LA450 Midterm 1

Mitigation

The duty to mitigate means that a party injured by a breach of contract may not recover for damages that he could have avoided with reasonable efforts. To keep the damages as low as reasonable

Specific Performance

forces both parties to complete the deal. Court will award only in cases involving the sale of land or some other asset that is considered "UNIQUE"

Who prepares the drafts of a contract?

generally both sides would prefer to "control the pen." typically the party with the most bargaining power.

BIOC (buyer in the ordinary course of business)

generally takes goods free and clear of any security interest

Good faith - nonmerchants

good faith means honesty in fact

Covenants

heart of the contract

Seller remedies under the UCC

if buyer breaches: 1. can resell goods somewhere else 2. seller can choose not to resell & settle for difference between contract price and market value of the goods

Seller's Remedies

if she acts in good faith, she will be awarded the difference between the original contract price and the price she was able to obtain in the open market

Severability

if some part of the contract turns out to be unenforceable, a severability provision asks the court simply to delete offending clause & enforce the rest of the contract

Material Breach

important enough to defeat an essential purpose of the contract

mixed contract

involving the sale of & services, the UCC will govern if the predominant purpose is the sale of goods, but the common law will control if the predominant purpose is service.

Restitution

means giving back

Good faith - merchants

means honesty in fact plus the exercise of reasonable commercial standards of fair dealing

Remedy

method a court uses to compensate an injured party

Incidental Damages

minor costs that the injured party suffers when responding to the breach ex) travel costs

Good Faith

must act in good faith to enforce the contract

Vagueness

parties to a contract deliberately include a provision that is unclear.

Integration

prevents either side from later claiming that the two parties had agreed to additional provisions

Goods

refer to all things that are movable except for money & securities -house --> not a good -stuff in the house --> goods

Taylor vs. Kjaer

seller delivered expired permits on the closing date and did not convey clear title. Taylor did not pay, sellers refused to return Taylor's deposit. -He is entitled to restitution

Implied warranty of merchantability

unless excluded or modified, a warranty that the goods shall be merchantable is implied in a contract for their sale if the seller is a merchant of goods of that kind.

Product Liability

when goods cause injury, there is question of product liability

Mirror Image rule

when on party makes an offer, the offeree must accept those exact terms. Any +/-, acceptance is ineffective

Asymmetric Information

when one party has more information compared to the other party

Void title

when there's a theft

Formation Basics 2-204

1. any manner that shows agreement 2. moment of making is not critical 3. one or more terms may be left open except quantity. -The code will enforce the contract only up to the quantity of goods stated in writing -under the UCC a court may enforce a bargain even though one or more terms were left open

Buyer remedies under the UCC

1. buyer an "cover" by buying substitute goods and obtain the difference between original contract price and cover price 2. buyer can choose not to cover

Issues related to product liability

1. warranty: a contractual assurance that goods will meet certain standards 2. Negligence: unreasonable conduct by the defendant 3. Strict Liability: policy which holds the defendant liable regardless of his behavior

UCC 2-302

A contract may be unconscionable if it is shockingly one-sided and fundamentally unfair

Permanent Injunction

A court order requiring that some action be taken, or that some party refrain from taking action. It differs from forms of temporary relief, such as a temporary restraining order or preliminary injunction. -Morgan Stanley Smith Barney v. O'Brien -O'Brien used to work for Morgan Stanley, before he left he printed a client list from their database.

Bona Fide Purchaser

A purchaser who takes title in good faith, with no knowledge of competing claims to title.

Commercial impracticability

A supervening event excuses performance of a contract, if the event was not within the parties' contemplation when they made the agreement.

Express Warranties

An express warranty is one that the seller created with his words or actions (oral, verbal, written) as long as its not vague. Any affirmation of fact - or any promise - can create an express warranty. Any description of the goods can create an express warranty -any sample or model can create an express warranty -the seller's conduct must have been part of the basis of the bargain

injunction

An order which legally prevents something

Rottner v. AVG Technologies USA, Inc.

