Bus Law ch 13-17

Discharge by operation of law

Under specified circumstances, contractual duties may be discharged by operation of law. These circumstances include material alteration of the contract, the running of the relevant statute of limitations, bankruptcy, and impossibility or impracticability of performance.

Anticipatory Repudiation

An assertion or action by a party indicating that he or she will not perform a contractual obligation. Before either party to a contract has a duty to perform, one of the parties may refuse to perform her or his contractual obligations.

Rulesvwhen one party or both parties are non merchants

if one or both of the parties is a non Merchant, the contract is formed according to the terms of the original offer submitted by the original offeror and not according to the additional terms of the acceptance

existing Goods

if the contract calls for the sale or lease of specific Goods that are already in existence, identification takes place at the time the contract is made.

open price term

if the parties have not agreed on a price, the court will determine a "reasonable price at the time for delivery." If either the buyer or the seller is to determine a price, the price is to be fixed (set) in good faith. sometimes the price fails to be fixed through the fault of one of the parties. -In that situation, the other party can treat the contract is cancelled or fix a reasonable price.

Elements of Fraud

1. A misrepresentation of a material fact must occur. 2. There must be an intent to deceive. 3. The innocent party must justifiably rely on the misrepresentation.

Duties That Cannot Be Delegated

1. When performance depends on the personal skill or talents of the obligor. 2. When special trust has been placed in the obligor. 3. When performance by a third party will vary materially from that expected by the obligee. 4. When the contract expressly prohibits delegation

Latent Defects

A defect that is not obvious or cannot readily be ascertained

Intended Beneficiary

A third party for whose benefit a contract is formed. An intended beneficiary can sue the promisor if the contract is breached.

Integrated Contract

A written contract that constitutes the final expression of the parties' agreement. Evidence extraneous to the contract that contradicts or alters the meaning of the contract in any way is inadmissible. EX: TKTS, Inc., offers to sell Gwen season tickets to the Dallas Cowboys football games in Cowboys Stadium. -Prices and seat locations are indicated in diagrams in a brochure that accompanies the offer. Gwen responds, listing her seat preference. -TKTS sends her the tickets, along with a different diagram showing seat locations. Also enclosed is a document that reads, "This is the entire agreement of the parties," which Gwen signs and returns. -When Gwen goes to the first game, she discovers that her seat is not where she expected, based on the brochure. -Under the parol evidence rule, however, the brochure is not part of the parties' agreement. -The document that Gwen signed was identified as the parties' entire contract. Therefore, she cannot introduce in court any evidence of prior negotiations or agreements that contradict or vary the contract's terms

Duress

Agreement to the terms of a contract is not voluntary if one of the parties is forced into the agreement. The use of threats to force a party to enter into a contract constitutes duress, -as does the use of blackmail or extortion to induce consent. Generally, for duress to occur, the threatened act must be wrongful or illegal, and it must render the person who receives the threat incapable of exercising free will. A threat to exercise a legal right, such as the right to sue someone, ordinarily does not constitute duress

Prenuptial Agreement

An agreement made before marriage that defines each partner's ownership rights in the other partner's property. Prenuptial agreements must be in writing to be enforceable. Attorneys only represent one party and the other party needs to seek other counsel

Measure of Damages

Because substantial performance is not perfect, the other party is entitled to damages to compensate for the failure to comply with the contract.

Concurrent conditions

Conditions that must occur or be performed at the same time— they are mutually dependent. No obligations arise until these conditions are simultaneously performed. If Janet Feibush promises to pay for goods when Hewlett-Packard delivers them, the parties' promises to perform are mutually dependent. -Feibush's duty to pay for the goods does not become absolute until Hewlett-Packard either delivers or tenders the goods. -Likewise, Hewlett-Packard's duty to deliver the goods does not become absolute until -Feibush tenders or actually makes payment. -Therefore, neither can recover from the other for breach without first tendering performance.

One year rule

Contracts that cannot be performed within one year from the day after the contract is formed must be in writing to be enforceable. The reason for this rule is that the parties' memory of their contract's terms is not likely to be reliable for longer than a year. -The one-year period begins to run the day after the contract is made.

Notice of Assignment

Giving notice is not legally necessary to establish the validity of the assignment because an assignment is effective immediately, whether or not notice is given.

Effect of a Delegation

If a delegation of duties is enforceable, the obligee (the one to whom performance is owed) must accept performance from the delegatee (the one to whom the duties are delegated).

Effect on Duty to Perform

If one party's performance is substantial, the other party's duty to perform—for instance, to make payment—remains absolute In other words, the parties must continue performing under the contract.

Types of Intended Beneficiaries

Intended beneficiaries can be further classified as creditor beneficiaries or donee beneficiaries.

Misrepresentation of law

Misrepresentation of law ordinarily does not entitle a party to be relieved of a contract. Exceptions to this rule occur when the misrepresenting party is in a profession known to require greater knowledge of the law than the average citizen possesses.

Injury to the Innocent Party

Most courts do not require a showing of harm in an action to rescind a contract. Most courts do not require a showing of harm in an action to rescind a contract. Because fraud actions necessarily involve wrongful conduct, courts may also award punitive, or exemplary, damages, which compensate a plaintiff over and above the amount of the actual loss. Because of the potential for punitive damages

Third Party Beneficiary

One who is not a party to the contract but who stands to benefit from the contract's performance.

Exceptions to the Statute of Frauds

Partial Performance Admissions Promissory Estoppel Special Exceptions under UCC

Contracts for the sale of goods

The Uniform Commercial Code (UCC) includes Statute of Frauds provisions that require written evidence or an electronic record of a contract for the sale of goods priced at $500 or more. A writing that will satisfy the UCC requirement need only state the quantity term (6,000 boxes of cotton gauze, for instance). -The contract will not be enforceable for any quantity greater than that set forth in the writing.

Discharge by performance

The contract comes to an end when both parties fulfill their respective duties by performing the acts they have promised. Performance can also be accomplished by tender. Tender is an unconditional offer to perform by a person who is ready, willing, and able to do so. Therefore, a seller who places goods at the disposal of a buyer has tendered delivery and can demand payment according to the terms of the agreement. -A buyer who offers to pay for goods has tendered payment and can demand delivery of the goods. Once performance has been tendered, the party making the tender has done everything possible to carry out the terms of the contract. If the other party then refuses to perform, the party making the tender can consider the duty discharged and sue for breech of contract

Performance

The fulfillment of one's duties under a contract—the normal way of discharging one's contractual obligations.

Contract Discharge

The most common way to discharge, or terminate, one's contractual duties is by the performance of those duties. The duty to perform under a contract may be conditioned on the occurrence or nonoccurrence of a certain event, or the duty may be absolute. As shown in Exhibit 14-4, in addition to performance, a contract can be discharged in numerous other ways, -including discharge by agreement of the parties and discharge by operation of law.

Ch 14 Privity of Contract

The relationship that exists between the promisor and the promisee of a contract.

Discharge by Novation

The requirements of a novation are as follows: 1. A previous valid obligation. 2. An agreement by all of the parties to a new contract. 3. The extinguishing of the old obligation (discharge of the prior party). 4. A new, valid contract. A novation expressly or impliedly revokes and discharges a prior contract.

Intent to Deceive

The second element of fraud is knowledge on the part of the misrepresenting party that facts have been misrepresented. This element, usually called scienter, or "guilty knowledge," generally signifies that there was an intent to deceive.

Novation

The substitution, by agreement, of a new contract for an old one, with the rights under the old one being terminated.

Discharge

The termination of an obligation, such as occurs when the parties to a contract have fully performed their contractual obligations.

Must be objectively impossible to perform in one year

The test for determining whether an oral contract is enforceable under the one-year rule is whether performance is possible within one year from the day after the date of contract formation. - It does not matter whether the agreement is likely to be performed during that period. Ex: A contract to provide five crops of tomatoes to be grown on a specific farm in Illinois would be objectively impossible to perform within one year. No farmer in Illinois can grow five crops of tomatoes in a single year. If performance is possible within one year under the contract's terms, the contract does not fall under the Statute of Frauds and need not be in writing.

Alienation

The transfer of title called restraints against alienation (the voluntary transfer of land ownership) to real property (which "alienates" the real property from the former owner).

Jerome is an elderly man who lives with his nephew, Philip. Jerome is totally dependent on Philip's support. Philip tells Jerome that unless Jerome transfers a tract of land he owns to Philip for a price 30 percent below market value, Philip will no longer support and take care of him. Jerome enters into the contract. Discuss fully whether Jerome can set aside this contract.

Under these circumstances, Jerome has been under undue influence and duress (maybe there was a fiduciary relationship between the 2) Jerome could get out of the contract due to the undue influence, and duress mentioned above, also because consent HAS to be voluntary

Potential for Discharge by Performance to the Wrong Party

Until the obligor has notice of an assignment, the obligor can discharge his or her obligation by performance to the assignor, and this performance constitutes a discharge to the assignee. Once the obligor receives proper notice, only performance to the assignee can discharge the obligor's obligations. Recall that Alexis, the obligee in Example 14.7, assigned to Louisa her right to collect $5,000 from Jason, and Louisa did not give notice to Jason. -What will happen if Jason later pays Alexis the $5,000? Although the assignment was valid, Jason's payment to Alexis will discharge the debt. -Louisa's failure to notify Jason of the assignment will cause her to lose the right to collect the $5,000 from Jason. (Note that Louisa will still have a claim against Alexis for the $5,000.) -If Louisa had given Jason notice of the assignment, Jason's payment to Alexis would not have discharged the debt.

When a Contract Is Personal in Nature

When a contract is for personal services, the rights under the contract normally cannot be assigned unless all that remains is a monetary payment. Anton signs a contract to be a tutor for Marisa's children. -Marisa then attempts to assign to Roberto her right to Anton's services. -Roberto cannot enforce the contract against Anton. -Roberto's children may be more difficult to tutor than Marisa's. -Thus, if Marisa could assign her rights to Anton's services to Roberto, it would change the nature of Anton's obligation. -Because personal services are unique to the person rendering them, rights to receive personal services are likewise unique and cannot be assigned.

Fraudulent Misrepresentation

When an innocent party is fraudulently induced to enter into a contract, the contract usually can be avoided because that party has not voluntarily consented to the terms. Normally, the innocent party can either rescind the contract and be restored to her or his original position OR enforce the contract and seek damages for any harms resulting from the fraud. Generally, fraudulent misrepresentation refers only to misrepresentation that is consciously false and is intended to mislead another.

