CONTRACTS Flashcards
(124 cards)
1
Q
What is the overarching question of contracts?
A
Which promises has society deemed important enough to enforce through courts of law.
2
Q
What is the objective theory of assent?
A
- Would a reasonable person in the position of the promisee understand from the promisor’s words and conduct an intent to be bound; AND
- Did the promisee in fact so believe?
3
Q
What is the difference between objective and subjective in contracts?
A
Objective: A reasonable person’s belief.
Subjective: The belief of the actual person in the case.
4
Q
In viewing an offer objectively, from which perspective do we look at?
A
The “listener’s shoes”.
5
Q
What intentions are considered in an intent to be bound?
A
Only the intentions expressed to the other party; no secret intentions.
6
Q
What are the factors relevant to Offer (Intent to Be Bound)?
A
Language used,
Conduct of parties,
Length of negotiations (depends on what you’re negotiating),
Subject matter of contract,
Setting of negotiations,
Course of dealing (or conduct before signing),
Method of communication,
Characteristics of parties (somewhat subjective),
Policy concerns.
7
Q
What must an offer give the listener?
A
The power of acceptance. All the listener needs to do to make a contract is say “I accept”.
8
Q
What are the two parts of an offer?
A
- Intent to be bound.
2. Specific terms (definiteness)
9
Q
What is the general rule of advertisements?
A
Advertisements are generally not offers, and price quotes are generally not offers. The exception is if the language is very specific and limited (like first come first served, or rewards), or if it is a response to an inquiry.
10
Q
What are the common essential terms?
A
Parties,
Time for Performance,
Price,
Subject Matter
11
Q
What are the two approaches to missing terms?
A
Old common law approach: No specific terms, the offer fails, no contract.
Modern approach: Fill the gaps wherever there is a reasonable basis for doing so.
12
Q
What are the ways to kill an offer?
A
- Rejection (from the offeree)
- Revocation (from the offeror) (direct/indirect)
- Lapse
- Death
13
Q
What is the rule for indirect revocation?
A
2 things have to happen:
- The offeror needs to take steps indicating an intent not to be bound; AND
- The offeree must learn of those steps from a reliable source?
14
Q
What are facts that matter in the killing of an offer?
A
Method of communication Price of item Rarity of item Time given for consideration (30 seconds vs 1 week,etc.) Fluctuation/stability of item price Demand of item
15
Q
What happens if the offeror dies?
A
The offer dies, whether or not the offeree knew about it. The contract does not die with the death of an offeror, just the offer. If it was accepted before the death of the party, it is still enforceable.
16
Q
What are some factors that are used to consider a “reasonable time”?
A
Subject matter
Method of communication
Course of dealing
Trade usage
17
Q
What is the common law rule for option contract?
A
a promise to keep an offer open that is supported by consideration is irrevocable for the stated time.
18
Q
What are the elements of a firm offer?
A
“An offer by a merchant to buy or sell goods in a signed writing which by its terms gives assurance that it will be held open is not revocable, for lack of consideration, during the time stated or if not time is stated for a reasonable time [not to exceed three months].”
19
Q
What is a firm offer and when does it apply?
A
Firm offer is a promise to keep the offer on the table. It is UCC so applies to sale of goods only. And it does not require consideration.
20
Q
What are the elements of promissory estoppel?
A
- A promise that the promisor should have reasonably expected to induce the plaintiff’s action or forbearance
- The promise did in fact induce the plaintiff’s action or forbearance, and
- Injustice can only be avoided by enforcing the promise.
The promise need not be definite enough to support a unilateral contract, but it must be definite enough to show that the plaintiff’s reliance on it was reasonable and foreseeable.
21
Q
What are the 3 ways to make an offer irrevocable?
A
Option Contract
Firm Offer
Promissory Estoppel
22
Q
Who is a merchant?
A
A merchant is a person who regularly deals in goods of the kind or otherwise by his occupation holds himself out as having knowledge or skill peculiar to the practices or goods involved in the transaction.
23
Q
What are the 3 categories of acceptance mediums?