Concept: What counts as a good, not programs. -AVG claimed UCC doesn't apply because software is not. a good Context: Rottner used PC TuneUp. -didn't work, forced his computer to lose valuable data Rottner sued for breach of express warranty and implied warranty of merchantability.

voidable title

when you have fraud or deception, limited right in goods inferior to the owner. a person with voidable title has power to transfer valid title for value to good faith purchaser, generally called a bona fide purchaser

Consequential (Special) Damages

Foreseeable damages that result from special facts and circumstances arising outside contract itself. These damages must be within contemplation of parties at time breach occurs

Lohman v Wagner

"no contract exists" -Lohman talked about raising weaner pigs for a new "pork network" -Wagner faxed over document with blanks -no QUANTITY included

Restrictions to Perfect tender rule

"usage of trade" "course of dealing" "course of performance"

direct compensatory damages

which represent harm that flowed directly from the contracts breach

Harman v. Dunn

· Harmon instructs Dunn to sell horse for $25,000 - Dunn delivered check to Harmon from Scarborough - papers of ownership were in the car, not with Dunn à horse died - Scarborough stopped payment for check - Harmon sues for his money -Risk of loss passes to buyer as long as receipt of goods is present, so the physical passing of the paper was not necessary to prove Scarborough had full control of the house. -scarborough has full title over the house, therefore must complete payment to Harmon

Minkler v. Safeco

-Ambiguity

Delta Star v. Michaels Carpet

-Delta Star claimed that bc tiling > $500, UCC made agreement unenforceable -no writing exists -flooring tiles were selected from a sample, not altered or specially manufactured

Goodman v. Wenco Foods Inc

-Goodman was eating at Wendy's in NC. there was a 0.5 piece of cow bone in his burger which broke pieces of his teeth. -bone was natural to the food therefore "fit for its purpose"

Valley Forge Insurance vs. Great American Insurance

-Kennedy's went to buy a mustang at dealership -financing wasn't complete but they let them take the car home -brother in law takes car for ride and crashed it, passenger gets injured -whose insurance covers? -The car dealership because ownership hasn't passed to Kennedy yet

Super Boiler Works v. R.J. Sanders

-R.J. had a contract w Superior to install a heating system at federal prison camp. -Shipping date was pushed back by Superior, R.J. had to rent equipment -R.J. reduced the amount he sent to Superior when the boiler arrived by the amount he rented for. -"Disagreement on time for delivery" - does not prevent the formation of a contract under UCC (different terms) Superior sued $45,000 and trail court granted.

Quaker v. American Airlines

-Vagueness, letter of intent: NOT a contract, NOT binding

Factors that limit the seller's responsibility

-buyer's misconduct. Misuse of the product by the buyer will generally preclude a warranty claim -Statute of limitations and notice of breach. the code prescribes. four-year statute of limitations the UCC requires that a buyer notify the seller of defects within a reasonable time

BiEconomy Market vs. Harleysville Insurance

-fire, all of building destroyed -filed claim w Harleysville insurance (did not respond quickly) -BiEconomy went out of business bc Harleysville failed to act quickly/investigate/pay the claim

Purpose of the UCC

-simplify, clarify, and modernize the law governing commercial contracts and transactions. -To permit the continued expansion of commercial practices through custom usage and agreement of the parties. -to make uniform the law among various jurisdictions

Strict liability may be imposed EVEN IF:

-the seller exercised all reasonable care -there is no contractual relationship

UCC 2-201

Requires a writing (in order for it to be enforceable) for any sale of goods of $500 or more

Buyer's Remedies

buyer can "cover": to make a good faith purchase of goods similar to those in the contract by purchasing substitute goods.

Battle of the forms

buyer places order with their preprinted forms and seller responds with their own.

Boilerplate

Creates a private law that governs disputes between the parties

Reliance Interest

Designed to put the injured party in the position he would have been in had the parties never entered into a contract.

Expectation Interest

Designed to put the injured party in the position she would have been in had both sides fully performed their obligations

Quantity

ESSENTIAL TERM. the code will enforce the contract only up to the quantity of goods stated in the writing

Jannusch v. Naffziger

FACTS The Jannusches owned Festival Foods, a concessions business. The Jannusches contended that they had as enforceable oral contract with Naffzigers to buy Festival Foods because essential terms were identified, i.e., price and the goods to be conveyed, and the Naffzigers breached that contract. -INTENT of a contract, Jannush believed they bought the business -Naftzigers claim this is not only a sale of goods but sale of business, common law should rule. RULE Decided it was UCC --> breach of contract

Hawkins v. McGee

Hairy hand case. Expectation interest. The value to him of a perfect handed the value of his hand in its present condition

Heritage Technologies, L.L.C. v. Phibro-Tech, Inc.