When the Contract Prohibits Delegation

When the contract expressly prohibits delegation by including an antidelegation clause, the duties cannot be delegated. Dakota Company has contracted with Belisario, a certified public accountant, to perform its audits. Because the contract prohibits delegation, Belisario cannot delegate the duty to perform the audits to another accountant—not even an accountant at the same firm.

Newmark & Co. Real Estate, Inc., contacted 2615 East 17 Street Realty, LLC, to lease certain real property on behalf of a client. Newmark e-mailed the landlord a separate agreement for the payment of Newmark's commission. The landlord e-mailed it back with a separate demand to pay the commission in installments. Newmark revised the agreement and e-mailed a final copy to the landlord. Do the parties have an agreement that qualifies as a writing under the Statute of Frauds? Explain.

Yes, emailed documents count as agreements/contracts under Statute of Frauds. also emailed communication usually contains electronic signatures

Delegation of Duties

The transfer to another of a contractual duty.

The rule that a contract can prohibit assignments has several exceptions:

1. A contract cannot prevent an assignment of the right to receive funds. This exception exists to encourage the free flow of funds and credit in modern business settings. 2. The assignment of ownership rights in real estate often cannot be prohibited because such a prohibition is contrary to public policy in most states. Prohibitions of this kind are called restraints against alienation (the voluntary transfer of land ownership). 3. The assignment of negotiable instruments (such as checks and promissory notes) cannot be prohibited. 4. In a contract for the sale of goods, the right to receive damages for breach of contract or payment on an account may be assigned even though the sales contract prohibits such an assignment.

elements of article 2

1. Article 2 deals with the sale of goods. -It does not deal with real property (Real Estate), Services, or intangible property such as stocks and bonds. -Thus, if the subject matter of a dispute is Goods, the UCC governs. -If it is real estate or Services, the common law applies. 2. in some situations, the rules can vary depending on whether the buyer or the seller is a merchant.

Exceptions to the Parol Evidence Rule

1. Contracts subsequently modified: -Evidence of a subsequent modification (oral or written) of a written contract can be introduced in court (is admissible) -Oral modifications may not be enforceable, however, if they come under the Statute of Frauds (such as a modification that increases the price of the goods being sold to more than $500). -Also, oral modifications will not be enforceable if the original contract provides that any modification must be in writing. 2. Voidable or void contracts: -Oral evidence can be introduced in all cases to show that the contract was voidable or void (for example, induced by mistake, fraud, or misrepresentation). -If deception led one of the parties to agree to the terms of a written contract, oral evidence indicating fraud should not be excluded. -Courts frown on bad faith and are quick to allow the introduction at trial of parol evidence when it establishes fraud. 3. Contracts containing ambiguous terms: -When the terms of a written contract are ambiguous, evidence is admissible to show the meaning of the terms. 4. Incomplete contracts: -Evidence is admissible when the written contract is incomplete in that it lacks one or more of the essential terms. -The courts allow evidence to "fill in the gaps" in the contract. 5. Prior dealing, course of performance, or usage of trade: -Under the UCC, evidence can be introduced to explain or supplement a written contract by showing a prior dealing, course of performance, or usage of trade. -This is because when buyers and sellers deal with each other over extended periods of time, certain customary practices develop. -These practices are often overlooked in the writing of the contract, so courts allow the introduction of evidence to show how the parties have acted in the past. -Usage of trade—practices and customs generally followed in a particular industry—can also shed light on the meaning of certain contract provisions, and thus evidence of trade usage may be admissible. 6. Contracts subject to an orally agreed-on condition precedent: (Condition precedent is something that has to happen before something else can be accomplished under the contract) -Sometimes the parties agree that a condition must be fulfilled before a party is required to perform the contract. -This is called a condition precedent. If the parties have orally agreed on a condition precedent and the condition does not conflict with the terms of a written agreement, then a court may allow parol evidence to prove the oral condition. -The parol evidence rule does not apply here because the existence of the entire written contract is subject to an orally agreed-on condition. -Proof of the condition does not alter or modify the written terms but affects the enforceability of the written contract. 7. Contracts with an obvious or gross clerical (or typographic) errors: -When an obvious or gross clerical (or typographic) error exists that clearly would not represent the agreement of the parties, parol evidence is admissible to correct the error.

When the rights of an intended beneficiary vest

1. When the third party demonstrates express consent to the agreement, such as by sending a letter, a note, or an e-mail acknowledging awareness of, and consent to, a contract formed for her or his benefit. 2. When the third party materially alters his or her position in detrimental reliance on the contract, such as when a donee beneficiary contracts to have a home built in reliance on the receipt of funds promised to him or her in a donee beneficiary contract. 3. When the conditions for vesting are satisfied. For instance, the rights of a beneficiary under a life insurance policy vest when the insured person dies.

elements of consumer leases

1. a lessor who regularly engages in the business of leasing or selling 2. a lesee (except a organization) who leases the goods "primarily for a personal, family, or household purpose" 3. total lease payments that are less than a dollar amount set by State statute

construction contracts

1. breach by owner: -before performance has begun, the contractor can recover only the profits that would have been made on the contract. -if the owner breaches during performance, the contractor can recover the profits plus the cost incurred and particularly construction the building. -if the owner breaches after construction has been completed, the contractor can recover the entire contract price, plus interest ex: Jamison well drilling, Inc., contracted to drill a well for ED Parson for $4,130. Jameson drilled the well and installed a storage tank. -The well did not comply with State Health Department requirements, however, and failed repeated test for bacteria. -The health department ordered the will to be abandoned and sealed. -Parson used the storage tank but pay Jameson nothing. -Jameson filed a suit to recover. -The Court held that Jameson was entitled to $970 for the storage tank but was not entitled to the full contract price because the well was not usable

types of damages

1. compensatory (to cover direct losses and costs) 2. consequential (to cover indirect and foreseeable losses) 3. punitive (to punish and deter wrongdoing) 4. nominal (to recognize wrongdoing with no monetary loss is shown)

when goods are held by a Bailee risk of loss passes to the buyer when one of the following occurs:

1. the buyer receives a negotiable document of title for the goods 2. the Bailee acknowledges the buyers right to possess the goods 3. the buyer receives a non negotiable document of title, and the buyer has a reasonable time to present the document to the Bailee and demand the goods. If the bailee refuses to honor the document, the risk of loss remains with the seller

Conditions Precedent

A condition in a contract that must be met before a party's promise becomes absolute. A condition that must be fulfilled before a party's promise becomes absolute is called a condition precedent. The condition precedes the absolute duty to perform. Life insurance contracts frequently specify that certain conditions, -such as passing a physical examination, must be met before the insurance company will be obligated to perform under the contract. Restoration Motors offers to buy Charlie's 1960 Cadillac limousine only if an expert appraiser estimates that it can be restored for less than a certain price. -Thus, the parties' obligations are conditioned on the outcome of the appraisal. -If the condition is not satisfied—that is, if the appraiser deems the cost to be significantly above that price—their obligations are discharged

Conditions Subsequent

A condition in a contract that, if it occurs, operates to terminate a party's absolute promise to perform. When a condition operates to terminate a party's absolute promise to perform, it is called a condition subsequent. The condition follows, or is subsequent to, the absolute duty to perform. If the condition occurs, the party need not perform any further. EX: A law firm hires Julia Darby, a recent law school graduate. -Their contract provides that the firm's obligation to continue employing Darby is discharged if she fails to pass the bar exam by her second attempt. -This is a condition subsequent because a failure to pass the exam -and thus to obtain a license to practice law -will discharge a duty (employment) that has already arisen. Generally, conditions precedent are common, and conditions subsequent are rare. The Restatement (Second) of Contracts omits the terms condition subsequent -and condition precedent and refers to both simply as "conditions."

`Contracts involving interests in land

A contract calling for the sale of land is not enforceable unless it is in writing or evidenced by a written memorandum. Land is real property and includes all physical objects that are permanently attached to the soil, such as buildings, fences, trees, and the soil itself. The Statute of Frauds operates as a defense to the enforcement of an oral contract for the sale of land. -Skylar contracts orally to sell his property in Fair Oaks to Beth. If he later decides not to sell, under most circumstances, Beth cannot enforce the contract. The Statute of Frauds also requires written evidence of contracts for the transfer of other interests in land, such as mortgage agreements and leases. -Similarly, an agreement that includes an option to purchase real property must be in writing for the option to be enforced.

Primary versus Secondary Obligations

A direct party to a contract incurs a primary obligation under that contract. A contract in which a party assumes a primary obligation normally does not need to be in writing to be enforceable. EX: Nigel tells Dr. Lu, an orthodontist, that he will pay for the services provided for Nigel's niece. -Because Nigel has assumed direct financial responsibility for his niece's debt, this is a primary obligation and need not be in writing to be enforceable.

What Must Be Contained in the Writing?

A memorandum or note evidencing an oral contract need only contain the essential terms of the contract, not every term. There must, of course, also be some indication that the parties voluntarily agreed to the terms. As mentioned earlier, under the UCC, a writing evidencing a contract for the sale of goods need only state the quantity and be signed by the party against whom enforcement is sought.

Negligent Misrepresentation

A misrepresentation that occurs when a person makes a false statement of fact because he or she did not exercise reasonable care or use the skill and competence required by her or his business or profession.

Innocent Misrepresentation

A misrepresentation that occurs when a person makes a false statement of fact that he or she believes is true.

Bilateral Mistake

A mistake that occurs when both parties to a contract are mistaken about the same material fact

Unilateral Mistake

A mistake that occurs when one party to a contract is mistaken as to a material fact. Mistakes of fact occur in two forms—unilateral and bilateral (mutual). A unilateral mistake is made by only one of the contracting parties, whereas a mutual mistake is made by both.

Substantial Performance

A party who in good faith performs substantially all of the terms of a contract can enforce the contract against the other party under the doctrine of substantial performance. Note that good faith is required. Intentionally failing to comply with the terms is a breach of the contract. The basic requirements for performance to qualify as substantial performance are as follows: 1. The party must have performed in good faith. Intentional failure to comply with the contract terms is a breach of the contract. 2. The performance must not vary greatly from the performance promised in the contract. An omission, variance, or defect in performance is considered minor if it can easily be remedied by compensation (monetary damages). 3. The performance must create substantially the same benefits as those promised in the contract. Wisconsin Electric Power Company (WEPCO) contracted with Union Pacific Railroad to transport coal to WEPCO from mines in Colorado. -The contract required WEPCO to notify Union Pacific monthly of how many tons of coal (below a certain maximum) it wanted to have shipped the next month. Union Pacific was to make "good faith reasonable efforts" to meet the schedule. -The contract also required WEPCO to supply the railcars. When WEPCO did not supply railcars, Union Pacific used its own railcars and delivered 84 percent of the requested coal. -After WEPCO sued for breach of contract, a federal court held that the delivery of 84 percent of the contracted amount constituted substantial performance.

