Business Law Final
condition precedent
"a condition in a contract that must be met before a party's promise becomes absolute" (Miller, 322). It affects a party's duty to perform a contract because it acts as a prerequisite.
What are liquidated damages?
"an amount, stipulated in a contract, that the parties to the contract believe to be a reasonable estimation of the damages that will occur in the event of a breach" (Miller, 343).
What is a limitation-of-liability clause, and when will courts enforce it?
"contract will be enforced depends on the type of breach that is excused by the provision. Normally, a provision excluding liability for fraudulent or intentional injury will not be enforced. Likewise, a clause excluding liability or illegal acts or violations of law will not be enforced" (Miller,349). This will be enforced when there is negligence present.
What are nominal damages, and when do courts award nominal damages?
"no actual damage or financial loss results from a breach of contract and only a technical injury is involved" (Miller, 241).
Distinguish liquidated damages from penalties.
"specifies a certain amount to be paid in the event of a default or breach of contract and is designed to penalize the breaching party. Liquidated damages provisions normally are enforceable" (Miller, 343).
What are punitive damages?
"such damages have no legitimate place in contract law because they are, in essence, penalties, and a breach of contract is not unlawful in a criminal sense. A contract is simply a civil relationship between the parties. The law may compensate one party for the loss of the bargain—no more and no less" (Miller, 241).
How are damages computed differently in construction contracts?
"the cost of completion, which includes reasonable compensation for any delay in performance. If the contractor finishes late, the measure of damages is the loss of use" (Miller, 339).
Define mitigation of damages
"the requirement that a plaintiff do whatever is reasonable to minimize the damages caused by the defendant" (Miller, 342).
What are the respective obligations of the seller or lessor under a sale or lease of goods? Define the two primary terms.
. The UCC sets out two primary terms that are used to describe the obligations of the seller or lessor that being conforming goods and tender of delivery. Tender of delivery refers to the obligation of the seller or lessor to get the goods to the buyer or lessee. This includes both physical delivery of the goods and transfer of title to the goods. The seller or lessor must deliver the goods to the buyer or lessee at the time and pay specified in the contract, or within a reasonable time if no time is specified. the goods must be delivered in the manner specified in the contract, or in a manner that is commercially reasonable if no manner is specified. Conforming Goods refers to the obligation of the seller or lessor to provide Goods that meet the specifications of the contract. the goods must be of quality and quantity specified in the contract, and must be fit for the purpose of which they are intended. if the goods do not conform to the contract, the buyer or lessee may have the right to reject them or seek damages
What options are available to the nonbreaching party when the other party to a sales or lease contract repudiates the contract prior to the time for performance?
1. The non-breaching party may treat the repudiation as a breach of contract and seek damages 2. The non-breaching party may suspend their own performance under contract until they receive adequate assurance from the other party that they will perform the contract. 3. The non-breaching party may cancel the contract and seek damages for any losses as a result 4. The non-breaching party may seek specific performance of the contract which would require the other party to perform their obligation 5. The non-breaching party may wait until the time for performance arrives and then sue for breach of contract.
How many exceptions are there to the perfect tender rule? Name them.
7; Cure, Substitution of carriers, Installment contracts, Destruction of identified goods, Commercial impracticability, Assurances, Acceptance
What is a sale?
A sale is considered as "the passing of title [evidence of ownership] from the seller to the buyer for a price" [UCC 2-106(1)]" (Miller, 385). When it comes to sales, the prices may be paid in cash or anything equivalent to that in form of other currencies, goods, and services.
Under what circumstances is a seller's title to goods that are being sold void?
A seller's title to Goods that are being sold can be void under certain circumstances. if the goods are stolen, the seller does not have valid title to them and cannot legally sell them. Similarly, if the goods are counterfeit or infringe on someone else's intellectual property rights, the seller does not have valid title to them and cannot legally sell them. In these cases the buyer may be able to recover damages from the seller if they have already paid for the goods.
What are goods?
According to the textbook, "to be characterized as a good, the item of property must be tangible, and it must be movable" (Miller, 385).
Under what circumstances is the remedy of rescission and restitution available?
According to the textbook, "when fraud, mistake, duress, undue influence, lack of capacity, or failure of consideration is present, rescission is available. Rescission may also be available by statute. The failure of one party to perform under a contract entitles the other party to rescind the contract. The rescinding party must give prompt notice to the breaching party" (Miller, 345). All of these are done to avoid unjust enrichment.
