Contracts Essay Flashcards
(24 cards)
Applicable Law
The UCC governs all contracts involving the sale of goods, and common-law rules govern contracts involving services.
OR
The Uniform Commercial Contract (“UCC”) governs contracts for the sale of goods. Goods are moveable, tangible items.
Mixed contract: When a contract includes both goods and services, whichever one predominates will determine the governing law.
Merchants: Special rules apply to merchants under the UCC. A merchant includes not only a person who regularly deals in the type of goods involved in the transaction, but also any businessperson when the transaction is of a commercial nature.
Contract Formation
A valid contract requires an offer, acceptance, consideration, and no defenses to formation.
Ambiguous Term
An ambiguous term is one that is subject to more than one interpretation. In determining if a term is ambiguous, the court will apply the plain-meaning rule, which provides that the objective definitions of contract terms control the meaning of the contract.
Trade Usage: If a term is ambiguous, evidence of trade usage or even local custom may be used to show that a particular word or phrase had a particular meaning.
PER
Under the PER, evidence of prior or contemporaneous negotiations and agreements, written or oral, that contradict or modify contractual terms is inadmissible to vary the terms of the contract as written. The first step is to determine whether the written contract is intended as the final agreement of the parties (i.e., an integration). A total integration is a writing that completely expresses all of the terms of the parties’ agreement. A partial integration is a writing that sets forth the parties’ agreement about some, but not all, terms.
One way an integration can be evidenced is by a merger clause within the contract.
For a partial integration, the parties are permitted to introduce supplementary extrinsic evidence (oral or written) of other terms as long as the evidence is consistent with the writing, but not if the evidence contradicts the terms of the writing.
Exception to PER: Ambiguity
Ambiguity is an exception to the PER. If the term is ambiguous, outside evidence may be introduced to explain ____.
Modification (CL)
To be valid, a modification at common law must be supported by additional consideration.
Express Condition Precedent
Express conditions are expressed in the contract. A condition precedent is one that must occur before an absolute duty of performance arises in the other party.
Express Condition Precedent Exception: Substantial Performance
When a party has almost completely performed his duties, but has breached in some minor way, the rule of substantial performance avoids forfeiture of a return performance. However, express conditions generally must be complied with fully unless excused. On the other hand, a party who substantially complies with an implied or constructive condition can trigger the obligation of the other party to perform.
The doctrine of substantial performance permits a party who substantially performs to recover on the contract even though that party has not rendered full performance.
Material Breach
A party who fails to substantially perform is in material breach.
Expectation Damages
Expectation damages are those damages that put the non-breaching party in the same position he would have been in had the breach not occurred. In general, a party who substantially performed her contractual obligations can recover the contract price minus any amount that it will cost the other party to obtain the promised full performance.
Restitution
When a defendant is unjustly enriched by the plaintiff, restitution generally allows the plaintiff to recover on the benefit conferred by the plaintiff upon the defendant.
Reliance
Reliance damages are based on the out-of-pocket expenses incurred by the non-breaching party. Reliance damages put the party in the same position as if the contract were never formed. They are an elected alternative to expectation damages.
Specific Performance
For the court to grant the equitable remedy of specific performance, there must be an inadequate legal remedy, definite and certain terms in a valid contract, feasibility, mutuality, and no defenses.
Inadequate legal remedy
The legal remedy is inadequate when the subject matter is rare or unique.
Feasibility
Enforcement of the contract must be feasible. It may not be feasible if the court lacks jurisdiction or if it requires too much supervision. In addition, it is not feasible in a service contract because of difficulty in supervision and because the courts feel it is tantamount to involuntary servitude in violation of the 13th Amendment.
Mutuality
Mutuality requires that the party seeking Specific Performance has already fully performed or can show that he is ready, willing, and able to perform.
Unclean Hands
Unclean hands is a defense to an equitable remedy when the party who seeks equitable relief himself engages in serious misconduct in close relation to the claim.
Statute of Frauds (“SOF”) – Goods
The SOF requires contracts for the sale of goods for $500 or more to be in writing and signed by the party to be charged.
Modification (UCC)
At common law, modifications to a contract require additional consideration, while under the UCC only good faith is required. Further, all modifications are subject to the SOF.
Anticipatory Repudiation
Under the UCC, in cases where the other party’s words, actions, or circumstances make it unequivocally clear that he is unwilling or unable to perform, the aggrieved party may: (i) sue immediately, (ii) suspend his own performance and wait and see until the due date, (iii) treat the repudiation as an offer to rescind and treat the contract as discharged, or (iv) ignore the repudiation and urge performance.
Adequate Assurances
Under the UCC, if reasonable grounds for insecurity arise regarding the seller’s ability to perform, then the buyer may in writing demand written adequate assurances of due performance. Until the seller offers assurances, the buyer may suspend his own performance. If no assurances are provided within a reasonable amount of time (usually not more than 30 days), the buyer may treat the contract as repudiated.
Express Warranty (UCC)
The UCC allows for express warranties. Any promise, affirmation, description, or sample that is part of the basis of the bargain is an express warranty unless it is merely the seller’s opinion or commendation of the value of the goods.
Risk of Loss – Shipment K
When the contract specifies FOB to seller’s place of business, the risk of loss is on the buyer once the seller delivers the goods to the shipping company, makes a proper contract for their shipment, obtains and completes all paperwork necessary for the buyer to obtain possession of the goods, and the buyer is notified. Failure to make a proper contract for shipment with the shipping company and failure to notify the buyer are grounds for rejection by the buyer only in instances of material delay or loss.