Condition

A qualification, provision, or clause in a contractual agreement, the occurrence or nonoccurrence of which creates, suspends, or terminates the obligations of the contracting parties.

When an Assignment Will Significantly Change the Risk or Duties of the Obligor

A right cannot be assigned if assignment will significantly alter the risks or the duties of the obligor. Alex has a hotel, and to insure it, he takes out a policy with Northwest Insurance Company. -The policy insures against fire, theft, floods, and vandalism. -Alex attempts to assign the insurance policy to Carmen, who also owns a hotel. -The assignment is ineffective because it may substantially alter the insurance company's duty of performance and the risk that the company undertakes. -An insurance company evaluates the particular risk associated with a specific party and tailors its policy to fit that risk. -If the policy were assigned to a third party, the insurance risk would be materially altered.

Collateral Promise

A secondary promise to a primary transaction, such as a promise made by one person to pay the debts of another if the latter fails to perform. A collateral promise normally must be in writing to be enforceable.

Statute of Frauds

A state statute that requires certain types of contracts to be in writing to be enforceable. The following types of contracts are said to fall "within" or "under" the Statute of Frauds and therefore require a writing: 1. Contracts involving interests in land. 2. Contracts that cannot by their terms be performed within one year from the day after the date of formation. 3. Collateral, or secondary, contracts, such as promises to answer for the debt or duty of another. 4. Promises made in consideration of marriage. 5. Under the Uniform Commercial Code, contracts for the sale of goods priced at $500 or more.

Incidental Beneficiaries

A third party who benefits from a contract even though the contract was not formed for that purpose. An incidental beneficiary has no rights in the contract and cannot sue to have it enforced. Because the benefit is unintentional, an incidental beneficiary cannot sue to enforce the contract. Spectators at the infamous boxing match in which Mike Tyson was disqualified for biting his opponent's ear sued Tyson and the fight's promoters for a refund on the basis of breach of contract. -The spectators claimed that they were third party beneficiaries of the contract between Tyson and the fight's promoters. -The court, however, held that the spectators could not sue, because they were not in contractual privity with the defendants. -Any benefits they received from the contract were incidental to the contract. -According to the court, the spectators got what they paid for: "the right to view whatever event transpired."

Promises made in consideration of marriage

A unilateral promise to make a monetary payment or to give property in consideration of marriage must be in writing. Not valid/honored in Texas -Exception: a Pre/Post Nup

What constitutes a writing?

A writing can consist of any confirmation, invoice, sales slip, check, fax, or e-mail—or such items in combination. -The written contract need not be contained in a single document to constitute an enforceable contract. One document may incorporate another document by expressly referring to it. -Several documents may form a single contract if they are physically attached—such as by staple, paper clip, or glue—or even if they are only placed in the same envelope. Ex: Simpson orally agrees to sell some land next to a shopping mall to Terro Properties. -Simpson gives Terro an unsigned memo that contains a legal description of the property, and Terro gives Simpson an unsigned first draft of their contract. -Simpson sends Terro a signed letter that refers to the memo and to the first and final drafts of the contract. -Terro sends Simpson an unsigned copy of the final draft of the contract with a signed check stapled to it. -Together, the documents can constitute a writing sufficient to satisfy the Statute of Frauds and bind both parties to the terms of the contract as evidenced by the writings.

temporary impossibility

An Occurrence or event that makes performance temporarily impossible, operates to suspend performance until the impossibilities ceases. -Once the temporary event ends, the party's ordinarily must perform the contract as originally planned

Promissory Estoppel

An oral contract that would otherwise be unenforceable under the Statute of Frauds may be enforced under the doctrine of promissory estoppel. Section 139 of the Restatement (Second) of Contracts provides that an oral promise can be enforceable, notwithstanding the Statute of Frauds, -if the promisee has justifiably relied on the promise to his or her detriment. -The promisee's reliance must have been foreseeable to the person making the promise, and enforcing the promise must be the only way to avoid injustice.

An Exception—The "Main Purpose" Rule

An oral promise to answer for the debt of another is covered by the Statute of Frauds unless the guarantor's purpose in accepting secondary liability is to secure a personal benefit. Under the "main purpose" rule, this type of contract need not be in writing. The assumption is that a court can infer from the circumstances of a case whether a "leading objective" of the promisor was to secure a personal benefit.

Discharge by Accord and Satisfaction

As explained in a previous chapter, in an accord and satisfaction, the parties agree to accept performance different from the performance originally promised. An accord is a contract to perform some act to satisfy an existing contractual duty that has not yet been discharged. A satisfaction is the performance of the accord agreement. An accord and its satisfaction discharge the original contractual obligation. EX: Shea obtains a judgment of $8,000 against -Marla. Later, both parties agree that the judgment can be satisfied by Marla's transfer of her automobile to Shea. -This agreement to accept the auto in lieu of $8,000 in cash is the accord. -If Marla transfers her automobile to Shea, the accord agreement was fully performed and the $8000 debt is discharged. -If Marla refuses to transfer her car, the accord is breached. -Because the original obligation is merely suspended, Shea can sue to enforce the judgment for $8,000 in cash or bring an action for breach of the accord.

Review: Chelene had been a caregiver for Marta's elderly mother, Janis, for nine years. Shortly before Janis passed away, Chelene convinced her to buy Chelene's house for Marta. Janis died before the papers were signed, however. Four months later, Marta used her inheritance to buy Chelene's house without having it inspected. The house was built in the 1950s, and Chelene said it was in "perfect condition." Nevertheless, one year after the purchase, the basement started leaking. Marta had the paneling removed from the basement walls and discovered that the walls were bowed inward and cracked. Marta then had a civil engineer inspect the basement walls, and he found that the cracks had been caulked and painted over before the paneling was installed. He concluded that the "wall failure" had existed "for at least thirty years" and that the basement walls were "structurally unsound." Using the information presented in the chapter, answer the following questions. 1. Can Marta avoid the contract on the ground that both parties made a mistake about the condition of the house? Explain. 2. Can Marta sue Chelene for fraudulent misrepresentation? Why or why not? What element (or elements) might be lacking? 3. Now assume that Chelene knew that the basement walls were cracked and bowed and that she hired someone to install paneling before offering to sell the house. Did she have a duty to disclose this defect to Marta? Could a court find that Chelene's silence in this situation constituted misrepresentation? Explain. 4. Can Marta obtain rescission of the contract based on undue influence? If the sale to Janis had been completed before her death, could Janis have obtained rescission based on undue influence? Explain.

Answer: 1. no, both parties didn't make a mistake -need more info, we don't know if marta made a mistake 2. We don't know is Charlene was being fraudulent or if she really didn't know. 3. if she knew about the defects, she has the duty to disclose that info ; yes a court could finf that she misrepresented the house if she knew about the defects and still said it was "in perfect condition" (in texas, the seller of a home is required to do a seller disclosure, Charlene could have gotten in trouble under this statue) 4. Marta could not get rescission under undue influence ; however if the sale was finished while Janis was alive, Janis could have claimed undue influence

Discharge by agreement

Any contract can be discharged by agreement of the parties. The agreement can be contained in the original contract, or the parties can form a new contract for the express purpose of discharging the original contract.

Rights That Cannot Be Assigned

As a general rule, all rights can be assigned. Exceptions are made, however, in the following special circumstances

Discharge by Mutual Rescission

As mentioned in previous chapters, rescission occurs when the parties cancel the contract and are returned to the positions they occupied prior to the contract's formation. For mutual rescission to take place, the parties must make another agreement that also satisfies the legal requirements for a contract—there must be an offer, an acceptance, and consideration. Generally, a rescission agreement may be written or oral. Oral agreements to rescind most executory contracts (that neither party has performed) are enforceable even if the original agreement was in writing. -Not in texas A writing (or electronic record) is required to rescind a contract for the sale of goods under the Uniform Commercial Code when the contract requires a written rescission. Also, agreements to rescind contracts involving transfers of realty must be evidenced by a writing or record. When one party has fully performed, an agreement to rescind the original contract usually is not enforceable unless additional consideration or restitution is made. Because the performing party has received no consideration for the promise to call off the original bargain, additional consideration is necessary.

Charter One Bank owned a fifteen-story commercial building. A fire inspector told Charter that the building's drinking-water and fire-suppression systems were linked, which violated building codes. Without disclosing this information, Charter sold the building to Northpoint Properties, Inc. Northpoint spent $280,000 to repair the water and fire-suppression systems and filed a suit against Charter One. Is the seller liable for not disclosing the building's defects? Discuss.

Charter One is liable for not disclosing the building defects beforehand

Performance to the Satisfaction of Another

Contracts often state that completed work must personally satisfy one of the parties or a third person. The question is whether this satisfaction becomes a condition precedent, -requiring actual personal satisfaction or approval for discharge, -or whether the test of satisfaction is performance that would satisfy a reasonable person (substantial performance) Most other contracts need be performed only to the satisfaction of a reasonable person unless they expressly state otherwise.

fraud or Mutual mistake

Court's order Reformation most often when fraud or Mutual mistake is present

Parol Evidence Rule

Either Oral or a written evidence that is outside of the written document and its not made a part of the contract by a reference in writing -This rule applies to ALL written contracts -evidence cant contradict a term that's already in the contract A rule of contracts under which a court will not receive into evidence prior or contemporaneous external agreements that contradict the terms of the parties' written contract. Under this rule, if a court finds that a written contract represents the complete and final statement of the parties' agreement, then it will not allow either party to present parol evidence. Thus, a party normally cannot present evidence of the parties' "prior or contemporaneous agreements or negotiations" if that evidence contradicts or varies the terms of the parties' written contract.

Bass-Fineberg Leasing, Inc. v. Modern Auto Sales, Inc.