A
Reasonable - effective upon dispatch
Unreasonable - effective upon receipt
Prohibited - ineffective
24
Q
What is the mailbox rule?
A
Acceptance is effective upon dispatch.
25
When is everything except the acceptance effective?
Upon receipt.
26
Why is acceptance triggered upon dispatch?
The offeror is in the best position to bear a risk, and has the power to change it.
27
What are the exceptions to the mailbox rule?
If the medium of acceptance is unreasonable
If the parties contract around the mailbox rule
Option contracts, acceptance of option effective upon receipt
When there is “Two in the mail”
Revocation of reward offers
28
How can you measure if a medium of acceptance is reasonable?
what would a reasonable listener think the offeror would allow? what would the reasonable offeree think is reasonable?
29
What is the "two in the mail" exception?
If acceptance goes out first=mailbox rule
Unless rejection somehow arrives first and is relied on.
If rejection goes out first, it is effective upon receipt
30
What is the revocation of reward offers exception?
Effective when posted, not when received, as long as the revocation is posted the same way as the reward was posted.
31
What is a bilateral contract?
Exchange of promises enforces a contract.
32
What is a unilateral contract?
Actual performance of promise is a contract
33
What are the three approaches to bilateral/unilateral contracts?
Old common law approach: binary -> either a contract is unilateral or bilateral, the offer determines which
Strict common law approach: the contract forms for unilateral only at completion of performance.
Modern Approach:
Words create bilateral contract,
Starting performance either forms bilateral contract or option to offeree to finish, OR
Unilateral contract formed at end of performance (only when contract specifically lays this out).
34
What notice of acceptance is required?
Common law only requires reasonable effort by the offeree to inform that offer has been accepted. UCC notice is required, or any information of notice.
35
What is the UCC Notice of Acceptance by Performance Rule?
Where the beginning of a requested performance is a reasonable mode of acceptance an offeror who is not notified of acceptance within a reasonable time may treat the offer as having lapsed before acceptance.
36
What is the mirror image rule?
If the acceptance is identical in terms to the offer, a contract forms. It is common law only. If there is acceptance and a suggestion, that's okay. If there is acceptance and new mandated terms there is no contract, as that constitutes a counter offer.
37
What is the last shot rule?
Whatever is the last shot (last offer/counteroffer) then the last terms communicated (if undisputed) are the terms of the contract. Common law only, cannot apply when mirror image rule applies.
38
What is the battle of the forms?
1. A definite and seasonable expression of acceptance or a written confirmation which is sent within a reasonable time operates as an acceptance even though it states terms additional to or different from those offered or agreed upon, unless acceptances is expressly made conditional on assent to the additional or different terms.
2. The additional terms are to be construed as proposals for addition to the contract. Between merchants such terms become part of the contract unless
(a) The offer expressly limits acceptance to the terms of the offer;
(b) They materially alter it; or
(c) Notification of objection to them has already been given or is given with a reasonable time after notice of them is received.
3. Conduct by both parties which recognizes the existence of a contract is sufficient to establish a contract for sale although the writings of the parties do not otherwise establish a contract. In such case the terms of the particular contract consist of those terms on which the writings of the parties agree.
39
How is section 2 of the UCC Battle of the Forms summarized into elements?
Additional terms become part of the contract if all of the following are satisfied:
Merchants;
Original offer not restricted to its terms;
Additional terms do not materially alter contract; AND
Original offeror has not objected
40
What are the 3 different split of authority on what to do with different terms?
Treat different terms exactly like additional terms.
Ignore the different terms, follow the offer exactly.
Follow knock-out rule; different terms knock each other out and what is reasonable is ok.
41
Simply describe the battle of the forms.
1. Do we have an agreement on the most important things?
2. Yes, are there additional things?
3. No, but did they act like it anyway?
42
What is the rule for electronic signatures?
Electronic signatures follow the general rule that you are bound to a contract whether or not you read it, however, you need to be on notice that you’re even making a contract and the standard for that notice is higher. The offeree has to know that in accepting, they are binding themselves to a contract.
43
How must terms be presented for an electronic signature contract?
