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Themis Contracts > Performance and the Parol-Evidence Rule > Flashcards

Performance and the Parol-Evidence Rule Flashcards

(65 cards)

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1
Q

What are the four big questions regarding whether a contract has been performed?

A
  1. Parol-Evidence Rule
  2. Warranties
  3. Conditions
  4. Excuse of Performance Obligations (impracticability, frustration of purpose, etc.)
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2
Q

What does the parol evidence rule do?

A

The parol evidence rule generally prevents a party to written contract from presenting extrinsic evidence that contradicts the terms of the contract as written.

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3
Q

When does the parol evidence rule apply?

A

For this rule to apply, the writing must be integrated—meaning that the parties intended it to be their final agreement (whether in full or in part).

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4
Q

What determines the level of integration of the writing under the parol evidence rule?

A

The intent of the parties

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5
Q

What is the common law rule for parol evidence?

A

The court may look ONLY to the writing (“four corners”) for evidence of intent.

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6
Q

What is the Second Restatement rule for parol evidence?

A

If a term would “naturally be omitted” and is not contradictory, it can be introduced.

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7
Q

What is the UCC rule for parol evidence?

A

Assumes that a contract is a partial integration and allows most outside terms.

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8
Q

When does the parol evidence rule NOT apply?

A

The parol evidence rule does not apply to communications made AFTER the execution of the written contract when a party is:
1. raising a defense to contract formation or enforcement;
2. Even if a writing is completely integrated, a party can introduce evidence of a second, separate deal;
3. providing a condition precedent to the existence of the contract;
4. interpreting or clarifying an ambiguity in the contract; OR
5. UNDER THE UCC, explaining or supplementing even apparently unambiguous terms with evidence of trade usage or course of dealing or performance. Express terms have the highest priority, followed by course of performance, then course of dealing, and then trade usage.

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9
Q

What is the difference between the SOF and the parol evidence rule?

A

No signed writing = SOF
Signed writing + earlier discussion = parol evidence rule

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10
Q

What is a warranty?

A

A warranty is a promise about a term of the contract that explicitly shifts risk to the party making the promise.

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11
Q

Can you disclaim all warranties?

A

Yes.

Example: I am selling my Jeep on an “as is” basis.

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12
Q

What are the different types of warranties?

A
  1. Express Warranty
  2. Implied Warranty of Merchantability
  3. Implied Warranty of Fitness for a Particular Purpose
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13
Q

What is an express warranty?

A

A promise that affirms or describes the goods and is part of the basis of the bargain is an express warranty unless it is merely the seller’s opinion.

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14
Q

What effect does the use of a sample or model have on a warranty?

A

The use of a sample or model creates an express warranty that the goods sold will be like the sample.

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15
Q

When is the implied warranty of merchantability triggered?

A

This warranty is triggered ONLY when the seller is a merchant dealing in the goods at issue.

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16
Q

What is the implied warranty of merchantability?

A

Warrants that the goods are fit for ordinary commercial purposes

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17
Q

Can a merchant disclaim the implied warranty of merchantability?

A

YES, but only if it is VERY clearly done. Look for very conspicuous language AND the term “merchantability.”

***Unless the circumstances indicate otherwise, the warranty can be disclaimed by use of “as is,” “with all faults,” or similar language that makes plain that there is no implied warranty. The disclaimer may be oral, but it must use the term “merchantability” and must be conspicuous if in writing.

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18
Q

When is the implied warranty of fitness for a particular purpose?

A

This warranty is triggered when a buyer relies on a seller’s expertise to select a special type of good that will be used for a special purpose

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19
Q

What is the implied warranty of fitness for a particular purpose?

A

Warrants that the goods will satisfy this special purpose

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20
Q

Can a nonmerchant extend the implied warranty of fitness for a particular purpose by implication?

A

Yes, as long as the buyer relies on any seller’s expertise.

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21
Q

Can the implied warranty of fitness for a particular purpose be disclaimed?

A

Yes, but it must be conspicuous and the disclaimer must be in writing

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22
Q

What is a condition?

A

A future event that must take place BEFORE contractual rights or obligations are created, destroyed, or enlarged.