FACTS: Bass-Fineberg Leasing, Inc., leased a tour bus to Modern Auto Sales, Inc., and Michael Cipriani. -The lease included an option to buy the bus. -The lease prohibited Modern Auto and Cipriani from assigning their rights without Bass- Fineberg's written consent. -Later, Cipriani left the bus with Anthony Allie at BVIP Limo Services, Ltd., for repairs. -Modern Auto and Cipriani did not pay for the repairs. -At the same time, they defaulted on the lease payments to Bass-Fineberg. -While BVIP retained possession of the bus, Allie signed an agreement with Cipriani to buy it and to make an initial $5,000 payment to Bass-Fineberg. Bass-Fineberg filed an action in an Ohio state court against Modern Auto, Cipriani, BVIP, and Allie to regain possession of the bus. -The court ordered the bus returned to Bass-Fineberg and the $5,000 payment refunded to Allie. -All of the parties appealed. ISSUE: Was the lease's antiassignment clause enforceable? DECISION: Yes. -A state intermediate appellate court affirmed the lower court's order. -The bus was to be returned to Bass-Fineberg and the $5,000 was to be refunded to Allie. REASON: An antiassignment clause can be enforceable when it clearly prohibits an assignment. -Violation of an enforceable anti- assignment provision renders the resulting agreement void. The antiassignment clause in the lease between Bass-Fineberg and Modern Auto and Cipriani was clear— -"MODERN AUTO AND CIP- RIANI MAY NOT ASSIGN . . . [THEIR] RIGHTS . . . UNDER THIS LEASE . . . WITHOUT BASS-FINEBERG'S PRIOR WRITTEN CON- SENT." -Bass-Fineberg argued that under this clause, the contract between Cipriani and Allie was void, because Bass-Fineberg had not provided written consent. -BVIP contended that if the contract was void, then BVIP should receive a refund of its $5,000 payment. -The court agreed with both of these parties. The contract between Cipriani and Allie was void because Cipriani could not assign his rights under the lease without Bass-Fineberg's written consent. -Because the contract was void, the parties were to be returned to their precontract status, which included a refund of the $5,000 payment.

Kohel v. Bergen Auto Enterprises, LLC

FACTS: Marc and Bree Kohel agreed to buy a used 2009 Mazda from Bergen Auto Enterprises, LLC, doing business as Wayne Mazda, Inc. The Kohels were credited $7,000 as a trade-in for their 2005 Nis- san Altima. -They still owed about $8,000 on the Nis- san, which Wayne Mazda agreed to pay. -The Kohels took possession of the Mazda with temporary plates. -Sometime later, Wayne Mazda discovered that the Nissan was missing a vehicle identification number (VIN) tag. -The dealer therefore refused to make the payment for the Nissan and also refused to give the Kohels permanent plates for the Mazda. -The Kohels applied and paid for a replacement VIN tag for the Nissan, but Wayne Mazda refused to take their calls on the matter and continued to refuse to supply permanent plates for the Mazda. -The Kohels filed a complaint against the dealer in a New Jersey state court, alleging breach of contract. -The court ruled in the plaintiffs' favor, and Wayne Mazda appealed. ISSUE: Was it a material breach of the contract for Wayne Mazda to refuse to go through with the sales agreement because the trade-in vehicle was missing a VIN tag? DECISION: Yes. -A state intermediate appellate court affirmed the judgment in the Kohel's favor. REASON: While both parties were arguably in breach of their contract, "there is a material distinction in plaintiffs' conduct," which was unintentional, "and defendant's refusal to release the permanent plates for which the plaintiffs had paid." -The Kohels had not been aware that their trade-in Nissan lacked a vehicle identification number (VIN) tag. -Moreover, "defendant's representatives examined the car twice before accepting it in trade and did not notice the missing VIN tag until they took the car to an auction where they tried to sell it." -The reviewing court found that Wayne Mazda had acted only to maintain "leverage." -The Kohels had applied and paid for a replacement VIN tag in an attempt to remedy the problem, but the owner of Wayne Mazda would not even take their calls to discuss the matter. -Thus, the court concluded that Wayne Mazda had acted in an unreasonable manner, which was a material breach of the contract.

When the Contract Prohibits Assignment

If a contract stipulates that the right cannot be assigned, then ordinarily it cannot be assigned. This restraint operates only against the parties themselves. It does not prohibit an assignment by operation of law, such as an assignment pursuant to bankruptcy or death. Whether an antiassignment clause is effective depends, in part, on how it is phrased. -A contract that states that any assignment is void effectively prohibits any assignment. EX: Ramirez agrees to build a house for Lee. -Their contract states "This contract cannot be assigned by Lee without Ramirez's consent. -Any assignment without such consent renders the contract void." -This antiassignment clause is effective, and Lee cannot assign her rights without obtaining Ramirez's consent.

Admissions

If a party against whom enforcement of an oral contract is sought "admits" under oath that a contract for sale was made, the contract will be enforceable. The party's admission can occur at any stage of the court proceedings, such as during a deposition or other discovery, pleadings, or testimony. If a party admits a contract subject to the UCC, the contract is enforceable, but only to the extent of the quantity admitted. Ex: Rachel, the president of Bistro Corporation, admits under oath that an oral agreement was made with Commercial Kitchens, Inc., to buy certain equipment for $10,000. -A court will enforce the agreement only to the extent admitted ($10,000), even if Commercial Kitchens claims that the agreement involved $20,000 worth

When a Statute Expressly Prohibits Assignment

If a statute expressly prohibits assignment, the right in question cannot be assigned. Quincy is an employee of Specialty Travel, Inc. Specialty is an employer bound by workers' compensation statutes in this state, and thus Quincy is a covered employee. -Quincy is injured on the job and begins to collect monthly workers' compensation checks. In need of a loan, Quincy borrows from Draper, offering to assign to Draper all of her future workers' compensation benefits. -A state statute prohibits the assignment of future workers' compensation benefits, and thus such rights cannot be assigned.

Priority Issues

If the assignor assigns the same right to two different persons, the question arises as to which one has priority—that is, which one has the right to the performance by the obligor. The rule most often observed in the United States is that the first assignment in time is the first in right. Some states, though, follow the English rule, which basically gives priority to the first assignee who gives notice. Texas is a priority state Jason owes Alexis $5,000 under a contract. -Alexis first assigns the claim to Louisa, who does not give notice to Jason. -Then Alexis assigns it to Dorman, who notifies Jason. -In most states, Louisa would have priority because the assignment to her was first in time. -In some states, however, Dorman would have priority because he gave first notice.

Conditions of Performance

In most contracts, promises of performance are not expressly conditioned or qualified. Instead, they are absolute promises. They must be performed, or the party making the promise will be in breach of contract. In some situations, however, contractual promises are conditioned. A condition is a qualification in a contract based on a possible future event, the occurrence or nonoccurrence of which will trigger the performance of a legal obligation or terminate an existing obligation under a contract. If the condition is not satisfied, the obligations of the parties are discharged. Three types of conditions can be present in any given contract: -conditions precedent, -conditions subsequent, -and concurrent conditions.

One Party Dominates the Other

In various types of relationships, one party may have an opportunity to dominate and unfairly influence another party. Minors and elderly people, for instance, are often under the influence of guardians Undue influence can arise from a number of confidential or fiduciary relationships,including: attorney/client,physician/patient, guardian/ward, parent/child, husband/wife, and trustee/beneficiary. The essential feature of undue influence is that the party being taken advantage of does not exercise free will in entering into a contract It is not enough that a person is elderly or suffers from some mental or physical impairment. -There must be clear and convincing evidence that the person did not act out of her or his free will.

Creditor Beneficiary

Like the plaintiff in Case Example 14.14, a creditor beneficiary benefits from a contract in which one party (the promisor) promises another party (the promisee) to perform a duty that the promisee owes to a third party (the creditor beneficiary). As an intended beneficiary, the creditor beneficiary can sue the promisor directly to enforce the contract. EX: Autumn Allan owned a condominium unit in a Texas complex. -Her unit was located directly beneath a unit owned by Aslan Koraev. -Over the course of two years, Allan's unit suffered eight incidents of water and sewage incursion as a result of plumbing problems and misuse of appliances in Koraev's unit. -Allan sued Koraev for breach of contract and won. -Koraev appealed, arguing that he had no contractual duty to Allan. -The court, however, found that Allan was an intended third party beneficiary of the contract between Koraev and the condominium owners' association. -Because the governing documents stated that each owner had to comply strictly with their provisions, failure to comply created grounds for an action by either the condominium association or an aggrieved (wronged) owner. -Here, Allan was an aggrieved owner and could sue Koraev directly for his failure to perform his contractual duties to the condominium association.

special rules for contracts between merchants

Merchants can satisfy the statute of frauds if, after the parties have agreed orally, one of the merchants sends a signed written confirmation to the other Merchants within a reasonable time. The communication must indicate the terms of the agreement, and the merchant receiving the confirmation must have reason to know of its contents. unless the merchant who received the confirmation gives written notice of objection to its contents within 10 days after receipt, the writing or record is sufficient, even though he or she has not signed anything

Misrepresentation by Conduct

Misrepresentation also occurs when a party takes specific action to conceal a fact that is material to the contract. Therefore, if a seller, by her or his actions, prevents a buyer from learning of some fact that is material to the contract, the seller's behavior constitutes misrepresentation by conduct.

Reformation

Reformation is an equitable remedy used when the parties have imperfectly expressed their agreement in writing. Reformation allows a court to rewrite the contract to reflect the parties true intentions

When the Duties Are Personal in Nature

O'Brien, who is impressed with Brodie's ability to perform veterinary surgery, contracts with Brodie to have her perform surgery on O'Brien's prize- winning stallion in July. -Brodie later decides that she would rather spend the summer at the beach, so she delegates her duties under the contract to Lopez, who is also a competent veterinary surgeon. -The delegation is not effective without O'Brien's consent, no matter how competent Lopez is, because the contract is for personal performance. -In contrast, nonpersonal duties may be delegated. -Suppose that, in Example 14.9, Brodie contracts with O'Brien to pick up a large horse trailer and deliver it to O'Brien's property. -Brodie delegates this duty to Lopez, who owns a towing business. -This delegation is effective because the performance required is of a routine and nonpersonal nature.

Misrepresentation by Silence

Ordinarily, neither party to a contract has a duty to come forward and disclose facts, and a contract normally will not be set aside because certain pertinent information has not been volunteered In general, if the seller knows of a serious potential problem that the buyer cannot reason- ably be expected to discover, the seller may have a duty to speak.

Undue Influence

Persuasion that is less than actual force but more than advice and that induces a person to act according to the will or purposes of the dominating party

May occur when market prices fluctuate

Quite often, an anticipatory repudiation occurs when performance of the contract would be extremely unfavorable to one of the parties because of a sharp fluctuation in market prices.

"Assignment of All Rights"

Sometimes, a contract provides for an "assignment of all rights." This wording may create both an assignment of rights and a delegation of duties. Typically, this situation occurs when general words are used, such as "I assign the contract" or "I assign all my rights under the contract." A court normally will construe such words as implying both an assignment of rights and a delegation of any duties of performance. Thus, the assignor remains liable if the assignee fails to perform the contractual obligations.

