final contract rules Flashcards
(132 cards)
1
Q
CONTRACT FORMATION
A
heading
2
Q
A Contract
A
promise or set of promises, the breach of which the law provides a remedy, or the performance of which the law in some way recognizes as a duty.
3
Q
What Law Applies
A
The Common Law applies to the sales of real property, services or intellectual property. The UCC applies to all contracts for the sale of goods.
4
Q
Hybrid Contract?
A
Predominant Purpose Test – where a hybrid transaction involves predominantly the provision of services, the UCC does not apply.
Gravaman Test – a contract is severed into different parts, with the UCC applying to the goods involved in the contract, and the common law applying to the non-goods involved in the contract.
5
Q
Sales
A
The transfer of title from seller to buyer for a price
6
Q
Goods
A
moveable, tangible property, identifiable at the time of contracting
7
Q
Merchants
A
a person who regularly deals in goods of this kind or who, by his occupation, has some special skill or knowledge as to these goods.
8
Q
Valid Contract?
A
A valid, enforceable contract consists of mutual assent (offer and acceptance), consideration, and a lack of formation defenses.
9
Q
Offer (UCC and CL)
A
the manifestation of present contractual intent, communicated to an identified offeree, containing definite and certain terms.
10
Q
Advertisement as an Offer
A
Generally an advertisement is not an offer - is an invitation to bargain.
11
Q
QTIPS
A
Quantity, Time, Identity of parties, Price, Subject matter
12
Q
Revocation of Offer
A
occurs when the offeror communicates to the offeree that the offeror no longer wishes to be bound to the terms of the offer.
13
Q
Indirect Revocation
A
occurs if the offeree receives correct information from a reliable source that the offeror no longer wants to be bound to the offer.
14
Q
Lapse of Offer
A
Must be a timely acceptance
15
Q
Rejection
A
occurs when the offeree communicates to the offeror that the offeree is rejecting the offer.
16
Q
Counter Offer
A
a rejection and a new offer.
17
Q
Option Contract
A
irrevocable if supported by consideration under common law.
18
Q
Merchants Firm Offer (UCC 2-205)
A
occurs when there is a writing signed by a merchant that gives assurance that the offer will be held open. It is irrevocable for the time stated but never to exceed 3 months.
19
Q
Unilateral Contract
A
is irrevocable for a reasonable time once performance has begun
20
Q
Bilateral Contract
A
CL: requires either a promise or beginning performance. UCC: requires either a promise to ship or shipment of goods
21
Q
Shipment as Acceptance (UCC 2-206)
A
UCC 2-206(1)(a) an offer generally is to be construed as inviting acceptance in any reasonable manner and medium.
UCC 2-206(1)(b) an order or other offer to buy goods for prompt or current shipment is construed as inviting acceptance by a prompt promise to ship or by the prompt or current shipment of conforming or non-conforming goods, but such a shipment is not acceptance if seller seasonably notifies buyer that goods are offered only as an accommodation to the buyer.
22
Q
Detrimental Reliance
A
occurs if the offeree relies on the offer and the reliance is reasonable, substantial and foreseeable. Then, the offer will remain open for a reasonable time.
23
Q
Acceptance
A
an unequivocal assent to the terms of the offer. Only intended offerees may accept.
24
Q
Mirror Image Rule
A
Under common law, the acceptance must be the “mirror image” of the offer. Any additional or missing terms will result in a rejection and counteroffer.
25
Acceptance with Additional Terms (UCC 2-207(1))
Under the UCC, an acceptance that adds new terms to the offer is a valid acceptance. a sales contract can be formed in any manner sufficient to show an agreement - unless acceptance is expressly made conditional on assent to the additional or different terms.
UCC 2-207(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 acceptance is expressly made conditional on assent to the additional/different terms.
26
Material Term
any term that substantially affects the economic risks or benefits, or in any way limits the usual remedies for breach.
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Mailbox Rule
An acceptance is effective on dispatch. An offer or rejection is effective on receipt.
In a Post-Acceptance Rejection, if the rejection is received first, the mailbox rule applies and there is a contract unless the offeror changes his position based on the rejection, then there is no contract.
In a Post-Rejection Acceptance the mailbox rule does not apply. Whichever the offeror gets first applies.
29
Private Reward Offer
Cannot be accepted by one who does not know of the offer as an offeree cannot assent to an offer unless he know of it.
