K II Flashcards
1
Q
When is the K governed by the UCC? Common Law?
A
Common Law — Land, employment, services, IP
UCC — Goods (moveable items at time of K)
2
Q
What are Mixed Contracts? How do you go about solving a mixed K problem?
A
K involving both goods and services. use “predominant factor” test. look at likely purpose of the K, language, amount of value of each part
Buy carpet; pay extra for installation — UCC
Go to beauty parlor; pay for hair dye — CL
3
Q
Goal of K Damages?
A
put the victim where they would have been economically if there had been no breach
- what would be in the victims bank account if the K was fully performed
4
Q
Expectancy Damages = ?
A
Direct Damages + Consequential Damages
5
Q
Formula for “Recoverable” Lost Profits
A
Recoverable Lost Profits = Lost Revenue - Cost Avoided
- Fixed Costs: costs that would incur with or without the breach, do not subtract
6
Q
Damage formula for a Buyer when Builder breaches
A
Damages for Buyer = New K - Old K
- K for $100k home, builder repudiates before work starts. NewBuilder K for $115k. will get $15k in damages
7
Q
Damage Formula for Builders when Buyer breaches
A
K Price - Cost Avoided
- K for $100k home. Normally, the labor and supplies would cost $80k. Builder avoided having to put $80k into the K. Profits would be $20k.
— $100k K price - $80k avoided in costs = $20k recoverable profit
8
Q
What are Direct Damages? How do you calculate what the direct damages are?
A
- harm caused directly by the breach.
- compare the value of the task promised to the task performed
9
Q
what kind of Consequential damages is a victim entitled to?
A
- Reasonably Foreseeable (natural or contemplated)
- Unavoidable (Duty to Mitigate)
- Reasonably Certain (as to the amount)
10
Q
what are Consequential Damages?
A
Damages that “Flows from the Breach”
- I.e, the lost profits. (out of business for a month, machine for work is broken, etc)
11
Q
Who raises the issue of a P’s duty to mitigate? Reason for doing so?
A
- D raises this defense
- P only gets “Unavoidable” consequential damages, this lowers the amount the D would owe the P if he didnt reasonably mitigate
12
Q
How does the victim show lost profits?
A
- Past profits you have earned at the store
- Past profit you have earned at other stores at different location
- past profits earned by SAME TYPE of store at SAME LOCATION run by former owner
13
Q
why does the P have a Duty to Mitigate?
A
P entitled to only those damages which he could not avoid by reasonable effort
- Victim only recovers CONSEQUENTIAL DAMAGES that could not be avoided
14
Q
How does a court assess the P’s actions regarding his Duty to Mitigate? who has the BoP on the P’s duty to mitigation?
A
- victim need not choose best way to mitigate, just needs to be reasonable
—court does not engage in a “hypercritical evaluation” of victim’s choices - BoP on breacher to show victim was not reasonable
15
Q
New Business Rule and its exception
A
New businesses cannot recover lost profits
- Exception — unless they track record elsewhere, or have taken over from an identical business
- should add a LD clause
16
Q
Goal of Reliance Damages? What do Reliance Damages award?
A
- Put the injured party in the same economic position as if the K had never been formed
- give the victim the amount of victim’s expenditures Reasonably made bc of the Breacher’s promise
17
Q
When are Reliance Damages Used? Limitations?
A
- Alternative to Expectancy Damages: used, if at all, when unable to recover consequential damages
- do not recover for Unreasonable Reliance
—-Expenditure AFTER Repudiation
—-Cannot spend money and recover it for a K that has not yet been formed
18
Q
UCC Buyer’s remedies bc of a Seller’s non-delivery? what kind of Consequential Damages would a buyer get?
A
- if non-delivery, 2 choices:
—- Buyer can Cover for the breach and get damages for Cover Good [Cover Price - K Price]
—- When the victim self covers or if victim does not cover, and market price rises from time of K [Market Price - K Price] - can get Unavoidable Consequential Damages and can get incidental damages (e.g., advertising for a new car)
19
Q
UCC Seller’s Remedies for Buyer Breach by not accepting conforming goods
A
- Can Resell - if commercially reasonable resale of goods, damages are how much less the seller gets (K price - Resale Price)
- If Victim seller does not resell [assume Mkt price went down] Mkt Price - K Price
— can still get their incidental damages (e.g., storing the car pending resale)
20
Q
what is a Lost Volume Seller? What are their damages?
