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57 Cards in this Set

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  • Back

When may a party delegate his duties under the K?

May do so anytime...

(1) Unless otherwise agreed; AND

(2) Unless the other party has substantial interest in having original promisor perform or control the acts required by the contract.

When may a party assign his rights under the K?

May do so anytime....EXCEPT may not assign where the assignment would materially:

(1) Change the duty of the other party; or

(2) Increase the burden or risk imposed on the other party by his K; or

(3) Impair his chance of obtaining return performance (for reasonable period).

What can a party do when for some reason there is an increased risk of nonperformance by the other party?

(1) If there are reasonable grounds for insecurity....

(2) he can, in writing, demand adequate assurance of due performance.....


(3) until receipt of such assurance, may suspend performance.....if commercially reasonable

What happens if the goods are destroyed by no fault of either party?

If the the risk of loss hasn't passed and the goods are identified, then:

(1) if the loss is total, K is avoided; and

(2) if partial or if goods nonconforming, buyer can demand inspection and at his option either:

(A) treat K as avoided; or

(B) accept with due allowance from K price for deterioration or deficiency in quantity, but without further right against seller

If, without fault of either party, the agreed berthing, loading, or unloading facilities fail, the agreed type of carrier becomes unavailable, or the agreed manner of delivery otherwise becomes commercially impracticable...what can the other party do?

If a commercially reasonable substitute is available, such substitute performance must be tendered and accepted.

What can the seller do if the agreed means or manner of payment fails because of domestic or foreign governmental regulation?

Seller may withhold or stop delivery unless the buyer provides a means or manner of payment which is commercially a substantial equivalent.

*EXCEPT if payment has already been taken, buyer's obligation is discharged....UNLESS the regulation is discriminatory, oppressive or predatory.

What can seller do if performance becomes impossible or impracticable?

Depends. Generally he assumes the risk, but his performance may be excused by a failure of presupposed conditions, but only to the extent of failure.

When is the excuse by failure of presupposed conditions available?

Events to excuse performance include:

(1) severe shortage of raw materials or supplied due to contingencies such as war, strike, embargo, unforeseen shutdown of a major supplier, or the like.....

(2) catastrophic local crop failure (as opposed to a mere shortage)....

(3) increased costs alone DOES NOT excuse performance UNLESS due to some unforeseen contingency that the changes nature of the K....

(4) Nor does the rise or fall in market itself.

What must seller do if only part of his obligation is excused for failure of presupposed condition?

(1) He must fairly and reasonably allocate deliveries among his customers and, at his option, may include in the allocation regular customers not then under contract; AN....

(2) He must reasonably notify buyers of any delay or reduction in deliveries because of unforeseen circumstances

What is buyer (1) able and (2) required to do after he receives notification of seller's justified inability to perform because of failure of presupposed condition?

(1) Buyer can either:

(A) terminate with respect to the affected installment (or whole K if substantially impaired);


(B) modify the K by agreeing to take allocation in substitution.....

BUT ....

(2) if buyer fails to modify the K within reasonable time (= at least within 30 days), the K lapses with respect to any deliveries affected


All things movable at the time of identification to the K....

Excluding: (1) investment securities; (2) non-commodity money....

Including: (1) unborn young of animals;

(2) if severed by seller---

(a) minerals or the like, including oil/gas,

(b) structure or its materials to be removed from realty; AND

(3) if capable of severance without material harm thereto---growing crops, uncut timber, and other things attached to realty,

Identification--existing and identified goods

when K made

Identification---future goods

when shipped, marked, or otherwise designated by seller as the goods to which the K refers

**unless special rule applies


when planted or otherwise become growing crops----if K is for crops to be harvest within 12 months or next normal harvest seasion

Identification--unborn young

when conceived---if K is for unborn young to be born with 12 months

Determining whether Article 2 applies to transactions involving both goods and services--Two tests

(1) Predominant purpose test (majority rule);

(2) Gravaman of the action test

Predominant purpose test

Whether predominant purpose of the transaction was to provide goods or services.

