Performance Terms Flashcards
(26 cards)
Common Law vs UCC Performance Terms
Common Law:
Party just needs to SUBSTANTIALLY PERFORM (meet the contract’s essential purpose). A material breach occurs when there is not substantial performance.
UCC Article 2:
UCC requires PERFECT TENDER–seller must deliver perfect goods in right place in right time. Otherwise, buyer has the right to reject goods.
Installment Sales Contract
Requires/authorizes seller to deliver in separate installments.
Seller may demand payment in installments.
Buyer’s right to inspect goods
Buyer has right to inspect goods before they pay unless contract provides for C.O.D. or otherwise indicating buyer has promised to pay without inspecting.
Simply paying in advance does not defeat buyer’s right to inspection.
Holding the goods for a long time (month +) might defeat buyer’s right to inspect and reject. The long delay an implied acceptance.
Buyer’s obligation to pay
Buyer must pay cash unless otherwise agreed. But checks are sufficient to satisfy performance unless seller demands cash. If seller refuses check, buyer gets additional reasonable time to pay by cash.
If check is paid, buyer’s duty to pay is discharged
If check is dishonored, then seller can sue for price or recover the goods.
Conditions in Contract
Conditions limit obligations created by the contract language.
Express conditions must be perfectly satisfied, or other party can waive obligation to perform.
No substantial performance rule for express conditions! Even if in a common law contract, must comply 100%.
If, as long as, until, when, unless, provided that, on condition that
Satisfaction Clauses
Satisfaction normally measured by reasonable person standard,
Unless the contract deals with art or personal taste, then personal, subjective standard is used.
Conditions precedent
Performance of the other party not due until an event occurs
Conditions subsequent
Events after performance that cuts off a duty to pay
I will pay to lease the gym until the city zoning changes from commercial to residential
Excuse of Conditions
Duty of immediate performance with respect to a conditional promise is not absolute until the condition is performed or legally excused.
Excuse of Condition by Hindrance/failure to cooperate: If party whose performance is due after condition occurs wrongfully prevents condition from occurring, the condition is excused.
Excuse of condition by waiver or estoppel: Party benefitting from condition can waive condition by words or conduct. Waiver can be retracted if the other party hasn’t relied on the waiver yet.
Anticipatory Repudiation: promisor indicates prior to performance that they won’t perform.
Prospective Failure of Condition: when party reasonable believes other party will not / cannot perform when performance is due. Similar to AR, but the repudiation is not unequivocal.
Anticipatory Repudiation.
When a promisor indicates prior to performance that they won’t perform.
Requirements: (1) bilateral contract with unperformed duties on both sides, (2) repudiation was unequivocal (I will not perform).
Effect: Other party has four options: (1) treat the AR as breach and sue immediately, (2) suspend performance and wait to sue until performance date, (3) treat repudiation as offer to rescind and treat contract as discharged, (3) ignore repudiation and urge promisor to perform.
Retraction: Repudiation may be retracted any time before next performance is due unless other party canceled, materially changed position in reliance on AR, or otherwise considered repudiation final.
Prospective Failure of Condition
When party reasonable believes other party will not / cannot perform when performance is due.
Effect: Innocent party can request adequate assurances that party will perform and suspend their performance until they receive adequate assurances. If no adequate assurance is provided, then the innocent party’s performance is excused and the failure to provide assurances can be treated as a repudiation.
Limitations of Adequate Assurance: C/n use to modify contract or demand certain other assurances. Only entitled to ADEQUATE assurance.
Discharge by Rescission
Rescission serves to discharge contractual duties. Rescission must be either mutual or unilateral.
Both parties must have some performance remaining for rescission to discharge the contract.
Partial Discharge by Contract Modification
When parties modify contract, the original contract terms that are subject of the modification are discharged.
Entire contract is not discharged by the modficaiton.
Discharge by Accord and Satisfaction
Contract can be discharged by accord and satisfaction. Accord is an agreement to accept different performance to satisfy existing duty.
Accord (the new duty) has to be satisfied before the original duty is excused.
Exam tip: Answer option with “If… then…” will be Accord and Satisfaction
Discharge by accord and satisfaction vs discharge by modification
Modification: the original debt is excused immediately.
Accord and Satisfaction: Original debt is excused later (once new performance is satisfied)
Discharge by Novation
Novation occurs when new contract substitutes in a new party in place of old party. A valid novation discharges the old contract.
Valid Novation: (1) previously valid contract, (2) agreement between all parties (including new party) to new contract, and (3) immediate extinguishment of contractual duties as between the original contracting parties, and (4) a valid and enforceable new contract.
A simple delegation d/n equal a novation!
Impossibility
A later unforeseen event making performance objectively impossible excuses performance. Objectively impossible means the duty couldn’t have been performed by anyone–it was truly impossible (e.g., D couldn’t perform bc of a personal problem, but another person could have performed).
If only partially impossible, duty only discharged to extent of that partial impossibility.
Death / Incapacity of a person necessary to effectuate the contract serves to discharge it for impossibility. Personal service contracts are discharged in this manner only if the services involved are unique.
Many courts treat supervening illegality as impossibility.
Destruction of Subject Matter of Contract
If either party has partially performed prior to the existence of facts resulting in impossibility, that party has a right to recover in quasi-contract for the reasonable value of his performance. While that value is usually based on the benefit received by the defendant (unjust enrichment), it also may be measured by the detriment suffered by the plaintiff (the reasonable value of the work performed).
Death / Incapacity
Death or incapacity of an ESSENTIAL person necessary to contract excuses performance.
This applies in personal service contracts where the services involved are “unique.” If the services are the kind that could be delegated, the contract is not discharged by the death of the person who was to perform them.
Illegality
Supervening illegality may serve to discharge a contract. Often treated as form of impossibility.
Destruction of Subject Matter of Contract
If contract’s subject matter is destroyed or means for performing contract are destroyed, contractual duties are discharged.
Risk of Loss and Impracticability
If risk of loss has passed to buyer, rules re: destruction of subject matter of contract do not apply.
In a contractor case where contractor is building a residence, the risk of loss does not shift to the owner until it is completed.
Impracticability
Modern courts also discharge contractual duties where performance becomes impracticable:
Impracticability: Test: Party to perform encounters: (1) extreme and unreasonable difficulty / expense, and (2) its nonoccurrence was a basic assumption of the parties.
Typically, a rise in costs is not enough to establish impracticability.
Frustration of Purpose
Frustration of Purpose exists if purpose of contract has become value-less by virtue of a supervening event not the fault of the party seeking discharge.
Elements: (1) Supervening event leading to frustration, (2) parties d/n reasonably foresee act/event occuring at time contract formed, (3) purpose is completely / almost completely destroyed, both parties aware of purpose at time of contract formation.
Risk Of Loss Rules: Scenarios
Defective goods Risk stays with seller until cured or accepted
Buyer revokes acceptance Risk shifts back to seller (to the extent of buyer’s insurance shortfall)
Noncarrier – Merchant seller Risk passes when buyer takes possession
Noncarrier – Nonmerchant seller Risk passes upon tender of delivery
Shipment contract Risk passes when goods given to carrier
Destination contract Risk passes when goods tendered at destination
FOB Seller’s city Treated as shipment contract
FOB Buyer’s city Treated as destination contract
FAS (boat shipments) Risk passes when goods are at the dock