A
- Seller with a near inexhaustible supply of inventory and would have made 2 sales but for the breach
- Damages are their Lost Profit (often the sale price minus the price victim paid for the goods, individually (if bought in bulk))
21
Q
Can a lost volume seller mitigate damages? Why?
A
- Cannot “mitigate”
—- A resale would not mitigate the damages, they would have made 2 sales but for the breach
22
Q
Who has the BoP to show they are a Lost Volume Seller
A
BoP is on the Victim to show they were a Lost Volume Seller
23
Q
Damages for an Ee when their Er breaches their employment K?
A
- Can sue for lost wages
- Note - Ee can have a second job during his time he would have worked for Er, and if he proves he is a lost volume seller can get full recovery of damages (i.e., job denied was a day shift and job worked during breach was a night shift job)
24
Q
Rules for Ee Mitigation
A
- do not recover damages they could have avoided through mitigation
— does not req Ee to take a job unless it is “Substantially Similar” to the one denied
25
Who has the BoP to show that an Ee Could Have Found a Similar Job? What needs to be proved? Result if the Burden is met?
- Breaching Er has BoP that Ee could have found a similar job and what the wages would have been
-
26
Construction Damages: What are they awarded and what is the Victim is entitled to [in terms of what is the costs limited to]?
Victim can get the cost to repair
- Reading Pipe Case - "owner is entitled to the money which will permit him to complete, unless the cost of completion is grossly and unfairly out of proportion to the good to be obtained"
---- Purple brick hypo - "good to be obtained" was brick color, courts won't deprive victim of the "benefit of the bargain." diff from the Pipe case bc they 2 diff pipes were identical
27
Rule for Class regarding Punitive Damages
Rule For Class - no punitive damages for mere breach [even if breach deliberate]
28
What is a Liquidated Damages Clause? What do they provide?
-- Clause in a K that establishes the monetary remedy in case of a breach.
-- Provides the amount to be paid to compensate for injuries in the event of a breach
29
What is the Courts Issue with Liquidated Damages Clauses?
Some LD Clauses are unenforceable penalty clauses
30
Elements to have an enforceable LD clause? what makes it unenforceable?
LD Clause can ONLY be enforced if:
- at the time of Kr, damages flowing from the breach were "Difficult to Ascertain"; AND
- the amount of LD's was a Reasonable Estimate of the harm that could be expected if there was a breach
--- will not enforce a LD Clause if it will lead to a "windfall" for the seller
31
What does the LD Clause need to factor in to be a Reasonable Estimate of the Harm?
-- Must include the Cost Avoided by The Victim
----Not enforced if LD Clause does not include cost avoided by Victim
-- Formula for K price is Flexible, aka, accounts for big harm and little harm
---- not all breaches are of the same gravity, will not enforce LD Clause that is Invariant to the Gravity of the Breach
32
LD Clause: What is the "Second Look"?
States are split on dealing with LD clauses in CL where there is No Actual Damages
33
LD Clause: What are the 2 Differing actions Courts take regarding the "Second Look"? and what do they do in response?
- Some Cts. do not take a "second look" at the Actual Damages
---- will award the LD Clause if it is a reasonable estimate
- Some Cts. say the LD Clause will lead to unjust enrichment and refuse to enforce a LD Clause absent of damages.
--- will say P needs to show actual harm or damages for the LD to be Triggered
34
UCC and the "Second Look" at the LD Clause
- ALL UCC cases look to see if there was "actual damages" as well
--- when assessing the reasonableness of the LD Clause, Cts. must consider BOTH "anticipated and actual harm"
35
What is Restitution? What is the Victim trying to get and how do they go about doing so?
-- Alternative to Expectancy Damages
-- "Restore to me the value I gave to you" or "How much did breacher receive from victim"
- treat the K as rescinded and may recover upon a Quantum Merit (restitution) so far as he has performed
- Victim will get the full value of the services rendered
36
How does a victim go about recovering by Restitution?
- treat the K as RESCINDED and may recover upon a Quantum Merit (Restitution) so far as he has performed
37
What are the limitations on the recovery of Restitution?
- If K Fully Performed, victim cannot get Restitution
- If K Not Fully Performed, victim can get Restitution
38
When is Specific Performance rewarded? What can victim show to make the Award of SP more likely?
Only award SP if damage remedy at law is inadequate:
- when money damages cannot buy a replacement. no SP if damages readily measurable
- Victim more likely to get SP if they prove a "special relationship" between the parties. a new party would not be adequate (e.g., ads prepared specifically for breacher)
39
When is SP Not Awarded?