30
Offeree Accepts by Performance
The duty of the offeror is discharged unless offeree uses reasonable diligence to notify offeror of acceptance, or offeror learns of performance in a reasonable time, or offeror excuses notification of acceptance.
31
Where Silence may act as Acceptance
Where offeror says silence is acceptance or where previous dealings make it reasonable to notify offeror if no intent to accept or where offeree takes the goods or when conduct creates an implied-in-fact contract or offeree takes the benefit of the services knowing offeror expects compensation.
32
Consideration
a legally sufficient, bargained-for exchange, which induces current performance, is a detriment to the promisor and is binding on both parties.
33
Gift
Promisor does not benefit or its an illusory benefit.
34
Adequacy of Consideration
A court will not inquire into the adequacy of consideration.
35
Pre-existing Duty
Cannot serve as consideration. But a similar performance is consideration if it differs from what was originally required.
36
Requirements or Output Contract
Quantity = output of seller or requirements of buyer or contract for exclusive dealings enforceable although no specific quantity may be stated because quantity is capable of being made certain by reference to objective extrinsic facts.
Exception: quantity cannot be unreasonably disproportionate
37
Promissory Estoppel (Detrimental Reliance)
a substantial, foreseeable and reasonable reliance on a promise to the detriment of the promisee. Enforcement will only be to the point necessary to avoid an unjust result.
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DEFENSES TO FORMATION
heading
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Statute of Frauds
certain contracts must be evidenced by a writing to be enforceable. -M-Y-L-E-G-S-. (marriage/executors or administrators of estate)
40
Year
Contracts that cannot be completed in less than a year must be evidenced by a writing to be enforceable
Test Note: Unilateral contracts do not fall under the statute of frauds because they do not become a contract except on full performance that happens the instant of full performance.
Time is from the time the contract was formed until the date of the end of performance.
Excused non-performance does not equal performance.
41
Land
Contracts for the sale of land must evidenced by a writing to be enforceable. It must contain price and location.
Under the "Equal Dignity Rule" An agent's authority to execute a contract within the statute of frauds must also be in writing signed by the principal.
42
Goods
Contracts for goods of $500 or more must be evidenced by a writing to be enforceable.
Exception: Specially manufactured goods will take the contract out of the SoF
Exception: the contract is taken out of the statute of frauds by part or full performance or acceptance.
Exception: must be "signed by the party to be charged”
Exception: merchants confirmatory memorandum - where both parties are merchants. Where one party sends a written confirmation to the other, signed by the sender, within a reasonable time of the oral contract. Where the recipient knows the content and where the recipient does not object within 10 days.
43
Surety
Contracts for a surety or to answer for the debt of another must be in writing to be enforceable.
Must be a collateral promise. "Main Purpose Rule": If the main purpose of the promise is to benefit the promisor rather than the debtor, the oral promise is enforceable against the promisor and the contract is taken out of the SoF.
Under the statute of frauds a contract is neither void nor voidable. It is unenforceable.
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Essay Approach to the SOF
- is the contract subject to the statute of frauds?
- what kind of contract is it?
- is there a signed writing sufficient to satisfy the statute of frauds?
- is there a recognized exception to the statute of frauds?
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Incapacity of Minors
Contract voidable at the option of the minor.
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Mental Incapacity
Contracts with persons adjudicated insane are void.
Contracts with persons who have deficient mental capacity to understand the "nature and significance" of a contract are voidable
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Incapacity - Intoxication
Contracts with persons who are so intoxicated as to not understand the "nature and significance" of a contract are void if the other party has reason to know of the intoxication.
49
Adhesion Contract
where a party with superior bargaining power can dictate terms on a take-it-or-leave-it basis that violate reasonable expectations.
50
Illegality
When subject matter of a contract is illegal, the contract is void.
When the subject matter of a contract is legal but it is to be used in an illegal manner or for an illegal purpose, then the contract is voidable at the option of the innocent party.
Contracts with non-competition clauses may be deemed illegal. To be valid the limit on competition must be reasonable in scope of time and geography.
An invalid non-competition clause will result in courts using the "blue pencil" to make the terms reasonable and the clause valid.
51
Misrepresentation/Fraud
contains a misrepresentation of fact concerning a material factor in the contract.
Nondisclosure: General rule is that there is no duty to disclose.
