Contracts Flashcards
1
Q
Offer
A
A manifestation of present intent to form a contract communicated to an identified offeree, which contains a definite and certain terms.
2
Q
Termination of Offer - Five Methods
A
Words - Unambiguous words by offeror
Conduct - Unambiguous conduct by offeror
Lapse of time
Death of a party prior to acceptance
Words or conduct by offeree
3
Q
Irrevocable Offers - Four methods
A
- Merchant Firm Offer
- Option Contract
- Unilateral Contract + Part performance
- Detrimental reliance
4
Q
Merchant Firm Offer
A
WRITING signed by merchant that gives assurance that hte offer will be held open (not revoke) for a reasonable time, Restricted to three months.
5
Q
Option Contract
A
Promise to keep the offer open (any duration) that is paid for (consideration required)
6
Q
Unilateral Contract / Part performance
A
May not be revoked after performance has started. Applies when contract requires acceptance by performance.
7
Q
Requirements contract
A
Where a buyer promises to buy from a certain seller, all of the goods that the buyer requires and the seller agrees to sell that amount to the buyer.
8
Q
Applicable Law
A
Service contracts are governed by the common law, however, if goods are the predominant factor of the contgract and merchants are selling the goods, the UCC will govern. Goods are moveable tangible property.
9
Q
Goods
A
Goods are moveable tangible property.
10
Q
Quasi-Contract
A
An equitable remedy that applies whenever the application of contract law yields an unfair or inequitable result. Protects against unjust enrichment.
11
Q
Valid Acceptance
A
A valid acceptance of a bilateral contract requires:
1) An offeree with the power of acceptance
2) Unequivocal terms of acceptance (Common: Mirror image rule)
3) communication of acceptance
12
Q
Mailbox Rule
A
An acceptance is effective when mailed.
13
Q
Improper performance as acceptance
A
Common Law: improper performance is a breach and acceptance
UCC: Operates as accepetance and breach unless hte seller is sending goods as an accomodation.
14
Q
Consideration:
A
A bargained for exchange of legal detriment/benefit.
15
Q
Pre-existing Duty rule
A
Applies to modification of existing contracts. When you are doing what you are already obliged to do no new consideration is needed.
No Pre-existing duty rule in UCC. No new consideration needed, just Good Faith
16
Q
Contract Formation Defenses
A
Statute of Frauds
Illegality
Misrepresentation
Duress
Unconscionability
Undue influence
Mistake of fact
Public Policy
Ambiguity
17
Q
Mistake of Fact
A
Mutual: Parties mistaken about a material aspect and the adversely affected party did no assume the risk of the mistake.
Unilateral: Generally insufficient to make a contract voidable.
18
Q
Ambiguity
A
There will be no contract if
1) Parties use a material term that is open to at least two reasonable interpretations
2) Each parties attach different meanings to the term
3) Neither party knows or has reason to know the term is open to at least two reasonable interpretations
19
Q
Statute of Frauds Contracts for Sale of Goods
A
$500 or more.
Exceptions: 1) Specially manufactured goods, 2) Goods that have been delivered or paid for., 3) Admission
20
Q
Parole Evidence Rule
A
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.
21
Q
Merger Clause
A
A clause that states the contract is complete on its face. Strengthens the presumption that the written document is finale. It strengthens the presumption that the contract is a complete and final expression of the parties.
AKA Intergration Clause
22
Q
Parole Evidence Rule Exceptions
A
- Formation defects (fraud, duress, mistake, illegality)
- The existence of a condition precedent to a contract
- The party’s intent of ambiguous terms
- consideration problems
- a prior valid agreement which (as by mistake) is incorrectly reflected in the writing
- a collateral agreement if it does not contradict or vary the main contract and if it is not so closely connected as to be part of the main contract
- subsequent modification
23
Q
Bilateral Contract
A
An offer that can be accepted by any reasonable way. A promise for a promise/
24
Q
Unilateral Contract
A
A promise in exchange for performance.
