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156 Cards in this Set

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Article 2 of the UCC
ARticle 2 apples to contracts that are primarily sales of goods. Most, but not all, UCC roles are teh samee as common law rules. The factors that determine wheter article 2 apples are thus:
1. type of transaction- sale
2. subject matter of transaction- goods, ie, tangible, personal property
Conviser contracts with epstein to lecture for BRI. does Article 2 apply?
No...It is a services contract.
Convister agrees to buy Linda and Ken Lay's HOuston penthouse. Does ARticle 2 apply?
No. It is a Real Estate Contract.
Convister contracts to buy Epstein's 1973 Cadillac for $400. Does Article 2 apply?
Yes...Sale of goods.
a contract is a promise or set of promises for breach of which the law gives a rememdy or the perfromance of which the law in some way recognizes a duty.
3 elements required for the formation of a contract
1. mutual assent (offer and acceptance)
2. consideration or a substitute and
3. no defenses to formation
Mutual assent
for an agreement to be enforced as a contract, there must be mutual assent. In other words, one party must accept the other's offer. Whether mutual assent is present will be determined by an objective standard, did words or conduct manifest a present intent to contract.
a manifestatoin of an intention to contract. The basic test is whether a reasonable person in teh position of the offeree would believe that his or her assent creates a contract.
To be valid, an offer must be:
1. an expresiion of promise, undertaking, or commitment to enter into a contract
2. definition and certain in terms and
3. communicated to the offeree
Promise, Undertaking or Commitment
It is important to distinguish between preliminary negotiations and promises. Consider:
1. the language used
2. surrounding circumstances
3. prior relationship of the parites;
the method of communication
4. the custom of the industry
5. the degreee of definiteness and certainty of terms
S offers to sel Balckacre to B. Nothis is said about price. is this an offer?
No because at common law, price and description required to be an offer.
S offers to sell her car to B. Nothing is said as to price. Is this an offer?
Yes because it is governed by article 2. There is not price requirement. It is an offer if the parties intended.
S offers to sell her car to B for a fair price. Is this an offer?
No, this is a vague or ambiguous material terms. It is not an offer under either common law or the UCC.
B offers to buy grits from S for five years. Tehre is not a specific quantity term in teh offer, instead, it provides that B shall purchase all of its grits from S. Is this an offer?
yes, because a contract for sale of goods can state teh quantity of goods to be delivered under teh contract in terms of the buyer's requirements or seller's output or in terms of exclusivity.
B buys 1,000 pounds of grits in each of the first three years of the agreement. B then orders 6,000 pounds of grits the fourth year. What result?
The amount is reduced because the output contracts connnon unreasonable increase the amount if it is left open.
Terms of the contract must be certain
1. Identification of the Offeree
2. Definiteness of Subject Matter
3. Communication Requirement
Identification of the Offeree
Teh offer must sufficiently identify the offeree or class of oferees to justify the inference that teh offeror intended to create a power of acceptance.
Definiteness of Subject Matter
1. Real estate contracts require identification of land and price terms.
2. In contracts for the sale of goods, the quantity must be certain or capable of being made certain.
3. In an employment contract, the duration of employment must be specified.
Reasonable terms supplied by the Court
Certain missing terms may be supplied by the court if they are consistent iwth the parties' intent. Under the UCC, a reasonalbe price term and a reasonable time for performance may be supplied by the court.
Exceptions to the fact that price quotation is not an offer.
1. Price quotation can be an offer if it is in response to a specific inquiry.
2. An advertisement can be an offer if it is in the nature of a reward. A company promises 100 pound reward to anyone who catches the flu after using its smoke ball as directed.
3. An advertisement can be an offer if it is specific as to quantity and expressly indicates who can accept.
Termination of Offer
An offer may be accepted only as long as it has not been terminated. It may be termination by either (i) an act of either party or (ii) operation of law
Termination by Offeror--Revocation
The offeror teminates an offerif he
1. directly communicaties the revocation to the offeree or
2. acts inconsistently with continued willingness to maintian the offer and the offeree receives correct information of this from a reliable source.
