO?
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It only bars the delegation of the duties
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EXPLAIN WHICH NON ASSIGNMENTS CLAUSES ARE VALID AND WHICH ARE INEFFECTIVE?
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A. If the clause does not contain the word VOID, then the assignor has the power to assign but does not have the right (promised not to) to assign - the assignment is effective but the assignor will be liable for damages. Assignment is valid BUT assignor is liable for any damages due to breach
B. If the clause does contain the word VOID then the assignor does not have the power to assign nor the right to assign – the assignment will be ineffective. |
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DELEGATION OF DUTIES (DEFINITION)
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Where the parties at the time of contracting, do not contemplate performance by a third, non contracting party, but subsequently, a party transfers duties under the contract to a third party
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DELEGATIONS ARE GENERALLY VALID, UNLESS..
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a. the duties involve personal judgment and/or skill; or
b. the delegation would materially change the obligee’s expectations. |
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HOW ARE DELEGATIONS OF DUTIES PROPERLY DELEGATED?
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a. Intent to delegate by delegator
b. No particular language required c. May be oral or written |
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WHAT HAPPENS IF A DUTY IS DELEGABLE AND PROPERLY DELEGATED?
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The obligee MUST accept performance from delegatee and the delegator remains a SURETY for delegatee
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WHO CAN THE OBLIGEE SUE?
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a. Delegator - as a surety
b. Delegatee - ONLY if the delegation was for consideration under a third party promise with the delegates being the promisor and the obligee being the TPB (If the contract is gratuitous then not enforceable due to no consideration) |
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WHAT IS NOVATION?
WHAT ARE THE NECESSARY ELEMENTS? |
A new contract with a substitution of a new party (A way to get out of an obligation on a contract)
a. a previous valid contract b. an agreement among all parties (including new party); c. immediate extinguishment of one contract; d. immediate enactment of a new contract |
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IF THERE IS A NOVATION, WHOSE DUTIES CHANGE?
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The replaced party has no longer any duties
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ONCE ALL CONDITIONS ARE SATISFIED OR EXCUSED WHAT ARE BOTH PARTIES?
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under an absolute duty to perform; they MUST perform, discharge their duty or be in breach
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CONDITIONS (DEFINITION)
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An event that determines if and when a duty arises or is extinguished.
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PROMISE, COVENANT AND CONDITION GENERALLY MEAN THE SAME THING... WHAT IS A PROMISE?
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A promise is a commitment to do or refrain from doing something
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HOW DO YOU DETERMINE IF ITS A PROMISE OR CONDITION? (5)
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a. Look to the intent of the parties (express?)
b. Language (if and only if, unless - condition) c. Prior dealings of the parties d. Custom in the industry or business e. In doubtful situations, courts prefer a promise to a condition because of a breach of a promise will not result in forfeiture |
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A CONDITION FOR ONE PARTY MAY BE A...
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promise for the same OR another party
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WHAT IS NOT A CONDITION?
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Passage of time (generally not interpreted as a conditional event)
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WHEN MUST THE CONDITION OCCUR and EXPLAIN IT? (3)
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a. Condition Precedent - Condition has to occur before any duty arises
b. Condition Concurrent - Both parties have a condition precedent to each other c. Condition subsequent - A subsequent condition occurs and the duty to perform is extinguished |
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HOW CAN A CONDITION EXIST (TYPES)? (3)
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Express condition - words written or oral
Implied Condition - implied by the facts (very rare) Constructive Condition - Implied by the law, the doing must take place before the duty of paying (common law) |
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NAME 3 TYPES OF SATISFACTIONS OF PARTY'S CONDITIONS
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a. Personal taste or judgment - Painting of daughter
b. Mechanical fitness, utility or marketability - P chips c. Applies to 3rd parties (such as an engineer verifying via certificate that the contractors conditions were met) |
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SATISFACTION BASED ON PERSONAL TASTE OR JUDGMENT
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Requires the designated persons personal satisfaction and failure to be satisfied is valid as long as the decision is in good faith, even if unreasonable
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HOW IS SATISFACTION BASED ON MECH FITNESS, UTILITY or MARKETABILITY MET?