25
Counteroffer
Operates as a rejection ending the original offer
26
Requirements Contract
When a buyer promises to buy from a certain seller, all of the goods that the buyer requires and the seller agrees to sell that amount to the buyer a valid offer has been made.
27
Detrimental Reliance
If an offeree has reasonably relied on the offer to his detriment the offer may be irrevocable.
28
Rejection
Offeree communicates to the offeror that the offeree is no longer interested in the offer.
29
Acceptance
A valid acceptance requires 1) an offeree with the power of acceptance, 2) unequivocal terms of acceptance and 3) communication of acceptance
30
Mirror Image Rule
At common law acceptance must be to a mirror image of the offer.
Mirror Image Rule is N/A to UCC.
31
UCC Acceptance
No mirror image required. Acceptance with additional terms is valid acceptance.
Both Merchants - New terms are part of the contract unless they materially alter the contract.
Only one party is a Merchant - New terms are proposal to the contract.
32
Methods of acceptance
1. Bilateral Contract: Promise to perform
2. Unilateral Contract: Complete Performance plus notice
3. UCC 2-206: Promise or Performance, Shipment of non-conforming goods will be an acceptance and breach unless there is a letter of accommodation.
33
Perfect tender rule:
UCC Only
If the goods or tender of delivery fail in any respect to conform to the contract, the buyer may: 1) Reject the whole, 2) Accept the whole, 3) Accept any commercial units and reject the rest.
34
Conditional Acceptance
A conditional acceptance deals with situations where the offeree’s response to an offer contains additional terms and states that acceptance is conditional on those new terms. Although a conditional acceptance would then terminate the offer, the parties then conduct themselves as if there is a contract.
a. Common Law: The conditional acceptance is treated as a counteroffer, and the later conduct is treated as acceptance of that counteroffer. Thus, all the terms of the conditional acceptance are part of the contract.
b. UCC: The contract is based solely on the conduct. The conditional acceptance is not treated as a counteroffer, and is not part of the contract. Thus, the terms appearing only in the conditional acceptance are not part of the contract.
35
Consideration
Consideration is a legally sufficient bargained for exchange of legal detriment.
36
Promissory Estoppel
Requires a promise, foreseeable detrimental reliance on the promise and enforcement necessary to avoid injustice.
A substitute for consideration
37
Quasi-Contract
An equitable remedy in the form of fictional contract created by courts for equitable, not contractual, purposes. It is a legal substitute for consideration that, in equity, is a remedy when a contract is unfair or yields inequitable results. Protects against unjust enrichment.
38
Contract Defenses
Statute of Frauds
Illegality
Duress
Undue Influence
Incapacity
Misrepresentation
Unconscionability
Mistake
39
Incapacity
An incapacitated person may do one of the following:
1. Disaffirm a contract for a reasonable period after becoming capacitated.
2. Affirm the contract after becoming capacitated
40
Illegality
A contract is unenforceable if the subject matter of the contract is illegal. Exceptions: Plaintiff is unaware of illegality while Defendant is aware, parties are not equally liable, the illegality is a failure to obtain a license for revenue raising purposes.
41
Unconscionability
Unconscionability will be shown through 1) oppressive terms or 2) unfair surprise 3) at the time of an agreement.
42
Undue Influence
The person is influenced by a person of influence, higher bargaining power or trust.
43
Mutual Mistake
Both parties are under a mistaken belief regarding a material aspect of the agreement and the adversely affected party did not assume the risk of the mistake. The resulting contract is unenforceable.
44
Unilateral Mistake
A mistake by one party is generally insufficient to make a contract voidable. Exception: non-mistaken party knew or should have known of the mistake, the contract is voidable by the mistaken party.
45
Duress
Duress exists when a person is induced by the unlawful act of another person to enter into a contract or to perform some other act in a context that deprives them of the exercise of free will.
Economic Duress exists when there is a wrongful act that is so coercive that a reasonably prudent person without any reasonable alternative has given into the perpetrator's pressure and agreed to an unfavorable contract.