Limitations on Offeror's Power to Revoke
1. There is an option contract supported by consideration
2. There is a firm offer under the UCC (a signed writing by a merchant, promising to hold offer open for some period of time)
3. Teh offeree has detrimentally relied on teh offer and the offeror could reasonable have expected such reliance or
4. In the case of a unilateral contract, the offeree has embarded on perfromance
Termination by Offeree
1. Rejection- an offeree may reject an offer expressly or by making a counteroffer
2. Lapse of Time- an offer may be terminated by the offeree's failure to accept within the time specified byt he offer or within a reaonable period if no deadline was specified.
Termination by Operation of Law
1. Death or insanity of either party
2. Destruction of the proposed contract's subject matter or
3. Suprevening illegality
Wen does revocation of an offer become effective?
1. Revocation of an offer sent through the mail is not effective until received.
2. An offer caonnot be rovoked after it has been accepted
Firm offer rule
An offer cannot be revoked for up to three months if
1. offer to buy or sell goods,
2. signed written promise to keep the offer open, and
3. party is a merchant
S Used Cars make an offer by signed writing to B to Seel a 1973 Cadillac for $400. May S revoke?
Yes, S has not made a promise to keep the offer open.
S offers to sell B her house for 100,000, and the written offer promises taht it can be accpted for the next 4 montths. May S revoke?
Yes, because this is not an article 2 contract and there is no consideration given to keep the offer open.
A is a genral contractor who is bidding on a contract to build a new hotel, using vairous subcontractors. B, subcontractor, bids to do the paintign work for $100,000. A uses B's bid in making its bid and is award the hotel construction contract. Can B still revoke?
No becasue the offer cannot be rovoked if there has been detrimental reliance by the offeree that is reasonably foreseeable.
O offers P $1000 to paint O's house. O's offer states that it can be accpted only by perfromance. P starts painting. Can O still revoke?
No because this is a unilateral contract that was accepted once perfromance began.
S offers Blackare to B for 10,000. B's response is "will you take $9,000?" S refuses to sell for 9,000. Can B later accpt S's offer?
Yes because B was merely bargaining, not making a counter offer.
Mirror Image Rule
Under Common Law, an acceptance that adds new terms is treated like a counter offer rather than an acceptance.
L offers to lease a building to T, sending T a signed lease that is silent about arbitration and disputes. T adds a paragraph providing for arbitartion and disputes and signs. Has T accpted L's offer creating an express contract?
No because under the mirror image rule, adding new terms to a signed offer is like a counter offer.
1. an offeree with the power of acceptance
2. unequivocal terms of acceptance and
3. commnication of acceptance
Acceptance must be unequivocal
a. Common law- acceptance must mirror the offeror's terms, nether omitting nor adding terms. Otherwise, it may be a counter offer.
b. UCC rules- in contracts involving the sale of goods, an acceptance need not mirror the offer's terms. Any acceptance that indicates an inention to enter itno a contract is valid unless it is made onditional on the acceptance of new or different terms.
Nonmerchants--Terms of Offer Govern
If one of the parties is not a mercahnt, the terms of the offer control. The nw or different terms are considred mere proposals.
Merchants--Acceptance Terms Usually Included
In transactions between merchants, additional terms proposed in teh acceptance become party of the contract unless they materialy alter teh agreement, the offer expressly limits acceptance to the terms of the offer, or the offeror objects witin a reasonable time to the additional terms
Generally, Acceptance must be communicated
Acceptance is judged on an objective standard (what would a reasonable person think there was an acceptance); the offeree's subjective state of mind is irreleant. The modern rule and the UCC permit acceptance by any reasonable means unless the offeror unambiguously limits acceptance to particular means.
Mailbox Rule
if acceptance is by mail or similar means and properly addressed and stamped, it is effective at teh moment of dispatch. It only applies to acceptance, not rejection or revocation.
Limitations on the Mailbox Rule
1. The rule does not apply if the offer stipulates taht acceptance is not efective until received
2. The rule does not apply if an option contract is involved (acceptance is effective upon receipt)
3. If the offereee sends a rejection and then sends an acceptance, whichever arrives first is effective.
4. If the offeree sends an acceptance and then a rejection, the acceptance is offective unless the rejection arrives firsr adn the offeror detrimentally relies on it.
Acceptance by Unautorized Means
An acceptance transmited by unauthorized means is effective if it is actually received by the offeror while the offer is still in existence
Crossing offers
Since an offer is effective on receipt, offres statin the same terms that cross in teh mail do not give rise to a contract.
