Essay Rules Flashcards
(142 cards)
1
Q
Applicable Law
A
The UCC governs all contracts involving the sale of goods, and common-law (CL) rules govern
contracts involving services.
2
Q
Mixed Contracts
A
When a contract includes both goods and services, whichever one predominates will determine the governing law.
3
Q
Merchants
A
Merchants include:
o A person who regularly deals in the type of goods involved in the transaction;
o A person who by his occupation holds himself out as having knowledge or skill peculiar to the practices or goods involved in the transaction; and
o In some instances, any businessperson when the transaction is of a commercial nature.
4
Q
Valid Contract
A
A valid contract requires offer, acceptance, and consideration.
5
Q
Offer
A
An offer is an objective manifestation of the offeror’s willingness to enter into a contract that creates a power of acceptance in the offeree.
6
Q
Offer Requirements
A
An offer requires a promise, terms, and communication to the offeree.
7
Q
Offer Terms (CL)
A
All essential terms must be provided (parties, subject matter, price, quantity).
8
Q
UCC Terms
A
The essential terms are the parties, subject matter, and quantity; a court will “gap fill” any other missing terms.
9
Q
UCC Place for Delivery
A
If the contract is silent as to delivery, the default place for delivery under the UCC is the seller’s place of business
10
Q
Communication of Offer
A
The offer must be communicated to the offeree (i.e., he must know of the offer).
11
Q
Advertisements
A
Advertisements are generally not offers, unless they are specific and limit who may accept the offer. If an ad is presented in the facts, you must discuss it as a potential offer.
12
Q
Bilateral Contract
A
Contract in which parties exchange promises; can be accepted by a promise OR by beginning performance
13
Q
Unilateral Contract
A
Contract in which the offeror makes a promise and the offeree must perform; can only be accepted by complete performance
14
Q
Forming a Unilateral Contract
A
To form a unilateral contract, the offeree must (i) know about the offer and (ii) intend to accept the offer by completing performance.
15
Q
UCC Firm Offer
A
A firm offer exists if:
o The offeror is a merchant; and
o The offeror gives assurance that the offer will remain open in a signed writing.
* Irrevocability cannot exceed 90 days
16
Q
Option Contract (CL)
A
- An offer where the offeror promises to hold the offer open for a certain period of
time. - The offeree must pay consideration to the offeror to hold the offer open.
17
Q
Partial Performance - Unilateral Contracts
A
For unilateral contracts, offeror invites acceptance only by performance and offeree begins to perform. At this point it becomes irrevocable.
18
Q
Promissory Estoppel
A
Offeror could reasonably foresee reliance on offer, and offeree reasonably and detrimentally relies on it. At this point it becomes irrevocable.
19
Q
Termination of Offer
A
TIRED
T – Reasonable TIME after an offer is made, or after expiration date expressly
stated in an offer
I – Mental INCAPACITY or death of offeror or offeree
R – REVOCATION of an offer communicated to an offeree before acceptance
E – EXPRESS or implied rejection communicated to offeror
D – DESTRUCTION of the subject matter of the offer or intervening illegality
terminates an offer by operation of law
20
Q
Counteroffer
A
A counteroffer acts as a rejection of the original offer and creates a new offer
- A “mere suggestion” of a different term or a “mere inquiry” about changing the terms is not a counteroffer and will not terminate the original offer.
21
Q
Acceptance
A
Acceptance is the objective manifestation by the offeree to be bound by the terms of the offer
22
Q
Acceptance of Bilateral Contract
A
Can be accepted by a promise OR by the beginning of performance
23
Q
Acceptance of Unilateral Contract
A
Can only be accepted by complete performance
24
Q
Manner of Acceptance
A
Any reasonable means of acceptance is allowed, unless the offer limits the means of
acceptance.
Silence is generally not acceptance, unless the offeree has reason to believe that silence
will constitute an acceptance.
25
Mirror-Image Rule (CL)
* The acceptance must mirror the terms of the offer.
* Any changes/additions to the terms constitute a rejection of the original offer and a
counteroffer.