It is not enough to give a link to the terms. If there is something special, it must be drawn to attention. Example of something special: arbitration. The more the terms deviate from what you would expect, the clearer and bolder they have to be.
44
What are preliminary negotiations, and what examples may come out of them?
Before a final complete deal is reached, parties can make many agreements, and subagreements. Examples:
Final Complete Contract
Partial contract (Closed terms/open terms, requires consideration)
No contract but a commitment to bargain further in good faith (unusual)
No contract and no obligation to bargain any further in good faith (common)
Promise that triggers reasonable reliance (promissory estoppel)
45
What is the rule for an option contract?
A promise to keep an offer open that is supported by consideration is irrevocable for the stated time.
46
What is the rule for "sham consideration" in an option contract?
An offer is binding as an option contract if it is in writing and signed by the offeror, recites a purported consideration for the making of the offer, and proposes an exchange of fair terms within a reasonable time.
47
Explain the concept and requirements of consideration.
Each side getting something is the bargain, each promise has to be worth the price of the other promise to be binding.There does not need to be equivalence of value, and there does not need to be equivalence of number of promises. There just must be something received in a bargain for exchange. Bargain as far as the second element of consideration, it does not mean negotiating. It means each side needs to be seeking the promise they are getting.
The two requirements of consideration are:
Benefit or detriment (or promise of)
AND bargained-for exchange.
48
What is the concept of nominal consideration?
Nominal Consideration says at some point the equivalence of value is such an obvious joke that the parties are clearly not bound. We don’t look at the equivalence of value except for nominal consideration. Something that is obviously not what the promisor is seeking is nominal consideration.
49
What is the concept of past consideration?
Past consideration is something received prior to bargaining for the contract. It fails the second element of consideration.
50
When is forebearance to sue sufficient consideration?
The forbearing party must honestly or reasonably believe that they had a colorable claim, at the time of the agreement. A claim is colorable when there is uncertainty as to its validity.
51
What is an illusory promise, and how does it affect consideration?
An illusory promise is consideration that appears real but is in fact and illusion. This examines the first element of consideration, as each side is not actually getting something.
52
What is the test for whether a conditional event makes consideration an illusory promise?
Is the contingency within complete control of the promisor?
53
What is the majority approach to past consideration and moral obligation? What is the minority approach?
Majority: Past consideration does not count, moral obligation does not equal legal obligation.
Minority: If a a promisor received benefits directly, and feels morally obligated to pay for that benefit, and does promise to pay for it there is a legal obligation.
54
What is the material benefit exception?
An exception to the rule of moral obligation, it is satisfied if there is a benefit to the promisor and the benefit goes directly to the promisor, and there is a re-promise to pay.
55
What is the doctrine of unjust enrichment?
Situations that don’t meet contract rules but still enforces the benefitor to pay for the benefit they received.
Elements: 1) enrichment 2) that is unjust.
56
What is quasi-contract theory?
Quasi-contracts are an implied-in-law agreement, which rests on the proposition or general theory of obligation that one party should not be permitted to be enriched unjustly at the expense of a second party unless the first party makes compensation to the second party for the value of the benefit conferred. There is no "wanting" in a quasi-contract, like in actual contracts. A quasi-contractual claim exists somewhere in-between classic contract and classic tort liability.
57
What is the common law rule for contract modification, and what is an exception?
Need new consideration to modify a contract. New consideration means each side is getting something new that they didn’t already have from the other side (The Pre-Existing Duty Rule). Any minor change, as long as it’s some change, is valid consideration for modification of contract.
An exception: changed circumstances exception - if there was an unforeseeable event and the parties voluntarily modified the contract, it’s allowed even if both sides aren’t getting something.
58
What is best efforts?
There is an implied promise to do your best efforts in fulfilling your side of the contract, which counts as valid consideration not illusory promise.
59
What are satisfaction clauses?
The parties can contract for the satisfaction of a party.
| A party who is dissatisfied must be either honest, or reasonable in that dissatisfaction.
60
What are requirement contracts? Output contracts?
UCC Contracts. Output contracts are measured based on the output of the seller. Requirement contracts are measured from the needs of the buyer in a given year. Is a promise. Must be honest.