Accptance without communication
An executory bilateral contract may be formed without communicatio of acceptance where
1. there is an express waier of communication in the offer
2. the offer requires an act as acceptance
3. the offeree silently takes the offered benefits
Interpreting Contract as Unilateral or Bilateral
Ina unilateral contaract, the offeree accepts by performing a stipulated act. In a bilateral contraCT, the offeree accepts by promising to a stipulated act. Modern courts generally interpret an offer as unilateral only if its terms clearly warn that an act is required fro acceptance. If the offer is ambiguous, the allow acceptance by either an act or a promise.
It involves two elements:
1. bargain
2. legal value
Bargained for Exchange
Teh partis must exchange someting. In teh case of a bilateral contract, tehy exhange promises. In the case orf a unilateral contract, they exchange a promise of an act.
There is no bargain involved when on e party gives a gift to another.
1. Act or Forbearance by Promisee- an act or fobearance by promisee will be sufficient to form a bargain if it benefits the promisor.
2. Economic Benefit Not Required- if one party gives the other peace of mind or gratification in exchange for something, it may be sufficient to establish a bargain.
past or Moral Consideration
A promise given in exchange for someting already done does not satidfy the bargain requirement
Exception- Where a past obligation is unenforceable becaseuof a technical defense, that obligatinon will be enforeabel if a new promise is made in writing or is partially perfromed. Also, under the modern trend, if a past act was perfromed by the promisee at teh promisor's requres, a new promise to pay for the act will be enforceable.
Legal Benefit and Legal Detriment Theories
The majority of courts require that a party incur detriment (by doing something he is not legally obligated to do or by refraining from something he has a legal right to do) to satisfy the legal value element. Under the minority rule, conferring a benefit on the party is also sufficient.
Preexisting Legal Duty
Performing or promising to perfrom an existing legal duty is insuffii
Formation Problems of unilatera contracts
the offeree of a unilateral contract must act with knowledge of the offer and be motivated by it. There is a duty to give notic of perffromance to the offeror if he requests notice or if the act would not normally come to his attention; otherwise theire is no duty to notify.
Formation Problems of Bilateral Contracts
An offeree's ignorance of certian contractual terms may be a defense to formation of the bilateral contract. Alos, oppressive terms or provisions contrary to publc ppolicy may prevent conttract formation. Blanket form recitals that stae that the offeree has read and understood all terms will not prevent a court from holding that therer is no contract if a reasonable person would not understand the provision.
Forebearance to Sue as considerations
A promise to refrain from suing on a cliam may constitute consideration if the claim is valid or the claimant in good faith beleived the claim was valid.
Mutual and Illusory Promises
Consideration must exist on both sides of a contract. If only one party is bound to perfrom, the promise is illusory and will not be enforced. Courts ofeten supply implied promises to infer mutuality.
Examples of contracts that satisfy the mutuality requirement:
1. requirements and ouput contracts
2. conditional promiese, unless the condition is entirely within the promisor's control;
3. contracts where a party has the right to cancel if that right is somehow restricted
4. vodable promises - one made by an infance
5. unilateral and option contracts and
6. gratuitous suretyship promises made before consideration flows to the principal debotor.
Exam Tip on Illusory Promises
Closely analyze the wording of contrat terms; language can make a big difference here. For example, a valid requirements or output contract term will say, "all the widgets I require" or "all that you produce", but a term ssuch as "all the widgets I want" or "all you want to sell me is illusory.
Right to Choose Alternative Courses
A prmise to choose one of several alternative means of performance is illusory unless every alternative involves legal detriment to the promisor. The promise will not be found illusory if
1. at least one alternative inovlves legal detriment and the power to choose rests with the promisee or a thrid party, or
2(a valuable alternative is actuall selected
Substitutes for Consideration
1. Promissory Estoppell or Detrimental Reliance
2. Modification Under the UCC
3. Prmises to Pay Legal Obligations Barred by Law
Promissory Estoppel or Detrimental Reliance as a substitute for consideration
The following elements must be present
1. promisor should reasonable expect her promise to induce action or forebearance
2. of a definite and substantial character
3. such action or forebearance is in fact induced
Modification Under the UCC
Under the UCC, consideration is not necessary to a good faith written modification of a contract.