- No SP if damages are readily measurable
- Won't award if item or service is "fungible" (readily replaceable)
- SP won't be decreed unless the Ct. can determine w/ R-Certainty what is the duty of each party
40
How does a court go about Specific Performance for Land for a Buyer? For a Seller? Mutuality of Remedy?
- Land is presumed to be unique. Buyers often get SP. Sellers of land usually cannot get SP [money can make them whole]
- no need for "mutuality of remedy" [it is OK if only one party could get SP in event of breach]
41
Why are there "Equitable Defenses"
- Cts. of Equity have higher standard than Cts. of law do for determining if K exists and awarding $ damages. More reach in Ct. of Equity
42
What are Equitable Defenses used for?
Equitable defenses can be used to defeat a request for SP
43
What must a party come into court with to secure the desired relief of SP?
- "Clean Hands Doctrine"
--- to secure the desired relief for SP, the party is rqd to come into Ct. with "clean hands"
44
What does the Court of Equity Req to Decree SP? what do they consider?
- the K provisions to be enforced must be just and equitable
- The consequences of SP, likewise, need to be just and equitable
---result of the K cannot be harsh or oppressive, or result in an unconscionable advantage to the P.
--- An "Accounting" should be done to take into consideration all things that occur between the breach and the litigation.
----- "What does each side gain and lose during that time?"
45
How can an Er get SP? what can undermine this?
- Only get injunction to keep Ee from working if Ee is "special, unique, unusual, or extraordinary"
--- Seek to enforce the Es's implied promise to NOT work for others.
--- If Ee is Avg. just hire another one
46
What must the goal of a Covenant Not to Compete be to be enforceable? What can it not be?
Goal must be to prevent unfair competition. Not to coerce performance or prevent all competition
47
What makes a Covenant not to Compete "Reasonable"?
Covenants not to compete MUST be reasonable, which is measured by the 3 Criteria:
- Geography
---where cant Ee work? Only where competition would steal clients, would be unfair
- Duration
--- How long cant Ee work? only until Ee is not getting an unfair edge in competition
- Scope
---what cant Ee do? only activities very similar to what they did with Er (oral surgery is not dentistry)
48
What do Cts. do when a covenant not to compete is "unreasonable"?
- Some Cts. edit to make the covenants not to compete reasonable. to protect legitimate interest of the Er
-Other Cts. refuse to edit and simply won't enforce. deters Er from writing "overly broad" covenants not to compete
49
How does a court go about Interpreting K Language?
(1) Literal Understanding
--- Dictionary and Grammar
--- Rules of grammar are a good starting point, but are often violated by so many that they can sometimes be unreliable to use
(2) Context
--- If the contextual meaning is diff from the literal K. Context evidence must be strong enough to alter literal understanding.
--- Look at rest of the written K, likely intent/purpose, presume parties intend reasonable meaning, Gov't regulations, negotiations. course of performance, course of dealings, trade usage [these 3 in this order]
50
What do Courts avoid when interpreting a K? further explain what it is
A K will not be interpreted to lead to an absurd result
-- Absurd = unlikely to be sought by rational businessperson. contradicts the likely purpose of the parties
51
How does a Party make a K that is "absurd" but yet enforceable?
Can only make a K for preposterous terms only if the K language is Crystal Clear
-- "The stranger the desire, the clearer the language must be"
52
what is Parol Evidence?
Evidence of an agreement outside of the written document
53
What are 2 things in every Parol Evidence Question?
- A writing
- Evidence of an agreement outside of the writing
54
When do you Include Parol Evidence?
- Outside evidence allowed only if writing is Ambiguous
-- Ambiguity means that the K is susceptible to more than one reasonable meaning. no matter if it is partially or totally integrated
55
How can you tell if a K is Partially or Totally Integrated?
Presume the K is Partially Integrated
- Need evidence that parties intended total integration [best evidence is integration clause. e.g., "This K contains entire agreement]
56
How to go about a Parol Evidence Question?
(1) Is the K Ambiguous?
-- If K is ambiguous, then include Parol Evidence to explain terms (for totally and partially integrated)
-- If Clear and Unambiguous, decide if the K is totally or partially integrated
(2) Is the K Partially or Totally integrated?
-- If completely integrated, exclude Parol Evidence
-- If Partially integrated, include Parol Evidence as long as it does not Contradict
57
What ways can you decide if the writing is "Ambiguous"? what if it is ambiguous?