A term which measures the quantity by the output of the seller or the requirements of the buyer means such actual output or requirements as may occur in good faith, except that no quantity unreasonably disproportionate to any stated estimate or in the absence of a stated estimate to any normal or otherwise comparable prior output or requirements may be tendered or demanded. - UCC 2-306
61
What is the rule for Common Law Modification of a Pre-existing Duty?
Allows the change to be valid without consideration if it is:
- Voluntary
- Contract not fully performed on either side
- Modification is fair and equitable
- Circumstances not anticipated by the parties (outside the parties’ purview)
62
What is the UCC rule for contract modification?
The UCC allows modification even without consideration if they are made in good faith.
63
What kind of promise is required for promissory estoppel?
A promise for promissory estoppel requires a real, legal commitment. Not puffery, exaggerations, or salesmanship.
64
What are the elements for promissory estoppel?
1. Promise (It does not need to be an offer, less than an offer. Higher level of commitment=real promise. Split of authority as to specific requirements and vague statements.)
2. Foreseeable to speaker that listener will rely
3. Actual and reasonable reliance by listener
4. Enforcement is necessary to prevent injustice
Note: element three and four are interrelated. The more you have of one, the less you need of the other, and vice versa.
65
What is the split of authority on enforcing promissory estoppel when a contract exists?
Some courts allow promissory estoppel even if there was an existing contract
Some courts do not allow promissory estoppel when there is a contract to be relied on.
66
What is the split of authority on promissory estoppel for charities?
Some courts waive reliance requirement
| Some courts will not waive reliance requirement
67
What are the three splits of authority regarding various promissory estoppel concepts?
1. How definite the promise needs to be.
2. Is there a contract already in place?
3. For charities, some courts don’t require reliance.
68
What is parol evidence?
Parol evidence is anything that is outside the writing of the contract. If there is no writing, there is no parol evidence.
69
What is the parol evidence rule?
The parol evidence rule is a rule of substantive law which prohibits the consideration of evidence as to anything which happened prior to or simultaneously with the making of a contract which would vary the terms of the agreement. Parol evidence rule is the rule about what evidence the court is allowed to hear. The judge makes the call on what the jury can hear. Parol evidence does not exclude evidence that occurred after the contract, only before.
70
What is the good faith doctrine?
Parties are required to act in good faith. Good faith is about being honest and reasonable. In determining good faith it often looks at motives.
71
What is a zipper clause/merger clause/integration clause?
A statement in the contract saying that this is the complete integrated writing.
72
What are the steps to be taken when considering whether there is parol evidence to take into account?
First, identify the writing, then identify the controversial parol evidence.
73
What are some exceptions to the parol evidence rule?
mistake in the writing, evidence that is collateral to the agreement (a side agreement that does not contradict the main agreement) fraud (lied to), duress (threatened), conditions precedent, contemporaneous writings
74
What parol evidence does the UCC allow and for what purpose?
UCC says we can admit trade usage (what do other companies do), course of performance (what you do after you sign), course of dealing (how these parties dealt with each other previously) to supplement or explain but not to contradict.
75
What is the element test for parol evidence?
Exclude evidence if:
1. Written contract
2. Integrated
3. Prior or contemporaneous evidence of terms not contained in the writing
4. Proffered terms contradict or add to written terms
76
What tests can be used to determine if a writing is integrated?
1. Four corners test - if it says it’s integrated, it’s integrated
2. Written Omission test - did they write about the subject of the controversial evidence, if yes assume it is integrated as to that subject
3. Ordinary inclusion test - would parties ordinarily include this type of evidence in a writing. If ordinary parties write about it and these parties didn’t we infer these parties didn’t want it and purposefully excluded it.
77
What evidence does the parol evidence rule not apply to?
Parol evidence does not apply to evidence that explains a writing, only that contradicts or adds to the writing
78
What is the overall goal of interpreting terms of a contract?
To determine what the intent of the parties is objectively expressed.
79
How do you determine objective intent?