26
UCC Counteroffers (One or Both Parties are not Merchants)
o An acceptance from the offeree with changes or additions will be a valid
acceptance.
o However, the contract will not include the changes or additions unless the
offeror agrees to them.
27
UCC Counteroffers (Both Parties are Merchants)
o An acceptance from the offeree with changes or additions will be a valid
acceptance.
o The contract will include the additions unless:
(a) They materially alter the terms of the original offer;
(b) The original offer limits acceptance to the terms of the offer; or
(c) The offeror objects to the changed or new terms.
28
Terms that Materially Alter a Contract
Terms that materially alter a contract include a warranty disclaimer or severe limitations on a party’s remedies.
29
Terms that do not Materially Alter a Contract
Terms that do not materially alter a contract include setting a reasonable time for a party to complain about the goods or reasonable limitations on remedies.
30
Mailbox Rule
Under the mailbox rule, an acceptance is valid when placed in the mail
31
Exception to the Mailbox Rule
If there is an option contract or firm offer, the acceptance is only valid when received before the offer expires.
32
Special Issue - Mailbox Rule
If a party mails a rejection of an offer and then mails an acceptance to the offer, the first communication to be received is effective.
33
Consideration
Consideration requires a bargained-for change in the legal position between parties. In other words, both sides must have a legal detriment.
34
Legal Detriment - Consideration
A legal detriment can take the form of a promise to do/not do something, or performance/refraining from performance.
35
Adequacy of Consideration
A court will not look at the adequacy of the consideration (e.g., the monetary value of the items being exchanged).
36
Gifts - Consideration
A gift from one party is not supported by consideration because the receiving party is not suffering a legal detriment.
37
Prexisting Duty Rule
A promise to perform a preexisting legal duty will not qualify as consideration because the promisor is already required to perform by the promisor (i.e., no additional legal detriment is being incurred).
38
Past Consideration
Under the common law, a legal detriment incurred in the past does not constitute consideration because it was not bargained for in exchange for a legal detriment.
39
Moral Consideration
Under the modern trend, a promise not supported by consideration may be enforceable if it is made in recognition of a significant benefit previously received by the promisor from the promisee.
* This rule does not apply if the promisee conferred the benefit as a gift to the promisor.
* The court may also reduce the amount of money owed under the promise if it is disproportionate to the benefit conferred by the promisee.
40
Promissory Estoppel (Detrimental Reliance)
Substitute for consideration under a contract
The promise will be binding in the absence of consideration if:
* The promisor should reasonably expect the promise to induce action or
forbearance;
* The promise actually induces action or forbearance; and
* Injustice can be avoided only by enforcement of the promise.
The damages awarded under promissory estoppel are usually limited to reliance
damages.
41
Mutual Mistake
Applies if both parties are mistaken as to an essential element of the contract
42
Reformation - Mutual Mistake
The parties can ask a court to reform the contract and rewrite it to reflect the correct element(s) of the contract. Reformation is available if:
* There was a prior agreement (either oral or written) between the parties;
* There was an agreement by the parties to put that agreement into writing; and
* As a result of a mistake, there is a difference between the prior agreement and the
writing.
43
Recission - Mutual Mistake
If reformation is available to cure the mutual mistake, neither party can void (rescind) the contract. If reformation is not available, the contract may be voidable if:
* A mistake of fact existing at the time the contract was formed;
* The mistake relates to a basic assumption of the contract;
* The mistake has a material impact on the transaction; and
* The adversely affected party did not assume the risk of the mistake.
44
Unilateral Mistake
Applies if only one party is mistaken as to an essential element of the contract
45
Recission - Unilateral Mistake
Rescission: The mistaken party can void (rescind) the contract if:
* The mistake would make enforcement of the contract unconscionable; or
* Non-mistaken party failed to disclose the mistake or caused the mistake.
For a unilateral mistake to form the basis for rescission, there also must be an absence of serious prejudice to the non-mistaken party
46
Fraudulent Misrepresentation
o Fraudulent misrepresentation is an intentional misrepresentation of a fact that the innocent
party justifiably relies on.
o The misrepresentation can be affirmative (a lie) or through non-disclosure (omission)
47
Two Types of Fraud
Fraud in the Factum + Fraud in the Inducement
48
Fraud in the Factum
If a fraudulent misrepresentation prevents a party from knowing the character or essential terms of the transaction, the apparent contract is void.