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Reasonable and objective standard
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NAME 3 WAYS TO SATISFY A CONDITION
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1. Full performance
2. Substantial performance 3. Doctrine of divisibilty |
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NAME THE 3 ELEMENTS OF SATISFACTION OF CONDITION BY SUBSTANTIAL PERFORMANCE
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a. When the performance meets the essential purpose of the contract
b. Will never satisfy an EXPRESS condition c. Courts allow for a damage offset - of a party has substantially performed and has satisfied a condition precedent, then can be offset by damages |
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NAME 3 ELEMENTS OF DOCTRINE OF DIVISIBILITY
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a. The performance by each party is divided into multiple parts
b. The number of parts due from each party is the same c. The performance of each part by one party is equivalent to the corresponding part of the other party |
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NAME 6 EXCUSES FOR SATISFACTION OF CONDITION
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FAWPIE
a. Failure to cooperate or use good faith effort b. Prospective Inability to perform c. Anticipatory repudiation d. Impossibility e. Waiver and Estoppel f. Election |
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FAILURE TO COOPERATE OR USED GOOD FAITH EFFORT
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If a party fails to cooperate or used good faith effort so that a condition can NOT be met, the condition is excused and the party has a duty to perform
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PROSPECTIVE INABILITY TO PERFORM
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If one party reasonably believes that the other party is not going to perform, the condition is excused
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ANTICIPATORY REPUDIATION
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When one party unequivocally communicates to the other party that he will not perform when performance is due, the condition is excused
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IMPOSSIBILITY ( EXCUSE OF CONDITION)
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If a condition becomes impossible to perform, the condition will be excused
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WAIVER AND ESTOPPEL (EXCUSE OF CONDITION)
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If there is a waiver of a condition, and estoppel the condition will be excused
a. waiver - relinquishment of a known right b. the waiver can be retracted unless detrimental reliance c. Detrimental reliance upon a waiver results in estoppel d. Once detrimental reliance has occurred, the party will be estopped from retracting a waiver |
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ELECTION (EXCUSE OF CONDITION)
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If there is a waiver of a condition after the time for occurrence of the condition, the waiver cannot be retracted, even in the absence of reliance. (same as a waiver but happens AFTER the time).
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HOW DOES QUASI CONTRACT APPLY AS FAR AS EXCUSE OF CONDITION
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If one party has performed, usually partially, and an unsatisfied or unexcused condition prevents performance from the other party, relief for the performing party may be found by quasi-contract or unjust enrichment.
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CONTRACTS (DEFINITION)
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A contract is an agreement for which the law gives remedy for breach
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VALID CONTRACT (DEFINITION)
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A valid contract consists of an offer, acceptance, consideration and lack of formation defenses
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OFFER (DEFINITION)
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An offer is a manifestation of present contractual intent, communicated to an identified offeree, containing definite and certain terms
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ACCEPTANCE (DEFINITION)
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An unequivocal assent to the terms of an offer.
It can only be accepted by a person who is the identified offeree and is generally not assignable |
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MERCHANTS FIRM OFFER (DEFINITION)
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A writing signed by a merchant which gives assurance that the offer will be held open and is not revocable for lack of consideration for a time not to exceed 3 months
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MAILBOX RULE (DEFINITION)
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When parties are not dealing face to face, acceptance is valid upon dispatch through the mail.
Exceptions: Post acceptance rejection - The mailbox rule applies. contract is formed unless offeror changes his position based on the rejection. (if it was received first) Post rejection acceptance - Mailbox rule does NOT apply and whichever gets there first is valid |
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CONSIDERATION (DEFINITION)
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Legally sufficient, bargained for exchange
(which induces current performance, detriment to the promisee and a binding obligation on both parties) |
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MERCHANT (DEFINITION)
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A merchant is one who regularly deals in these types of goods or by their profession have some special skill or knowledge concerning these goods.
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BILATERAL CONTRACT (DEFINITION)
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An exchange of mutual promises - A promise for a promise
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UNILATERAL CONTRACT (DEFINITION)
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A contract which is accepted by performance or an act by the offeree. It is generally irrevocable once performance has begun.
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IMPLIED IN FACT CONTRACT (DEFINITION)
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A contract formed by manifestation of assent or conduct.