1. Plain meaning
a. Text and definitions within contract
2. Context
a. Parties’ conduct during contract formation
i. Negotiations, drafts, conversations, etc.
b. Course of performance: what happened after signing
c. Course of previous dealing
d. Trade practices
3. Court-supplied terms
4. Legislative terms
80
What test is used to determine the writing is unambiguous? What doctrine allows evidence when there is possible ambiguity?
For determining ambiguity, there is the four corners interpretation that there is only one meaning and it is that laid out within the four corners of the writing. Provisional admission includes evidence to explain the meaning.
Four corners does not allow the evidence into the court (if it finds it is unambiguous within the four corners), provisional admission does allow the evidence to get into a judge who then decides whether or not it goes to the jury to settle ambiguity.
81
What is good faith performance for common law? For UCC?
The phrase “good faith” is used in a variety of contexts and its meaning varies somewhat with the context. Good faith performance or enforcement of a contract… excludes a variety of types of conduct characterized as involving “bad faith” because they violated community standards of decency, fairness, or reasonableness.
Restatement Second of Contracts
A failure to perform or enforce in good faith, a specific duty or obligation under the contract, constitutes a breach of that contract.
UCC
82
When does good faith attach?
Good faith only attaches once the contract is made. Negotiating in good faith is only required if there was an agreement to do so, no obligation.
83
What turns good faith into bad faith?
Motive!
84
What are satisfaction clauses and how are they evaluated?
Satisfaction clauses: would a reasonable person believe that it is acceptable? (Objective)
Exception for taste and fancy (art, movies, music, etc.) (Subjective)
Apply both subjective and objective tests to satisfaction (if subjective then… if objective then…)
85
What is the standard for satisfaction? Does that ever change?
The default rule is objective standard, to go around the default rule you have to make it abundantly clear that you want to do a subjective standard.
An item of taste or fancy for subject matter is an exception to the default of objective.
86
What is the difference between misrepresentation and a breach of warranty?
In general, the remedy for misrepresentation is rescission, basically undoing the contract. The remedy for a breach of warranty is the value of item you were supposed to be provided.
87
How are express warranties by the seller created?
Express warranties by the seller are created as follows:
Any affirmation of fact or promise made by the seller to the buyer which relates to the goods and becomes part of the basis of the bargain creates an express warranty that the goods shall conform to the affirmation of promise.
88
What are not considered affirmations of fact? How can you tell?
Estimates and guesses and opinions are not affirmations of fact.
Measurability is a good way to differentiate between puffery and affirmations of fact. Additional factors:
Variability
Oral vs. written (express warranty more likely written)
Definiteness/Commitment
Specific vs. Vague
89
Are appraisals warranties?
Appraisals alone are statements of opinion not statements of fact, so appraisals alone are not warranties.
90
What is warranty of fitness for a particular purpose?
Where the seller at the time of contracting has reason to know any particular purpose for which the goods are required and that the buyer is relying on the seller’s skill or judgment to select or furnish suitable goods, there is unless excluded or modified under the next section an implied warranty that the goods shall be fit for such purpose.
91
Can both an express warranty and implied warranty exist?
You can have both an express warranty and an implied warranty.
92
What is warranty of merchantability?
A warranty that the goods shall be merchantable is implied in a contract for the sale if the seller is a merchant with respect to goods of that kinds...goods to be merchantable must be at least such as...are fit for the ordinary purposes of which such goods are used”
93
How do you determine what law applies when there is a mix of goods and services?
Main test= predominant purpose test - what is the predominant purpose of the contract?
Gravamen test: what is being sued about.
94
Can you sue the manufacturer for breach of warranty when the item was purchased through a retailer?
Express warranties you can sue the manufacturer even when you buy it from a retailer and not the manufacturer.Implied warranties, there is a split of authority. Some require privity, others don't.
95
How can you disclaim a warranty?
Warranty Disclaimer
(2) subject to subsection (3) to exclude or modify the implied warranty of merchantability or any part of it the language must mention merchantability and in case of a writing must be conspicuous, and to exclude or modify any implied warranty of fitness the exclusion must be by a writing and conspicuous.