What exceptions to the parol evidence rule are found in the UCC?
An exception to the parol evidence rule is unconscionability. When it comes to an "unconscionable contract" is one that is so unfair and one-sided that it would be unreasonable to enforce it. The UCC allows the court to evaluate a contract or any clause in a contract, and if the court deems it to have been unconscionable at the time it was made, the court can (1) refuse to enforce the contract, (2) enforce the remainder of the contract without the unconscionable clause, or (3) limit the application of any unconscionable clauses to avoid an unconscionable result" (Miller, 399)
How do Article 2 and Article 2A of the UCC differ?
Article 2 and Article 2A of the UCC differ because they are separate parts of transactions. Article 2 refers to sales. Moreover, the purpose of 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 a dispute involves real estate or services, the common law applies" (Miller, 385). On the other hand, Article 2A refers to leases.
What types of transactions does each article cover?
Article 3 (negotiable instruments), Article 4 (bank deposits and collections), Article 4A (fund transfers), and Article 5 (letters of credit) cover this part of the transaction. The transaction may involve a bill of lading or a warehouse receipt that covers goods when they are shipped or stored. Article 7 (documents of title) deals with this subject. The transaction may involve a demand by the seller or lender for some form of security for the remaining balance owed. Article 9 (secured transactions) covers this part of the transaction" (Miller, 384).
What remedies are available to a buyer or lessee if the seller or lessor breaches the contract?
If a seller or lessor breaches the contract, the buyer or lessee may have legal remedies such as damages or specific performance.
Acceptance
If the buyer or lessee accepts non-conforming goods, the perfect tender rule no longer applies.
Risk of loss does not necessarily pass with title. If the parties to a contract do not expressly agree when risk passes and the goods are to be delivered without movement by the seller, when does risk pass?
If the parties to a contract do not expressly agree on when risk passes and the goods are to be delivered without Movement by the seller the risk passes to the buyer when the goods are tendered to the buyer. This means that the seller has made the goods available to the buyer at their great upon location and the buyer has the opportunity to inspect and take possession of them. Once the buyer has accepted the goods, the risk of loss passes to the buyer. In other words, the risk of loss is given to the buyer upon the acceptance of the goods.
In a sales contract, if an offeree includes additional or different terms in an acceptance, will a contract result?
In situations like this, the mirror image rule is applied. Essentially, "Generally, the UCC takes the position that if the offeree's response indicates a definite acceptance of the offer, a contract is formed even if the acceptance includes additional or different terms from those contained in the offer [UCC 2-207(1)]. Whether the additional terms become part of the contract depends, in part, on whether the parties are nonmerchants or merchants" (Miller, 393).
What is the standard measure of compensatory damages when a contract is breached?
It is breached when the "difference between the value of the breaching party's promised performance under the contract and the value of her or his actual performance. This amount is reduced by any loss that the injured party has avoided" (Miller, 337).
What is the significance of identifying goods to a contract?
It's important to identify goods in a contract so that both parties know exactly what is being sold or purchased. It's also important to specify the quantity, quality, and price of the goods. Also, "identification is important because it gives the buyer or lessee the right to insure the goods and the right to recover from third parties who damage the goods" (Miller, 411).
In contracts subject to the UCC, are parties free to limit the remedies available to the nonbreaching party on a breach of contract? If so, what ways?
Parties are generally free to limit the remedies available to the non-breaching party on a breach of contract, but such limitations may be subject to legal scrutiny. One way to limit remedies is through a limitation of liability clause, which is the capacity amount of damages that can be awarded. Another way is through an exclusion of consequential damages clause, which limits the types of damages that can be awarded. however such clauses must be reasonable and not violate public policy or applicable laws.
What law governs contracts for the international sale of goods?
The Contracts for the International Sale of Goods, acts as the law for the sale of international goods. Some important things to note: the CISG does not apply to consumer sales and does not apply to contracts for services. The CISG applies to international sales contracts.
At what point does the buyer acquire an insurable interest in goods subject to a sales contract?
The buyer acquires insurable interest in Good subject to a sales contract when the goods are identified to the contract.
Review and recite the five normal provisions covered by the Statute of Frauds.
The five normal provisions covered by the Statute of Frauds are 1. contracts involving interest in land 2. contracts for the sale of goods priced at $500 or more 3. contracts that cannot by their terms be performed within one year from after the date of formation 4. promises made in consideration of marriage 5. collateral contracts such as promises to answer for the debt or duty of another.