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EXPRESS CONTRACT (DEFINITION)
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A contract resulting from words, written or oral
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QUASI CONTRACTS (DEFINITION)
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Quasi contracts are not really contracts, but they describe situations where the may be unjust enrichment. (where one party should have paid for their benefit). The measure of recovery is the value of the benefit conferred.
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OPTION CONTRACT (DEFINITION)
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A promise which meets the requirements of a contract and limits the promisors power to revoke an offer. Consideration is required and can be done via paying money, performance or forbearance.
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UNDUE INFLUENCE
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A defense to validity of contract where an act of persuasion overcomes the judgment and free will of another. It normally results from persons with a confidential relationship with the alleged victim through flattery, trickery or deception
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BARGAINED FOR EXCHANGE
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The promise is sought by the promisor in exhange for his promise, and the promise by the promisee in exchange for that promise. One of the two elements of consideration.
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INJUNCTION
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A court order of equity which requires or refrains a party from doing a specified act.
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ESTOPPELS (DEFINITION)
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A legal principle that bars a party from denying or alleging a certain fact owing to that party's previous conduct, allegation, or denial.
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DETRIMENTAL RELIANCE (DEFINITION)
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If the offeree relies on the offer and their reliance is detrimental, substantial and foreseeable then the offer must stay open for a reasonable time.
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GOODS (DEFINITION)
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Tangible, movable property. (including the unborn young of animals and growing crops and minerals (including oil & gas) pr a structure if they are to be severed by the seller.
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SALE (DEFINITION)
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The passing of title from the seller to the buyer for a price (UCC 2-106)
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INDIRECT REVOCATION
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If an offeree receives correct information from a reliable source that the offeror no longer wants to be bound to the offer. (offers to 3rd parties and rumors are insufficient)
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PRIVITY OF CONTRACT (DEFINITION)
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A legal doctrine describing individuals who have made a legally enforceable agreement
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THIRD PARTY BENEFICIARY CONTRACTS (DEFINITION)
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Contracts where one of the two parties makes an enforceable promise that benefits a third party.
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ILLEGALITY
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When a contract violates constitution, law or public policy the contract is void
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CUSTOM AND USAGE OF TRADE
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Any practice or method of dealing having such regularity in a trade that it will be observed with respect to the transaction
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COURSE OF DEALING
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A sequence of previous conduct between the parties which establishes a common basis of understanding
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COURSE OF PERFORMANCE
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Where the contract for sale involves repeated occasions for performance by either party, and there is no objection then it becomes relevant
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WHAT ARE THE REMEDIES FOR ANTICIPATORY REPUDIATION?
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a. Sue immediately; (because condition is excused)
b. Suspend own performance that is due and wait until repudiating party’s performance is due to sue; c. Treat the repudiation as an offer to rescind the contract d. Ignore repudiation and urge performance |
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CAN THE REPUDIATION BE RETRACTED AND IF SO HOW?
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Repudiation may be retracted unless the non-repudiating party either accepts the repudiation or detrimentally relies upon it
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PROSPECTIVE INABILITY TO PERFORM (DEFINITION)
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If a party has reasonable grounds to believe that the other party will not perform when performance is due. It is judged by the reasonable person standard
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WHAT ARE THE EFFECTS OF PROSPECTIVE INABILITY TO PERFORM UNDER COMMON LAW?
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Innocent party must wait until date of performance or until an unequivocal repudiation is received
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WHAT ARE THE EFFECTS OF PROSPECTIVE INABILITY TO PERFORM UNDER THE UCC?
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UCC 2-609 (reasonable grounds for insecurity)
Innocent party... (1) may demand adequate assurances (in writing) (2) suspend own performance until they receive assurances (3) If assurances are not forthcoming (no longer than 30 days) they can treat it as an anticipatory repudiation. |
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IS RETRACTION POSSIBLE OF A PROSPECTIVE INABILITY TO PERFORM?
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Retraction is possible as long as the innocent party has not detrimentally relied on the prospective inability to perform
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DOES THE UCC REQUIRE ADDITIONAL CONSIDERATION FOR A MODIFICATION?
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the UCC does not require additional consideration so long as the modification is requested in good faith.
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IMPOSSIBILITY (DISCHARGE OF DUTIES)
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Contractual duties can be discharged by impossibility of performance
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WHAT ARE EXAMPLES OF DUTIES BEING DISCHARGED DUE TO IMPOSSIBILITY?
