Performance, Modification, and Excuse

Question 1

Under the UCC, what if something happens to the goods before the buyer receives them?

Answer 1

If seller bears the ROL = seller provide replacement goods

If buyer bears ROL = buyer must pay the price regardless

Question 2

What is a carrier case?

Answer 2

parties to a sale of goods K agree to use common carrier (trucking firm, train, etc.)

Question 3

What is a non-carrier case?

Answer 3

parties to a sale of goods K do not agree to use a common carrier

Question 4

In a non-carrier case, when does the ROL transfer to the buyer?

Answer 4

If seller isn’t a merchant = as soon as goods are made available to him (tendered)
If seller is a merchant = once goods are physically in buyer’s possession

Question 5

In a carrier case, when does ROL transfer?

Answer 5

Shipment contract = ROL passes to buyer when goods are delivered to the carrier
Destination contract = ROL passes to buyer when goods are tendered at the destination point specified in the K

Question 6

What is a shipment contract?

Answer 6

ROL passes to buyer when goods are delivered to the carrier.
Identified as “FOB Seller” or K is silent (default rule)
Buyer bears ROL if goods are damaged in transit

Question 7

What is a destination contract?

Answer 7

ROL passes to buyer when goods are tendered at the destination point specified in the K
Identified as “FOB Buyer”
Seller bears the ROL if the goods are damaged in transit

Question 8

What is the common law preexisting duty rule?

Answer 8

a promise to increase compensation for duties already owed is unenforceable b/c there’s no consideration for the modification

Question 9

What are exceptions to the preexisting duty rule?

Answer 9

(1) mutual modification

(2) unforeseen circumstances

Question 10

What is the mutual modification exception to the preexisting duty rule?

Answer 10

Mutual Modification of an existing K is enforceable if both parties agree to different performance from what was originally required by the original K

Question 11

What is the unforeseen circumstances exception to the preexisting duty rule?

Answer 11

Preexisting duty rule not applicable if increased compensation is given in exchange for a promised performance that has been rendered substantially more burdensome than reasonably anticipated when K formed

Question 12

How can K’s be modified under the UCC?

Answer 12

Agreement modifying an existing K needs no consideration to be enforceable as long as made in good faith

Question 13

How can K’s be modified under the common law?

Answer 13

Must have consideration to modify

Question 14

Under what 4 doctrines can K performance be excused due to faulty assumptions?

Answer 14

(1) mistake
(2) impossibility
(3) impracticability
(4) frustration of purpose

Question 15

What is a unilateral mistake?

Answer 15

1 party’s mistake about present material fact(s) is NOT excused UNLESS the other party knew/had reason to know of the party’s mistake

Question 16

What is a mutual mistake?

Answer 16

A mutual mistake is voidable by the disadvantaged party when all three are met:

(1) mistaken assumption relates to material facts (not just value)
(2) mistake made by both parties; and
(3) disadvantaged party didn’t bear the risk of mistake under the K

Question 17

What is the impossibility doctrine?

Answer 17

Both parties are excused if performance has been rendered impossible by events occurring after K formed

Question 18

What are the requirements for the impossibility doctrine?

Answer 18

(1) impossibility must be OBJECTIVE: when performance is literally impossible for anyone due to circumstances beyond the control of the parties
(2) the contingency that creates the impossibility wasn’t known to the parties at the time the K was made; it happened after and was unanticipated

Question 19

In what circumstances is impossibility likely to be obejctive?

Answer 19

(1) when the subject matter of the K is DESTROYED
(2) when there’s a personal services K and the performing party has DIED or become INCAPACITATED
(3) when supervening law or legal developments have rendered performance LEGALLY IMPERMISSIBLE

Question 20

What is the impracticability doctrine?

Answer 20

A promisor may be excused from performance where the following two elements are proven:

(1) contingency causing impracticability was unforeseen; and
(2) increased cost/burden of performance would be far beyond what either party anticipated

Question 21

What is the frustration of purpose doctrine?

Answer 21

Where a contingency occurs that dramatically reduces the value of performance to the receiving party

Question 22

What are the three requirements for frustration of purpose?

Answer 22

(1) the principal purpose in entering the K is substantially frustrated;
(2) frustration was substantial in nature; and
(3) non-occurrence of the event that caused frustration was a basic assumption of the K

Question 23

When is rescission permissible?