49
Fraud in the Inducement
If a fraudulent misrepresentation is used to induce another to enter into a contract, the contract is voidable by the adversely affected party if she justifiably relied on the misrepresentation in entering into the agreement.
50
Undue Influence
o Undue influence occurs when a party unfairly persuades the other party to assent to a
contract.
o This can occur in certain relationships where the innocent party is susceptible to persuasion
51
Duress
o Duress occurs when a party is improperly threatened and feels he has no meaningful choice but to agree to the contract.
o When a party’s agreement to enter into a contract is physically compelled by duress (e.g., a threat to inflict physical harm), the contract is void.
o When a party is induced to enter into a contract due to other duress (e.g., a threat of pursuing a civil action in bad faith), the contract is voidable.
52
Threat to Breach
Generally, a threat to breach a contract is not improper for purposes of duress. However, if the breach would violate the duty of good faith and dealing, it would constitute an improper threat.
53
Capacity
Certain parties are considered to be incompetent to enter into a contract (e.g., due to infancy, mental illness, or intoxication).
54
SOF Required Contracts
MSOUR
Marriage
Suretyship
One Year
UCC
Real Property
55
SOF Requirements - Writing
* The writing does not have to be a formal contract.
* Multiple writings can be put together to meet the requirements (as long as they reference each other).
* The writing does not have to exist at the time of the promise; it can be created after the promises are made.
* Sale of goods for $500 or more: The writing need not contain all the terms of the contract, but the contract is not enforceable against the party beyond the quantity of the goods shown in writing.
56
SOF Requirements
Contracts that fall within the Statute of Frauds are unenforceable unless they are evidenced by a writing that is signed by the party to be charged and contains the essential elements of the deal.
57
SOF Requirements - Signature
* The writing must be signed by the party against whom the contract is enforced.
* A document on company letterhead may be enough to constitute a signed writing.
58
SOF Exceptions - Contracts that cannot be performed within one year of making
If full performance has occurred by either party, court will enforce it
59
SOF Exceptions - UCC Sale of Goods for $500 or More
* If full performance has occurred by the party seeking to enforce the contract (e.g., goods have been fully delivered or fully paid for), the contract will be fully enforceable.
* If part performance has occurred (part of the purchase price has been paid), the contract will be enforceable to the extent that the money has been paid.
* No writing required if the contract involves specially manufactured goods for the buyer.
* Letter or Memorandum of Confirmation (frequently tested): A contract is enforceable against the receiving party if:
o Both parties are merchants;
o A party sends a confirmatory letter/memo that meets the SOF (writing, signed, essential terms of the deal) to the other party; and
o The other party knowingly receives the memo and does not object in writing within 10 days.
60
SOF Exceptions - Sale of Land
If the contract involves the sale of land, the contract will be enforced if at least two of the following three acts have occurred:
* The purchaser pays part or all of the purchase price;
* The purchaser takes possession of the land; or
* The purchaser substantially improves the property.
61
SOF Exceptions - Estoppel
If a party reasonably and detrimentally relies on a promise, a court may enforce the contract against the other party.
62
Illegality
A court will not enforce a contract that has involves illegal consideration or performance.
63
Unconscionability
o A court will not enforce a contract that is so unfair, no reasonable person would agree to it.
o Remedies: The court may refuse to enforce the entire contract, strike the unconscionable
portion of the contract, or limit the unconscionable terms.
64
Procedural Unconscionability
Bargaining process leading to the formation of the contract is unfair
65
Substantive Unconscionability
Actual terms of the contract are significantly unfair
66
Express Warranty
Any promise or description that is part of the basis of the bargain is an express
warranty, unless it is merely the seller’s opinion/commendation of the value of the
goods.
Disclaimer: Disclaimer clauses that conflict with express warranties are ignored.
67
Implied Warranty of Merchantibility
A warrant of merchantability is implied whenever the seller is a merchant.