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23
Q

What do warranties and conditions do?

A

Shift risk

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24
Q

What types of conditions are there?

A

Like warranties, conditions can be express or implied

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25
What is an express condition?
It is a condition created by language in the contract. Look for magic words like "only if," "provided that," "on the condition that," "only in the event that," etc.
26
What is the brightline rule for express conditions?
Express conditions MUST be strictly satisfied unless the condition is somehow excused. This means that even substantial performance will NOT suffice.
27
How do you determine if express conditions are satisfied?
The preferred approach is to use an objective standard of satisfaction. That is, if most reasonable people would be satisfied, then the condition is met. EXCEPTION: Contracts involving aesthetic tase, such as art or tutoring services, use a subjective standard. The party can still breach if they claim dissatisfaction in bad faith.
28
Who may waive an express condition?
The party receiving the protection of the condition may waive the condition.
29
How may an express condition be waived?
The party receiving the protection of the condition may waive the condition by words or conduct. A condition will also be waived if the other party wrongfully interferes with or hinders the occurrence of the condition. This will be judged by a good-faith standard.
30
What is an implied-in-law condition?
Supplied by the court if reasonable under the circumstances (i.e., constructive condition)
31
What is an implied-in-fact condition?
The nature of the agreement suggests that the parties intended the condition but failed to expressly include it
32
What kind of performance satisfies an implied condition?
Substantial performance is sufficient, so long as the failure is not willful. Moreover, a party will be considered to have substantially performed so long as there is not a material breach.
33
What is a constructive condition of exchange (CCE)?
An implied condition in which one party's performance is conditioned on the other side's performance.
34
If payment must be made, can the nonbreaching party recover damages for the deficiency for an implied condition?
Yes. Typically measured as the cost to complete the performance. Sometimes limited to the diminution in market value.
35
Can a breaching party who fails to satisfy the CCE due to a material breach get paid anything?
NO---maybe quasi-contract
36
Can a breaching party who fails to satisfy an express condition get paid in quasi-contract?
Usually not, because express conditions must be strictly satisfied
37
What if a contract that contains conditions is divisible?
If the contract is clearly divisible, it will be broken into mini-contracts for the purposes of determining if there has been substantial performance. Example: Mickey contracts with Best Buy to install a kegerator in each of the 20 rooms in her house. Mickey agrees to pay Best Buy $100 for each of the 20 kegerators. If Best Buy installs only five kegerators before it abandons the job, can it collect anything on the contract? YES, if the contract is divisible, Best Buy can collect $500.
38
What are the UCC requirements for performance?
The UCC requires perfect tender.
39
How is perfect tender satisfied?
1. Perfect goods; and 2. Perfect delivery
40
What is the exception to the perfect tender rule for performance under the UCC?
EXCEPTIONS: The contract explicitly changes the default rule, or it is an installment contract.
41
When can a buyer revoke an acceptance of goods (UCC perfect tender)?
The buyer may revoke an acceptance of the goods if the goods seem OK when delivered but a defect is discovered within a reasonable time.
42
What is the seller's right to cure (UCC perfect tender)?
If the seller fails to tender perfect goods and time is left on the contract OR the seller had reasonable grounds to believe that the buyer would accept a replacement, then the buyer MUST give the seller a chance to cure.
43
What is the default method of delivery (UCC perfect tender)?
The default method of delivery under the UCC is one delivery of the goods. EXCEPTION: The UCC allows for installment contracts (agreement for delivery in separate lots).
44
When can a buyer reject a specific delivery that is not perfect in an installment contract (UCC perfect tender)?
A buyer can reject a specific delivery that is not perfect ONLY when there is substantial impairment in the installment that cannot be cured.
45
What are the methods of delivery (UCC perfect tender)?
(a) Tender at Seller's Place of Business (b) Shipment Contract (c) Destination Contract
46
What is "Tender at Seller's Place of Business" delivery?
If the goods are to be tendered at the seller's place of business, then the seller just needs to give the goods to the buyer.
47
What is "Shipment Contract" delivery?
If the contract is a shipment contract, then the seller must take three actions to satisfy perfect delivery: (1) Get the goods to a common carrier; (2) Make arrangements for delivery; and (3) Notify the buyer. Look for: "F.O.B. Seller's Place of Business."
