Conditions

Question 1

What is a condition?

Answer 1

A condition is a risk shifting device that states one party’s contractual obligation only kicks in if some future event occurs.

Question 1

What is an express condition? How must an express condition be satisfied?

Answer 1

Express conditions are created by the language of the K. They must be strictly satisfied unless the condition is excused.

Question 2

Satisfaction condition

Answer 2

If most reasonable people would be satisfied with the performance, then the condition of satisfaction is met.

BUT: for Ks involving aesthetic taste, subjective standard applies. Party breaches if they in bad faith claim the condition of satisfaction has not been met.

Question 3

Waiver of conditions – 3 ways

Answer 3

The party receiving protection of condition may waive condition by (1) words or (2) conduct.

(3) A condition is also waived if the other party wrongfully interferes with/hinders the occurrence of the condition. Whether a party has interfered/hindered is judged by a good faith standard.

Question 4

What is the Constructive Condition of Exchange?

Answer 4

One party’s performance is conditioned on the other side’s performance.

Question 5

In the CL universe, when is the Constructive Condition of Exchange (CCE) satisfed?

Answer 5

To satisfy the CCE at CL, a part must substantially perform. If a party does not substantially perform, he has materially breached. Even if a party has only failed on a small part of the K, if his failure was willful, then he has still materially breached.

Question 6

What recovery is possible when substantial performance has occurred? How is that recovery measured?

Answer 6

If a party must pay because the other party substantially performed, but there is still some minor problem with performance, the nonbreaching party can recover DAMAGES.

Typically limited to cost to complete performance; sometimes limited to the diminution in MV.

Question 7

Can the breaching party who has not satisfied the CCE recover?

Answer 7

If a party has not satisfied CCE, he cannot recover on the K. He maybe can recover on quasi-K theory.

Question 8

Can a breaching party who fails to satisfy an express condition of the K recover?

Answer 8

No. Usually cannot recover under quasi-K. Express conditions must be strictly satisfied.

Question 9

Divisibility and substantial performance

Answer 9

If a K is clearly divisible (50 in total v 10 units of 5), then the K will be broken into mini-Ks for the purposes of determining substantial performance.

Possible to have SP on 3/10; can recover on the 3/10.

Question 10

What does UCC require re: performance? Two exceptions.

Answer 10

UCC requires perfect tender.

Note: SP does NOT apply to UCC; material breach does NOT apply to UCC.

Except 1: if K explicitly changes UCC default rule
Except 2: K is an installment K. If K is installment, then doctrine of material breach/SP applies.

Question 11

What does perfect tender under UCC require?

Answer 11

Perfect goods
Perfect delivery

Question 12

UCC perfect tender: revocation of acceptance

Answer 12

The buyer may revoke an acceptance of the goods if the goods seem OK when delivered but
a defect is discovered within a reasonable time.

Question 13

Under the UCC’s perfect tender rule, when does the seller have a right to cure? Must the buyer give the seller a chance to cure under these two instances?

Answer 13

If the seller fails to tender perfect goods and:

• time is left on the contract, OR
• the seller had reasonable grounds to believe that the buyer would accept a replacement

then the buyer MUST give the seller a chance to cure

Question 14

• Under the UCC’s perfect tender rule, what unit is the default method of delivery?
• What can the buyer do if delivery is not perfect?
• What is one exception to the perfect delivery rule?
• What is the buyer’s obligation once he accepts the goods?
• If the buyer rejects the goods as nonconforming and time is still left on the K, what right does the seller have?

Answer 14

• The default method of delivery for perfect delivery is ONE delivery of goods.
• If delivery is not perfect, buyer has a right to reject the entire delivery.
• The perfect tender rule does not apply to installment Ks. Instead buyer can reject specific delivery that is not perfect ONLY IF there is (1) substantial impairment in the installment that (2) cannot be cured.
• Once the buyer accepts the goods, he has an obligation to pay.
• The seller has the right to cure and tender conforming goods.

Question 15

How to satisfy perfect delivery when the tender is at the seller’s place of business?

Answer 15

If the goods are to be tendered at the seller’s place of business, then the seller just
needs to give the goods to the buyer.

Question 16

How to satisfy perfect delivery when the K is a shipment K? (3 reqs)

Answer 16

Shipment K perfect delivery reqs:

1. get the goods to a common carrier
2. make arrangements for delivery, AND
3. notify the buyer.

If the K does not specify a place of delivery, it is a shipment K.

Question 17

How to satisfy perfect delivery when the K is a destination K? (2 reqs)

Answer 17

Destination K perfect delivery reqs:

1. get the goods to the buyer’s business, AND
2. notify the buyer

Question 18

When there is a goods K, but the goods are damaged/destroyed before the buyer receives them: who bears the loss? 4 steps.

Answer 18

1. Does the K allocate the risk? If so, allocation controls.
2. Has either party breached (any part of the K)? If so, breaching party bears risk of loss. This is true even if the breach is unrelated to the delivery damage.
3. If no breach, and goods are shipped, what type of delivery K was there? If shipment, risk of loss is with buyer. If destination, risk of loss is with seller.
4. In all other cases, ask if seller is merchant. If yes merchant, risk of loss stays with the seller until the buyer receives the goods. If the seller is not a merchant, the risk of loss moves to the buyer when the seller tenders the goods.

Question 19

Under the UCC, how can an offer to buy goods be accepted?

Answer 19

*promising to ship the goods

*shipping goods that conform to the order or

*shipping nonconforming goods without notice that they are being offered only as an accommodation (which also operates as a breach)

Question 20

What can the buyer do if the goods are not perfectly tendered?

Answer 20

Buyer can accept or reject the nonconforming goods, in whole or in part, and can sue for damages related to breach.

If buyer rejects goods, he does NOT waive any remedy for breach of K. Instead, upon rejection, buyer is entitled to a return of any payment made for the goods.

Question 21

If a seller ships nonconforming goods but also notifies the buyer that he intends the goods only as an accommodation, what is the accommodation treated as?

Answer 21

A counteroffer.

Question 22

If a goods K does not specify a place of delivery, what kind of K is it?

Answer 22

Shipment

Question 23

How do you know if a K is a shipment K or a destination K?

Answer 23

If the K requires the seller to deliver goods through a third-party carrier –> either shipment/destination K.

shipment contract – a contract that does not require delivery at a particular location, in which case the risk of loss passes to the buyer when the goods are delivered to the carrier and a proper contract for their shipment is made or

destination contract – a contract that requires delivery at a particular location, in which case the risk of loss passes to the buyer when the goods are delivered at the named location.