To be merchantable, goods must:
* Be fit for their ordinary purpose; and
* Pass without objection in the trade under the contract description.
Disclaimer: This warranty can be disclaimed through a clear written “as is” statement or an oral statement that uses the term “merchantability.”
68
Implied Warranty of Fitness for a Particular Purpose
A warranty that the goods are fit for a particular purpose is implied if the seller has
reason to know:
* The buyer has a particular use for the goods; and
* The buyer is relying upon the seller’s skill to select the goods.
The seller need not be a merchant for this implied warranty to apply.
Disclaimer: This warranty can be disclaimed by general language such as “as is”, but the
disclaimer must be in writing and be conspicuous.
69
Modification
After a valid contract has been formed, any change to the terms of the contract is a modification. Both parties must agree to the modification
70
Modification - CL
Under the common law, a modification must be supported by consideration.
71
Modification - CL (Pre-existing Duty Rule)
If a party offers to pay more money to the other party to guarantee completion of the contract on time, the modification will be unenforceable due to lack of consideration.
If a party agrees to pay more money in exchange for earlier performance of the contract, there will be consideration because the parties are changing their duties.
72
Modification - CL (SOF)
Statute of Frauds: If the modified contract falls within the SOF, it must be in writing unless an exception applies
73
Modification - CL (Provisions Prohibiting Oral Modifications)
A provision requiring a modification to be in writing even though the modification would not otherwise fall within the SOF is not enforceable.
74
Modification - UCC
o A modification does not require additional consideration, as long as the modification is entered into in good faith by both parties.
o Statute of Frauds: If the modified contract falls within the SOF, it must be in writing unless an exception applies (see the exceptions to the SOF, above).
o Provisions prohibiting oral modifications: A provision prohibiting oral modifications to a sales contract is valid—even if the modification would not otherwise fall within the SOF.
75
Accord and Satisfaction
When there is a genuine dispute over the validity of the contract or the amount owed, a party can agree to accept a different performance from what was agreed upon in the contract.
76
Accord
A new agreement where a party agrees to accept a different performance than what was agreed upon
77
Satisfaction
Occurs when the different performance is completed by the other party, which discharges the original contract duties and the accord agreement duties
78
Parol Evidence Rule (PER)
Under the PER, extrinsic evidence of oral or written communications prior to the written contract (e.g., contract negotiations) are generally inadmissible for contradicting the terms of the contract.
79
Integration
o The PER only applies if the writing in question is “integrated” (i.e., intended to be the final agreement regarding the terms of the contract).
o The court will look at the words in the contract to determine if the parties intended for it to be a total or partial integration .
80
Total Integration
The writing contains all the terms of the agreement.
* No parol evidence is admissible.
* Merger clause: If the contract has a “merger” clause stating that the contract is the
final and complete understanding of the parties, it is likely to be a total integration.
81
Partial Integration
The writing contains some of the terms of the agreement.
* Parol evidence is admissible to supplement the writing, as long as it is consistent
with the writing (and do not contradict any of the terms)
82
PER Exceptions - Subsequent Agreement
The PER does not prohibit evidence of modifications or statements made after the contract was written.
83
PER Exceptions - Ambiguity and Interpretation
Evidence is admissible for purposes of interpreting or clarifying an ambiguity in the contract.
84
PER Exceptions - Collateral Deal
Evidence of a separate deal between the parties is admissible, if the deal is not part of the written contract.
85
PER Exceptions - UCC
Evidence of usual performance and dealing between parties is admissible.
86
PER Exceptions - Condition Precedent
Evidence of a condition precedent to the existence of the contract is admissible.
87
Performance of the Contract
* After determining the existence of a contract and the terms of the contract, the next issue is the performance of the contract.
* When discussing the performance of the contract, determine whether the contract involves promise(s) and/or condition(s).
88
Substantial Performance - CL
A party must substantially perform his part of the contract.
A party who substantially performs may recover on the contract even though that party has not rendered full performance.
* A delay in performance does not necessarily constitute a failure to substantially perform.
A party who has not substantially performed generally cannot recover damages based on the contract, but she may be able to recover through restitution.