Special Exceptions under the UCC

Special exceptions to the applicability of the Statute of Frauds exist for sales contracts. Oral contracts for customized goods may be enforced in certain circumstances. Another exception has to do with oral contracts between merchants that have been confirmed in a written memorandum. We will examine this exception when we discuss the UCC's Statute of Frauds provisions.

Statements of Opinion

Statements of opinion and representations of future facts (predictions) are generally not subject to claims of fraud. In certain situations, such as when a naïve purchaser relies on an opinion from an expert, the innocent party may be entitled to rescission or reformation. Ex: An instructor at an Arthur Murray dance school told Audrey Vokes, a widow without family, that she had the potential to become an accom- plished dancer. After many hours of lessons and much money spent, Vokes learned that she wouldn't be a good dancer The court held that because the dance school had superior knowledge about a person's dance potential, the instructor's statements could be considered statements of fact rather than opinion.

shipment of nonconforming goods

The Prompt shipment of nonconforming goods constitutes both an acceptance, which creates a contract, and a breach of that contract. This rule does not apply if the seller seasonably (within a reasonable amount of time) notifies the buyer that the non-conforming shipment is offered only as an accommodation, or a favor. The notice of accommodation must clearly indicate to the buyer that the shipment does not constitute and acceptance and that, therefore, no contract has been formed.

sales contracts

The Uniform Commercial Code (UCC) provides that remedies can be limited in a contract for the sale of goods. We will examine the UCC provisions on limitation of liability Clause is again in the context of the remedies available on the breach of a contract for the sale or lease of goods

Assignee Takes Rights Subject to Defenses

The assignee obtains only those rights that the assignor originally had. In addition, the assignee's rights are subject to the defenses that the obligor has against the assignor. In Example 14.1, Brent owes Alex $1,000 under a contract in which Brent agreed to buy Alex's laptop. -Alex assigns his right to receive the $1,000 to Carmen. -But Brent, in deciding to purchase the laptop, relied on Alex's fraudulent misrepresentation that the computer had sixteen megabytes of memory. -When Brent discovers that the computer has only eight megabytes of memory, he tells Alex that he is going to return it and cancel the contract. -Even though Alex has assigned his "right" to receive the $1,000 to Carmen, Brent need not pay Carmen the $1,000—Brent can raise the defense of Alex's fraudulent misrepresentation to avoid payment.

Presumption of undue influence

The dominant party in a fiduciary relationship must exercise the utmost good faith in dealing with the other party. When the dominant party benefits from the relationship, a presumption of undue influence may arise. when a contract enriches the dominant party in a fiduciary relationship, the court will often presume that the contract was made under undue influence

breech of contract

The failure, without legal excuse, of a promisor to perform the obligations of a contract.

Justifiable Reliance on the Misrepresentation

The third element of fraud is reasonably justifiable reliance on the misrepresentation of fact. The deceived party must have a justifiable reason for relying on the misrepresentation. Also, the misrepresentation must be an important factor (but not necessarily the sole factor) in inducing the deceived party to enter into the contract Reliance is not justified if the innocent party knows the true facts or relies on obviously extravagant statements

Assignment

The transfer to another of all or part of one's rights arising under a contract.

Gemma promises a local hardware store that she will pay for a lawn mower that her brother is purchasing on credit if the brother fails to pay the debt. Must this promise be in writing to be enforceable? Why or why not?

This is a collateral promise, and if Gemma isn't benefiting from the promise, it doesn't not have to be in writing. (in Texas it needs to be in writing)

Material Alteration

To discourage parties from altering written contracts, the law allows an innocent party to be discharged from a contract that has been materially altered. If one party alters a material term of the contract—such as the quantity term or the price term—without the knowledge or consent of the other party, -the party who was unaware of the alteration can treat the contract as discharged or terminated

who is a merchant?

Under the UCC, a person who deals in Goods of the kind involved in the sales contract or who holds herself or himself out as having skill or knowledge peculiar to the practices or Goods being purchased or sold there are three ways in which Merchant status can arise: 1. a merchant is a person who deals in Goods of the kind involved in a sales contract. -Thus, a retailer, a wholesaler, or manufacturer is a merchant of those goods sold in the business. -A merchant for one type of goods is not necessarily a merchant for another type. -For instance, a sporting equipment retailer is a merchant when selling tennis rackets but not when selling a used iPad 2. a merchant is a person who, but occupation, holds them self out as having special knowledge and skill related to the practices or Goods involved in the transaction. -This broad definition may include Banks or universities as merchants. 3. a person who employs a merchant as a broker, agent, or other intermediary has the status of a merchant in that transaction. -Hence, if an art collector hires a broker to purchase or sell art for her, The Collector is considered a merchant in the transaction . a person is emergent when he or she, acting in a Mercantile (commercial) capacity, possesses or uses and expertise specifically related to the goods being sold. -this distinction is not always clear-cut, -for instance, state courts appear to be split on whether Farmers should be considered merchants.

Rimma Vaks and her husband, Steven Mangano, executed a written contract with Denise Ryan and Ryan Auction Co. to auction their furnishings. The six-page contract provided a detailed summary of the parties' agreement. It addressed the items to be auctioned, how reserve prices would be determined, and the amount of Ryan's commission. When a dispute arose between the parties, Vaks and Mangano sued Ryan for breach of contract. Vaks and Mangano asserted that, before they executed the contract, Ryan had made various oral representations that were inconsistent with the terms of their written agreement. Assuming that their written contract was valid, can Vaks and Mangano recover for breach of an oral contract? Why or why not?

Under the parole evidence rule, due to the inconsistency of the oral info, the evidence cant come in (be heard/used) if the oral agreement was consistent with the written agreement it could come in

Partial Performance

When a contract has been partially performed and the parties cannot be returned to their positions prior to the contract's formation, a court may grant specific performance. Specific performance is an equitable remedy that requires that a contract be performed according to its precise terms. Pacific Fruit, Inc., exports cargo from Ecuador. NYKCool, based in Sweden, provides maritime transportation. - NYKCool and Pacific entered into a written con- tract with a two-year duration, under which NYKCool agreed to transport weekly shipments of bananas from Ecuador to California and Japan. -At the end of the period, the parties agreed to extend the deal, but a new contract was never signed. -The parties continued making weekly shipments for four more years until a dispute arose over unused cargo capacity and unpaid freight charges. -An international arbitration panel found that Pacific Fruit was liable to NYKCool for $8.7 million for breach of contract. -Pacific Fruit appealed, arguing that there was no contract in place. -The court affirmed the award in favor of NYKCool. -"The parties' substantial partial performance on the contract weighs strongly in favor of contract formation."

Donee Beneficiary

When a contract is made for the express purpose of giving a gift to a third party, the third party is a donee beneficiary. Like a creditor beneficiary, a donee beneficiary can sue the promisor directly to enforce the promise. The most common donee beneficiary contract is a life insurance contract. Ang (the promisee) pays premiums to Standard Life, a life insurance company, and Standard Life (the promisor) promises to pay a certain amount on Ang's death to anyone Ang designates as a beneficiary. -The designated beneficiary is a donee beneficiary under the life insurance policy and can enforce the promise made by the insurance company to pay her or him on Ang's death.

Complete Performance

When a party performs exactly as agreed, there is no question as to whether the contract has been performed. When a party's performance is perfect, it is said to be complete. Normally, conditions expressly stated in the contract must fully occur in all aspects for complete performance (strict performance) of the contract to take place. Any deviation breaches the contract and discharges the other party's duty to perform EX: For instance, most construction contracts require the builder to meet certain specifications. -If the specifications are conditions, complete performance is required to avoid material breach. -(Material breach will be discussed shortly.) If the conditions are met, the other party to the contract must then fulfill her or his obligation to pay the builder. EX: If the parties to the contract did not expressly make the specifications a condition, however, and the builder fails to meet the specifications, performance is not complete. -What effect does that failure have on the other party's obligation to pay? -The answer is part of the doctrine of substantial performance.

Repudiation Is a Material Breach

When anticipatory repudiation occurs, it is treated as a material breach of the contract, and the nonbreaching party is permitted to bring an action for damages immediately, even though the scheduled time for performance under the contract may still be in the future. Until the nonbreaching party treats this early repudiation as a breach, however, the breaching party can retract the anticipatory repudiation by proper notice and restore the parties to their original obligations. An anticipatory repudiation is treated as a present, material breach for two reasons. First, the nonbreaching party should not be required to remain ready and willing to perform when the other party has already repudiated the contract. Second, the nonbreaching party should have the opportunity to seek a similar contract elsewhere. Indeed, that party may have the duty to do so to minimize his or her loss.

When Performance by a Third Party Will Vary Materially from That Expected by the Obligee

When performance by a third party will vary materially from that expected by the obligee under the contract, contractual duties cannot be delegated. Jared, a wealthy investor, established the company Heaven Sent to provide grants of capital to struggling but potentially successful businesses. -Jared contracted with Merilyn, whose judgment Jared trusted, to select the recipients of the grants. -Later, Merilyn delegated this duty to Donald. -Jared did not trust Donald's ability to select worthy recipients. -This delegation is not effective because it materially alters Jared's expectations under the contract with Merilyn.

Extinguishes the Rights of the Assignor

When rights under a contract are assigned unconditionally, the rights of the assignor are extinguished. The assignee has a right to demand performance from the other original party to the contract, the obligor. Brent (the obligor) owes Alex $1,000 under a contract in which Brent agreed to buy Alex's MacBook Pro laptop. -Alex, the obligee, assigns to Carmen the right to receive the $1,000 (thus, Alex is the assignor). Here, a valid assignment of a debt exists. -Carmen, the assignee, can enforce the contract against Brent, the obligor, if he fails to perform (pay the $1,000).

impossibility of performance

a Doctrine under which a party to a contract is relieved of their duty to perform when the performance becomes objectively and possible or totally impractical after a contract has been made, supervening events such as a fireman make performance impossible in an objective sense. this so-called impossibility of performance can discharge the contract. The doctrine of impossibility of performance is applied only when the parties could not have reasonably foreseen, at the time of the contract was formed, the event or events that rendered performance impossible

Chill 15 Damages

a breach of contract entitles the non-breaching party to sue for monetary damages. In contract law damages are designed to compensate the non-breaching party for the loss of the bargain.