Relevant factors in predominant purpose test

(1) contract language re: parties’ performance and relationship;

(2) motivation for transaction; AND

(3) costs of the goods vs. cost of the services

“Gravaman of the Action” Test

Whether the cause of action (or claim) is related to faulty goods or faulty services.


A sale is a contract in which title to goods passes from the seller to the buyer for a price.


A person:

(1) Who deals in goods of the kind; or

(2) Who, by his occupation, holds himself out as having knowledge or skill peculiar to the practices or goods involved; OR

(3) To whom such knowledge may be attributed to him b/c his employee holds himself out as having such skill or knowledge.

***N.B., only when acting in that capacity

place of delivery if not specified in K

seller's place of business, if he has one; otherwise seller's residence

time for shipment if not specified

reasonable time

seller's tender of delivery obligation

(1) must put and hold conforming goods at the buyer's disposition; AND

(2) give the buyer any notification reasonably necessary to enable him to take delivery.

**tender must be at a reasonable hour and goods must be kept available for period reasonably necessary to enable buyer to take possession

buyer's tender of delivery obligation

buyer must furnish facilities reasonably suited to the receipt of goods

does buyer have a right to inspect goods before paying?

yes, right to inspect at any reasonable place or time and in any reasonable manner

UNLESS otherwise agreed OR if the K provides for delivery C.O.D. or other like terms

who bears the cost of inspection?

buyer, but he can recover them from seller if goods are nonconforming and he rejects

risk of loss---(1) shipment K; (2) destination K

(1) passes when buyer delivers goods to carrier.

(2) passes when goods are delivered to buyer.

risk of loss when goods held by bailee to be delivered without being moved

passes to buyer:

(1) on his receipt of a negotiable document of title;

(2) on acknowledgment by bailee of buyer's right to possession; OR

(3) after his receipt of a non-negotiable document of title or other written direction when permitted.

risk of loss in noncarrier case (i.e., direct tender by seller)

(1) if seller is a merchant, ROL passes when buyer takes physical possession

(2) if seller is a non-merchant, ROL passes upon tender of delivery

risk of loss in FOB case

passes to buyer when goods delivered at the location that follows FOB

What is seller required to do in a shipment K?

(1) put goods in possession of carrier and make a reasonable K for transportation;

(2) provide buyer with any document necessary to enable him to obtain possession of goods; AND

(3) promptly notify buyer of the shipment.

what if seller fails to notify buyer of shipment or fails to make a reasonable shipment K?---ground for rejection?

ground for rejection only if material delay or loss ensues.

what is seller required to do when goods are in possession of a bailee and are to be delivered without being moved?

Seller must either tender a negotiable document of title covering such goods or procure acknowledgment by bailee of buyer's right to possession of the goods

***BUT tender to buyer of non-negotiable document of title or written direction to bailee to deliver is sufficient tender UNLESS buyer seasonably objects

risk of loss when goods are defective

if buyer has right to reject goods, ROL does not pass to buyer until:

(1) defects are cured; OR

(2) buyer accepts in spite of defects.

risk of loss if buyer rightfully revokes acceptance

ROL treated as having been with seller from beginning to the extent of any deficiency in buyer's insurance K

can the parties agree to a fixed amount of damages for breach (i.e., liquidated damages clause)?

yes, but only IF amount reasonable in light of anticipated or actual harm caused by:

(1) the breach;

(2) the difficulties of proof of loss, AND

(3) the inconvenience or non-feasibility of otherwise obtaining an adequate remedy.

****BUT a term fixing unreasonably large liquidated damages is void as a penalty.

can the parties agree to a limitation on remedies clause (i.e., clause that limits remedies available)?

Parties may agree to a limitation on remedies clause

****UNLESS: (1) clause is unconscionable; OR (2) circumstances cause clause to fail of its essential purpose

****BUT NOTE: Consequential damages have their own rule

can the parties agree to a limitation on consequential damages?

yes, may be limited or excluded UNLESS unconscionable.