46
Accord & Satisfaction
An accord is a new agreement based upon an existing contract. Performance of the new agreement is satisfaction. Can sue for breach under both agreements when a party fails to perform.
"If and Then" are the terms the BAR uses for A&S.
47
Novation
A duty may be discharged by a novation. A novation is a contract substituting a new party for one of the parties to a contract. Elements:
1. A previous valid K
2. An agreement among all parties
3. Immediate extinguishment of K duties between original K parties, and
4. A valid new mutual rescission
48
Commercial Impracticability
Seller's duty to perform is discharged where it is impracticable includes embargo, crop failure, war, labor strike, or unforeseen cost increase.
49
Estoppel
Estoppel prevents a person or organization from adopting a position, action or attitude, inconsistent with an earlier position if it would result in an injury to another person.
50
Excuse by Hindrance/Prevention
If the party protected by the express condition hinders or prevents the occurrence of the express condition, the express condition is excused and the K must be performed.
51
Impossibility
Impossibility of performance is where a party may be released from a contract on the ground that unforeseen and uncontrollable circumstances have rendered the performance impossible. Objective test: Nobody can perform.
52
Impracticality
A party must encounter extreme and unreasonable difficulty or an expense that was not anticipated.
53
Frustration of Purpose
A supervening event that was not reasonably foreseen between the parties at the time of formation that completely destroys the purpose of the contract.
54
Anticipatory Repudiation
An unambiguous statement of conduct indicating that a repudiating party will not perform and is made prior to the time that performance was due, the non-repudiating party may:
1. Treat the contract as totally repudiated and sue immediately.
2. Suspend own performance and wait until performance is due to sue.
3. Ignore the repudiation and urge performance.
55
Adequate Assurances
If reasonable grounds for insecurity arise with respect to the performance due from either party, the other party may, in writing, demand adequate assurances of due performance. Party may suspend own performance until assurances are made. After 30 days, contract is considered repudiated.
56
Implied Warranty of Merchantability
Goods are fit for their ordinary purpose. Seller must be a merchant with respect to goods of that kind.
57
Minor Breach/Substantial Performance
If one party substantially performs the K, they have not committed a material breach, but only a minor breach. Substantial performance does not excuse the non-breaching party from performance.
58
Expectation Damages
Expectation damages put the plaintiff in the place they would have been had the contract not been breached.
59
Reliance Damages
Reliance damages put the person in the place they would have been had the contract not occurred.
60
Restitution Damages
Restitution damages compensate the plaintiff for how much the defendant benefitted from the contract.
61
Incidental Damages
Incidental damages are the cost of finding a replacement. They are always recoverable.
62
Consequential Damages
Special damages that are reasonably foreseeable at the time of the contract. As a result of the breach, something else happened to cause the non-breaching party to lose money. Recovery depends on whether this kind of damage was reasonably foreseeable to the breaching party at the time the contract was signed.
63
Duty to Mitigate
Damages suffered by the plaintiff that could have been avoided are not recoverable. A plaintiff has a duty to mitigate.
64
Liquidated Damages
Damages stated in the contract.
Two-part test:
1. Damages were difficult to forecast at the time the contract was made, and
2. The provision is a reasonable forecast.
65
UCC Money Damages
4 Scenarios:
1. Seller breaches, buyer keeps goods: FMV of goods as delivered.
2. Seller breaches, seller keeps goods: FMV at discovery of breach or replacement cost.
3. Buyer breaches, buyer has goods: Contract price.
4. Buyer breaches, seller has goods: K minus FMV at delivery or K minus resale and lost profits.
66
Lost Volume Seller
Seller can receive lost profit from buyer's breach of contract. If the breach deals with a good sold of regular inventory, seller can get expectation damages for the lost profit.
67
Intended 3rd Party Beneficiary
Intended TPB are usually named in the contract, the performance runs directly to them, and there is a relationship between the promisee and the TPB. Intended beneficiaries can be creditors.