buyer in the ordinary course of business

a buyer who in good faith and without knowledge that the sale violates the ownership rights or security interest of a third party in the goods, purchases Goods in the ordinary course of business from a person in the business of selling Goods of that kind. a person is a buyer in the ordinary course of business in the following circumstances: 1. they buy Goods in good faith 2. the goods are purchased without knowledge that the sale violates the rights of another person in the goods 3. the goods are purchased in the ordinary course from a merchant (other than a pawn broker) in the business of selling Goods of that kind 4. the sail to that person is consistent with the usual or customary practices in the kind of business in which the seller is engaged

insolvent

a condition in which a person cannot pay his or her debts as they become do or ceases to pay debts in the ordinary course of business. Under the UCC, insolvency occurs when a person ceases to pay their debts in the ordinary course of business, cannot pay debts as they become due, or is insolvent under federal bankruptcy law

penalty

a contract clause that specifies a certain amount to be paid in the event of a default or breach of contract but is unenforceable because it is designed to punish the breaching party rather than to provide a reasonable estimate of damages although a penalty also specifies a certain amount to be paid in the event of a default or breach of contract, it is designed to penalize the breaching party, not to make the innocent party hole

destination contract

a contract for the sale of goods in which the seller is required or authorized to ship the goods by carrier and tender delivery of the goods at a particular destination. The seller assumes liability for any losses or damage to the goods until they are tender at the destination specified in the contract

shipment contract

a contract for the sale of goods in which the seller is required or authorized to ship the goods by carrier. The seller assumes liability for any losses or damage to the goods until they are delivered to the carrier

contract Provisions limiting remedies

a contract may include Provisions stating that no damages can be recovered for certain types of breeches or that damages will be limited to a maximum amount. A contract may also provide that they only remedy for breach is replacement, repair, or refund of the purchase price. In addition, a contract May provide that one party can seek injunctive relief if the other party breaches the contract. Provisions stating that no damages can be recovered or called exculpatory Clause is. -Provisions that affect the availability of certain remedies or call and limitation of liability clauses

sale of land

a court May Grant specific performance to a buyer in an action for breach of contract involving the sale of land. In this situation, the legal remedy of monetary damages may not compensate the buyer adequately because every parcel of land is unique ex: Howard Smith entered into a contract to sell Trent Lowe 40 acres of mostly Timber and land for $45,000. -Lowe agreed to pay for a survey of the property and other cost in addition to the price. -He gave Smith a check for $1,000 to show his intent to fulfill the contract. -One month later, Smith died. -His son David became the executor of the estate. -After he discovered that the Timber on the property was worth more than $100,000, David asked Lowe to withdraw his offer to buy the 40 acres. -Lowe refused and filed a suit against David seeking specific performance of the contract. -The court found that because Lowe had substantially performed his obligations under the contract and offered to perform the rest, he was entitled to specific performance.

frustration of purpose

a court created Doctrine under which a party to a contract will be relieved of their duty to perform when the objective purpose for performance no longer exist due to reasons beyond that parties control in principle, a contract will be discharged as supervening circumstances make it impossible to attain the purpose both parties had in mind when making the contract. as with commercial impracticability, the supervening event must not have been foreseeable at the time of the Contracting

written contract in correctly States the parties oral agreement

a court will also perform a contract when two parties enter into a binding oral contract but later make an error when they attempt to put the terms into writing. Usually the court will allow into evidence the correct terms of the oral contract, they are by reforming the written contract

commercial impracticability

a doctrine that may use the duty to perform a contract when performance becomes much more difficult or costly due to the forces that neither party could control or foresee at the time the contract was formed for someone to invoke the doctrine of commercial impracticability successfully, however, the anticipated performance must become extremely difficult or costly. -Furthermore, the added burden of Performing must not have been foreseeable by the parties when the contract was made ex: in one classic case, a Court held that a contract could be discharged because the party would have to pay ten times more than the original estimate to excavate a certain amount of gravel. -in another case, a power failure during a wedding reception relieved the owner of a banquet hall from the duty to perform a contract.

movable

a item can be carried from place to place

document of title

a paper exchanged in the regular course of business that evidence is the right to possession of goods(for example of bill of lading Or a Warehouse receipt)

insurable interest

a property interest in Goods being sold or leased that is sufficiently substantial to permit a party to ensure against damage to the goods

good-faith purchaser

a purchaser who buys without notice of any circumstance that would cause a person of ordinary Prudence to inquire as to whether the seller has valid title to the goods being sold. the real, or original, owner cannot recover goods from a good-faith purchaser for value

voidable title

a seller has voidable title if the goods that he or she is selling we're 1. obtained by fraud, 2. paid for with a check that is later Dishonored (insufficient funds) 3. purchased on credit when the seller was insolvent

duration of ongoing contract

a single contract that specifies success of performances but not indicate how long the parties are required to deal with each other. In this situation, either party May terminate the ongoing contractual relationship. Principles of good faith and sound commercial practice call for reasonable notification before the termination, to give the other party time to make substitute Arrangements

nominal damages

a small monetary award (often $1) granted to a plaintiff when no actual damage was suffered. with no actual damage or financial loss results from a breach of contract and only a technical injury is involved, the court May award nominal damages to the innocent party. Nominal damages awards are often small, such as $1, but they do establish that the defendant acted wrongfully

predominant Factor test

a test courts use to determine whether a contract is primarily for the sale of goods or for the sale of services

sufficiency of the writing

a writing, including an email or other electronic record, will be sufficient to satisfy the UCC statute of frauds as long as it meets the following requirements: 1. it indicates that the parties intended to form a contract 2. it is signed by the party (or agent of the party) against whom enforcement is sought -(remember that I typed name can qualify as a signature)

lease agreement

an agreement in which one person agrees to transfer the right to The Possession and use of the property to another person in exchange for rental payments

liquidated damages

an amount, stipulated in a contract, that the parties to the contract believed to be a reasonable estimation of the damages that will occur in the event of a breach a liquidated damages provision in a contract specifies that a certain dollar amount is to be paid in the event of a future default or breach of contract liquidated means determined, settled, or fixed

specific performance

an equitable remedy in which a court orders the parties to perform as promised in the contract. This remedy normally is granted only when the legal remedy (monetary damages) is inadequate this remedy is attractive to a non-breaching party because it provides the exact bargain promised in the contract. -It also avoid some of the problems inherent in a suit for monetary damages, such as collecting a judgment and arranging another contract. Normally, specific performance will not be granted unless the parties legal remedy monetary damages is inadequate

unconscionability

an unconscionable contract is one that is so unfair and one-sided that it would be unreasonable to enforce it. the UCC allows courts to evaluate unconscionability. If a court deems a contract or clause in a contract to have been unconscionable at the time it was made, the court can do any of the following: 1. refuse to enforce the contract 2. enforce the remainder of the contract without the unconscionable part 3. limit the application of the unconscionable term to avoid an unconscionable result

future Goods

any Goods that are not in existence at the time of the contract or known as future Goods. Various rules apply to identification of future Goods, depending on the goods. 1. if a sale or lease involves unborn animals to be born within 12 months after Contracting, identification takes place when the animals are conceived. 2. if a salmon balls crops that are to be harvested within 12 months (or the next harvest season occurring after Contracting, whichever is longer), identification takes place when the crops are planted. Otherwise, identification takes place when the crops begin to grow. 3. in a sale or lease of any other future Goods, identification occurs when the goods are shipped, marked, or otherwise designated by the seller or lessor as the goods to which the contract refers

usage of trade

any practice or method of dealing that is so regularly observed in a place, vocation, or trade that parties justifiably expect it will be observed in their transaction

Article 2A - Leases

article 2A covers any transaction that creates a lease of goods, as well as subleases of goods. Article 2A is essentially a repetition of Article 2, except that it applies to the lease of goods rather than sales of goods and thus varies to reflect differences between Sales and Lease transactions.

Goods that are part of a larger Mass

as a general rule, Goods that are part of a larger Mass are identified when the goods are marked, shipped, or somehow designated by the seller or lessor as the particular Goods that are the subject of the contract. a common exception to this rule involves fungible Goods. fungible Goods are Goods that are alike Naturally, by agreement, or betrayed usage. Typical examples include specific grades or types of wheat, petroleum, and cooking oil, which are usually stored in large containers.

recovery based on quasi contract

as previously discussed, quasi contract is a legal Theory under which an obligation is imposed in the absence of an agreement. A quasi contract is not a true contract but rather a fictional contract that is imposed on the parties to prevent unjust enrichment

Goods associated with real estate

because real estate cannot be carried from place to place, is excluded from Article 2. -Goods associated with real estate often fall within the scope of Article 2 ex: a contract for the sale of minerals, oil, or natural gas is it contract for the sale of goods if Severance, or separation, is to be made by the seller. -in contrast, A contract for the sale of growing crops or Timber to be cut is a contract for the sale of goods regardless of who severs from the land

title and risk of loss

before the UCC, title was the central Concept in sales law and controlled all issues of Rights and remedies of the parties to a sales contract. In some situations, title is still relevant Under the UCC, and the UCC has special rules for determining who is title. In most situations, the UCC focuses Less on the title then on the concepts of identification, risk of loss, and insurable interest

incidental damages

damages that compensate for expenses directly incurred because of a breach-of-contract, such as those incurred to obtain performance from another source

compensatory damages

damages that compensate the non-breaching party for the loss of the bargain are known as compensatory damages. These damages compensate the injured party only for damages actually sustained and proved to have Arisen directly from the loss of the bargain caused by the breach of contract they simply replace what was lost because of the wrong or damage, and, for this reason, are often said "to make the person whole"

consequential damages

foreseeable damages that result from A party's breach of contract but are caused by special circumstances beyond the contract itself they differ from compensatory damages and that they are caused by special circumstances beyond the contract itself. ex: Mason contracts to buy a certain quantity of quench, a specialty sports drink, from Nathan. -Nathan knows that Mason has contracted with Ruthie to resell and ship the quench within hours of its receipt. -The beverage will then be sold to fans attending the Super Bowl. -Nathan fails to deliver the quench on time. -Mason can recover the consequential damages (the loss of profits from the planned resale to Ruthie) caused by the non-delivery. -(If Mason purchase is quench from another vendor, he can also recover compensatory damages for the difference between the contract price and the market price.)

