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60 Cards in this Set
- Front
- Back
Unilateral Contract
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Offer acceptable only by performance only
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Quasi Contract
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Equitable Remedy: NOT CONTRACT
Elements: -- P has conferred a benefit on D, AND -- P reasonably expected to be paid, AND -- D realized unjust enrichment if P not compensated Measure of Recovery -- Value of the benefit conferred -- K price is ceiling |
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Article 2 Applies To...
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1. K's primarily SALE OF GOODS
2. Look for a. Type of transaction: SALE b. Subject matter of sale: GOODS: TANGIBLE PERSONAL PROPERTY |
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Applicable Laws
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Real Estate: common law
Services K: common law Sale of Goods: UCC 2 Mixed: A2 applies to all or nothing, applies if sale of goods is most important part of transaction -- If A2 doesn't apply to all, common law applies to all EXCEPTION: If K divides payment, apply UCC to goods and common law to rest |
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Offers, Generally
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Look for MANIFESTATION of an intent to contract and words or conduct showing COMMITMENT
TEST: whether a reasonable person in the position of the OFFEREE would believe that his or her assent creates a K |
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Missing Price Term in Sales K
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REAL ESTATE: common law = price and description required or it's not an offer
SALE OF GOODS: A2 = no price requirement |
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Vague or Ambiguous Terms
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If material terms are vague or ambiguous, NOT an offer under common law or UCC
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Quantity Term of Fulfillment
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"I offer to buy my grits from you for 5 years."
K for SALE OF GOODS can state quantity in terms of requirements: "all, only, exclusively, solely" Increase in Requirement: can increase requirements so long as the increase is IN LINE WITH PRIOR DEMANDS and NOT UNREASONABLY DISPROPORTIONATE increase or decrease |
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Advertisements
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Generally, advertisements are NOT offers
Can be an offer if it specifies: 1. Quantity, AND 2. Expressly indicates who can accept Ex: "1 fur coat, $10, first come, first served" |
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Methods of Termination of Offers (4)
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1. LAPSE OF TIME
-- Only get time state in offer or reasonable time 2. DEATH OF PARTY PRIOR TO ACCEPTANCE -- Death or incapacity of either party after offer but before acceptance defeats offer -- Exception: irrevocable offers 3. WORDS OR CONDUCT OF OFFEROR: -- Unambiguous statement by offeror to offeree of unwillingness or inability to K -- Unambiguous conduct by offeror indicating an unwilingness or inability to K THAT OFFEREE IS AWARE OF Multiple offes to multiple people are NOT revocation 4. WORDS OR CONDUCT OF OFFEREE -- Counteroffer: becomes new offer if it is a counter and not just bargaining; don't destroy options -- Conditional Acceptance: conditional acceptance terminates the offer, usually with words like "if, only if, provided, so long as, but, on condition that" -- Indirrect Rejection: Mirror Image Rule - additional terms to a common law K are counteroffers -- UCC 2-207 a. Sale of goods b. Response with additional terms First Question: Is there a contract? - A response that adds a new term is treated as a "seasonable expression of acceptance" Second Question: Is the additional term part of the K? - The additional term is part of the K IF: i) both parties are merchants, AND ii) additional term is not material (fact question), AND iii) additional term is not objcted to by offeror within reasonable time |
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Four Irrevocable Offers
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1. OPTIONS: offeror promises not to revoke AND consideration
2. UCC FIRM OFFERS: offer can't be revoked for UP TO 3 MONTHS if: a. offer to buy or sell goods b. signed, written promise to keep open, AND c. party is a merchant -- If offered for more than 6 months or no time limit is put in place: COURT SETS FOR 3 MONTHS -- Must be EXPRESS and WRITTEN 3. RELIANCE: offer can't be revoked if a. reliance that is b. reasonably foreseeable, AND c. detrimental Ex: using subK's bid in making a larger bid 4. START OF PERFORMANCE: start of performance pursuant to an offer to enter into a unilateral K makes the offer irrevocable for a reasonable time to complete performance -- Mere preparation is not enough, must actually start performance which tenders benefit to offeree |
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Methods of Acceptance
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The offer can control the method of acceptance, time for accepting, or whether offeree must give notice that it has accepted by performance
On the bar, the offer is usually silent |
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First Acceptance Fact Pattern: offer, no response, start of performance
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General Rule: start of performance is acceptance, treated as an implied promise to perform, so it creates a bilateral K
Exception: Start of performance is NOT acceptance of a unilateral K, completion of performance is required -- It is an implied promise to perform and offeror must give reasonable time to complete -- Completion is acceptance |
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Second Acceptance Fact Pattern: distance and delay in communications
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Offeror and Offeree are in different locations, 4 Rules
1. All communications OTHER THAN ACCEPTANCE are effective only WHEN RECEIVED 2. Acceptance is GENERALLY effective WHEN MAILED 3. If a rejection is mailed before an acceptance is mailed, neither is effective UNTIL RECEIVED 4. You CANNOT use the Mailbox Rule to meet an option deadline |
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Third Acceptance Fact Pattern: seller sends the wrong goods
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General Rule: acceptance, and breack
Accommodation Exception: Counteroffer and no breach -- Must have the explanation that it is just for accommodation |
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Who can Accept an Offer?