A party who fails to substantially perform is in material breach.
89
Perfect Tender - UCC
The parties must strictly perform all duties under the contract, or they will be in breach.
The buyer has a right to inspect the goods, and once he accepts them, he has an obligation to pay.
If either the tender or the goods are nonconforming, then the buyer has the right to accept or reject all or part of the goods.
* Right to cure: If a buyer rejects goods as nonconforming and time still remains to perform under a contract, the seller has a right to cure and tender conforming goods.
A party who fails to strictly perform is in material breach.
90
Installment Contracts - UCC
An installment contract is defined as one in which the goods are to be delivered in multiple shipments (i.e., segments).
* Each shipment is to be separately accepted by the buyer.
* Payment is due upon each delivery, unless the price cannot be apportioned.
91
Installment Contracts - Nonconforming Segments
The buyer can reject only if the nonconformity substantially impairs the value of that shipment to the buyer and cannot be cured.
* If the seller makes adequate assurances that he can cure the nonconformity, then the buyer must accept the shipment.
* Remaining segments: The buyer may cancel the entire contract only if the nonconformity substantially impairs the value of the entire contract to the buyer.
92
Conditions
o A condition is a future event that must occur before a party’s contractual rights or obligations are created, destroyed, or enlarged.
o If a condition is not met, there may be no contract at all.
93
Express Conditions
Conditions expressed in the contract itself (e.g., “on condition that”). Must be met fully.
94
Implied Conditions
Conditions which a court may find exist because the nature of the contract suggests that the parties intended the condition. Require substantial performance.
95
Condition Precedent
Must occur before the other party has an obligation to perform
96
Condition Subsequent
Must occur before the other party has an obligation to perform
97
Waiver
A condition may be waived by words or conduct; the waiving party would then have a duty to perform.
98
Wrongful Interference
If a party hinders the other party’s performance and interferes with the occurrence of the condition, the condition will be excused, and the wrongful party will have duty to perform.
99
Estoppel
If a party indicates that it will not enforce a condition, and the other party reasonably relies on this, the party will be estopped from later enforcing the condition.
100
Discharge of Duty to Perform
In certain circumstances, a promisor party’s duty to perform will be discharged, regardless of whether there is a promise or condition involved. All relevant theories for discharging a promisor party’s duty to perform should be discussed.
101
Impracticability
A duty may be discharged if:
* An unforeseeable event occurs (e.g., natural disaster) making the performance of the contract extremely difficult; and
* The nonoccurrence of the event was a basic assumption at the time of the contract.
The party seeking discharge must not be at fault.
Non-extraordinary increases in the cost of performance are not a sufficient basis for this defense.
102
Impossibility
An unforeseeable event occurs, making it objectively impossible for the party to perform.
103
Frustration of Purpose
If an unexpected event arises that destroy the party’s purpose for entering the contract, the party will be entitled to rescind the contract, even if the performance is still possible.
Similar to impracticability, the nonoccurrence of the event must have been a basic assumption at the time of the contract and the party seeking discharge was not at fault.
104
Third-Party Beneficiary Contracts
A third-party beneficiary contract results when the parties to a contract intend that the performance by one of the parties is to benefit a third person who is not a party to the contract.
105
Intended v. Incidental Beneficiaries
When a contract benefits persons other than the parties to the contract, a third party can enforce the contract if the third party is an intended beneficiary. Otherwise, the third party is an incidental beneficiary who cannot enforce the contract.
106
Assignment of Rights
o Almost all contract rights can be assigned.
o Assignments are not allowed when they (i) materially increase the duty or risk of the obligor or (ii) materially reduce the obligor’s chance of obtaining performance.
107
Delegation of Duties
o Generally, obligations under a contract can be delegated.
o When obligations are delegated, the delegator is not released from liability.
The delegator is still liable if the delegatee does not perform.
108
Novation
Delegator is only released from liability if the other party to the contract agrees to release the delegator as a party to the contract and substitute a new one
109
Breach of Contract
If a duty to perform exists and has not been discharged, a party’s non-performance is a breach.