In many states and under the UCC, a seal is not longer a substitute for consideration
Defenses to Contract formation
1. Absence of Mutual Assent
2. Absence of Consideration
3. Public Policy Defenses- illegality of contract
Mutual Mistake
A mistake by both parties is a valid formation defense if:
1. the mistake concerns a basic assumption on which the contract was made
2. the mistake has a material adverse effect on the agreed upon exchange and
3. the adversely affected party did not assume the risk of mistake (when the parties know thet their assumption is doubful (conscious ignorance, mutual mistkae is not a defense-parites will be deemed to have assumed the risk that their assumption was wrong.
Mistake in Value is Generally no Defense
A mistake in value generally goes unremedied, as courts presume parties assume the risk of d4etermining value. Ther are exceptions such as when the parties rely on a thrid party to establish value.
Unilateral Mistake
Whether it be of identity, subject matter, or computation, a mistake by one party is generally insufficient to make a contract voidable. However, if the nonmistaken party know or should have known of the mistake, the contract is voidable by the mistaken party.
Mistake by Intermediary (Transmission)
Where there is a mistake by an intermediary (a telegraph company makes a mistake) the message usually will be operative as transmitted unless the party receiving the message should have been aware of the mistake.
Latent Ambiguity Mistkaes
If the contract includes an ambiguous terms, the reslt depends on the parties awareness of the ambiguity:
1. If nether party is aware, then no contract unless both parties intended teh same meaning
2. If both parties are aware, then no contract unless both parties intended the same meaning
3. If one party is aware, then binding contract on what the ignorant party reasonably believed to be the meaning of the ambiguous words.
If a party induces another to enter into a contract by using fraudulent misrepresentation or by using nonfraudulent material misrepresentation (by asserting information that she does not knwo is untrue but that would induce a reasonable person to enter into the contract) the contract is voidable by the innocent party if she justifiably relied on the misrepresentation.
Absence of Consideration
If promieses exchanged at the formation state lack elements of bargain or legal deteriment, no contract exists.
Public Policy--Illegality of Contract
If the consideration or subject matter of a contract is illegal, the contract is void. If only the purpose behond the contract is illega, the contract is voidable by the party who was unaware of the purpose or aware but did not facilitate the purpose and the purpose does not involve seriouse moral terpitude
Exceptions to voiding a contract for illegality
1. the P is unaware of the illegality while th eD knows of the illegality
2. the parties are not in pari delicto
3. the illegality is the failure to obtain a lecense when the license is for revenue rasing purposes rather than for the protection of the public.
Defenses based on lack of capacity
Persons under 18 lack capacity to contract. Upon rachin gmajority, the infant may affirm her contractual obligation. A contract between an infance and an adult is voidable by the infanct but binding on the adult. Inance persons lack capacity. Intoxicate persons lack capacity if party has reason to know. Contracts induced by duress and coercion are voidable.
Statute of Frauds
Certain agreements must be in writing to be enforced. These agreements are:
1. Promises by executors or administrators to pay estate debts out of their own funds
2. Promises to answer or the debt or default of another.
3. Promises for marriage
4. Promises creating an interset in land
5. Promises that by their terms cannot be perfromed in one year
6. Agreements for the sale of goods for $500 or more except specifically manufactured goods, a written confirmation of an oral agreement between merchants, admission in pleadings of court that a contract for goods existed or partial payment or deliver made and accepted.
Requirements of a Writing in the Statute of Frauds
1. Identity of the parties to be charged
2. Identification of the contract's subject matter
3. terms and conditions of the agreement
4. recital of the consideration and
5. the signature of the party to be charged or his agent
When is the Statute of Frauds not applicable
To the extent of admissions in court that a contract was formed or to the extent there was part performance. For a sale of goods, party payment or acceptance and receipt of party of the goods takes the contract out of the stateute ot the extent of the party payment or partial acceptanc eand receipt of goods.
A contract may be vodable where the clauses are so one sided as to be unconsionable. This includes contract with inconspicuous risk shifting provisions and contracts of adhesion (take it or leave it). Uncon. is tested at the time the contract was made, not later. The defense often appleied where one party has substantially superiro bargaining power. Seldom a good defense on MBE.
Third Party Beneficiaries
In the typical third party beneficiary situation, A (the promisee), contracts with B (the promisor) that B will render some performance to C (the third party beneficiary).