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Generally, only by:
1. a person who knows about the offer at the time she accepts 2. who is the person to whom it was made Offers CANNOT be assigned, but options can be assigned unless provided otherwise |
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Rewards
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The person seeking the reward must know of the reward before completing performance
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Reason for not enforcing agreement: Lack of Consideration or Consideration Substitute
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On the bar exam:
1. Identify the promise breaker 2. Did that person ask for something in return for the promise. 3. Look at the person trying to enforce the promise and find the legal detriment |
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Possible Consideration Issues
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1. Bargained for: people being asked to do things
2. Legal Detriment: people giving up things 3. Promise as consideration: typical of bilateral K's -- Illusory Promise Exception: "I will sell, unless I change my mind" 4. Adequacy of consideration: not relevant in K law, so rarely the right answer on the bar 5. Past consideration a. General Rule: NOT consideration b. Exception: EXPRESSLY requested by promisor AND expectation of payment by promisee -- A asks B to save C. B does. A promises to pay B. Consideration present. 6. Preexisting contractual or statutory duty rule: a. Common Law: doing what you're obligated to do is not consideration -- Exception: addition or chagne of performance -- Exception: unforeseen difficulty so severe as to excuse performance -- Exception: third party promise to pay b. Article 2 UCC: does not have pre-existing duty rule -- As long as modification for SALE OF GOODS is in GOOD FAITH, no new consideration needed 7. Party payment as consideration for release: -- If debt is "due and undisputed" part payment is NOT consideration -- Early payment or lesser paympent past SOL okay |
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Consideration Substitutes
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1. Seals: majority now says not a substitute
2. A WRITTEN promise to satisfy an obligation for which there is a legal defense IS enforceable WITHOUT CONSIDERATION -- Lesser payment past SOL 3. Promissory Estoppel/Detrimental Reliance -- Elements a. Promise b. Reliance hat is reasonable, detrimental, and foreseeable c. Enforcement necessary to avoid injustice |
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Reason for not enforcing agreement: Promissor's Lack of Capacity
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WHO LACKS CAPACITY?
1. Under 18 2. Mental Incompetent: can't understand agreement 3. Intoxicated person IF other party has reason to know CONSEQUENCES OF INCAPACITY 1. Right to DISAFFIRM by person without capacity (capacity of plaintiff not relevant) 2. Implied affirmation by retaining benefits after gaining capacity: RATIFICATION 3. Quasi-K liability for necessities: person without capacity is legally obligated to pay for necessary things like food, clothing, medical care, shelter, but that liability is quasi-K, not K |
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Reason for not enforcing agreement: Statute of Frauds
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General Outline:
1. Decide if SOF applies 2. See if plaintiff can get around it Proof Required to Satisfy the SOF: 1. Performance 2. Writing signed by person to be charged |
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Contracts WITHIN the SOF
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1. Promises to Answer for the Debt of Another: Suretyship
-- If you see "answer for" in an answer, it's almost always WONG -- Look for a GUARANTEE of payment if someone else doesn't -- MAIN PURPOSE EXCEPTION: If the main purpose is to benefit the surety, then might be outside the SOF 2. Service Contract not Capable of Being Performed Within a Year from the Time Of the K a. SOF applies to specific time periods more than a year (early termination, early out irrelevant) b. SOF applies to specific time more than 1 year from date of K c. Tasks ARE NOT within the SOF b/c we assume unlimited resources d. Life: SOF does not apply 3. Transfers of Interest in Real Estate -- Exception: leases of a year or less 4. Sale of Goods of $500 or More |
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Different Ways of Asking about SOF
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1. Is the SOF satisfied?