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(1) Supervening Illegality: A subsequent enacted law rendering the contract subject matter illegal
(2) Subsequent destruction of the subject matter through no fault of either party (b) Destruction of a forum for performance (c) subjective test is applied where there is a death or physical incapacity of person necessary to effectuate the contract |
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WHEN MUST AN IMPOSSIBILITY ARISE TO DISCHARGE THE DUTIES?
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After the formation of the contract
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HOW CAN A PARTY RECOVER DUE TO IMPOSSIBILITY?
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A party that renders performance prior to impossibility may recover in quasi contract if the other party has benefited from the performance (restitution from unjust enrichment)
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NAME THE MODES OF DISCHARGE OF DUTIES
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(MIFIFANAM)
Modification Impossibility Force Majeure Impracticability Frustration of Purpose Mutual rescission Accord and Satisfaction Account Stated Novation |
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WHAT DOES A VALID MODIFICATION REQUIRE UNDER UCC AND COMMON LAW
(DISCHARGE OF DUTIES) |
a. Mutual Assent
b. Consideration (Common Law requires additional consideration, UCC does not) c. May need to satisfy the SOF d. Provisions that require modification to be in writing and signed by both parties are enforceable unless - waiver and estoppel have occurred |
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FORCE MAJEURE (DISCHARGE OF DUTY)
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An event that cannot be prevented, that might impede performance such as earthquake, strike, and delays in the delivery of material and supplies
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IMPRACTICABILITY (DISCHARGE OF DUTY)
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1. When a party will not perform because it is not commercially practical for that party to perform
a. Can only be done at excessive and unreasonable cost b. must be an unreasonable difficulty that was not anticipated |
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FRUSTRATION OF PURPOSE (DISCHARGE OF DUTY)
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a. Contractual duties can be discharged because the purpose for the contract has been frustrated
b. Requires a supervening event c. was not foreseeable at the time of entering in to contract d. completely or almost completely destroys the purpose of the contract e. The purpose was understood by both parties at time of formation |
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MUTUAL RESCISSION (DISCHARGE OF DUTY)
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a. Contractual duties can be discharged by mutual rescission when both parties expressly agree to it
b. Contract must generally be executory on both sides c. Bilateral contract - rescission is generally enforceable where there has been part performance d. Unilateral contract - rescission is ineffective unless other consideration paid by non performing party e. Can be made orally unless a writing is required |
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ACCORD AND SATISFACTION
What is the accord and what is the satisfaction |
Accord - An agreement to discharge an existing contractual duty based on an unliquidated debt or dispute
Satisfaction - Performance of the accord |
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WHAT DOES
ACCORD DO SATISFACTION DO |
Accord - Does not discharge duty, it merely suspends the other party's power to enforce it
Satisfaction - Discharges both the accord and that original debt (There is no discharge of contractual duties until there is accord and satisfaction) |
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HOW IS AN ACCORD AND SATISFACTION OFTEN ACCOMPLISHED?
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By tendering a check that is conspicuously marked "payment in full"
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ACCOUNT STATED (DISCHARGE OF DUTY)
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a. Contractual duties can be discharged by an account stated
b. Parties have engaged in multiple transactions c. The parties have agreed as to the final balance due d. Further rights under the individual transactions have been discharged |
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NOVATION (DISCHARGE OF DUTY)
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a. Contractual duties can be discharged by a novation
b. Novation occurs when there is a new contract with a substitution of a new party c. Necessary elements are previous valid contract, agreement among all parties, immediate extinguishment of one contract and immediate enactment of a new contract d. Replaced party's duties are discharged |
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BREACH (DEFINITION)
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When a party has an absolute duty to perform and does not perform or discharge the duty, then the party will be in breach
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MATERIAL BREACH
and its result |
Material (total) breach: If a party has not received the substantial benefit of the contract, then the breach is material
Result: non breaching party may suspend performance and sue for damages immediately |
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MINOR BREACH
and its result |
Minor (partial) breach: If a party has received the substantial benefit of contract, then the breach is minor.
Result: non-breaching party must perform his part of the obligations but may offset payment by the amount the minor breach caused. |
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TIMELINESS OF PERFORMANCE - IS IT A MATERIAL BREACH?