4-Corners Rule -- Judge decides by reading the K
Extrinsic Ambiguity -- Lawyer explains why language is ambiguous
ALWAYS allow PE if the writing is ambiguous
58
What are the competing definitions of "Consistent" pertaining to PE
Cannot "Totally Negate" OR term is "Reasonably Harmonious"
- HYPO: Writing: A will sell 500 ton of bricks. PE: quantity was understood to be "Up to 500 ton"
--- Totally Negate - PE allowed. PE does not totally negate writing. deliver 500ton satisfies PE and writing. PE creates an exception to the express term but does not swallow it entirely
--- Reasonably Harmonious - PE not allowed. unconditional promise of exactly 500 ton is not consistent with a promise that can vary down to 0ton
59
How does the UCC go about the inclusion of Parol Evidence? what do they look at when deciding to include or not?
Can add terms into a Totally Integrated K if consistent
Under the UCC, even a completely integrated agreement can be supplemented BUT NOT CONTRADICTED by
(1) Course of Performance
(2) Course of Dealings, OR
(3) Usage of trade
60
For PE how do you decide if the writing is ambiguous? (2 ways)
— 4-corners rule: judge decides by reading the K (4 corners of the written agreement)
— Extrinsic Ambiguity: lawyer explains why the K is ambiguous
61
What is a Duty v a Condition
— Duty: a promise
— Condition: an event, which must occur before a K performance becomes due.
62
What can a Condition NOT be?
A condition that is sure to occur (usually time passing) is not a condition. If Non occurrence of a condition is excused, performance is still due
63
Harsh *Audette* Rule on conditions
— Duty is not owed unless the condition is 100% met.
—HYPO: A will pay B $10 if they arrive by 12. B arrives at 12:01, nothing owed
64
Condition on a Ks existence vs Condition on performance of the terms
— Condition on the Ks existence: when parties have made an event a condition of their agreement. No K will arise “unless and until the condition occurs”
— Condition on Performance: when a K exists but there is no performance due until a condition.
65
How can you tell the difference between a condition on K existence and a condition on K performance? why do Courts care?
- Words in the K will speak to this, like "this agreement has no further effect," meaning the K was in effect before
- Courts care about which bc they will ALWAYS allow PE to prove a Condition on a Ks Existence.
66
What is an Express Conditions? How can you tell there is an Express Condition?
No K arises unless and until the condition occurs.
- Contains conditional language
67
Why would a party use Express Conditions?
- it sets a rqmt of strict compliance in a K, it protects the party who has taken the caution to make it expressly conditional
- There is no mitigating standard for express conditions
68
How does a Court go about the Conditions on a GenKr's payment of a SubKr? when should the GenKr pay the SubKr? How can a GenKr avoid the Courts assumptions?
- GenKr assumes risk of Owner insolvency, if they want to avoid this assumption GenKr NEED to make it a clear condition in the K
- GenKr has to pay SubKr a reasonable time after they finish work, even if owner has yet to pay GenKr
69
What is a Constructive Condition?
— BOTH A CONDITION AND A DUTY
— lacks conditional language of an express condition. But most of the time, courts presume the parties meant for the promises to be truly independent from each other
70
What are Concurrent Conditions? when are they due?
When a Constructive Conditions is made with 2 short term performances
- Performances are due simultaneously
71
How does a party go about suing on a Concurrent Condition?
Neither party can place the other in breach for failure to perform without a tender of their own performance
72
Who goes first in Constructive Condition Ks
Longer performance goes first
Short performance goes after
73
When there is a Long and Short promise on a Constructive Condition, how much must they do before the other party has to perform?
Needs to complete “Substantial Performance” before the other party’s performance is due
-- usually 90-95% complete. essentially all done
74
What counts as a Material Breach in a Constructive Condition?
Substantial Performance is usually 90-95% complete. Any less can be a material breach if they cease work before it is performed substantially.
— some Cts. Say economic harm is a material breach if it deprives victim of the “benefit of the bargain”
75
What can victim do if there is an “ongoing material breach?
I.e., only done 3/4 of house and it’s late af
— Victim can suspend their own performance (not pay) until their performance is done
— Victim can cancel the K and hire others IF TOTAL BREACH
——NOTE: can only cancel if there is a TOTAL BREACH: (1) material breach is very very serious, (2) a material breach is not "cured" within a reasonable time, OR (3) there is a repudiation
76
What can Victim do if there is only a “partial” or “not material” breach?
— Victim has to perform
— BUT, victim can sue for damages (i.e., not perfect performance. Pay for a small part of a house they did not paint. That missing 5-10%)
77
What are conditions that are mutually dependent each other?