2. Is there a SOF defense? 3. Trickiest: Is there K liability? |
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How is the SOF Satisfied by Performance?
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1. Performance and Real Estate: part performance satisfies teh SOF in transfers of real estate so long as 2/3 are present
a. improvement to the land b. payment c. possession 2. Performance and Service K's: Full performance by either party satisfies the SOF -- Part performance of a services K DOES NOT satisfy the SOF 3. Part Performance and UCC Sale of Goods K: a. Ordinary Goods: satisfies the SOFbut only to the extent of the part performance -- Delivered Goods SATISFY the SOF to extent delivered -- Undelivered Goods DO NOT SATISFY the SOF b. Specially Mfr'd Goods: SOF satisfied as soon as mfr. makes "SUBSTANTIAL BEGINNING" -- Seller has done enough work that it is clear what she is working on |
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How is the SOF Satisfied by Writing?
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1. Other than UCC's SOF: look at the contents of the writing or WRITINGS
-- Test: all material terms test (like who? and what? items) -- Signed by person to be charged 2. UCC A2: look at writng and who signed it, determine a. if K for sale of goods, AND b. contains the quantity term -- Generally, must be signed by person to be charged -- Exception of BOTH MERCHANTS: person who receives signed writing with quantity term claiming a K who fails to respond within 10 days of receipt has NO SOF DEFENSE 3. Judicial Admission: in SALE OF GOODS contracts, judicial admission in pleading or testimony satisfies SOF |
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Use of SOF other than Enforcement and Agreement
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1. Authorization to enter into a K for someone else
-- When rules of law require written authorization, authorization must be in writing ONLY if the K falls within the SOF 2. Contract Modification 2-part Test: a. Look at the deal with the alleged change b. determine whether the deal would be within the SOF c. if so, the modification must be in writing 3. Written Agreement Requires Modifications in Writing a. Common Law: not effective, not required as a matter of law b. UCC: EFFECTIVE unless waived |
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Other reasons for not enforcing agreement: Illegality, Public Policy, Misrepresentation, Non-Disclosure, Duress
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1. Illegal Subject Matter or Purpose
-- If the SM is illegal, not enforceable -- If the SM is legal but purpose is illegal, not enforceable NOTE: the other party MUST KNOW OF THE ILLEGAL PURPOSE if it is to be unenforceable 2. Public Policy -- Look for exculpatory agreement that exempts intentional or reckless conduct from liability OR covenant not to compete with unreasonable terms 3. Misrepresentation: a. Statement of "fact" before K b. By the K-ing party or agent c. Induces the K d. False -- No wrongdoing required; even honest misrepresentation provides basis for K remedy (though maybe not Tort!) 4. Nondisclosure -- Generally, no duty to disclose -- There IS a wrongdoing requirement -- On bar, look for fiduciary relationship OR concealment 5. Duress: Physical or Economic -- Economic Duress Elements a. "bad guy": improper threat which is usually threat to breach the existing K, AND b. "vulnerable guy": left with no reasonable alternative |
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Reasons for not enforcing agreement: Unconscionability
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Empowers a court to refuse to enforce all or party of the agreement
Two Basic Tests 1. Unfair Surprise (procedural) 2. Oppressive Terms (Substantive) -- These tests are applied at the time the agreement was made |
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Reasons for not enforcing agreement: Ambiguity
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NO CONTRACT IF:
1. Parties us a material term that is open to at least 2 reasonable interpretaions 2. Each party attaches different meaning to the term, AND 3. Neither party knows or has reason to know the term is open to at least two reasonable interpretations -- IF ONE OF THE PARTIES KNOWS OF THE AMBIGUITY, THAT PARTY LOSES |
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Reasons for not enforcing agreement: Mistake of Fact Existing at Time of Contract
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1. Mutual Mistake of Material Fact and NO Assumed Risk: Rose 2 of Abilone, no K
2. Unilateral Mistake of Material Fact: reluctance by courts to void K's -- Look for situations in which the other party had reasons to know of the mistake (palpable mistakes) |
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Parol Evidence Rule Vocab
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Complate Integration: written, final agreement
Partial Integration: written, but not final Merger Clause: recitation of complete and final agreement -- persuasive, but not conclusive Reformation: equitable action to modify a written K to reflect actual agreement |
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Parol Evidence Rule Triggered when...