68
Assignment of Rights
Assignments are generally valid unless they materially alter the obligor's duty or risk, or unless they are prohibited by law.
69
Delegation of Duties
Delegations are generally valid unless the duties involve personal judgement or skill where the delegation would materially change the obligee's obligations, or the contract prohibits delegation.
70
Misrepresentation
When one party makes a misrepresentation of a material fact prior to the other signing. This includes not disclosing a known defect. Makes a contract unenforceable even if it is an honest misrepresentation.
1) State of Mind: Need not be intentional; it can be done negligently or even innocently.
2) False statement of material fact
3) Justifiable and actual reliance
71
Fraud
The tort of fraud may serve as a contract defense where one party makes an intentional misrepresntation prior to the signing of the contract, not an opinion.
1) Misrepresentation of a material fact
2) Knowledge of statement's falsity or reckless disregard for the truth
3) Intent to induce reliance
4) Causation: Actual reliance
5) Justifiable reliance: Reasonable reliance presumed unless there is clear evidence to the contrary
6) Pecuniary Damages: Usually benefit of the bargain analysis. Can't recover for emotional distress without presence of physical harm. Punitive damages available.
Nondisclosure: A person's nondisclosure of a fact known to them is equivalent to an assertion that the fact does not exist where they know that disclosure is necessary to prevent some previous assertion from being mispresented.
72
Mistake:
A belief not in accord with the facts. May be mutual or non-mutual
73
Mutual Mistake
One made by both parties to the contract. Can be voidable if:
1) Mistake is as to a basic assumption that exsisted at time contract was formed.
2) Material effect
3) Neither party assumed the risk of the mistake
74
Assuming the Risk of the Mistake
Occurs when:
1) The risk is allocated to them by agreement of the parties
2) They are aware at the time of the contract that they have only limited knowledge with respect to the facts but treat their limited knowledge as sufficient or,
75
Predominant Factor Test
Must be applied to determine which law governs the contract. The test deteremines the main purpose of the contract: It is either selling goods or selling services. If a single contract contains both the sale of goods and services then the test must also be applied.
76
Formation of a Contract
IN order for contractual rights to exist, first it must be determined if there is a valid enforceable contract. A valid contract consists of 1) offer, 2) acceptance, 3) consideration, 4) lack of defenses.
77
Invitation to Deal
An invitation to deal is merely an opportunity to negotiate such as advertisements and are generally not valid offers.
78
Termination of an offer
1) Words: Unambiguous statement by the offeror to the offeree of an unwillingness or inability to contract.
2) Unambiguous Conduct of unwillingness to enter into a contract
3) Lapse of time
4) Death of a party prior to acceptance
5) Words or conduct by the offeree
79
Lack of Consideration Substitutes
Promissory Estoppel and Quasi Contract
80
Statute of Frauds
MY LEGS
Marriage
Year
Land
Executor's Promise
Goods over $500
Surety
81
SoF Part Performance for Sale of Goods
Will satisfy SoF if goods are delivered or fully paid for.
Unique Goods - if substantial amount of work towards manufacturing is completed
Partial Performance: A payment under a contract with multiple items will only satisfy the SoF for the individual items.
82
SoF Writing Requirement - Common Law
1) Must meet all material terms test, give both name and what the agreement is about.
2) Signed by party to be charged
83
SoF Writing Requirement - UCC
1) Does not need to mention who, just needs to mention what and quantity. No price requirement
2)Must be signed by party to be charged
Exception: When both are merchants, if the party not charged sends a memo and signs it, and the party to be charged does not respond within 10 days, then no response is necessary.
General Exception: Judicial Admission
84
SoF and Modifications
If SoF to the original then so it must apply to the modification
85
Contract Term - "All changes must be in writing"
Common Law: Not effecitve, ignored
UCC: Yes, effective unless the facts establish a waiver
86
Incapacity
An incapacitated person may do one of the following:
- Disaffirm a contract for a reasonable period after they become capacitated. However, if they take too long then it is presumed they affirmed it.
- Affirm contract after capacitation.