EXCEPTIONS? |
Failure to perform by the time stated in the contract is generally not a material breach if performance is rendered within a reasonable time.
Exceptions: a. If both parties are aware that the nature of the contract makes timely performance essential, or b. if the contract expressly states that “time is of the essence,” then c. failure to perform on time is material breach |
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WHAT DO REMEDIES ATTEMPT TO DO?
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Try to put the non-breaching party in as good of a position as performance would
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HOW ARE DAMAGES PROVEN AND WHAT HAPPENS IF THEY CANNOT BE PROVEN?
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All damages must be proven to a degree of certainty and when they cannot be prevent then they are too speculative and non-recoverable
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WHICH ARE THE COMPENSATORY DAMAGES
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1. Expectation Damages
2. Contracts for sale of goods 3. Contracts for the sale of land 4. Employment Contracts 5. Construction contracts 6. Lost Volume Sale 7. Limitations on completion/repair damages |
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CONSEQUENTIAL DAMAGES (DEFINITION)
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Damages that are the consequence of a breach are recoverable if they are foreseeable at the time of formation
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EXPECTATION DAMAGES
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To receive the benefit of the bargain
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CONTRACTS FOR THE SALE OF GOODS (DAMAGES)
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1. damages are measured at the time when the seller tenders the goods or when the buyer learns of the breach
2. Market price minus the contract price 3. Cover - Price minus contract price (buying from another source) 4. Profit - Contract price minus party's savings by not performing 5. Resale price minus contract price: non breaching party may resell the goods, after notice is given to the other party, at either a public or private sale and recover thee difference between the contract price and the proceeds from the resale |
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CONTRACTS FOR THE SALE OF LAND (DAMAGES)
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Damages are measured by the difference between the contract price and the fair market value
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EMPLOYMENT CONTRACTS (DAMAGES)
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1. Breach by employer - Full contract price
2. Breach by employee - Cost of replacing employee |
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CONSTRUCTION CONTRACTS (DAMAGES)
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1. Breach by owner before completion: Builder entitled to profits from contract plus any costs
2. Breach by owner after completion: Builder entitled to the full contract price plus interest 3. Breach by the builder - owner is entitled to cost of completion plus reasonable compensation for the delay |
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LOST VOLUME SALE (DAMAGES)
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1. Party will be able to recover lost profit from breaching party even if substitute performance has occurred
2. Non breaching party must show that they had the ability to satisfy both contracts |
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LIMITATIONS ON COMPLETION/REPAIR DAMAGES
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1. Cost of performance rule v. value rule
2. The aggrieved party is entitled to the money which will permit him to complete performance unless a. the cost of completion is grossly out to proportion to the value added b. Where the property has special significance and the repair seems likely, they cost of repair may be appropriate |
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CONSEQUENTIAL DAMAGES
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Definition: Damages that are the consequence of a breach are recoverable if foreseeable at the time of formation
1. Any loss from requirements and needs seller at time of contracting had reason to know and which could not be prevented by cover or otherwise; and 2. injury to person or property proximately resulting from breach of warranty |
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LIMITATION OF CONSEQUENTIAL DAMAGES
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1. Consequential Damages may be limited or excluded unless the limitation or exclusion is unconscionable
2. Limitation of consequential damages for personal injury due to consumer goods is unconscionable but commercial loss is not. |
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INCIDENTAL DAMAGES
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Damages that are incidental to the breach are recoverable if they are reasonable
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INCIDENTAL DAMAGES (SELLERS)
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Sellers incidental damages from the buyers breach include any commercially reasonable charges, expenses or commissions incurred
a. in stopping delivery b. in the transportation, care and custody of goods after the buyers breach c. in connection with return or resale of the goods or d. otherwise resulting from the breach |
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INCIDENTAL DAMAGES (BUYERS)
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a. in inspection
b. receipt c. transportation and care and custody of goods rightfully rejected d. Any commercially reasonable charges, expenses in connection with effecting cover e. any other reasonable expense incident to the delay or other breach |
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LIQUIDATED DAMAGES