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1. Written K that court finds as final agreement
2. Oral statement made at teh time of K OR earlier oral K or written statements |
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Parol Evidence Fact Patterns
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1. Changing/contradicting terms of written deal
-- No admission of evidence 2. MIstake in Integration -- Admitted for limited purpose of testing mistakes in integration 3. Getting Out of Written Deal -- Doesn't limit defenses of the enforcement, such as misrepresentation, fraud, duress 4. Explaining Term in Written Deal -- resolve ambiguities 5. Adding to Written Deal -- Prevents evidence of prior consistent additional terms unless a. written agreement was only partial integration, OR b. additional terms would ordinarily be in a separate agreement |
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Conduct and Course of Performance
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Courts look at things in this order...
1. Words 2. Course of Performance 3. Course of Dealing 4. Custom and Usage 5. UCC (if applicable) TO EXPLAIN WORDS IN K'S OR FILL IN GAPS |
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UCC Terms for Delivery in Sale of Goods K's
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1. SHIPMENT K's
-- Seller completes delivery obligation when it: a. gets the goods to a common carrier, and b. makes reasonable arrangements for delivery, and c. notifies the buyer 2. DESTINATION K's: -- Seller does not complete delivery obligation until the goods arrive WHERE THE BUYER IS 3. FOB -- "Free on board" -- Most contracts with delivery obligations are shipment K's -- FOB followed by city where SELLER is or where goods are means shipment K --FOB followed by any other city means destination K |
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UCC Terms for Risk of Loss in Sale of Goods K
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1. Agreement of the Parties' controls
2. Breach: Breaching party is liable for any UNINSURED loss even though breach is UNRELATED to problem 3. Delivery by Common Carrier other than Seller: Risk of loss shifts from seller to buyer at the time teh seller completes its delivery obligations 4. No agreement, breach, or carrier: -- IF SELLER IS A MERCHANT: risk of loss shifts to buyer upon buyer's RECEIPT -- Risk of loss shifts from non-merchant seller when she TENDERS teh goods |
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UCC Warranties of Quality
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1. Express
-- Words that promise, describe or state facts or for use of sample or model Ex: "all steel" = yes; "top quality" = no 2. Implied Warranty of Merchantability -- Automatically added to the K by law if purchas is FROM A MERCHANT -- Promises goods are fit for ordinary purpose for which normally used -- Triggering Fact: seller is a merchant WHICH DEALS IN GOODS OF THAT KIND 3. Implied Warranty of Fitness for Particular Purpose -- Triggering Fact: buyer has particular purpose; buyer is relying on seller to select suitable goods; seller has reason to know of this purpose and reliance -- Warranty: goods fit for particular use |
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Contractual Limitations on UCC Warranty Liability
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Disclaimer eliminates implied warranties
Ex: "there are no warranties" 1. Express warranties generally cannot be disclaimed 2. Implied warranties of Merchantability and fitness can be disclaimed in EITHER of the following 2 ways: a. CONSPICUOUS language of discaimer, mentioning merchantability, OR b. "as is" or "without all faults" |
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Limitation of Remedies for UCC Warranty Breaches when Disclaimed
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It does not eliminate warranties, it just limits or sets recovery for any breach of warranty
-- Possible to limit remedies even for express warranties -- General test: unconscionability -- Prima Facie unconscionable if breach of warranty on consumer goods causes personal injury |
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SALE OF GOODS Performance Concepts (6)
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1. PERFECT TENDER