87
Illegality
- Illegal Subject matter is not a legally enforceable contract
- Illegal Purpose: One is not apparent that the contract is being used for an illegal purpose
88
Conditions
An event that determines if and when a duty arises or is extinguished. Must perform or there is breach. As a general rule strict compliance is required for "satisfaction" of the condition.
Types:
Express Condition (i.e. Time is of essence)
Condition Precedent
Condition Concurrent
Condition Subsequent
89
Modification of a Contract - Rules for Consideration
Common Law: Additional Consideration required
UCC: Good Faith required
*** Still apply SoF if original K applied SoF ***
90
Ambiguity
Both parties are mistaken as to an ambiguous fact.
91
Waiver
A waiver of a contract can happen if the party deliberately fails to take certain actions or take a positive act to waives the terms of a contract.
A waiver requires: 1) action must be intentional and voluntary.
May be implied, express or based on words from the party waiving their rights
92
Estoppel
Prevents a person or organization from adopting a position or action inconsistent with an earlier position if it would result in an injury to another person.
93
Reasons for Excused Performance
- Excuse by Hinderance/Prevention
- Impracticability
- Frustration of Purpose
- Substantial Performance
- Anticipatory Repudiation
94
Excuse by hinderance/prevention
If the party protected by the express condition hinders or prevents the occurrence of the express condition, the express condition is excused and the contract must be performed.
95
Impossibility
Impossibility of performance is where a party may be released from a contract on the ground that unforeseeable and uncontrollable circumstances have rendered performance impossible.
Objective Test: Nobody can perform.
Impossibility arises after formation, but prior to performance.
96
Impracticability
A party must encounter extreme and unreasonable difficulty, or an expense that was not anticipated.
○ A mere change in the expense due to normal risks that could have been anticipated will not warrant discharge here.
○ Commercial Impracticability: A seller’s duty to perform is discharged where it is impracticable (i.e., embargo, crop failure, war, labor strike or unforeseen cost increase).
97
Frustration of Purpose
A supervening event that was not reasonably foreseen between the parties at the time of formation that completely destroys the purpose of the contract.
98
Substantial Performance
When a party has almost completely performed his or her duties, but has breached in some minor way, the rule of SP avoids forfeiture of a return performance.
99
Anticipatory Repudiation
An unambiguous statement or conduct indicating that a repudiating party will not perform; and is made prior to the time that performance was due, non-repudiating party may:
1) Treat the contract as totally repudiated and sue immediately;
2) Suspend own performance and wait until performance is due to sue;
3) Treat the repudiation as an offer to rescind and treat the contract as discharged; or
4) Ignore the repudiation and urge performance.
Note: Repudiation may be retracted until the non-repudiating party has accepted the repudiation or detrimentally relied on it.
100
Shipment Contracts
In a shipment contract the obligation of the seller is complete prior to delivery. The seller’s obligations for a shipment contract are:
1. Gets the goods to a common carrier;
2. Makes reasonable arrangements for delivery; and
3. Notifies the buyer.
101
Destination Contracts
The obligation of the seller is complete when the goods get to the destination.
102
Risk of Loss Rules
Rules to determine who bears the risk of loss:
1. K states who bears the risk.
2. The breaching party is liable for any uninsured loss, even though the loss is unrelated to the breach.
3. Risk of loss shifts from seller to the buyer when the delivery obligation is fulfilled.
4. No agreement, no breach, no delivery by common carrier. The determining factor is whether the seller is a merchant. Risk of loss shifts when the seller receives the goods. It does not matter if the buyer is a merchant; the risk of loss shifts from a non-merchant seller when s/he “tenders” (make available for pick-up) the goods.
103
Express Warranty
Created where a seller makes a statement of fact, promise, or description of goods. Mere expression of an opinion is not an express warranty.
104
Implied Warranty of Fitness for a Particular Purpose
Goods are fit for the buyer's special purpose, where the buyer has a special purpose, the seller at the time of contracting has reason to know any particular purpose for which the goods are required; and the buyer is relying on the seller's skill or judgment to select or furnish suitable goods. Note: seller does not have to be a merchant.