— “Parties intended performance by one to be conditioned on performance by the other. Each promise is also a condition on the other party’s next duty”
— HYPO: K - SubKr will work in a workmanlike manner, GenKr will pay every month
NOTE: starting performance is BOTH a duty to work and a constructive condition on others performance
78
How to deal with Breachers in Mutually Dependent Conditions
— 2 Promises: Builder will work and Owner will pay monthly. Continues month to month
— if Owner’s refusal to pay is justified, Builder still needs to continue work, Builder will not be justified in discontinuing work by Owner’s refusal to pay.
—— No need to pay if prior breach material and is not cured
——If substantially performed, Payment cannot be withheld. Refusal to pay when substantially performed is repudiation
79
UCC view of Conditions: [Specifically, conditions on Buyer's duty to accept goods and pay for them]: When does UCC seller breach their condition? What can the Buyer do?
If goods fail in ANY (no matter how small) respect to conform to the K, Buyer can:
— Reject the whole
— Accept the whole (can sue for damages and get cost of cover or market value and any consequential damages, if any)
— Accept Conforming Goods and reject the rest
80
UCC: How does a buyer "accept" non-conforming goods?
Acceptance of Non-conforming goods by either:
-- telling the seller they will take the goods; OR
-- failing to reject after a R-opportunity to inspect goods
81
UCC: Can a Buyer keep non-Conforming goods? Can Buyer still get damages by acceptance, if so, how?
Buyer can keep them and can sue for direct and consequential damages
---BUT: after acceptance, UCC victim buyer does not get damages if the buyer does not give notice of defect to seller
82
UCC: What is an installment K?
- Requires or Authorizes the delivery of goods in separate lots to be separately accepted
- Usually, all goods in a K must be delivered at the same time, but parties who make an
83
UCC: what can Buyer do when there is an Installment K breach?
-- buyer may reject an installment which is non-conforming if the non-conformity:
---- substantially impairs the value of the installment; and
---- cannot be cured
* IF the non-conformity does not fall within the above, and the seller gives adequate assurance of its cure, the buyer must accept that installment
84
UCC: when can the Seller "Cure" a non-conforming delivery?
- Seller can make a conforming delivery if: (1) there is time left on the K; or (2) Seller has reasonable grounds to believe the delivery would be acceptable
85
Installments: What if a buyer wants to Cancel the Entire Agreement?
-- whenever non-conformity or default w/ respect to an installment K substantially impairs the value of the whole K, there is a breach of the whole
---- BUYER MUST SHOW THAT THE NON-CONFORMITY SUBSTANTIALLY IMPAIRS THE VALUE OF THE WHOLE
------ P has BoP
86
Rights of Breachers who PARTIALLY PERFORM: Differing court views when a Breacher attempts to get their money back from the victim? [Hint - 2 ways to look at it]
-- *Martin* - if there be but part performance by the P on his part of the K, he cannot recover
---- If a material breach, Breachers cannot get paid. Breacher no recover if performance is not substantial
-- *Lancellotti* - Quasi-K - the party who committed breach should be entitled to recover "any benefit in excess of the loss that he has caused by his own breach"
87
What is a "Quasi-K" and how does a breacher recover under it?
-- An obligation to pay for part performance, imposed by law to prevent unjust enrichment
-- A Breacher can sue for Quasi-K relief for Restitution for value conferred minus the harm caused by the Breach
---- i.g., K for a $200k home, builder has conferred $150k then breached. Owner pay $80k for new builder to finish, since owner paid $30k extra compared to OG K, Breacher recovers $150k - $30k = $120k
88
Policy argument For Quasi-Ks
-- To prevent a windfall to the non breaching party
-- party who breaches after almost completely performing should not be more severely penalized than the party who breaches by not acting at all
---- Breaches without a Quasi-K can lead to large losses for the breacher depending on the occurrence of the breach
------ Breach at beginning of performance - put $10k in, lose $10k. If breach later, putting in $80k would lose $80k
89
Policy Argument Against Quasi-K
-- does not want to impose a new K that the victim never agreed to
---- Victim never agreed to a K for 80% of a house.
-- Allowing recovery for a Breacher can encourage breaches
90
UCC Rights of Breachers
-- Breaching buyer is entitled to restitution of any amount paid by which the sum of the buyer's payment exceeds $500 (if no LD Clause)
---- Seller can still sue for damages, of course
----For any UCC K worth more than $2,500, Breaching Buyer gets back the amount they paid minus $500
91
Divisibility: what is Part Performance as Agreed Equivalents?