Exception: Half-truths; what you believed to be true, you now know is false; statement was true when made, but false before reliance occurs; or active concealment
Misrepresentation includes both innocent and negligent misrepresentations. Fraud requires scienter - knowing it was false or with a reckless disregard as to its truth of the falsity.
Innocent misrepresentation requires both reasonable and actual reliance.
Fraudulent misrepresentation requires only actual reliance.
52
Elements of Fraud
1) Intentional/knowing or negligent/reckless misrepresentation (an assertion not in accordance with the facts) of a material fact; or Concealment in some cases of a fiduciary relationship or failure to correct a mistake; AND
2) Justifiable reliance on the misrepresentation to his/her detriment.
53
Duress
contracts induced or modified by an improper threat that leaves the victim no reasonable alternative are voidable.
Threat of future crime or tort; threat of criminal prosecution; bad faith use of civil process; threat of wrongful breach of existing contract
54
Economic Duress
Economic duress occurs when one party makes an improper threat to another to induce the victim to enter into or modify a contract. Contracts induced by economic duress are voidable at the option of the victim.
55
Undue Influence
occurs where there is an improper persuasion by a wrongdoer, usually a person in a position of trust and confidence that seriously impaired the free exercise of judgment by the victim. The contract is voidable by the victim.
56
Unconscionability
when the conditions existing at the time of the making of the contract are both procedurally and substantively unconscionable.
Procedural Unconscionability: indicates an absence of meaningful choice usually unequal bargaining power.
Substantive Unconscionability: when the terms are unreasonably favorable to one party.
57
Mutual Mistake
occurs when both parties are mistaken as to a material fact. The contract is voidable at the discretion of the adversely affected party.
58
Unilateral Mistake
occurs when a party is mistaken as to a material fact. This is not a defense unless the non-mistaken party knew or should have known of the mistake.
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PARTIES TO A CONTRACT
heading
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Privity
Third parties generally do not have privity. However, third-party beneficiaries, assignments and delegations are the exceptions to the privity requirement.
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Third Party Beneficiaries
A third-party beneficiary is one for whose benefit a contract is made but who is not party to the contract
Third-party beneficiaries rights vest if: 1) the third-party is asked to assent to the contract terms, 2) the third-party changes their legal position in reliance of the promise, 3) or the third- party sues to enforce the promise.
Modification/discharge of contract duty to TPB is ineffective to affect rights of TPB if contract so provides. Otherwise parties can modify their agreement. Rights to modify the contract terminate if beneficiary, before notice of change, changes position in reliance, brings suit, or manifests assent.
Either promissee or TPB(creditor or donee) may seek specific performance.
TPBs right to performance is subject to any contractual defenses that may be raised by the promisor.
62
Intended Third Party Beneficiaries
usually are named in the contract, the performance runs directly to them, and there is a relationship between the third-party beneficiary and the promisee.
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Incidental Third Party Beneficiaries
have no rights. Not an intended beneficiary.
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Creditor Third Party Beneficiaries
intended TPB where the promisees purpose in extracting the promise from the promissor was to discharge an obligation owed to the TPB.
65
Donee Beneficiary
intended TPB where the promisees purpose in extracting the promise from the promissor was to confer a gift on the TPB. Generally cannot sue to enforce the promise. CAN sue: detrimental reliance if the promissee tells the donee beneficiary of the contract and should foresee reliance by the donee and the donee reasonably relies to their detriment, the donee can sue the promissee directly under a promissory estoppel-detrimental reliance theory – BUT NOT as TPB on the contract.
A donee beneficiary is the person who becomes a third-party beneficiary because of a gift from the promisee to the third-party beneficiary.
66
Assignments
present transfer of a right. Extinguishes the right in the assignor, so can be enforced only by the assignee. Can be created by contract or gift. Rights are generally assignable. Assignment is effective when executed, that is, by document or conduct in reliance.
Assignments generally are valid unless they materially alter the obligor's duty or risk or unless they are prohibited by law.
An assignee becomes the real party in interest and may enforce any rights against the obligor directly.
The obligor must deal directly with the assignee once notice is given.
Gratuitous assignments are generally revocable. For value – generally irrevocable.
Exceptions to assignment:
Rights may be assigned unless validly precluded by contract, forbidden by statute or public policy or the assignment would materially change the obligors duty, or increase the burden of risk, or impair return performance, or reduce the value of the performace.