105
Breach
If the Duty to Perform has not been excused, there has there been a breach. The key is to determine whether the breach is major or minor.
NOTE: If Anticipatory Repudiation is met above, that is a form of Breach.
106
Material Breach
A breach is material, if, as a result of the breach, the non-breaching party does not receive the substantial benefit of his or her bargain. If the breach is material, the non-breaching party:
a. May treat the K as at an end (any duty of counter-performance is discharged); and
b. Has an immediate right to all remedies for breach of the entire contract, including total damages.
● Note: Breaching party can seek reasonable value of work done under Quasi-contract.
107
Minor Breach
If one party substantially performs the K, s/he has not committed a material breach, but only a minor breach.
o Exam Tip: Substantial performance will not excuse the non-breaching party from performance (paying the breaching party for the full contract).
108
Money Damages / Compensatory: All the contract money remedies
Expectation
Reliance
Restitution
Incidental
Consequential
Avoidable
Liquidated
109
UCC Money Damages
Based on expectation damages. Ask who has breached and who has the goods.
1. Seller breaches, buyer keeps the goods.
Fair market value (“FMV”) if perfect fair market value of good as delivered.
2. Seller breaches, seller keeps the goods.
Market price at the time of discovery of the breach-contract price or replacement price-contract price.
3. Buyer breaches, buyer has the goods.
Contract price.
4. Buyer breaches, seller has the goods.
Contract price minus market price at the time and place of delivery or contract price minus resale price and, in some situations, provable lost profits.
110
Lost Profits for Lost Volume Seller
○ Seller can receive lost profit from buyer’s breach of contract. If the breach deals with a good sold out of regular inventory, seller can get expectation damages (the lost profit; not the entire contract price).
○ Seller who resells must use good faith.
111
Non-Monetary Remedies (Contracts)
Specific Performance: Usually property
UCC Specific Performance: Must be unique goods
112
Third Party Rights or obligations
Intended Third-Party Beneficiary (“TPB”) are usually named in the contract, the performance runs directly to them, and there is a relationship between the promisee and the TPB. Intended beneficiaries can be creditors. (Donee)
● Intended beneficiary will always be named in the contract.
● Incidental beneficiary is not named in the contract
● A third-party contract can be cancelled and modified unless the intended beneficiary’s rights have vested.
113
Assignment of Rights
Assignments are generally valid unless they materially alter the obligor’s duty or risk, or unless they are prohibited by law.
● Language of invalidation takes away both the right to assign and the power to assign so that there is a breach by the assignor and no rights in the assignee.
● If the invalidation contains language of invalidation, it is void.
● Even if the contract does not in any way limit the right to assign, the common law bars an assignment that substantially changes the duties of the obligor.
● Assignment of a right to receive payment is never a substantial right.
● Consideration is not required (Gratuitous assignment)—Can be revoked.
● The assignee can sue the obligor (if performance was performed).
● Assignor for consideration cannot recover from the obligor after assigning the contract.
● The obligor must have notice of the assignment. Prior to this, the payments made to the assignor are valid.
114
Multiple Assignments
MULTIPLE ASSIGNMENTS
All Gratuitous assignments
General Rule: Last assignee generally wins.
Assignments for Consideration
General Rule: First assignment for consideration wins.
Limited Exception: A subsequent assignee takes priority over an earlier assignee for value only if s/he both:
● Does not know of the earlier assignment; and
● Is the first to obtain (1) Payment, (2) Judgment, (3) A novation, or (4) Indicia of ownership.
115
Replevin
Replevin is an equitable remedy to acquire goods if 1) Plaintiff is unable to cover despite his best efforts and 2) the goods are identified in the contract.
116
Third Party Beneficiary Rights
Rights of a Third-Party Beneficiary: An intended beneficiary can sue the breaching promisor, even though there is no privity of contract between them. However, TPBs do not have greater rights than original contracting parties.