Intended vs. Incidental Benficiary
Only intended beneficiaries have contractual rights, not incidental beneficiaries. In determining if a beneiciary is intended, consider whether the beneficiary
1. is identified in the contract
2. receives perfromance drectly from the promisor
3. has some relationsip with the promisee to indicate intent to benefit
Two types of Intended Beneficiaryies
1. Creditor beneficiary- a person to whom a debt is owed by the promisee
2. Donee beneficiary- a person th epromisee intends to benefit gratuitously
When does a 3rd party beneficiary acquire Contractual Rights?
A third party can enfoce a contract only when his rights have vested. This occurs when he manifests assent to the promise in the manner requested by the parties, brings a suit to enforce the promise or materially changes position in justifiable reliance on the promise. Prior to vesting, the promisee and promisor are free to modify or rescind the beneficiary's rights under contract.
Who Can Sue Whom?--
Third Party Beneficiary vs. Promisor
A beneficiary may sue the promisor on the contract. The promisor may raise any against the third party any defense that the promisor has against the promisee. Whether the promisor may use the defenses the promisee would have against the third party beneficiary depnds on whther the promisor made an absolute promise to pay or only a promose to pay what the promisee owes the beneficiary. If the promise is absolute, the promisor cannot assert the promisee's defenses; if the promise is not absolute, the promisor can asswer the promisee's defenses.
When Can Sue Whom?--
Third Party Beneficiary vs. Promisee
A creditor beneficiary can sue the promisee on the existing obligation between them. She may also sue the promisor, but may obtain only one satisfaction. A donee beneficiary has no right to sue the promisee unless ground for a detrimental reliance remedy exist.
Who Can Sue Whom--
Promisee vs. Promisor
A promisee may sue the promisor both at law ans in equiuty for the specific perfromance if the promisor is not performing for the third person.
In teh typical assignment situation, X (the obligor) contracts with Y (assignor). Y assigns his right to X's perfromance to Z (the assignee).
What Rights may be assigned?
Generally, all contractual rights may be assigned.
Exceptions to the General rule of assignemtn of contracts
1. an assignment that would substantially change the obligor's duty or risk (person service contracts where the sercie is unique, requirements and ouput contracts where the assignee will substantially vary the quantity)
2. an assignment of future rights to arise from future contracts (not future rights in already existing contracts) and
3. an assignment prohibted by law (wage assessments)
Nonassignment Provisions
A clause prohibiting assignment of the contract will be construed as barring only delegation of the assignor's duties. A clause prohibiting assignment of contractual rights generally does not bar assignment, but merely gives the obligor the right to sue for damages. However, if the contract provides that attempts to assign will be void, the parties can bar assignment. Also, if the assignee has notice of the nonassignment clasue, an assignment will be ineffective.
What is necessary for an effective assignment?
The assignor must manifest an intent to immediately and completely transfer her rights. A writing is usually not required to have an effective assignment. The right being assignemd must be adequately described. It is not necessary to use the word assign; any accepted words of transfer will suffice. A ratuitous assignment is effective; consideration is not required.
Is Assignment Revocable or Irrevocable?
An assignment for consideration is irrevocable. An assignment not for consideration is generally revocable.
When is a gratuitous assignment irrevocable?
1. the obligor has already performed
2. a token chose (stock certificates) is delivered
3. an assignment of s simple chose (intangible claim like contract right)
4. the assignee can show detrimental reliance on the gratuitous assignment (estoppel).
A revocable gratuitous assignemnt may be terminated by:
1. death or bankruptcy
2. notice of revocation by the assignor to the assignee or the obligor or
3. subsequent assignment of the same right by the assignor to another.
What is the effect of an Assignment?
To establsih privity of contract between the obligor and the assignee whil extinguishing privity between teh obligor and the assignor.
Who can sue whom?--
Assignee vs. Obligor
The assignee can sue the obligor as the assignee is the real party in interest. The obligor cannot raise by way of defense any defenses the assignor might have against against the assignee.
Who Can Sue Whom?--
Assignee vs. Assignor
The assignee can sue the assignor for wrongfully exercising the power to revoke an irrevocable assignment situation. An action by the assignee against the assignor may also lie where teh obligor successfully asserts a defense against the assignor in an brought by the assignee againt the obligor to enforce the obligation. The assignor will not be liable to the assignee if the obligor is incapable of performing.