Ch 17 article 2

governs sales contracts (contracts for the sale of goods) in general, the rule is that when a UCC provision addresses a certain issue, the UCC governs, but when the UCC is silent, the common law governs

covenant not to compete

if a covenant not to compete is for a valid and legitimate purpose, but the area or time restraints are unreasonable, some courts will reform the restraints by making them reasonable and will then enforce the entire contract as reformed ex: cardiac study center, Inc., a Medical Practice Group, hired Doctor Robert Emerson. -Later, Emerson became a shareholder of cardiac and signed an agreement that included a covenant not to compete. -The Covenant stated that of physician who left the group promise not to practice competitively and the surrounding area for a period of five years. -After cardiac begin receiving complaints from patients and other Physicians about Emerson, it terminated his employment. -Emerson sued cardiac, claiming that the covenant not to compete that he had signed was unreasonable and should be declared illegal. -Ultimately, a State Appellate Court held that the Covenant was both reasonable and enforceable. -Cardiac had a legitimate interest in protecting its existing client base and prohibiting Emerson from taking its clients.

risk of loss when the seller or lessor breaches

if the seller or lessor breaches by supplying Goods that are so non-conforming that the buyer has the right to reject them, the risk of loss does not pass to the buyer was nonconforming Goods, the risk of lost is not passing the buyer until one of the following occurs with nonconforming Goods, the risk of lost is not passing the buyer until one of the following occurs: 1. the defects are cured 2. the buyer accepts the goods in spite of their defects

sale of goods

in a contract for the sale of goods, the usual measure of compensatory damages is the difference between the contract price and the market price. ex: Medik Laboratories contracts to buy 10 model UTS 400 network servers for Cal Industries for $4,000 each, but Cal Industries fails to deliver the servers. -The market price for the servers at the time Medik learns of the breach is $4,500. -Therefore Medik's measure of Damages is $5,000 (10x500), -plus any incidental damages (expenses) caused by the breach

identification

in a sale of goods, the express designation of the goods provided for in the contract identification takes place when specific goods are designated as the subject matter of a sales or lease contract identification allows title to pass from the seller to the buyer. -In addition, it allows risk of loss to pass from the seller or lessor to the buyer or lessee. forgets already in existence, the parties can agree in their contract on when identification will take place. If the parties don't specify, the UCC Provisions discussed here determine when the identification takes place

exceptions

in addition to the special rules for merchants, the UCC defines three exceptions to the writing requirements of the statute of frauds. An oral contract for the sale of goods priced at $500 or more or the lease of goods involving total payments of $1,000 or more will be enforceable despite the absence of a riding in the circumstances described next 1. specially manufactured goods: an oral contract for the sale or lease of custom-made Goods will be enforceable if the following conditions exist A. the goods are specially manufactured for a particular buyer or specially manufactured or obtained for a particular lease B. the goods are not suitable for resale or least two others in the ordinary course of the sellers or lessors business C. the seller or lessor has substantially started to manufacture the goods or has made commitments for the manufacture or procurement of the goods 2. admissions: an oral contract for the sale or lease of goods is enforceable if the party against whom enforcement of the contract is sought admits in pleadings, testimony, or other court proceedings that a contract for sale or lease was made. -In this situation, the contract will be enforceable even though it was oral, but enforceability will be limited on the quality of goods admitted 3. partial performance: an oral contract for the sale or lease of goods is enforceable if payment has been made and accepted or Goods have been received and accepted. -This is the partial performance exception. -The oral contract will be enforced at least to the extent that performance actually took place.

employment contracts

in the majority of States, if a person who's employment has been wrongfully terminated has a duty to mitigate damages incurred because of the employer's breach of the employment contract. In other words, a wrongfully terminated employee has a duty to take a similar job if one is Susan Dills works as a librarian at Brigham Young University. -when she is fired, she claims that she was terminated in retaliation for filing an employment discrimination claim. -Suppose that Dills succeeds in her employment discrimination claim -but that Bringham Young can show that she is failed to take another librarian position when several comparable positions were available. Bringham Young can show that she has failed to mitigate damages. -In that situation, any compensation she is awarded for wrongful termination will be reduced by the amount she could have obtained from other employment

common uses of liquidated damage provisions

liquidated damage Provisions are frequently used in construction contracts. ex: a provision requiring a construction contractor to pay $300 for every day they are late in completing the project is a liquidated damage provision such Provisions are also common in contracts for the sale of goods. In addition, contracts with entertainers and professional athletes often include liquidated damages provisions

open quantity terms

normally if the parties did not specify quantity, there is no contract, because the court will have no basis for determining a remedy There is almost no way for a court to determine objectively what is a reasonable quantity of goods for someone to buy (whereas a court can objectively determine a reasonable price for goods by looking at the market) the UCC recognizes two exceptions involving requirements and output contracts 1. requirement contracts: in a requirements contract, the buyer agrees to purchase and the seller agrees to sell all or up to a stated amount of what the buyer needs or requires -requirements contracts are common in the business world and normally are enforceable. -In contrast, if the buyer promises to purchase only if the buyer wishes to do so or if the buyer reserves the right to buy the goods from someone other than the seller, the promise is illusory (without consideration) and unenforceable by either party 2. output contracts: in an output contract, the seller agrees to sell and the buyer agrees to buy all or up to a stated amount of what the seller produces

passage of title

once goods are identified, the provisions of UCC 2 - 401 apply to the passage of title. -Parties can expressly agree when and how title will pass. Throughout UCC 2-401, the words "unless otherwise explicitly agreed" appear, meaning that any explicit understanding between the buyer and the seller determines when the title passes. Without an explicit agreement to the contrary, title passes to the buyer at the time and the place the seller performed by delivering the goods.

sale of land

ordinarily, because each parcel of land is unique, the remedy for a seller's breach of a contract for a sale of real estate is specific performance. -The buyer is awarded the parcel of the property for which they bargained -(majority of States follow this rule) a minority of State Supply different rule when the seller breaches and land sale contract and intentionally. -In these states, a prospective buyer is limited to a refund of any down payment made plus any expenses incurred (such as fees for title searches, attorneys, and escrows). when the buyer is the party in breach, the measure of Damages is typically the difference between the contract price and the market price in the land.

course of dealing

prior conduct between the parties to a contract that establishes a common basis for their understanding a course of dealing is a sequence of actions and Communications between the parties to a particular transaction that establishes a common basis for their understanding

sales or leases by non-owners

problems occur when a person who acquires Goods within imperfect title attempts to sell or lease them. sections 2 - 402 and 2- 403 of the UCC deal with the rights of two parties who lay claim to the same good, Sold with imperfect title. -generally, by requires at least whatever title the seller has to the goods sold.

intangible property

property that cannot be seen or touched but exists only conceptually, -such as corporate stocks, bonds, and patents and copyrights, and ordinary contract rights such property is not governed by Article 2 of the UCC

tangible property

property that has physical existence and can be distinguished by the senses of touch and sight

punitive damages

punitive (or exemplary) damages, generally are not awarded in an action for breach of contract. Such damages have no legitimate place in contract law because they are, penalties. -And breach of contract is not unlawful and a criminal sense.

when quasi contract is used

quasi contract allows a court to act as if a contract exists when there is no actual contract or agreement between the parties ex: Erickson contracts to build two oil Derricks for petrol Industries. -the Derricks are to be built over a period of three years, -but the parties do not create a written contract. -Therefore, the writing requirement will bar the enforcement of the contract. -After Erickson completes one Derrick, Petro Industries informs him that they will not pay for the Derrick. -Erickson can sue Petro Industries under the theory of Quasi contract.

parol evidence

recall that parol evidence consists of evidence outside of the contract, such as evidence of the parties prior negotiations, prior agreements, or oral agreements made at the time of contract formation when a contract completely sets forth all the terms and conditions agreed by the parties and is intended as a final statement of their agreement, it's considered fully integrated. The parol evidence rule applies. -The terms of a fully integrated contract cannot be contradicted by evidence outside of the contract. if however, the writing or record contains some of the terms the party agreed on but not others, the contract is not fully integrated. -In this situation, a court may allow evidence of consistent additional terms to explain or supplement the terms stated in the contract. -The court may also allow the parties to submit evidence of course of dealing, usage of trade, or course of performance. -A court will not under any circumstances allow the parties to submit evidence that contradicts the contracts stated terms

additional terms

recalled that under the common law, the mirror image rule requires that the terms of the acceptance exactly match those of the offer. ex: Amy emails and offer to sell 20 Samsung Galaxy Tab S 8.4 tablets to Bailey. -If Bailey accepts the offer of it changes it to require Tab S 10.5 tablet and there is no contract. to avoid these problems, the UCC dispenses with the mirror image rule. Under the UCC a contract is formed if the offer is response indicates a definite acceptance of the offer even if the acceptance includes terms additional to or different from those contained in the offer

conditioned on offerors assent

regardless of merchant status, the UCC provides that offer is expression cannot be construed as an acceptance if it contains additional or different terms that are explicitly conditioned on the offerors assent to those terms ex: Philips offers to sell Hunter 650 lb of turkey thighs at a specified price and was specified delivery terms. Hunter responds, "I accept your offer for 650 lb of turkey thighs on the condition that you give me 90 days to pay for them." Hunters response will be construed not as an acceptance but as a counter-offer, which Phillips may or may not accept

rescission and restitution

rescission is essentially an action to undo, or cancel, a contract -(to return non-breaching parties to the positions that they had occupied prior to the transaction) to rescind a contract, both parties generally must make restitution to each other by returning Goods, property and, or funds previously conveyed. restitution: an equitable remedy under which a person is restored to his or her original position prior to loss or injury, -or placed in the position they would have been in had the breach not occurred. restitution may be required when a contract is rescinded, but the right to restitution is not limited to rescission cases. Because an award of restitution basically return something to its rightful owner, -a party can seek restitution in actions for breach of contract, tort actions, and other types of actions

additional terms may be stricken

section 2-207(3) states that conduct by both parties that recognizes the existence of a contract is sufficient to establish a contract for the sale of goods even though the writings of the parties do not otherwise establish a contract. In this situation, "the terms of the particular contract will consist of those terms on which the writings of the parties agree together with any supplementary terms Incorporated under any other provisions of this act"

bailment

situation in which the personal property of one person (bailor) is entrusted to another who (bailee) is obligated to return the bailed property to the Baylor or dispose of it as directed

rental agreements

some states require a landlord use reasonable means to find a new tenant if a tenant abandons the premises and fails to pay rent. -If an acceptable tenant becomes available, the landlord is required to lease the premises to this tenant to mitigate the damages recoverable from the former tenant. -The former tenant is still liable for the difference between the amount of the rent under the original lease and the rent received from the new tenant. -If the landlord has not taken reasonable steps to find a new tenant, a court will likely reduce any award by the amount of rent the landlord could have received had they done so

Statutes of Limitations

statutes of limitations limit the period during which a party can sue on a particular cause of action. After the applicable limitations period has passed, a suit can no longer be brought Lawsuits for breach of a contract for the sale of goods must be brought within four years after the cause of action has accrued. In their original contract, the parties can agree to reduce this four-year period to not less than one year. They cannot, however, agree to extend it beyond four years.