Review and recite the parol evidence rule.
The parol evidence rule is "a rule of contracts under which a court will not receive into evidence prior or contemporaneous oral statements and agreements that contradict the terms of the parties' written contract" (Miller, 314).
What is the perfect tender rule?
The perfect tender rule is a legal principle that requires a seller to deliver Goods that can form perfectly to the contract in all respects.
What 3 exceptions to the Statute of Frauds are defined by the UCC
The three exceptions to the Statute of Frauds that are defined by the UCC are specially manufactured goods, admissions, and partial performance. When it comes to specially manufactured goods, it is an "An oral contract is enforceable if (1) it is for goods that are specially manufactured for a particular buyer or specially manufactured or obtained for a particular lessee, (2) these goods are not suitable for resale or lease to others in the ordinary course of the seller's or lessor's business, and (3) the seller or lessor has substantially started to manufacture the goods or has made commitments for their manufacture or procurement" (Miller, 396)
In the formation of sales and lease contracts, discuss the three necessary parts of contract formation.
The three important parts of sales and lease contracts are the offer, acceptance, and consideration. An offer is when a service or exchange is hypothetically provided to another person. Acceptance serves as an agreement to the offer made by the other party. Consideration is the exchange that will be made between the two parties in which it is usually in the form of cash
Who is a merchant?
There are three ways that a merchant can be identified. A merchant can be "a person who deals in goods of the kind involved in the sales contract...a person who, by occupation, holds himself or herself out as having special knowledge and skill related to the practices or goods involved in the transaction...and a person who employs a merchant as a broker, agent, or other intermediary has the status of merchant in that transaction" (Miller, 387)
What do the letters UCC stand for?
UCC stands for Uniform Commercial Code
Can both the buyer and seller have an insurable interest in the goods simultaneously?
Yes, both the buyer and seller can have an insurable interest in the goods simultaneously.
Will the courts allow parties to avoid performing their contractual duties when performance becomes extremely difficult or too expensive?
Yes, they will! If something is deemed impossible to perform, then the contract is discharged.
When is a breach considered material, and what effect does that have on the other party's obligation to perform?
a "breach is material when performance is not at least substantial. If there is a material breach, the nonbreaching party is excused from the performance of contractual duties and can sue for damages caused by the breach. If the breach is minor (not material), the nonbreaching party's duty to perform may sometimes be suspended" (Miller, 326)
Recall: what is a quasi-contract and what is it intended to avoid?
a type of contract that can evoke unjust enrichment. It is not agreed upon and is something that is implied. Intended to avoid unjust enrichment
What is the difference between compensatory damages and consequential damages?
consequential damages "are caused by special circumstances beyond the contract itself and flow from the consequences, or results, of a breach" (Miller, 341). Consequential damages are special and less frequent. On the other hand, compensatory damages are more common in a sense that they are generalized as a means of damages.
What remedies are available to a seller or lessor when the buyer or lessee breaches the contract
f there is a breach the seller or lessor May seek legal remedies such as damages specific performance or termination of the contract
Commercial impracticability
if performance becomes commercially impractical due to unforeseen circumstances beyond the control of the seller or lessor, the perfect tender rule may be excused.
Assurances
if the buyer or lessee has reasonable grounds to believe that the seller or lessor will not perform, they make demand assurances of performance
Installment contracts
if the contract is for the sale or lease of goods and separate lots, the perfect time to roll applies to each lot individually, rather than to the entire contract
Substitution of carriers
if the contract requires shipment by a particular carrier, but that carrier is unavailable, the seller or a lessor may substitute another carrier if it is reasonable to do so.
Destruction of identified Goods
if the goods are destroyed or damaged after the contract is formed, but before the risk of loss passes to the buyer or lessee, the seller or lessor is excused from performance.
breach of contract occur
occurs as it relates to nonperformance activities related to duty listed within a contract. It is best described as "the failure, without legal excuse, of a promisor to perform the obligations of a contract" (Miller, 326).
substantial performance
performance that "must not vary greatly from the performance promised in the contract, and it must create substantially the same benefits as those promised in the contract. (Miller, 325)
Cure
the seller or lessor has the right to cure any non-conforming Goods within the time specified in the contract, or if no time is specified, within a reasonable time after receiving notice of the non-conformity.