1) Defenses: The promisor can raise any defense s/he has against the promisee when s/he is sued by the third party beneficiary. If promisor did not have to perform for promisee (because of some excuse from performance), promisor does not have to perform for third party, even when third party relies.
2) Suing the Promisee: Creditor beneficiary can go against the promisee for damages arising out of the promisor’s breach. The Creditor beneficiary can also go against the Promisor. Note: Only a donee can sue the promisor.
117
Statute of Frauds - Lack of Writing Defenses
- Full performance
- Part performance in transfer of real estate; Need two of three: partial payment, buyer improvement of real estate, buyer's possession
- UCC - Goods delivered or paid
- Payment in installment contracts
- Special manufacturers goods (not suitable for resale to others)
- judicial admission
- merchant confirmation memo
- Equal dignities rule (principal/agent agreement)
Part performance is not a defense but will permit recovery for reasonable value of part-services provided.
118
Merchant Confirmation Memo
The merchant's confirming memo allows a writing to be enforced against both the sender and recipient:
1) Where it is:
a) Between two merchants and one party receives signed confirmation (i.e., the recipient receives the sender’s signed confirmation); and
b) The recipient has reason to know its contents.
2) In which case:
a) Both parties will be bound to the terms of the writing, unless,
b) The recipient objects within (10) ten days of receipt of sender’s signed confirmation.
119
Written Authority to Sign for Another (“Equal Dignities Rule”)
Written Authority to Sign for Another (“Equal Dignities Rule”): Agreements by which a principal appoints an agent to execute a contract, which is itself within a provision of the Statute of Frauds.
1) If the underlying agreement falls within the SOF, it needs written evidence of the agent’s authority.
2) If the underlying agreement does not fall within the SOF, agent’s authority does not have to be in writing.
120
Seller's right to cure
Where a buyer has rejected goods, the seller may, within the time provided for performance, cure by:
1) Giving reasonable notice of an intention to cure, and
2) Making a new tender of conforming goods, which the buyer must then accept.
There is one situation where even after the time for performance has passed, the seller may cure→ where the seller sends the buyer nonconforming goods, that s/he reasonably believes will be acceptable to the buyer, but the buyer rejects, the seller will get a reasonable time to cure.
121
Right of Rejection for Installment Contracts
An installment contract authorizes or requires delivery in separate lots. Buyer can reject an installment only if the nonconformity substantially impairs the value of that installment and cannot be cured.
122
Revocation of Acceptance
Acceptance terminates the buyer’s power to reject and obligates her to pay the price less any damages because of the seller’s breach.
However, a buyer may revoke his or her acceptance of goods if the defect substantially impairs their value to him or her, and:
a) S/he accepted them on the reasonable belief seller would cure and s/he has not;
b) S/he accepted them because of the difficulty of discovering defects, or because of the seller’s assurance that the goods conformed to the contract (a proper revocation of acceptance has the effect of rejection); or
c) Buyer may seek replevin (an in rem proceeding to gain possession of goods) of goods in seller’s possession or a right to specific performance where the goods are unique or in other proper circumstances.
123
UCC Seller Remedies- Measure of Damages
Three Measures of Damages: UCC provides for three measures of damages when a Buyer wrongfully repudiates or refuses to accept conforming goods.
a. Recover the difference between the contract price and the market price;
b. Resell the goods and recover the contract price – resale price; or
c. If applicable, recover the lost profits (Lost Volume Seller): The recoverable lost profits can be found through the difference between the list price and the cost to the seller + Incidentals
124
Retraction of Repudiation
The repudiating party can withdraw its repudiation at any time prior to the party’s next required act.
a. Exception: If the other party has canceled, materially changed his or her position in reliance on the repudiation, or indicated the repudiation is considered final by him or her.
b. Liquidated Damages: Parties may designate an amount for liquidated damages at any amount that is reasonable. If it is an unreasonable amount then the penalties are void.
c. Note: Statute of Limitations for breach of sale contract is four years from the time of the breach.