What Problems exist if there have been successive assignments of same rights?
If first assignment is revocable, a subsequent assignment revokes it. If it is irrevocable the first assigment will usually prevail over subsequent assignment. Go back over this on page 19 of Conviser.
Delegation of Duties
In the typical delegation situation, Y (the obligor/delegator) promises to perform for X (the obligee). Y delegates her duty to Z (the delegate)
What Duties may be delegated?
All duties may be delegated.
Exceptions to General Rule that All duties may be delegated.
1. Duties involve personal judgment and skill
2. delegation would change the obligee's expectancy
3. Special trust was reposed in teh delegator by the other party to the contract, and
4. there is a contractual restriction on delegation
Requirements for effective delegation
The delegator must manifest a present intention to make a delegation. there are no special formalities to be compled with to have a valid delegation. It may be written or oral.
Rights and Liabilities of Parties to a delegation
The obligee must accept perfromance from the delegate of all duties that may be delegated. The delegator remains laible on the contract; thus, the obligee may sue the delegator for nonperformance by the delegate. The obligee may sue the delegate for nonperformance, but can require teh delegate to perform only if there has been an assumption. The promise creates a contract between teh delegator and the delegate in teh which the obligee is a thrid party.
Novation substitutes a new party for an original party to the contract. It requires assent to all parties and completely releases the original party.
Rules of Contract Construction
A contract is contrued as "whole" and according to the ordinary meaning of words. If there is an inconsistency between provisions, written or typed provisions prevail over printed provisions. Ambiguities are construed against the party preparing the contract, absent evidence of the intention of the parties. Court look to custom and usage in a particular business and in a particular locale to determine the parties' inent when it is unclear. Try to make enforceable.
Parole Evidence Rule
Evidence of prior or contemporaneous negotiations and agreements that contradict, modify, or vary contractual terms is inadmissible if the written contract is intended as a complete and final expression of the parties. A merger clause strengthens the presumption that the written document is final.
Exception to the Parole Evidence Rule
Evidence of the following is admissible:
1. formation defects (fraud, duress, mistake, illegaility)
2. the existence of a condition precedent to a contract
3. the parties' inent regarding ambiguous terms
4. consideration problems (consideration in the contract never paid)
5. prior valid agreement which is incorrectly relflected in teh writing
6. a collateral agreement if it does not contradict or vary the main contract if it is not so closely connected as to be part of the main contract, and
7. subsequent modifications
A promise is a commitment to do or refrain from doing something. It may be conditional or unconditional.
is an event the occurence or nonoccurene of which will create, limit, or extinguish the absolute duty to perfrom; it is a promise modifier.
Interpretation of the Provision as Promise or Condition
It is not always clear whther a contract provision is a promise or a condition. The basic test is the intent of the parites, as judged by the words of the agreement, the prior practices of the paries, and customs of the business. In doubtful situations, the courts prefer a promise, since a promise will support a contract.
Why is the distinction between a promise and a conditions important?
The failure of a promise gives rise to a breach, but the failure of a condition relieves a party of th eobligation to perform.
A condition precedent
is one that must occur before an absolute duty of performance arises in teh other party.
A concurrent condition
those that are capable of occurring together, as where property is tendered in exchange for cash.
Condition Subsequent
is one that cuts off an already existing duty of performance.
Burdens of Proof and Condition
It is the P's burden to plead and prove that all conditions precedent to the D's duty have been performed, and it is the D's burden to plead and prove that a condition subseqent has cut off his duty.
Impled Conditions
called implied in fact conditions, are those to be inferered from the evidence of the parties' intention
Constructive Condition
called implied in law conditions, are those read into a contract by the court without regard to teh parties' intention in order to ensure that the aprties receive what they bargained for. They may relate to the time of performance.
Have the Conditions been excused?
A duty of performance becomes absolute when conditions are either performed or excused.
Ways that a condition may be excused.
1. Failure to Cooperate
2. Actual Breach
3. Anticipatory Repudiation
4. Prospective Inability or Unwillingness to Perform
5. Substantial Performance
6. Divisibility of Contract
7. Waiveer or Estoppel
8. Impossibility, Impracticability, or Frustration
Excuse of Condition by Failure to cooperate
A party who wrongfully prevents a condition from occurring will no longer be given the benefit of it.