-- Only applies to sale of goods -- seller's performance must be perfect: perfect goods, perfect delivery -- less than perfect tender allows buyer to reject 2. REJECTION OF THE GOODS -- Distinguish rejection of an offer and rejection of the goods -- There is a K and a breach with rejection of the goods -- If the seller does not make perfect tender, buyer can a. retain goods and sue b. reject "all or any commercial unit" and sue -- Rejection alternative limited by CURE "INSTALLMENT CONTRACT and ACCEPTANCE" 3. CURE -- Sometimes, seller is allowed to cure -- Test: whether the seller has REASONABLE GROUNDS for believing that the improper tender would be acceptable, perhaps with a money allowance -- Seller can cure if the TIME FOR PERFORMANCE has not expired 4. INSTALLMENT K'S -- Require or Authorize a. delivery of goods in separate lots b. to be separately accepted -- Buyer has right to reject any installment ONLY where there is a SUBSTANTIAL IMPAIRMENT in that installment that can't be cured 5. ACCEPTANCE OF GOODS -- Effect of Acceptance: if the buyer accepts, it cannot later reject the goods -- Effect of Payment: payment w/out opportunity for inspection not acceptance -- Payment alone is NOT acceptance -- If buyer keeps goods for MORE THAN 1 MONTH without objection, it is ACCEPTANCE 6. REVOCATION OF ACCEPTANCE -- Requirements a. Nonconformity substantially impairs the value of the goods b. excusable ignorance of grounds for revocation or reasonable reliance on seller's assurance of satisfaction, AND c. revocation within a reasonable time after discovery of nonconformity |
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Uncertain Prices under the UCC
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1. Open price term means REASONABLE PRICE AT TIME OF DELIERY
2. "Price to be fixed by buyer or seller" means price must be fixed IN GOOD FAITH |
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Common Law Performance
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SUBSTANTIAL PERFORMANCE
-- If one party "substantially performs" then the other party must pay or otherwise perform |
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Specific Performance
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Things to look for:
-- adequacy of remedy at law -- unclean hands -- other parties' equities CONTRACTS FOR SALE OF REAL ESTATE: -- Can't get specific performance after BFP CONTRACTS FOR SALE OF GOODS: Unique goods -- specific performance is available for unique goods like antiques and art CONTRACT FOR SERVICES -- No specific performance, possibly injunctive relief |
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Reclamation
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Right of the unpaid seller to get its goods back.
FACTORS: a) buyer must have been insolvent at the time it RECEIVED the goods b) seller demands return of the goods within 10 days or within a reasonable time if the buyer was representing solvency c) buyer must still have the goods at the time of demand NOTE: if the buyer is willing to pay cash, deliver still has to be made |
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MONEY DAMAGES: Measure of Damages
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General Approach: protection of expectation
PROCESS a) Determine the dollar value of performance without breach b) Determine the dollar value of performance with the breach c) Compare the two to determine the amount of damages Buyer: look at replacement cost Seller: look at lost profit and lost labor, etc. |
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MONEY DAMAGES: Damage Rules for Sales of Goods
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RELEVANT FACTORS:
a) Who breached? b) Who has the goods? FOUR BASIC RULES: 1) Seller Breaches, Buyer Keeps the Goods -- FMV if Perfect MINUS FMV as delivered 2) Seller Breaches, Seller has the Goods -- Market price at the time of discovery of the breach MINUS contract price -- OR replacement price MINUS contract price 3) Buyer Breaches, Buyer Keeps the Goods -- Contract Price 4) Buyer Breaches, Seller has the Goods -- K price MINUS resale price (and sometimes provable lost profits) LOST VOLUME SELLER'S LOST POFITS: -- Can recover "provable lost profit" so long as it was REGULAR or INFINITE INVENTORY |
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MONEY DAMAGES: Incidental Damages
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Costs incurred in ealing with the breach such as costs of storing the rejected goods in a sale of goods or finding a replacement in a service K are ALWAYS RECOVERABLE
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MONEY DAMAGES: Foreseeable Consequential Damages
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General damages are damages any person would sustain
Consequential damages are limited to damages for P's special circumstances that D had reason to know of at the time of the K -- Ex: P tells D that he has a mill wheel that needs to be fixed, and his mill is closed until it was repaired. If D breaches, P can recover dor lost profits while the mill was down |
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MONEY DAMAGES: No recovery for AVOIDABLE damages
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No recovery for damages that could have been avoided without UNDUE BURDEN on P
-- Burden of proof for this is on the D -- Can't run up damages -- Profits from a replacement job or opportunity are deducted from expected profits that would have been paid by the breaching party |
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MONEY DAMAGES: Certainty limitations and Reliance alternative
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Things to look for:
-- Fact pattern involving services contract -- Plaintiff engaged in a new business or new business activity -- Consider Reliance as an alternative to expectation Ex: spending $2000 promoting a concert when it's your first one |
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MONEY DAMAGES: Liquidated Damages
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The issue is Validity
-- If the provision sets damages too high, it will be considered a penalty TEST: 1) Damages were difficult to forecast at the time the K was made, AND 2) Provision is a reasonable forecast -- Can't be a "one size fits all" number |
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Improper Performance
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Four Rules
1) Damages for any breach 2) Only material breaches by one party excuse the other 3) Materiality of the breach is a fact question 4) If there is substantial performance, the breach is not material PROBLEMS WITH THE QUANTITY OF PERFORMANCE -- Unjust enrichment for the work done, NOT CONTRACT b/c there was a breach -- DIVISIBLE K EXCEPTION: In a divisible K, there can be K law recovery for substantial performance of a divisible part even where there is a material breach of the whole; look at whether price is a lump sum or on a per performance basis PROBLEMS WITH THE QUALITY OF PERFORMANCE -- Can recover for material breach -- If it is not a material breach, P can recover damages but still has to pay for the work REMINDER OF PERFECT TENDER RULE: -- Sale of goods problems NEVER involve a discussion of material breach or divisible contracts -- INSTEAD, you look at perfect tender and installment K's |
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Excuse (from performance) Because of Non-Occurrence of an Express Condition
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EXPRESS CONDITION:
-- "if, only if, provded that, so long as, subject to, in the event that, unless, when, until, on condition that," in the contract -- Distinguish from conditional acceptace ("I will buy IF" vs. "if a mortgage of 6% is obtained") -- Acceptance: conditional acceptance -- Agreement: express condition HOW IS A CONDITION SATISFIED? -- RULE: strict compliance is required for satisfaction of a condition HOW CAN AN EXPRESS CONDITION BE ELIMINATED? -- Non-occurrence is an excuse, such that all remaining K obligations are excused, UNLESS 1) Waiver/Estoppel: estoppel occurs before the condition was to be perormed; waiver occurs after it was supposed to be performed 2) Prevention: If the party potected by the condition hinders its performance, the party to perform is excused |
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Excuse by Anticipatory Repudiation
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UNAMBIGUOUS statement or conduct indicating
1) Repudiating party will not perform 2) Made prior to teh timethat performance was due -- AR excuses performance of other party -- Generally gives rise to an immediate claim for breach unless aggrieved party has already finished performance -- CAN BE REVERSED so long as there has not been a material change in the parties' positions |
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Insecurity
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ONLY IN SALE OF GOODS CASES ON THE BAR
If the words or conduct of one party give "REASONABLE GROUNDS FOR INSECURITY" the other party can demand in writing an adequate assurance and can SUSPEND PERFORMANCE until it gets adequate assurance |
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Rescission (Cancellation)
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The key is whether performance is still remaining from each of the contract parties: EXECUTORY
-- Can agree to mutually rescind at any point until at least one party completes performance |
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Accord and Satisfaction
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Accord: agreement by the parties in a K to accept a different performance
-- Can't be just less of the same obligation If the new agreement is performed, then the performance of the original agreement is satisfied -- If the new agreement is not performed, the other party can sue on the original obligation or the accord On the bar exam, it will likely be an "if...then" question |
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Modification
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Agreement by the parties to an existing obligation to accept a different agreement in satisfaction of the existing obligation
-- Must be in writing if original K had to be in writing |
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Novation
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Agreement between both parties to an existing K and a third party to substitute the thrid party into the K for one of the originals
-- Same promises, performance, and satisfaction, just a different party doing it Novation EXCUSES the party for whom the substitute was made Delegation: unilateral delegation of K rights/duties Novation: Both parties agree to a substitute |