110
Anticipatory Breach/Repudiation
Anticipatory breach or repudiation occurs when a promisor party indicates that it will not perform prior to the date that performance is due.
111
Anticipatory Breach/Repudiation - CL
The promisor party clearly and unequivocally indicates through words or acts that it will not perform.
The nonbreaching party can:
* Treat the repudiation as a breach of contract and sue immediately;
* Suspend its own performance and demand performance from the promisor;
* Cancel the contract; or
* Wait for the date of performance, and then sue for breach
112
Anticipatory Breach/Repudiation - CL - Retraction
The promisor party can retract its repudiation until/unless the other party:
* Acts in reliance on the repudiation;
* Accepts the repudiation; or
* Has already filed an action for breach of contract.
113
Anticipatory Breach/Repudiation - UCC
Anticipatory breach or repudiation occurs when a buyer/seller (i) unequivocally refuses to perform; or (ii) fails to provide timely adequate assurances.
Either party can demand assurances in writing if it has reasonable grounds to be insecure about the other party’s ability to perform and may suspend performance until it receives assurances.
* A failure to provide reasonable assurances within a reasonable time (must not exceed 30 days), can be treated as a repudiation.
The nonbreaching party can:
* Treat the repudiation as a breach of contract and sue immediately;
* Suspend its own performance and demand performance from the promisor;
* Cancel the contract; or
* Wait for the date of performance, and then sue for breach.
114
Anticipatory Breach/Repudiation - UCC - Retraction
The promisor party can retract its repudiation of the contract until/unless the other party has:
* Cancelled the contract;
* Materially changed position on the basis of the repudiation; or
* Otherwise indicated that he considers the repudiation to be final.
115
Material Breach - CL
A material breach occurs when the nonbreaching party does not receive the substantial benefit of the bargain.
The nonbreaching party can withhold any promised performance and pursue remedies for breach.
116
Minor Breach - CL
A minor breach occurs when the breaching party has substantially performed, but not fully performed.
* The nonbreaching party is entitled to pursue remedies for the minor breach, but it still must perform under the contract.
117
Expectation Damages
Expectation damages are generally calculated by comparing the value of performance without the breach (i.e., contract price for performance) with the value of the performance with the breach (i.e., fair market value of performance).
118
Diminution in Value
If the award of expectation damages would result in economic waste, then courts may instead award damages equal to diminution in value.
119
Breach - Economic Waste
If the breach is willful, and only completion of the contract will give the nonbreaching party the benefit of its bargain, then a court may award expectation damages even if that award would result in economic waste.
120
Consequential Damages
Consequential damages are reasonably foreseeable damages other than expectation damages that are related to the breach of the contract (e.g., loss of profit).
121
How to Recover Consequential Damages
In order to recover consequential damages, three elements must be met:
1. Foreseeability: The damages must be natural and probable consequences of the breach or contemplated by the parties at the time the contract was formed.
2. Causation: The plaintiff must show that the damages were caused by the defendant’s breach.
3. Certainty: The plaintiff must prove the dollar amount with reasonable certainty.
* If the amount is too speculative (e.g., a new business), the court will not award consequential damages.
122
Reliance Damages
These are damages that the nonbreaching party incurs in reasonable reliance upon the promise that the other party would perform.
123
Incidental Damages
These are damages that arise when the nonbreaching party is trying to remedy the breach (e.g., in a commercial contract, the cost of finding a replacement seller of goods).
124
Duty to Mitigate Damages
o The nonbreaching party has duty to avoid or mitigate its damages by taking reasonable steps to seek replacements/substitutes for goods and/or services.
o A failure to take reasonable steps to mitigate damages will reduce the damages recovered by the nonbreaching party.
125
Restitution
Restitution allows nonbreaching and breaching parties to recover damages under an unjust enrichment theory (i.e., not based on the contract).
126
Restitution - Nonbreaching Party
A nonbreaching party cannot seek restitution if it has performed all of its duties and the only performance due from the other party is the payment under the contract.
* The nonbreaching party must seek expectation damages instead.