Repair and construction contracts are generally assignable. Non-assignable personal services sa lawyers, physicians, architects and authors. Test for assignment is whether performance so involves the personality or personal characteristics of the obligor that it would be unfair to require the obligor to perform for a third person.
67
Delegation
transfer of a duty
Delegation of duties is permitted except where the duties involve personal judgment and/or skill or where delegation would substantially change the obligee's expectations.
Delegation does not result in complete substitution of delegate for the obligor. obligor remains liable and can be sued if delegate fails to perform or performs improperly.
An obligee must accept performance from the delegate.
The delegator remains a surety for the delegatee.
The obligee may sue the delegator and may sue the delegatee if the delegation was for consideration under a third-party beneficiary promise with the delegatee being the promisor and the obligee being the third-party beneficiary.
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Novation
an agreement through which the obligee agrees to accept the delegate as a complete substitute for obligor and relases the obligor from her duties under the contract. requires the assent of all parties
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TERMS OF A CONTRACT
heading
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Indefiniteness - Supplying Missing Terms
A court may supply a missing term where
- Parties manifest that a reasonable term may apply
- parties have left the term to be determined by future mutual agreement
- performance may supply the missing term by a manifestation of intent
- the duty of good faith and fair dealing may imply a missing term
72
Sources of Meaning & Standards of Interpretation (UCC)
to aid in interpretation courts look at words and conduct. General meaning prevails. Technical terms have technical meanings. Writings as a whole are interpreted together and all writings that are part of the same transaction are interpreted together. Express terms take precedence over course of performance, course of dealing and usage of trade. Course of performance takes precedence over course of dealing and usage of trade. Course of dealing takes precedence over usage of trade.
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Course of Performance
a sequence of conduct between parties to a particular transaction that exists if the transaction involves repeated occasions for performance and the other party accepts the perfomance without objection.
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Course of Dealing
a sequence of conduct concerning previous transactions between the parties to a particular transaction.
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Usage of Trade
any practice or method of dealing having regularity of observance in a place, vocation, or trade as to justify an expectation that it will be observed with repect to the transaction in question.
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ambiguity
a contract is interpreted as a whole, with consideration of express terms having greater weight than course of performance, course of dealing or usage of trade. (UCC)
If the language of a contract is unambiguous, we give effect to its plain meaning (“plain meaning rule”) and do not contemplate what the parties may have subjectively intended by certain terms at the time of formation. (if unambiguous – judge to apply the unambiguous meaning).
Where a contract term may be interpreted as having more than one meaning – considered ambiguous – courts (and the UCC) will reject the plain meaning rule and allow the introduction of extrinsic evidence (external, outside, contextual, parol evidence) to explain the ambiguous term. (if ambiguous – jury to examine the extrinsic evidence).
77
modification
A modification requires the mutual assent of the parties. Under common law a modification requires additional consideration.
A modification requires the mutual assent of the parties. Under UCC 2-209, no consideration is needed as long as the modification is requested in good faith.
A modification may need to satisfy the statute of frauds and require a writing.
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NO Oral Modification Claus
A clause requiring modification be in writing generally is valid.
However, if there is a waiver of this provision with detrimental reliance, then the adverse party is estopped from asserting the defense.
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Common Law Contract Terms
Mirror Image Rule – sellers response with materially different terms is a counter offer.
Last Shot Rule – where performance begins, acceptance of goods is acceptance and a contract exists with the last communication included in the terms.
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Acceptanc with Additional Terms (UCC-2-207)(2)
As between merchants, the additional terms become part of the contract unless they materially alter the contract, unless the offeror objects, or unless the offer is limited as to its terms.
If non-merchants, then the additional terms become mere proposals for new terms and must be expressly accepted.
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Application of (UCC 2-207)(2)
different/conflicting terms in an offering and acceptance documents.
Majoriy – Knock out rule – the conflicting terms knock each other out and neither become part of the contract.
UCC gap filler provision – use a gap filler if one is relevant or if the common law controls.
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UCC 2-207(3)
conduct of the parties can establish a contract even if the writing do not show one. The terms consist of thos on which the writings of the parties agree AND UCC gap fillers.
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Parol Evidence Rule
Rule: when parties intend a writing to be a full and final expression of their agreement (a total integration), the agreement may not be contradicted or supplemented by any oral or written agreement made prior to the writing. Where an agreement is partially integrated, evidence of a prior oral or written agreement may not be admitted to contradict the terms of the written agreement.
will not allow any PRIOR written or oral statement/evidence or any oral contemporaneous statement to vary, contradict or add to a written agreement.