(3) Notwithstanding subsection (2) unless the circumstances indicate otherwise, all implied warranties are excluded by expressions like “as is”, “with all faults” or other language which makes plain that there is no implied warranty.
96
What warranties are easy to disclaim? Hard?
Implied warranties are easy to disclaim, express warranties are hard to disclaim.
97
What is a condition?
A condition is an event, not certain to occur, which must occur, unless its non-occurrence is excused, before performance under a contract becomes due.
98
What do you look at in determining if something is a condition?
Magic words
Context
Risk of Loss
99
What are the three things an event in a contract can be considered? Provide an example of each.
An event in the contract can be: A condition, a promise, or both. If it’s a condition, it’s a pure condition, if it happens the contract goes through and if it doesn’t no obligations. A promise is just a promise. A promissory condition is both, where you promise the conditional event.
Pure condition:
“If the Raiders win the Super Bowl, I will buy your bike for $200.”
Pure condition - no promise, if the event happens contract continues, if event doesn’t happen no breach and contract does not continue
Promise:
“Insurer will insure against damage to insured’s crops in exchange for premium payments. Insured will not destroy his crops prior to inspection after a loss.”
Just a promise - Doesn’t use magic words, other conditions exist explicitly but not this one, policy, etc.
Promissory Condition:
“The insured will make premium payments each month. The obligation to pay for a loss is conditioned on timely premium payments.”
100
What is the old common law approach and modern approach for independent vs. dependent promises?
Old common law approach: promises are independent, you have to do what you promised regardless of what the other party does.
Modern approach: when promises are dependent upon each other, if one doesn’t occur the other doesn’t have to occur.
101
What is the inferred condition when a contract doesn't say?
Things that take longer in time are a condition of things that take shorter in time. (building comes before payment)
When two events take the same amount of time,and contract is silent, constructive condition: one promise is the condition of the other, each promise needs to be tendered. If the other side doesn’t tender, you don’t have to tender, but to sue for breach you have to show you were ready to tender.
102
What is tender?
Tender is showing that you are ready, willing, and able to perform your promise.
103
What is a restricted tender?
Tender counts even if you are insisting on what you have a legal right to insist upon, called a restricted tender.
104
What are the 3 circumstances where the contract continues even if condition fails?
1. Waiver - intentional relinquishment of a known right (express or implied) UCC waives any promise, common law can only waive nonmaterial promises. Waivers can be retracted but it looks at proper timing, proper notice, and no reliance by other party.
2. Estoppel - waiver with reliance. Requires reliance. Can apply to material terms. Cannot be retracted.
3. Hindrance - if a party hinders the condition from occurring the party cannot then claim the failed condition as an excuse for not performing.
105
What is a waiver of a condition? What is the test for establishing if a condition has been waived?
Waiver is the intentional relinquishment of a known right. It can be done expressly, or impliedly.
The test either way: did the party who had the right to receive performance waive that right?
106
What may be waived according to common law? UCC?
Common law says you can only waive nonmaterial rights. UCC you can waive any right.
107
Who may waive a condition?
Conditions can be waived by the party the condition benefitted, only if the condition clearly benefited the party. Conditions cannot be waived if they are designed to benefit both parties.
108
What is a retraction of a waiver and how is it fulfilled?
The promisor can make the promisee’s duty again subject to the condition by notifying the promisee or beneficiary of his intention to do so if (a) the notification is received while there is still reasonable time to cause the condition to occur. (The other side still needs a chance to perform). AND the party receiving the waiver has not materially changed her position in reliance on the waiver.
109
What is estoppel of a condition?
Did the listener do something in reliance of the condition being waived, and was it reasonable and substantial.
110
What is the big difference between waiver and estoppel?
Estoppel is waiver plus reliance. Estoppel excuses waiver under common law or UCC.
If there is estoppel, the party who waived cannot retract that waiver.
111
What is hinderance and its affect?
Also called prevention.
Non occurrence is excused when a party hinders the condition from occurring. A party who materially contributes to the failed condition cannot use the failure of that condition to their advantage. A party can hinder by acting, or through omission of an act. Bad faith is often hinderance.
112
What is a material breach?