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When parties agreed during formation to a set amount of damages for breach if
a. Actual damages are difficult to ascertain at the time contract was formed b. the amount is reasonable approximation of the anticipated damages and c. they are not a penalty d. however, the courts allow bonuses that accomplish the same purpose as a penalty e. an amount which is reasonable in the light of the anticipated or actual harm caused by the breach |
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NOMINAL DAMAGES
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If actual damages cannot be proven, the court will award nominal damages
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PUNITIVE DAMAGES
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Punitive damages are never allowed (for breach of contract)
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DUTY TO MITIGATE
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Non breaching party has a duty to mitigate their damages and the non breaching party may NOT recover damages that were avoidable
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EMPLOYMENT CONTRACTS (DUTY TO MITIGATE)
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The non breaching party must use reasonable effort to find comparable work at comparable pay
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SALE OF GOODS CONTRACTS (DUTY TO MITIGATE)
(buyer and seller) |
A non breaching party must in good faith
a. BUYER: find reasonable cover (substitute goods) b. SELLER: resell goods |
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CONSTRUCTION OR MANUFACTURING CONTRACTS (DUTY TO MITIGATE) |
A non breaching party contractor or manufacturer must cease work unless completion would increase damages
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RESCISSION |
Termination of a contract (a remedy to defenses to formation, and only the innocent party may rescind the contract) |
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RESTITUTION |
Return of benefit transferred, if any to the other party. It is used to place parties back in their pre contractual state because of a valid formation defense |
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QUASI CONTRACT - UNJUST ENRICHMENT |
May arise from the absence of a contract or a failed contract. Defendant received benefit from Plaintiff and plaintiff reasonably expected payment or performance by defendant. If plaintiff is not compensated defendant would have unjust enrichment. |
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PERFECT TENDER RULE (UCC) |
If the goods do not conform in any respect the buyer may a. reject the whole b. accept the whole c. accept any commercial units and reject the rest |
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SELLERS RIGHT TO CURE (UCC) |
A. Where the buyer has rejected non-conforming goods and the time for performance has not yet expired, and the seller notifies the buyer of the sellers intention to cure, then the seller is allowed to cure within the contract time. B. If the seller resasonably believed that the goods would be acceptable he would have further reasonable time |
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ACCEPTANCE OF GOODS (UCC) |
An acceptance of goods occurs when the buyer after a reasonable opportunity to inspect, communicates to the seller that the goods are conforming or will take them in spite of their non-conformity - and he fails to make an effective rejection or any act inconsistent with the sellers ownership |
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REJECTION OF GOODS (UCC) |
An affirmative action by the buyer where he notifies the seller of the rejection. The rejection has to happen within a reasonable time after delivery or tender and the seller. |
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BUYERS RIGHT TO INSPECT (UCC) |
Unless otherwise agreed the buyer has a right before payent or acceptance to inspect the goods. (no right to inspect before payment if delivered COD) |
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PAYMENT BY BUYER BEFORE INSPECTION |
Whether by COD or the contract terms, payment before inspection does not constitute an acceptance of goods or impair the buyers right to inspect or any other remedies |
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REVOCATION OF ACCEPTANCE |
1. Buyer may revoke acceptance of goods that substantially impair the value of the agreement if a. the buyer reasonably assumed the seller would cure non-conforming goods, but the goods have not been seasonably cured or b. acceptance was because of the difficulty of discovery of nonconfirmity or by the sellers assurances |
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DELIVERY TERMS ( RISK OF LOSS) - LIST 4 and Explain |
FOB - "Free On Board" Seller is required at their risk and expense, to transport the goods to the destination FAS - "Free Alongside" - Seller is required at the sellers risk and expense to transport the goods to the vessel or dock at the named port CIF - "Cost of Goods, Insurance & Freight" - The seller is required at own risk and expense to transport the goods to the destination. Price stated is lump sum for CIF C&F - "Cost of Goods & Freight" - The seller is required, at the sellers risk and expense, to transport the goods to the destination following the C&F desigination
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RISK OF LOSS WHERE THERE IS BREACH |
1. Where tender of delivery by seller fails to conform as to give buyer the right of rejection, the risk of loss remains with seller until cure or acceptance 2. Where buyer rightfully revokes acceptance, buyer, seller from beginning only to the extent of any deficiency in buyers insurance 3. Where buyer is in breach before risk of loss passes to buyer, seller may treat risk of loss as having rested with buyer for a commercially reasonable time only to the extent of any deficiency in sellers insurance |
