Contracts - Model Rule Statements Flashcards
(10 cards)
contracts for the sale of goods of $500 or more
A contract for the sale of goods is governed by Article 2 of the Uniform Commercial Code (UCC). Under the UCC, a contract for the sale of goods for $500 or more falls within the Statute of Frauds (SOF) and is generally unenforceable unless evidenced by a writing. The writing need not be formal but must be signed by the party to be charged and contain the essential elements of the deal. The writing must indicate that a contract has been made, identify the parties, and contain a quantity term. So long as the parties intend to create a contract, the UCC “fills the gap” if any other terms are missing—e.g., the time or place for delivery, or the price.
when a writing is not required under the UCC
A writing is not required (1) for specially manufactured goods, (2) to the extent that payment has been made and accepted for goods, (3) to the extent that goods are received and accepted, or (4) when a merchant fails to object to a memorandum from another merchant within 10 days of receipt of the memorandum.
anticipatory repudiation
The doctrine of anticipatory repudiation applies when a promisor repudiates a promise before the time for performance is due. The repudiation must be clear and unequivocal, then the promisee can either treat the repudiation as a breach or ignore it and demand performance. A repudiating party may not retract the repudiation after the other party (1) acts in reliance on the repudiation, (2) signifies acceptance of the repudiation, or (3) commences an action for breach of contract.
compensatory damages
Compensatory damages are meant to put the nonbreaching party in as good a position as performance would have done by compensating the nonbreaching party for actual economic loss. Under the UCC, when a buyer breaches or repudiates a contract for the sale of goods, the seller may resell the goods and sue for the contract price minus the resale price. A seller intending to resell the goods in a private sale must first give the buyer reasonable notice of his intent to resell. But the resale must (i) be only of goods identified in the contract and (ii) must be commercially reasonable. In such cases, the seller can recover the difference between the contract price and the resale price. Additionally, the seller is entitled to recover incidental damages, which include storage and shipping costs.
common law vs. UCC
The common law applies to contracts for services or real estate and Article 2 of the UCC applies to contracts for the sale of goods. If a transaction includes both goods and services, the predominant purpose test is applied to resolve whether the common law or the UCC applies to the entire transaction.
common law - minor breach of contract
Under common law, if the breach is minor (i.e., the breaching party has substantially performed), then the non-breaching party must still perform under the contract. This allows a party who substantially performs to recover on the contract even though that party has not rendered full performance. Generally, the substantially performing party can recover the contract price minus the cost to the other party of obtaining the promised full performance.
common law - material breach of contract
a material breach of contract occurs when the non-breaching party does not receive the substantial benefit of the bargain. The material breach allows the non-breaching party to withhold any promised performance and to pursue remedies for the breach, including damages. The breaching party who failed to substantially perform generally cannot recover contract damages, but may be able to recover through restitution. However, most courts hold that recovery in restitution is only available if the breach was not willful. Consequently, a party who intentionally furnishes services that are materially different from what was promised cannot recover anything in restitution unless the non-breaching party has accepted or agreed to accept the substitute performance.
measure of damages in construction contracts
In construction contracts, the general measure of damages for a contractor’s failure is the difference between the contract price and the cost of construction by another builder, plus any progress payments made to the breaching builder and compensation for delay in completion of the construction.
When a breach results in a defective or unfinished construction, if the award of damages based on the cost to fix or complete the construction would result in economic waste, then a court may instead award damages equal to the diminution in the market price caused by the breach. Economic waste occurs when the cost to fix or complete the construction is clearly disproportional to any economic benefit or utility gained as a result.
actual damages
Actual damages can be either direct or consequential. Consequential damages are a direct result of the breach but need not be the usual result of the breaching party’s conduct. Instead, consequential damages need only be a reasonably foreseeable result of the breach given the parties’ specific circumstances. The breaching party must have reasonably foreseen the consequential damages for them to be recoverable. Damages are foreseeable if they were a natural and probable consequence of breach, if they were “in the contemplation of the parties at the time the contract was made,” or if they were otherwise foreseeable.
Consequential damages do not concern the value of the lost performance due to breach, but there must be a causal link between the breach and the consequential damages for them to be recoverable. And the plaintiff must prove the dollar amount of consequential damages with reasonable certainty not speculatively.
mitigating damages
A party to a contract must avoid or mitigate damages to the extent possible by taking steps that do not involve undue risk, expense, or inconvenience. A non-breaching party is held to a standard of reasonable conduct in preventing loss. The non-breaching party’s failure to mitigate does not give the breaching party a right to sue the non-breaching party for such failure; it only reduces the non-breaching party’s damages recovery.