48
What is "Destination Contract" delivery?
If the contract is destination contract, then the seller must get the goods to the buyer's business and notify the buyer. Look for: "F.O.B. Buyer's Place of Business."
49
What is the "risk of loss problem" (UCC perfect tender)?
The risk of loss problem arises when there is a goods contracts followed by damage or destruction of the goods BEFORE the buyer receives them. Who will bear the loss, the seller or the buyer?
50
How do you solve a risk of loss problem (UCC perfect tender)?
(1) Check whether the parties have already dealt with the risk problem in the contract, If so, their agreement will control. (2) If not, ask whether either party has breached. If so, the breaching party bears the risk of loss. This is true even if the breach is totally unrelated to the delivery damage. (3) If there is no breach, and the goods are being shipped, then ask what type of delivery contract it was. If it was a shipment contract, then the risk of loss during delivery rests with the buyer. If it was a destination contract, then the risk of loss during delivery rests with the seller. (4) In all other cases, ask whether the seller is a merchant. If so, the risk of loss stays with the seller until the buyer receives the goods. If not, the risk of loss moves to the buyer when the seller tenders the goods.
51
What is an excuse?
There is a contract, but something has happened to prevent one side from having to perform.
52
What are the different kinds of excuses?
1. Impossibility and Impracticability 2. Death After a Contract 3. Frustration of Purpose 4. Performance Is Excused Because the Initial Contract Has Been Modified or Canceled
53
What is the excuse of impossibility/impracticability?
Look for these common fact patterns: (a) performance becomes illegal AFTER the contract is formed; (b) the subject matter of the contract is destroyed; (c) in a services contract with a "special person," the performing party dies or is incapacitated.
54
What does NOT excuse performance under impossibility and impracticability?
Something that just makes performance more expensive than expected will not normally excuse performance.
55
What should you look for regarding the excuse of impossibility or impracticability?
Look for something that hinders the ability to perform, not just the cost to perform. OR Look for an unforeseen event in which the non-occurrence of the event was a basic assumption of the contract, and the party seeking discharge was not at fault.
56
What should you ask regarding the excuse of death after a contract?
Ask whether there is something special about the person performing on the contract, such that it makes no sense to continue if they die. ***Dying does not normally excuse liability on a contract that has been made. The estate will normally be on the hook for any contractual obligations.
57
What is the excuse of frustration of purpose?
Performance can still occur, but something has happened to undermine the entire reason for the creation of the contract. ***This is VERY RARE. The event must be extreme and not previously allocated to one of the parties. Example: You rent an apartment in Chicago at $5,000 for one day because it has a prime view of Wrigley Field, and the Cubs are scheduled to play in the World Series that afternoon. The game is unexpectedly canceled one day before because of an earthquake. This contract may be excused for frustration of purpose.
58
When can "performance is excused because the initial contract has been modified or canceled" occur?
Both parties can just walk away from a contract as long as there is some performance remaining from EACH side (this is called recission or cancellation by mutual agreement). Otherwise, there is no consideration for this modification.
59
What is an accord?
An accord is an agreement by which a contracting party agrees to accept different performance from another party to satisfy that other party's existing duty.
60
What is a satisfaction?
A satisfaction is performance of the accord, which discharges the original contract AND the accord contract. In other words, a satisfaction is the excusal of the initial performance obligation.
61
What are the caveats of an accord and satisfaction?
(a) The original contract is not discharged until satisfaction is complete (b) An unliquidated or disputed claim may be discharged by a negotiable instrument (e.g., a check with the note "payment in full)
62
What is the difference between an accord and satisfaction versus a modification?
If the party to perform has an option to satisfy a contract obligation by doing something else, then it is an accord and satisfaction. In a modification, it is clearer that the parties have changed the performance obligation.
63
What is a novation?
A novation arises when BOTH parties agree that a substitute person will take over the contractual obligations
64
Can ONE side of the contract create a novation?
NO. This would instead be a delegation
65
What is the effect of a valid novation?
If there is a valid novation, then the original promisor will be excused from performance

Themis Contracts (7 decks)

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