**limitation for consequential damages for personal injury in a consumer goods case = prima facie unconscionable

Parole Evidence Rule

If the parties intended the writing to be a final expression of their agreement:

(1) may not be contradicted by evidence of any prior agreement or contemporaneous oral agreement,

(2) BUT may be explained or supplemented by:

(a) COD, COP, UOT (anytime!); AND

(b) Evidence of consistent additional terms, UNLESS intended as complete and exclusive statement

Can K limit: (1) assignment or (2) delegation?

Yes, such agreements are generally enforceable, but the right to prohibit delegation by agreement is unfettered while the right to prohibit assignment is subject to an exception for rights to recover money for obligations that are no longer executory--two specifically:

(1) right to recover money damages for breach of a whole K; OR

(2) right to payment resulting from fill performance.

Can the parties assign all of their rights?

Yes, EXCEPT where the assignment would materially:

(1) change the duty of the other party;

(2) increase the burden or risk imposed on him by his K; OR

(3) impair his chance of obtaining return performance.

Can the parties delegate all of their duties?

Yes, UNLESS the other party has a substantial interest in having his original promisor perform or control the acts required by the K

***N.B., no delegation of performance relieves the party delegating of any duty to perform or any liability for breach

Termination vs. Cancellation

Termination = (1) end to K other than for breach; (2) all future obligations discharged; (3) only retain remedy for prior breach or performance

Cancellation = (1) end to K for breach; (2) all future obligations discharged; (3) retain remedy for whole K and any unperformed balance

Is K valid if it provides for successive performances but is indefinite in duration?

Yes, valid for a reasonable time, but may be terminated at any time

What is required when a party terminates the K?

Except on the happening of an agreed event, termination requires reasonable notification to the other party.

N.B., An agreement dispensing with such notification is invalid if its operation would be unconscionable.

When can a party demand adequate assurance? And how?

When reasonable grounds for insecurity arise re: performance of either party, the other may:

(1) demand adequate assurance of due performance, in writing

(2) And until he receives such assurance, may, if commercially reasonable, suspend any performance for which he has not already received the agreed return.

What if a party accepts improper delivery or payment? Can that party still demand adequate assurance of future performance?


What must a party do upon receiving a justified demand for adequate assurances?

After receipt of justified demand, must provide such assurance within a reasonable time not exceeding thirty days.

**Failure to do so is a repudiation of the K.

What can a party do when the other party repudiates re: future performance?

If it is a substantial impairment of K, aggrieved party may:

(1) await performance for commercially reasonable time; OR

(2) resort to remedy for breach; AND

(3) in either case, suspend performance, or identify goods to K, or salvage unfinished goods

Can a repudiating party retract his repudiation?

Yes, can retract until next performance is due

UNLESS aggrieved party has since the repudiation:

(1) cancelled;

(2) materially change his position; OR

(3) otherwise indicated that he considers the repudiation final.

How can a repudiating party retract his repudiation?

By any method which clearly indicates that he intends to perform.

***BUT must include any assurance justifiably demanded

What if the agreed manner of delivery becomes commercially impracticable through no fault of either party?

If available, any commercially reasonable substitute must be tendered and accepted

What can seller do if the agreed manner of payment fails because of governmental regulation?

May withhold or stop delivery,

UNLESS buyer provides manner of payment which is commercially a substantial equivalent.

What if a party demands adequate assurance (1) when he does not have grounds to do so OR (2) he more assurance than he is entitled?

Both cases will constitute a repudiation.

When is delay in delivery or non-delivery not a breach by seller?

When performance has been made impracticable:

(1) by a failure of presupposed condition; OR

(2) by good faith compliance with any governmental regulation or order, whether or not it later proves invalid.

What is seller obligated to do if his performance is to be excused for impracticability?

(1) fairly and reasonably allocate, if only partially impracticable; AND

(2) seasonably notify buyer: (a) of delay or non-delivery; AND (b) of buyer's estimated quota.