The more complete an agreement appears on its face, the more likely it will be viewed as complete. A court decided whether writing is final and complete.
Under Williston, if the parties normally would have included this provision (the extrinsic matter) and did not, then the provision (extrinsic matter) will not become part of the contract. if evidence of additional terms would certainly have been included in the agreement, then it must be kept from the trier of fact.
Partial integration allows: supplementary evidence of course of dealing, course of performance or trade usage AND other supplementary but not contradictory evidence.
Full integration allows: supplementary (NOT contradictory) evidence from course of performance, course of dealing or trade usage; but NOT supplementary evidence from other sources, even if consistent.
Exception: Formation defenses; Ambiguity; Conditions precedent to formation; Course of dealing, usage in trade, course of performance; and Consistent additional terms.
Exception: Parol evidence rule does not bar evidence to show: fraud, illegality, duress, mistake, lack of consideration, condition precedent.
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PERFORMANCE
heading
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Promise
a commitment to act or refrain from acting in a specific way in the future. If promise is unconditional, failure to perform the promise is breach.
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Condition
A condition is an event that determines if and when a duty either arises or is extinguished. A condition is either expressed, implied or constructive.
Conditions must be excused or satisfied to have an absolute duty to perform.
A condition may be excused by a failure to cooperate, a prospective inability to perform, anticipatory repudiation or waiver and estoppel.
A condition may be satisfied by complete satisfaction, substantial satisfaction, or the doctrine of divisibility.
Use of Conditions to sequence performance:parties can provide for express sequencing of performance or court can infer sequencing.
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Condition Precedent
A condition precedent is an event that must occur before a duty arises – before performance that is subject to the condition becomes due. An express condition precedent is satisfied only by full performance. Failure of condition can both excuse contingent performance and give rise to a breach of contract claim.
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Condition Concurrent
A condition concurrent occurs when both parties' duties arise at the same time and from each other parties' actions. Instantaneous performances. Promises are dependent on each other. Failure of condition can both excuse contingent performance and give rise to a breach of contract claim.
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Condition Subsequent
A condition subsequent occurs alter a duty has arisen and refers to a future event, upon the happening of which an obligation no longer becomes binding on the other party. This divests liability that already has attached – cuts off a duty that is already in existence.
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Types of Conditions
Express Condition – a condition stated clearly and expressly in a contract. strictly enforced.,
Implied Condition – not expressly stated – but can be inferred/implied in fact. May not require strict compliance.
Construed/Constructive Conditions – implied in law – based on a court finding a condition. Each partys substantial performance is generally a constructive condition to the performance of any subsequent duties by the other party.
91
Consequences of Failure of Condition(2)
Duty imposed by the promise associated with the condition does not become due until the condition occurs
If the condition can never occur, the duty on which occurrence of the condition depends is discharged
Non occurrence of a condition does not support a claim for damages unless a party has promised to cause the condition to occur.
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Conditions of Satisfaction
contracts can include an express provision that party will pay only if satisfied with the others performance.
Commercial contract – GOOD FAITH standard – objective test
Personal contract – subjective satisfaction – subjective test
94
Performance
A party must discharge the duty, perform the duty or they will be in breach. Performance can be complete, substantial or occur through the doctrine of divisibility.
Common Law – a partys duty is to substantially perform all that is called for in the contract.
UCC – Perfect Tender Rule and all parties are required to act in good faith- honesty in fact and observance of reasonable commercial standards of fair dealing.
95
Anticipatory Repudiation - Excuse of Performance
must be unequivocal. Before the date of performance, the promisor makes it clear, through words or conduct, that she will not perform material terms of the contract (or UCC – loss of which will substantially impair value of contract) when time for performance is due.
Anticipatory repudiation gives the non-repudiating party four alternatives:
- treat the contract as totally repudiated and sue immediately;
- suspend his own performance and wait until performance day to sue;
- treat the repudiation as an offer to rescind and treat the contract as discharged; or -ignore the repudiation and urge performance.
Repudiation may be rescinded until the non-repudiating party has accepted repudiation, cancelled, or detrimentally relied on it.
96
Prospective Inability or Unwillingness to Perform - Excuse of Performance
This occurs when a party has reasonable grounds to believe the other party will be unable or unwilling to perform when performance is due.