Excuse of Condition by Actual Breach
An actual, material breach by one party excuses the other's duty of counterperformance. Minor breach might just suspend.
Excuse of Condition by Anticipatory Repudiation
It apples only if there are executory (unperformed) duties on both sides of a bilateral contract. Anticipatory repudiation give sthe nonrepudiating party for alternatives:
1. treat the contract as totally repudiated and sue immediately
2. suspend his own performance and wait until the performance is due to sue
3. treat the repudiation as an offer to rescind and treat teh contract as discharged
4. ignore the R and urge perfromance
R may be regtracted until relied upon or accepted
Excuse of Condition by Prospective Inability or Unwillingness to Perform
A party might have reasonable grounds to believe the other party will be unable or unwilling to perfrom when performance is due. This is different from AR because this is merely a doubt, AR is unequivocal. Innocent party may suspend her own performanc euntil she receives adqeuqate assurancess
Excuse of Condition by Substantial Performance
Where a party has almost completely performed his duties, but has breach in some minor way, the rle of substantial perfromance avoids forfeiture of a return peformance. pg. 25?
Excuse of Condition by Divisibility of Contract
Where a party performs one o fthe units of a divisible contract, she is entitled to teh agreed equivalent for that unit even though she fail to perform the other units.
What is a Divisible Contract?
1. The performance of each party is divided into tow or more party under the contract
2. The number of parts due from each party is the same, and
3. The performance of each part by one is agreed equivalent of the corresponding part by the other party.
Installment Contracts
Under the UCC, a contract that authorizes or requires delivery in separate lots is an installment contract. The buyer may declare a total breach only if defects in an installment are such as to substantially impari the value of the entire contract.
Estoppel Waiver
A party may waive a condition by indicating that he will not insist on it. However, such a waiver may be retracted at any time unless the other party relies on the waiver and changes her position to her deteriment. Upon such detrimental reliance, the waiving party is estopped from asserting the contion.
Election Waiver
If a condition is broken, the party who was to have its benefit may either terminate his liability or continue under the contract. If he chooses the latter, he is deemed to have waived the condition.
Has the duty to Perform been discharged?
Once it is established that there is an immediate duty to perform (either because the duty is unconditional or the condition has been satisfied or excused), the duty must be discharged.
Discharge by Performance or Tender of Performance
The duty may be discharged by complete performance or tender of performance, assuming the tendering party possess the present ability to perform.
Discharge by Condition Subsequent
The duty may be discharged by occurrence of a condition subsequent.
Discharge by Illegality
The duty may be discharged by supervening illegality of subject matter.
Discharge by Impossibiilty
The duty may be discharged by impossibilyt (measured by objective standard--nobody could perfrom according to the terms of the contract). This impossibility must arise after the contract was entered into. A party who has rendered part performance prior to the impossibility may recover quasi-contract.
Examples of Impossibility
1. Death or incapacity
2. a subsequently enacted law rendering the contract subject matter illegal and
3. subsequent destruction of the contract's subject matter or mean of performance, as long as the promisor was not at faul and it is truly impossible to fulfill the terms of the contract at any price.
Discharge by Impracicability
Modern courts will aslo discharge a duty becaue of impracticability (subjective test). Impracticability requires that a party encount extreme and unreasonable difficulty or expnse taht was not anticipated. A mere change in the difficulty or expense due to normal risks that could not have been anticipated will not warrant discharge by impracticability.
Discharge by Frustration of Purpose
1. a supervening event
2. that was not reasonably foreseeable at the time of entering into the contract
3. which completely or almost completely destroys the purpose of the contract and
4. the purpose was understood by both parties
Discharge by recission
1. Mutual Recission- duties may be discharged by mutual recission, where both parties expressly agree to it. The contract to be rescinded must be executory on both sides. Mutual recission may be made orally unless the subject matter is within the SOF or it involves a contract for the sale of goods requiring a recission to be in writing.
2. Unilateral Recission- recission may be unilateral where only one of the parties to the contract desires to rescind it. In this case, that party must hae adequate legal gfounds (mistake, misrep., or duress)
Discharge by Modification by Contract
A duty may be discharged partially by modification of the contract. There must be mutual assent ot the modifying agreement. Generally, consideration is necessary, although court will usually find it where each aprty has limited his right to enforce the original contract. Consideration is not neccessary where the modification of other contracts must be supported by consideration.