Material breach is common law. Each party has a right to get substantially what they bargained for.
113
What is the difference between a breach and a material breach?
A breach is any broken promise. For a breach you can always sue.
Only if the breach is material can the other side cease performance.
114
What is the doctrine of substantial performance?
It allows a court to imply a term that allows a partial or substantially similar performance to stand in for the performance specified in the contract.
The doctrine of substantial performance does not apply if the condition is clear. If the condition is clear and perfect compliance is required, that can be insisted upon.
115
What are the material breach factors?
a. Extent of harm to injured party by breach = if victim got what bargained for no material breach
b. Adequacy of monetary damages to compensate injured party for breach = if money can compensate the injured party no material breach
c. The extent to which the party failing to perform will suffer forfeiture (doing work not paid for) if injured party is allowed to suspend or cancel performance. = if there is forfeiture no material breach
d. The ability and willingness of party failing to perform will cure his failure. = if there is a willingness to cure no material breach
e. The good faith of party failing to perform. = if party acted in good faith no material breach
116
What is the election of remedies doctrine?
If you elect to continue the contract you don’t give up your right to sue but you do give up your right to suspend. When a party materially breaches a contract, the nonbreaching party must choose between two remedies it can elect to terminate the contract and recover liquidated damages or it can continue the contract and recover damages solely for the breach.
117
What is divisibility? When does it apply?
Divisibility is a common law concept. Divisibility helps isolate the breach into one part of the contract so that the victim of the breach can complain about one part of the contract but cannot cease performing on the other part of the contract. The contract continues with all parts except where the breach is. Difficult to make divisible contract, most contracts are whole contracts.
Divisibile contracts:
Contract can be fairly apportioned into agreed equivalents AND
Each set of agreed equivalents has independent value standing alone
118
What is the perfect tender rule?
Perfect tender rule (UCC): If the goods or the tender of delivery fail in any respect to conform to the contract, the buyer may:
(a) Reject the whole; or
(b) Accept the whole; or
(c) Accept any commercial unit or units and reject the rest.
119
What is considered acceptance for the purpose of the perfect tender rule?
Receipt of the goods is not acceptance of the goods.
Where a tender has been accepted the buyer must within a reasonable time after he discovers or should have discovered any breach notify the seller of breach or be barred from any remedy.
The buyer accepts ownership of the goods if they alter, or sell them.
The buyer accepts if they keep it past the reasonable time.
120
What is the right to cure?
Where any tender or delivery by the seller is rejected because non-conforming and the time for performance has not yet expired, the seller may seasonably notify the buyer of his intention to cure and may then within the contract time make a conforming delivery.
Where the buyer rejects a nonconforming tender which the seller had reasonable grounds to believe would be acceptable… the seller may if he seasonably notifies the buyer have a further reasonable time to substitute a conforming tender.
121
May acceptance be revoked for the purpose of perfect tender?
The buyer may revoke his acceptance of a lot or commercial unit whose nonconformity substantially impairs its value to him if he has accepted it without discovery of such non-conformity if his acceptance was reasonably induced either by the difficulty of discovery before acceptance or by the seller’s assurances. Revocation of acceptance must occur within a reasonable time.
122
What is anticipatory repudiation?
Anticipatory repudiation is a statement by one side that they are going to breach. Once the other side gives a clear indication they are not going to perform on a contract that still has performance left, then the victim of the statement can sue for breach immediately.
123
What are the buyer's rights for perfect tender?
Where the buyer has accepted goods and given notification he may recover as damages for any nonconformity of tender the loss resulting in the ordinary course of events from the seller’s breach as determined in any manner which is reasonable.
Where a tender has been accepted… the buyer must within a reasonable time after he discovers or should have discovered any breach notify the seller of breach or be barred from any remedy.
If buyer accepts goods, he can still reserve his right to sue for damages if there is reasonable notice.
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What is adequate assurances?
When reasonable grounds for insecurity arise with respect to the performance of either party the other may in writing demand adequate assurance of due performance and until he receives such assurance may if commercially reasonable suspend any performance for which he has not already received the agreed return.