Under the UCC the innocent party may demand adequate assurances of performance, suspend own performance until the assurances are received and, if these are not forthcoming (usually within 30 days), may treat the failure as a repudiation.
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Divisibility of Contract - Excuse of Performance
If a party performs one of the units of a contract, the party is entitled to the agreed upon equivalent for that unit even if the party fails to perform the other units.
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Rule of Substantial Performance
Generally, where there is a constructive condition involved, the rule of complete performance may be excused if the party has rendered substantial performance if a breach is minor.
Test note: Express conditions must be fully performed
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Condition by Waiver or Estoppel - Excuse of Performance
Occurs when one party, by words or conduct, indicates that the party will not insist on that condition being met. The promise to waive a condition may be retracted at any time before the other party has changed their position to their detriment – then the party is estopped from retracting the waiver.
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Discharge - Modification
Common law requires additional consideration by both parties. The UCC does not as long as the modification is requested in good faith. Statute of Frauds may apply.
101
Discharge - Accord and Satisfaction
This requires additional consideration. The accord is the new agreement with a different performance in lieu of the original contracted for performance; and the satisfaction is the performance. The effect of the satisfaction is that it will discharge both the original and the accord agreements.
102
Discharge - Novation
This is an agreement by all parties to extinguish contractual duties between the original parties and replace them with a new valid and enforceable contract.
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Discharge - Mutual Recission
By an express agreement. Each party gives up their right to counterperformance from the other.
This must be in writing if the statute of frauds and/or the UCC apply.
Cannot rescind if TPBs rights have already vested.
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Discharge - Impossibility
Impossibility occurs upon the death or incapacity of a person necessary to effectuate the contract.
However, impossibility does not occur in the case of an option contract when the deceased party already has given their right to revoke as consideration.
Impossibility occurs with illegality.
Impossibility occurs with the destruction of the subject matter by no fault of either party before risk of loss passes. Unexpected event.
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Discharge - Impracticability
Only under the UCC, this occurs when an extreme andimpracticable difficulty occurs that was unanticipated and without fault of the party. No foreseeability.
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Discharge - Frustration of Purpose
occurs when there is a supervening act that was not reasonably foreseeable at the time of formation that almost completely destroys the purpose of the contract. without fault of the party.
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Discharge - Occurrence of a Condition Subsequent
A condition subsequent divests liability that already has attached.
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BREACH
heading
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Breach
when a promisor under an absolute duty to perform, fails to perform in accordance with contractual terms.
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Efficient Breach
breach is permitted without penalty, so long as non-breaching party receives adequate compensation.
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Common Law Material or Non-Material Breach
Material Breach – A breach is material if as a result of the breach, the nonbreaching party does not receive the substantial benefit of their bargain.
If the breach is material, the nonbreaching party may treat the contract at an end and any duty of counterperformance is discharged and has an immediate right to all remedies for breach of the entire contract, including total damages.
A minor breach coupled with an anticipatory repudiation is treated as a material breach.
permits non-breaching party to decline performance, terminate the contract and sue for breach of contract.
A party in partial breach has rendered substantial performance and is entitled to contract price less offset to address deficient performance. Breacher cannot enforce the contract.
Non-Material Breach – substantial performance. Breacher can enforce the contract. full contract price less cost of rectifying deficit.
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Timeliness of Performance
Failure to perform by the time stated in a contract generally is not a material breach if performance is rendered within a reasonable time.
However, if the nature of the contract makes timely performance essential, or if the contract expressly provides that time is of the essence, then the failure to perform is a material breach.
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Substantial Performance/Breach - UCC - Buyer's Remedy - PERFECT TENDER RULE
If the goods do not conform in any respect the buyer may reject the whole, accept the whole or accept any commercial units and reject the rest.
The buyer must notify the seller of any nonconformity and though the buyer has the right to reject for any nonconforming defect in general, if contract time remains, the seller has the right to cure.
Buyer may cover and recover the difference between the cost of cover and the contract price.
Buyer may recover the difference between the market price at the time the buyer learned of the breach and the contract price.
Buyer may recover any incidental or consequential damages.
Buyer may recover identified goods in the seller's possession or obtain specific performance.
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Installment Contract - Exception to the Perfect Tender Rule
The UCC assumes all goods to be tendered in a single delivery. Where a contract authorizes or requires deliveries in separate lots, it is an installment contract.
Buyer may reject nonconforming installment only if nonconformity substantially impairs the value of the installment and nonconformity cannot be cured.