Discharge by Novation
A duty may be discharged by novation, a new contract substituting a new party for one of the parites to the original contract. Necessary elements:
1. a previous valid contract
2. an agreement among all parties, including the new party
3. immediate extinguishment of contractual duties as between teh original contracting parties and
4. a valid new contract
Discharge by Release
Duties may be dischareged by a release and/or covenant not to sue. The release must be in writing and supported by new consideration or promissory estoppel elements.
Discharge By substituted Contract
There is a discharge by substituted contract where the parties to a contract enter into a second contract that expressly or impliedly immediately revokes the first contract.
Discharge by Accord and Satisfaction
1. Accord- an accord is an agreement in which one party to a contract agrees to accept performance differnt from that origianally promised. Gerenally an accord requires consideration. Consideration less than that of original contract will be sufficient if is of a different type or is to bepaid to a thrid party, exhange $550 TV set for $700 cash debt is valid.
2. Satisfaction- is the perfromance of the accord. It discharges both the accord and the original debt.
Discharge by Account Stated
Duties may be discharged by an account stated. It is necessary that there have been more than one prior transaction. A writing is required only if one or more of the original transactions ws subject to the statute of frauds.
Discharge by Operation of Law
Duties may be discharged by operation of law (the contractual duty of performance is merged in a court judgment for breach of the duty; the discharge in bankruptcy bars any right of action on the contract.)
Effect of Running of Statute of Limitations
Where the SOL on an action has run, it is generally held that an aciton for breach is barred.
When does breach of a contract occur?
If the promisor is under an absolute duty of performance and this duty has not been discharged, thent his failure to perfrom in accordance with the contractual terms may be held to be a breach of contract.
Material or minor breach
A breach is material if as a result of the breach, the nonbreaching aprty does not receive the substantial benefit of her bargain. If the breach is material, the non breaching party may treat the contracts as at an end and has an immediate right to all rememdies for brreach of the entire contract.
Test for Materiality
1. the amount of the benefit received by the nonbreaching party
2. the adquacy of compensation for damages to the injured party
3. the extent of part performance
4. hardship to the breaching party
5. negligent or willful behavior of the nonbreacher
6. the liklihood that the breacher will perform remainder of contract.
Remedies for Breach
1. Damages
2. Specific Performance
3. Recission and Restitution
4. Quasi-Contractual Relief
Standard Measure of Damages
Will be the expectation damages that would permit the plaintiff to buy a substitut. In cases where expectation damages are speculative, the P may recover reliance damages (cost incurred by performing).
Consequential Damages
awarded in addition to standard measure and will be given if a reasonable person would hae foreseen at the time of entering the contract taht such damages would result from teh breach. Note that the P bears the burden of proving the foreseeability of damages where special circumstances are involved.
Punitive and Nominal Damages
Are generally not awarded in commercial contract cases. Nominal damages may be awarded where a breach is shown but not actual loss is proven.
Liquidated Damages
A liquidated damges provision will be valid if damgaes were difficult to adcertain at the time of the contract was formed and the amount agreed upon was a reasonable forecaset of compoensatory damages. if these requirements are met, the P will receive the liquidated damges amount evne tho no actual money damages have been suffered. If the liquidated damages amount is unreasonable, the courts iwll construe this as penalty and will not enforce the provision. UCC may consider actual damages in determintion of reasonableness.
Duty to Mitigate
If she does not do so, her damages will be reduced by the amount that might have been avoided by mitigation.
Specific Performance
Where the legal remedy is inadequate, the nonbreaching party can seek specific performance. The legal remedy is considered inadequate when the subject matter of the contract is rare or unique.
Equitable Defenses Available
1. laches
2. unclean hands
3. sale to bona fide purchaser- a claim that the subject matter has been sold to a person who purchased for value and in good faith
Recission and Restitution
The nonbreacher may rescidn and sue for damages at law or in equity. If the nonbreacher transferred a benefit to the breacher while attempting to perform, the non-breacher is entitled to restitution for the benefit transferred.
Quasi Contractual Relief
If there is no contractual relief available under the rules discussed in this outline, quasi contraual relief might be proper.