Equitable remedies

that's the parties back to what they were (or what they had) before the contract in these situations, the non-breaching party may ask the court for an equitable remedy. Equitable remedies include: 1. rescission and restitution, 2. specific performance, 3. and Reformation

the statute of frauds

the UCC contains statute of frauds provision governing Sales and Lease contracts. Under these Provisions, sales contracts for sales priced at $500 or more and Lease contracts requiring payments of $1,000 or more must be in writing to be enforceable

rules when both parties are merchants

the UCC created a special rule for merchants to avoid the "battle of the forms", which occurs when two Merchant's Exchange separate standard forms containing different contract terms. Under UCC 2-207(2) in Contracts between Merchants, the additional terms automatically become part of the contract unless one of the following conditions exist: 1. the original offer expressly limited acceptance to its terms 2. the new or changed terms materially alter the contract 3. the offeror objects to the new or changed terms within a reasonable period of time when determining whether an alteration is material, courts consider several factors. -Generally, if the modification doesn't involve and unreasonable element of surprise or hardship for the offeror, the court will hold that the modification did not materially alter the contract

Merchants firm offer

the UCC creates a second exception for firm offers made by Merchant to sell, buy, or lease Goods. a Merchant's firm offer is irrevocable without the necessity of consideration for the stated period Or if no definite period Is stated, a reasonable period -neither period exceed 3 months a firm offeror arises when a merchant offer gives assurances and a signed writing that the offer will remain open. The offer must be both written and signed by the offeror

what is a sale?

the UCC defines a sale as "the passing of title (evidence of ownership rights) from the seller to the buyer for a price" the price may be payable in cash (or its equivalent) or in other Goods or services

rules of construction

the UCC provides rules of construction for interpreting contracts. Express terms, course of performance, course of dealing, and usage of trade are to be construed to be consistent with each other whenever reasonable. When such a construction is unreasonable, the UCC establishes the following order of priority: 1. Express terms 2. course or performance 3. course of dealing 4. usage of trade

void title

the buyer May unknowingly purchase goods from a seller who is not the owner of the goods. If the seller is a thief, the seller's title is void - legally, no title exists the buyer requires no title, and the real owner can reclaim the goods from the buyer. If the goods were least, the same result would occur, because the lessor has no leasehold interest to transfer

consideration

the common law rules that our contract requires consideration also applies to Sales and Lease contracts. however, The UCC does not require a contract modification to be supported by the new consideration. An agreement modifying a contract for the sale or lease of goods needs no consideration to be binding of course a contract modification must be sought and good faith if the contract itself prohibits any changes to the contract unless they are in a signed writing, then only those changes agreed to and assigned writing are enforceable

course of performance

the contact that occurs under the terms of a particular agreement, which indicates what the parties to that agreement intended the agreement to mean presumably, the parties themselves know best what they meant by their words. -Thus, the course of performance actually carried out under their agreement is the best indication of what they meant

risk of loss when the buyer or lessee breaches

the general rule is that when a buyer lessee breaches a contract, -the risk of loss immediately shifts to the buyer or lessee. This rule has three important limitations: 1. the seller or lessor must already have identified the contract Goods 2. the buyer or lessee Bears the risk for only a commercially reasonable time after the seller or lessor has learned of the breach 3. the buyer or lessee is liable only to the extent of any deficiency in the sellers insurance coverage

Mitigation Of damages

the requirement that a plaintiff do whatever is reasonable to minimize the damage is caused by the defendants breach of contract. when a breach-of-contract occurs, the injured party is held to a duty to mitigate, or reduce, the damages that they suffer

entrustment rule

the rule that entrusting Goods to a merchant who deals in Goods of that kind gives that Merchant the power to transfer those goods and All rights to them to a buyer in the ordinary course of business the entrustment rule basically allows innocent buyers to obtain legitimate title to Goods purchased from Merchants even if the merchants do not have good title.

standard measure

the standard measure of compensatory damages is the difference between the value of the breaching parties promised performance under the contract and the value of their actual performance. This amount is reduced by any loss that the injured party has avoided ex: Randall contracts to perform certain Services exclusively for Hernandez during the month of March for $4,000. -Hernandez cancelled the contract and is in breach. -Randall is able to find another job during March but can earn only $3,000. -He can sue Hernandez for breach and recover $1,000 as compensatory damages. -Randall can also recover from Hernandez the amount that he spent to find the other job. Expenses that are directly incurred because of a breach-of-contract such as those incurred to obtain performance from another source or called incidental damages

when performance is impossible

three basic types of situations may qualify as grounds for the discharge of contractual obligations based on impossibility of performance 1. when a party whose personal performance is essential to the completion of the contract dies or becomes incapacitated prior to the performance -ex: Fred, a famous dancer, contracts with dancing Guild to play a leading role in its new ballet. -Before the ballet can be performed, Fred becomes ill and dies. -His personal performance was essential to the completion of the contract. -Thus, his death discharges the contract and his Estates liability for his non-performance 2. when the specific subject matter of the contract is destroyed -ex: A-1 farm equipment agrees to sell Gunther the green tractor on its lot and Promises to have the tractor ready for Gunther to pick up on Saturday. -on Friday night, however, a truck veers off the nearby Highway and smashes into the tractor, destroying it Beyond repair. -because the contract was for the specific tractor, a once performance is rendered impossible owing to the accident 3. when a change in the law renders performance illegal -ex: Russo contracts with playlist, Inc., how to create a website through which users can post and share movies, music, and other forms of Digital entertainment. -Russo goes to work. -before the site is operational, however, Congress passes the no online piracy and entertainment. - The NOPE Act makes it illegal to operate a website on which copyrighted works are posted without the copyright owner's consent. -In this situation, the contract is discharged by operation of law. -The purpose of the contract has been rendered it legal, and contract performance is objectively impossible

what are Goods?

to be characterized as a good, the item of property must be tangible, and it must be movable.

enforceability

to determine whether a particular provision is for liquidated damages or a penalty, the court must answer two questions: 1. at the time the contract was formed, was it apparent that damages would be difficult to estimate in the event of a breach? 2. was the amount set as damages a reasonable estimate and not excessive? if the answers to both questions are yes, the provision normally will be enforced. -If either answer is no, the provision usually will not be enforced

the requirements of Quasi contract

to recover on a quasi contract theory the party seeking recovery must show The Following: 1. the party conferred a benefit on the other party 2. the party conferred the benefit with the reasonable expectation of being paid 3. the party did not act as a volunteer and conferring the benefit 4. the party receiving the benefit would be unjustly enriched if allowed to retain the benefit without paying for it

lease

under article 2A of the UCC, a transfer of the right to possess and use goods for a period of time in exchange for payment.

options and cooperation regarding performance

when the contract contemplates shipment of the goods but does not specify the shipping Arrangements the seller has the right to make these Arrangements in good faith, using commercial reasonableness in the situation

open terms

under the common law of contracts, and offer must be definite enough for the parties and the courts to ascertain its essential terms when it is accepted. in contrast, the UCC states that a sales or lease contract will not fail for indefinite honest even if one or more terms are left open as long as both of the following are true: 1. the parties intended to make a contract 2. there is a reasonably certain bases for the court to Grant and appropriate UCC provides numerous open term Provisions that can be used to fill the gaps in a contract. Thus, if a dispute occurs, all that is necessary to prove the existence of a contract is an indignation such as a purchase order that there is a contract. Missing terms can be proved by evidence, or Court can presume that the parties intended whatever is reasonable under the circumstances keep in mind though, that have too many terms are left open, a court may find that the parties did not intend to form a contract.

communication of acceptance required

under the common law, because a unilateral offer invites acceptance by performance, the offeree need not notify the offeror of performance unless the offeror would not otherwise know about it. In other words, a unilateral offer can be accepted by beginning performance. UCC requires notification. Under the UCC, if the offeror is not notified within a reasonable time that the offeree has accepted the contract by beginning performance, then the offeror can treat the offer is having lapsed before acceptance

enforceability of limitation of liability clauses

weather a limitation of liability clause in a contract will be enforced depends on the type of breach that is excused by the provision. Clauses that normally will not be enforced include: -Provisions including liability for fraudulent or intentional injury -or for illegal Acts -or other violations of law. Clauses excluding liability for negligence may be enforced -in certain situations. when an exculpatory clause for negligence is contained in a contract made between parties who have roughly equal bargaining positions, the Clause usually will be enforced. ex: engineering Consulting Services, LTD., contracted with RSN Properties, Inc., a real estate developer, to perform soil studies for $2,200 and render an opinion on the use of septic systems in a residential subdivision being developed. -A clause in the contract limited ESC is liability to RSN to the value of the Engineering Services or the sum of $50,000 whichever was greater. -ESC concluded that most of the Lots were suitable for septic systems, so RSN proceeded with the development. -RSN constructed roads and water lines to the subdivision in Reliance on ASCS conclusions, which turned out to be incorrect. -RSN suit ECS for breach of contract and argued that the limitation of liability Clause was against public policy and unenforceable. -The court, enforced the limitation of liability Clause as "a reasonable allocation of risks in an arm's length business transaction".

goods and services combined

when contracts involve the combination of goods and services, courts generally use the predominant Factor test to determine whether a contract is primarily for the sale of goods or for the sale of services. If a Court decides that I'm mixed contract is primarily a good contract, any dispute, even a dispute over the services portion, will be decided Under the UCC Gene and Morton Jacob's agreed to sell Festival Foods, a concession business to Luan Naples for a price of $150,000. -The deal included a truck, a trailer, freezers, Roasters, chairs, tables, a fountain service, signs, and Lighting. -Naples paid $10,000 down with the balance to come from a bank loan. -They took possession of the equipment and began to use it immediately in Festival Foods operations at various events. -after 6 events, the Naples return the truck and all the equipment and wanted out of the deal because the business did not generate as much income as they expected. -The Jacobs sued the Naples for the balance due on the purchase price, claiming that the Naples could no longer reject the goods Under the UCC. -The Naples claimed that the UCC did not apply because the deal primarily involved the sale of a business rather than the sale of goods. -the court found that the UCC governed under the predominant Factor test. -The primary value of the contract was in the goods, not the value of the business. -The parties had agreed on the essential terms of the contract such as the price. -Thus, a contract had been formed, and the Naples had breached it. -The Naples had taken possession of the business and had no right to return it.

open delivery term

when no delivery terms are specified, the buyer normally takes delivery at the sellers place of business. If the seller is no place of business, the seller's residence is used. When goods are located in some other place and both parties know it, deliveries made there if the time for shipment or delivery is not clearly specified in the sales contract, the court will in for a reasonable time for Performance

open payment

when parties did not specify payment terms, payment is due at the time and place at which the buyer is to receive the goods. The buyer Contender payment using any commercially normal or acceptable means, such as check or credit card. If the seller demands payment in cash, the buyer must be given a reasonable time to obtain it