Buyer cannot cancel contract unless problems within installment defeat reasonable expectations of entire contract.
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DAMAGES AND REMEDIES
heading
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Compensatory Damages
A nonbreaching party is entitled to compensation for a breach. The damages are calculated to put the nonbreaching party in the same position they would have been in had there been no breach (had the contract been performed).
Compensatory damages include;
Expectation damages ("benefit of the bargain")
-market price minus contract price;
-cover price minus contract price;
-contract price minus party's savings by not performing (profit) (limited by certainty, foreseeability, mitigation)
Consequential damages (available only if foreseeable) Incidental damages
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Liquidated Damages
Liquidated damages occur where actual damages are difficult to ascertain at the time the contract was formed, must be an amount that is a reasonable approximation of the damages, and are not a penalty.
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Specific Performance
Specific performance can be ordered where the subject is unique(inability to cover, inability to calculate speculative damages); or money damages are inadequate. Equitable remedy where equitable defenses apply.
Courts are reluctant to require specific performance of long term contracts. Discretionary by courts
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Injunctive Relief
exceptional remedy. Must show irreparable harm.
Mandatory Injunction – orders positive action
Prohibitory Injunction – orders action to be avoided
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Personal Services Contract
courts are reluctant to specifically enforce. May violate 13th amendment. Courts may enjoin performers or entertainers who jump contracts.
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Limitation on Damages
| certainty, foreseeability, mitigation/avoidable consequences
Certainty – plaintiff must prove damages with reasonable certainty. Certainty regarding fact of damages or certainty regarding amount of damages. Profits from new business are less certain.
Foreseeability – damages must be foreseeable at the time the contract is enterd into, to be recoverable. Foreseeable damages are the natural, usual consequence of a breach or contemplated by the parties at the time of the contracts as a probable result of the breach..
Mitigation/avoidable consequences – plaintiff has a duty to mitigate damages. Plaintiff must make reasonable efforts to avoid consequences of breach. Plaintiff cannot recover for consequences that could have been avoided. Plaintiff can choose between reasonable choices in order to mitigate.
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Expectation Interest
benefit of the bargain – as if the contract had never been made. Can be measured by reference to a substitute transaction; reference to market value; reference to lost profits.
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Reliance Interest
reimbursement for loss – as if the contract has never been made. Plaintiff may elect damages as a reliance measure rather than expectation damages where the plaintiffs expectation damages are too speculative to measure.
125
Restitution
reimbursement of any benefit conferred on breacher. Equitable remedy based on preventing unjust enrichment whenone has conferred a benefit on another without gratuitous intent.
Action for quasi contract or implied in law contract when contract is unenforceable or no contract exists between parties. Value of the benefit conferred.
126
Quasi-Contractual Damages (Constructive Contract)
These occur where the plaintiff has conferred a benefit on the defendant and plaintiff reasonably expected to be paid, and the defendant will realize an unjust enrichment if the plaintiff is not compensated. Quasi-contract prevents unjust enrichment to the defendant's benefit and the detriment of the plaintiff
Under quasi-contract the contract price is not the measure of recovery. The contract price is a ceiling if the plaintiff is in default or the statute of frauds bars contract recovery.
127
Punitive Damages
usually not awarded in contracts cases.
128
Recission
remedy where the original contract is considered voidable and rescinded and parties are left as though a contract had never been made.
129
Reformation
remedy where the writing setting forth the agreement between the parties is changed to conform to the original intent by the parties.
130
UCC Buyers Remedies
- if nonconformity is not material or cured, buyer may get compensation for noncompliant tender, usually price reduction.
- if buyer accepts nonconforming goods – must, within a reasonable time, notify seller of the defect. difference in value of goods as warranted and goods that are delivered plus incidental and consequential damages.
- If nonconformity is material or not cured, buyer can reject goods.
- if buyer does not receive/accept goods – difference between cover price (cost of replacement goods) and contract price; or, difference between contract price and market price.
131
UCC Sellers Remedies
- claim for price of goods
- difference between contract price and resale price (requires good faith commercially reasonable sale)
- if no resale, difference between contract price and market price
- if contract/market remedy not adequate, seller can recover lost profits + reliance expenses, less salvage.
132
UCC Mitigation of Damages
buyer may recover incidental and consequential damages. Sellers may recover incidental damages, including reasonably certain charges.