Answer 23

permissible where both parties to a K have remaining performance due. Consideration is provided by each party’s discharge of the other’s duties.

Question 24

What is accord and satisfaction?

Answer 24

The parties may make an accord, which is permissible when one party has already performed and is waiting on the other party to finish performing.

Question 25

What is accord?

Answer 25

obligee promises to accept substituted performance in satisfaction of the obligor’s existing duty

Question 26

What is the legal effect of accord and satisfaction?

Answer 26

Satisfies the obligor’s obligation

The accord alone doesn’t discharge the obligor’s duty; it only suspends the obligor’s duty

Question 27

Where will there be sufficient consideration for accord and satisfcation?

Answer 27

(1) where the accord involves an agreement for partial or substituted performance, the substituted performance differs significantly from the original performance, or its obligation is doubtful
(2) where the accord involves an agreement for partial payment, there is a good-faith or bona fide doubt about the amount owed

Question 28

What are the two ways anticipatory retaliation can be established?

Answer 28

(1) party’s definitive statement that it will breach; or

(2) party’s voluntary act that renders party unable to perform its contractual obligations

Question 29

What is adequate assurance of performance?

Answer 29

If anticipatory repudiation can’t be established but there are reasonable grounds for insecurity, the insecure party may make a demand for adequate assurance of performance

Question 30

What happens when a party fails to respond to a demand for adequate assurance?

Answer 30

Repudiation

Question 31

What are the two ways to fail to respond to a demand for adequate assurance?

Answer 31

(1) not responding within a reasonable time (30 days under the UCC); or
(2) doesn’t respond in a way that provides reasonable assurances

Question 32

What are the rights of an aggrieved party upon repudiation?

Answer 32

(1) cancel K and terminate all rights/obligations
(2) bring action for damages or specific performance
(3) ignore the repudiation and continue under the K

Question 33

A party who has made an anticipatory repudiation to the other party may retract unless/until the other party:

Answer 33

(1) acts in reliance on repudiation;
(2) accepts repudiation by signaling this to the breaching party; or
(3) commences suit for damages/specific performance

Question 34

What happens when a party fails to comply with an express condition?

Answer 34

discharges the party’s obligation to perform

Question 35

What are the two situations where the failed express condition can be excused?

Answer 35

(1) waiver

(2) bad faith conduct

Question 36

For an implied condition, the failure to comply is still a breach and will be treated in one of two ways:

Answer 36

(1) material breach

(2) substantial performance

Question 37

When a condition has failed and can’t be excused, what are the two methods of enforcement?

Answer 37

(1) divisibility of the contract

(2) quantum meruit

Question 38

When a condition has failed and can’t be excused, what is divisibility of the K?

Answer 38

Breaching party can argue the K is divisible and only part of the K has been materially breached.
Divisibility test = is it easily apportioned into agreed equivalents?

Question 39

What is quantum meruit?

Answer 39

Where a party failed to fulfill an express condition or is in material breach, breaching party may still recover reasonable value of benefits conferred (but recovery is reduced by damages from breach)

Question 40

What is the perfect tender rule under the UCC?

Answer 40

Terms of a K for sale of goods are enforced EXACTLY, every K term treated as an express condition. The seller breached is the goods fail in any way to conform to the K

Question 41

What are the buyer’s 3 options if the seller fails to make perfect tender?

Answer 41

(1) reject the goods in a reasonable time and notify seller
(2) accept the goods
(3) accept part and reject part (only in terms of commercial until of those goods - i.e. can’t accept half a loaf of bread)

Question 42

What is the seller’s right to cure BEFORE the K deadline?

Answer 42

If the seller makes non-conforming tender but the time for performance has not passed, then the seller may substitute conforming goods. Two requirements:

(1) seller must give reasonable notice of intent to cure; and
(2) seller must make conforming delivery by K deadline

Question 43

What is the seller’s right to cure AFTER the K deadline?

Answer 43

(1) reasonable grounds to believe that delivery was acceptable based on the buyer’s express assurances, trade usage, course of dealing, or course of performance; and
(2) seller must give the buyer reasonable notice that they want to cure AND make conforming delivery w/in a reasonable time

Question 44

Does the perfect tender rule apply to installment K’s?

Answer 44

Nope. The buyer must generally give the seller an opportunity to cure any defects in the installment deliveries, unless the seller “substantially impairs” the value of the entire K