-- Parts of each pair are properly regarded as agreed equivalents
---- e.g., "Paint 5 houses for $1,000 EACH." Note - it has UNIT PRICING
92
How do you treat a Divisibility question?
-- treat it like 5 separate Ks. Breacher will get paid for completing 3 houses, but has to pay damages for the 2 unpainted houses.
--e.g., Shipping logs down river hypo: $20/log, will get paid for each log delivered. but when a K is for $2/log/mile, it will not be seen as an "Agreed Equivalent." K may divide payment by mile, but courts will not see that sending a log down a river for a mile and then sinking is worth $2 to the P
93
Common Law implied Duty of Good Faith
Every K imposes upon each party a duty of good faith and fair dealing in its performance and enforcement
94
UCC Implied Duty of Good Faith
Means honesty in fact and the observance of reasonable commercial standards of fair dealing in the trade
95
Does Good Faith mean "nice" or "decent"
NO
96
What if a K left a decision to the DISCRETION of one party?
those terms are virtually unreviewable
97
Explain Duty of Non-Prevention
a party has an implied obligation to not prevent, hinder, or delay performance
98
What if a promisor prevents a condition from occurring?
the performance of the condition is excused and the duty is owed.
- Needs to be in Bad Faith
99
What must have happened to excuse a condition when it was prevented by the other party
Prevention done by one party that was "wrongful" or in "bad faith"
100
What is a "Percentage Rental"
where some or all the rent the landlord gets is based on the tenant's profit
101
what issue arises concerning duties and Percentage Rentals?
is there an implied duty to maximize profits thus maximizing the rent
102
When will a Court find a Duty to Maximize Profits as to Maximize Rent in a percentage K?
- exclusive sales rights
- specified items/terms in the K [war memorial case]
- when there is no minimum rent
- fixed rent is significantly below the fair rental value
103
how does trickery play a role in prevention of a condition? What case helps with this?
- Good faith goes to the state of Mind
- look for dishonesty or opportunistic actions done by a party
- can be a jury question
- Think of the Market Pantry case
104
What does "Time is of the Essence" allow for in a K?
any delay, however small, permits the other party to cancel the K
105
Is Time of the Essence normal in a K?
Time is NOT of the essence for CL or UCC
106
How is a K made where Time is of the Essence?
- ONLY IF circumstances viewed at time of breach indicate that performance/tender on that time were of GENUINE IMPORTANCE
- K is made where performance/tender by a date is a CONDITION BY THEIR AGREEMENT
107
What can a victim due when there is a breach of a K where time was made of the essence?
victim can cancel the K OR extend time to perform and sue for damages
108
How are K breaches usually interpreted when there is a date of performance?
- a delay entitles the victim to WITHHOLD performance and gives a claim for damages.
- DOES NOT DISCHARGE THIER DUTIES
109
what does the law req for a For the sale of goods that fails to provide a time for delivery?
req's delivery within a reasonable time
110
When is time NEVER of the essence?
in a K that explicitly of impliedly provides for delivery within a reasonable time
111
can a victim waive time being of the essence? how?
yes. waives time of the essence by permitting the K to continue after delay
112
can a party make or restore time as of the essence? how?
either party can, only if they
(1) give notice,
(2) notice is clear, distinct, and unequivocal,
(3) fixes a REASONABLE time to act and
(4) inform that failure to perform by then is a default
113
Does it matter if the reasonable time to perform for a ToE K is unilaterally set?
no, does not matter if one party makes the time
114
What must be shown to prevail in a ToE claim?
- that the K stated a Definite time of performance
- OR
- reinstated TOE with notice given w/ a reasonable time to perform
115
UCC: ToE on seller’s duty to perform v ToE on Buyer’s duty to pay
Seller - perfect tender rule. Must perform on time
Buyer - NO ToE for buyer to pay. Must pay within a reasonable time
116
What happens if a party Waives ToE?
Then performance is due within a reasonable time
117
When will a court Excuse the Non-Occurrence of a condition in the face of disproportionate forfeiture?
If non-occurrence of a condition would cause
(1) disproportionate forfeiture,
(2) court may excuse the condition
(3) unless it’s occurrence was material part of K
118
What is disproportionate forfeiture?
- the loss due to forfeiture is MUCH greater than the harm to the other
119
How does a court go about Conditions of Satisfaction? Classic example?