Restitution damages based on the reasonable value of the benefit conferred on the other party
127
Restitution - Breaching Party
If a party has not substantially performed, it will be in breach of contract, and cannot recover under the contract.
However, if the nonbreaching party has benefited from the breaching party’s performance, the breaching party can recover for the benefit conferred minus the damages the nonbreaching party is entitled to.
128
Quasi-Contract (i.e., implied-in-law contract)
If there is no enforceable contract, a court may award restitution damages on the basis of quasi-contract if:
The plaintiff conferred a measurable benefit on the defendant;
The plaintiff acted without gratuitous intent (i.e., he intended to be paid); and
It would be unfair to let the defendant retain the benefit.
129
Quasi-Contract - Retaining the Benefit
Courts will find that it is unfair to let the defendant retain a benefit if (i) the defendant had an opportunity to decline the benefit but
did not do so, or (ii) the plaintiff had a reasonable excuse for not giving the defendant such an opportunity.
130
Specific Performance
Under the remedy of specific performance, the nonbreaching party can ask a court to order the breaching party to perform the contract.
131
Speicifc Performance - Elements
The following five elements must be met:
1. There must be a valid contract.
2. The terms of the contract must be certain/clear enough to allow a court to make an order.
3. The nonbreaching party has satisfied any conditions precedent (or the condition has been excused), so the breaching party’s performance is now due.
4. Money damages are inadequate.
* This usually means the item(s) involved in the contract are unique (e.g., land, pieces of art, antique cars).
5. It is feasible for the court to enforce and supervise the breaching party’s performance.
132
Specific Performance - When Not Allowed
Courts will not require people to perform service contracts (e.g., employment) because it is not feasible to enforce/supervise a person’s service and forcing a person to work can rise to the level of indentured servitude under the Thirteenth Amendment.
133
Defense to Specific Performance
A court will not grant specific performance if the breaching party can assert defenses of laches or unclean hands.
Laches: The nonbreaching party waited an unreasonably long time to seek specific performance, and the delay prejudiced the breaching party.
Unclean hands: The nonbreaching party engaged in unethical or immoral acts relating to the contract.
134
Buyer's Remedies: Failure to Tender
Under the UCC, the buyer has several alternative remedies if the seller fails to tender the goods
135
Buyer's Remedies: Failure to Tender - Damages
The buyer may recover the market price minus the contract price. The UCC also permits recovery for incidental and
consequential damages resulting from the seller’s breach.
136
Buyer's Remedies: Failure to Tender - Cover
The buyer may purchase similar goods elsewhere and recover the replacement price minus the contract price.
137
Buyer's Remedies: Failure to Tender - Specific Performance
The buyer may demand specific performance for unique goods or if the buyer is unable to cover.
138
Buyer’s Remedies: Non-Conforming Tender
o Buyer has the right to accept or reject all or part of the goods.
o The buyer has the right to inspect the goods before deciding whether to accept or reject.
o Payment does not constitute acceptance if there is no opportunity to inspect the goods before payment.
139
Buyer’s Remedies: Non-Conforming Tender - Rejection
A valid rejection requires that the buyer give notice to the seller within a reasonable time, before “acceptance.”
Rejection triggers the seller’s right to cure.
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Buyer’s Remedies: Non-Conforming Tender - Right to Cure
The seller has a right to cure a defective tender if:
The time for performance under the contract has not yet elapsed; or
The seller had reasonable grounds to believe that the buyer would accept despite the nonconformity.
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Buyer’s Remedies: Non-Conforming Tender - Acceptance
Under the UCC, the buyer accepts goods by expressly stating acceptance, or using the goods, or failing to reject the goods.
A buyer may revoke an acceptance of goods if there is a defect that substantially impairs their value to the buyer and:
* The buyer accepted the goods on the reasonable belief that the seller would cure the defect, but the seller has failed to do so; or
* The buyer accepted the goods without discovery of the nonconformity, and such acceptance was reasonably induced either by the difficulty of discovering the nonconformity before acceptance or because the seller gave assurances that the goods were conforming.
The buyer must inform the seller of its decision to revoke within a reasonable time after the nonconformity is discovered or should have been discovered by the buyer.
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