- satisfaction, if in good faith, is unreviewable in court when the K involves taste, fancy, or personal Judgement
- K to commission a painting of oneself
- satisfaction is limited to the specific subject matter of the condition
120
How does a party prove dissatisfaction was done in bad faith?
- not in GF if the issue was known by one party at the time of K
- not in GF if they can show that cost was the real problem
- if satisfaction can be shown by an objective standard (involve utility, fitness, or value)
121
What is an Anticipatory Repudiation?
Repudiation before K was due
122
What constitutes suff anticipatory repudiation?
(1) stated that they will not perform
(2) stated that they will not perform, except on conditions beyond the K (i.e., “pay me more”)
(3) performed an act that will make performance impossible
123
What is NOT anticipatory repudiation?
- mere statements of doubt are not suff
- statement that buyers are “resisting pressure to close”
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Policy reason FOR anticipatory repudiation excusing conditions?
- benefit both parties
- victim can get another job before performance is due
- Breacher will allow victim to mitigate damages by getting another job
- A K for sale imposes an obligation on each party that the other’s expectation of receiving due performance will not be impaired
125
What can a victim do in the face of suff. anticipatory repudiation?
-can take him at his word and sue immediately OR wait until performance was meant to be due
126
When can you NOT Nullify an anticipatory repudiation?
- if the other party relied on the repudiation (made a new K)
- other party told them that their repudiation was considered FINAL
- sued on the K
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What happens if repudiation is retracted? Nervous victim?
- go on about the K like it never happened
- under Common Law, nervous victim has no recourse
128
Under UCC, what can a nervous party do when the other party repudiated, then nullified?
(1) if nervous party has reasonable grounds for insecurity
(2) can give Written Demand for adequate assurance and Suspend Performance (no pay, delay ship, etc)
(3) Other party has MAX 30 days to give adequate assurance
(4) if no adequate assurance, nervous party can treat failure like repudiation
129
Define what a valid Impossibility Excuse consists of? What is the outcome if all are met?
(1) If a duty becomes objectively impossible to perform, (2) bc of an unexpected event (3) that is not the fault of either party
- K is discharged and neither parties duties are owed
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Intervening Excuses and Personal Performance?
- if performance is personal, and that person dies, their duty is discharged. Estate won't need to fulfill
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What are the 3 Supervening Circumstances that might relieve a K duty?
- Impossibility
- Impracticability
- Frustration of Purpose
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Supervening Circumstance are only considered "default" rules, why is that?
- "default" rules can be supplanted but he parties using K language
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What is a Force Majeure Clause? what does it result in?
- aka "Act of God Clause"
- "Seller shall not be responsible for delays in performance due to causes beyond the Seller's Control"
- Court will excuse the party
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What is Ejusdem Generis?
- Rule of K interpretation which limits application of general terms. Implied terms are limited to the specific ones. Need to be of the same kind or class
135
how do you defeat Ejusdem Generis?
- Proceed general terms with "including but not limited to"
136
What needs to be shown for a K to be discharged due to impracticability?
(1) can only be performed with extreme and unreasonable difficulty;
OR
(2) increases the cost by more than double
137
Remember the Farmer Jones hypo?
what you expect is not always what we require
- Farmer jones K to give potatoes does not limit it to his potatoes
138
Frustration of purpose requires what?
(1) unforeseen event,
(2) causes a party's principle purpose to be substantially frustrated (no value or virtually none), and
(3) without fault of either party
- K duties will be discharged
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When will Frustration of Purpose NOT discharge a K duty?
- unless agreed to otherwise
- parties can agree to bear the risk of any foreseeable event at time of contracting
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How does a K become voidable due to Duress?
if the person's assent to that K was:
(1) induced by a threat by the other party,
(2) that threat was wrongful,
(3) the person had no reasonable alternatives but to assent
- wrongful threat e.g., physical threat or threat unrelated to the K (deportation)
141
A K entered into as a result of duress is not void, but....
merely Voidable
142
How does a K made under Duress become ratified?
- if the party complies with the K for a considerable time after the opportunity is afforded to void it
143
what is NOT a wrongful threat?
- mere hard bargaining ("take it or leave it")
- victim succumbs bc of economic difficulty and the person making the K did not cause it
144
How is a K voidable due to Undue Influence?
- needs to show a (1) confidential relationship, (2) K is not fair
145
How does the Burden shift for Undue Influence cases?
- victim needs to show that there was a confidential relationship
- Breacher or "Dominant Party" needs to prove the K was fair to survive
146
what is a confidential relationship?
party has gained confidence in the other party, likely to exists with family relationships and lawyers and their clients
147
What is an Executed K?
Finished K performance
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What is an Executory K?
performance still to be done
149
what happens if a minor made a K and wanted to sue?
- if Executed K, minor must pay wear and tear to get their money back
- if executory K, adult sues kid for remaining money to be paid. child returns what he has, if any, and does not have to pay
150
Minors have a right to avoid the K, how do they ratify their K?
by not acting to avoid the K after they become an adult
151
what is Volitional Incapacity?
unable to ACT in a reasonable manner, in relation to the transaction (bipolar)
152
What is Cognitive Incapacity?
unable to UNDERSTAND nature and consequences of the K
153
How is a K Voidable due to mental illness?
if due to mental illness (1) Unable to understand in a reasonable manner (cognitive) OR (2) unable to act in a reasonable manner (volitional) (3) AND other party has reason to know of their condition
154
What is the test for Voidability for Misrepresentation and NON-FRAUDULENT misrepresentation?
(1) misrepresentation (false or incorrect statement)
(2) of a material part of the K,
(3) assent was induced by the misrepresentation and
(4) Reliance on misrepresentation was justified
155
What is the test for Voidability for FRAUDULENT misrepresentation?
(1) Misrepresentation (false or incorrect statement)
(2) assent induced by by the misrepresentation and
(3) reliance was justified
156
Rule for buyers of land relying on innocent misrepresentation?
they are barred from recovery only if the buyer's acts in failing to discover defects were wholly irrational, preposterous, or in bad faith
157
when is reliance on misrepresentation NOT justified?
will not be justified if they rely on opinions, "mere puffery"
158
What is the exception to a person's reliance on "puffery" instead of facts?
misrepresentation is actionable when party relied on an opinion when there is a fiduciary relationship, or there has been some sort of trick employed by the party or they dont have the ability to become appraised of the truth
159
For misrepresentation, when does silence equate to an assertion?
(1) When necessary to prevent a previous assertion from becoming a misrepresentation
(2) other party could not find out easily and would assume the fact exists
(3) would correct a mistake in writing [typographical mistake]
(4) when other party is entitled to know the truth from a confidential relationship of trust
160
what is Reformation?
when the Court will reform the writing to include the correct term [K IS NOT VOIDABLE]
161
what does a party need to show for the court to reform a K?
(1) an oral agreement
(2) Both parties intended to put the specific term in writing
(3) writing omits or mis-states that term
162
What is a challenge when going for reformation?
the burden to prove that the term was "omitted by mutual mistake"
163
what is a legal mistake?
false belief that must relate to a **fact in existence at the time the K is executed**
164
Factors needed for a K made on a Mistake to be voidable
(1) there is a mistake of both parties,
(2) mistake concerned a basic assumption which the K was made on,
(3) has a material effect on the agreed exchange,
(4) the K is voidable by the adversely affected party, unless they bear the mistake
165
When is a K made by mistake NOT voidable?
when the adversely affected party bears the mistake
166
when does a party bare the Risk of a Mistake?
(a) risk is allocated to him by agreement of parties OR;
(b) they are AWARE they have limited knowledge and they treat it as sufficient (conscious uncertainty) OR;
(c) risk is allocated to him by the court on the ground that it is reasonable to do so in the circumstances (i.e., two innocent parties and one could learn the truth easier
167
When does a Unilateral Mistake make a K voidable?
(1) material effect on the agreed exchange that is averse to him if the effect would be UNCONSCIONABLE;
OR
(2) the other party had reason to know or should have known of the mistake **OR** his fault caused the mistake
168
what does unilateral mistakes usually apply to?
Incorrect bids. court will look if the mistake is an "Obvious Error"
169
Is an Unconscionable K voidable?
No. the judge has the discretion to limit or strike unfair terms or refuse to enforce the K
170
what two factors does a court look for in Unconscionability cases?
(1) unfairness in the formation of the K (Procedural Unconscionability) AND (2) excessively disproportionate terms (Substantive Unconscionability)
171
is a one-sided K always unconscionable?
NO. it only invokes the doctrine of unconscionability.
172
what is an "adhesion K"?
Form K, made between parties of unequal bargaining power. usually on a "take it or leave it" basis.
173
How do I start a K exam analysis?
WITH WHAT THE K SAYS
174
How do you void a K made via misrepresentation?
Once the victim discovers the truth about the misrepresentation, then they need to act to void the K