Heritage to buy from Phibro, price unpredictable, heritage later asked Heritage. Phibro wrote the type, which benefitted Heritage. 0.1 v. 0.01(correct)

Destruction of goods

If identified goods are partially destroyed, the buyer may choose whether to accept the goods at a reduced price or void the contract

Negligence

In negligence cases, plaintiffs most often raise one or more of these claims: -negligent design -negligent manufacture -failure to warn

Land

Isn't protected by the UCC --> COMMON LAW

Lile v. Kiesel

Kiesel bought a trailer from Lile, found a faulty leak. Lile repaired, but it leaked again -Lile refused refund, Kiesel sued Lile -Court says Kiesel told Lile in a reasonable time about the leak

Hadley v Baxendale

Loss must be reasonably foreseeable at the time the contract was entered into. The scope of damages are those which are natural or contemplated; two limbs to remoteness test: 1. Imputed knowledge, natural course of things 2. Actual knowledge, resonable contemplation of both parties . The crankshaft broke in the C's mill. He engaged the services of D to deliver the crankshaft to the place where it was to be repaired and to subsequently return it after it had been repaired. Due to neglect of the D, the crankshaft was returned 7 days late. C was unable to use the mill during this time and claimed for loss of profit. not foreseeable for Baxendale, no one said they would have to shut down.

Exceptions: "Statute of Frauds Turned off"

Merchants - Specially made goods - Delta Star v. Michaels Carpet World Judicial Admission - Delta Star v. Michaels Carpet World

Equitable Interest

Money damages will not suffice to help the injured party.

Strict Liability

Need not prove that the defendant's conduct was unreasonable. May impose if: -the defective condition is unreasonably dangerous to the user -seller is in the business to sell this product -the product reaches the user without substantial change

Promissory Estoppel

No Contract but defendant made a promise that she can foresee will induce reliance, Plaintiff relies on it and it would be unjust not to enforce -Toscano v. Greene

UCC 2-204

Permits contracts to be formed in other ways

Risk of Loss

The responsibility for loss or damage to goods -can allocate risk of loss any way the parties wish in the contract -when neither party has breached, the risk of less generally passes from seller to buyer when seller transports goods as far as he is obligated to -if a party breaches, the risk of loss lies with that party

Passing of Title

Title may pass in any manner on which the parties agree. -when goods ARE being moved, so title passes when seller completes its last contractually required step -when the goods are NOT being moved and a contract calls for delivery of ownership documents, so title passes when the seller delivers these documents to the buyer -when the goods are NOT being moved and the contract does NOT call for delivery or ownership documents, so title passes when the contract is formed.

Ambiguity

When a provision in a contract is unclear on accident Burden lies with drafter

Implied warranty of fitness for a particular purpose

When the seller at the time of contracting knows about a particular purpose for which the buyer wants the goods, and knows that the buyer is relying on the seller's skill and judgment, there is (unless excluded or modified) an implied warranty that the goods shall be fit for such purpose

Privity

When two parties contract, they are in privity. -in cases of personal injury, the injured party may sue any reasonable party, regardless of privity -in cases of economic loss, the injured party (buyer) may be required to have privity with the defendant

ProCD v. Zeidenberg

Zeidenberg bought consumer version of SelectPhone and violated license agreement by reselling database information on the internet

Insurable interest - buyer

a buyer obtains insurable interest when the goods are identified to the contract

"time is of the essence" clause

a clause in a contract that uses the words "time is of the essence" to indicate that time of performance is essential to the contract, so any time delays will be considered a material breach

Reformation

a court may partially rewrite a contract to fix a mistake or cure an unenforceable provision

Force Majeure

a disruptive, unexpected occurrence for which neither party is to blame that prevents one or both parties from complying with a contract

liquidated damges clause

a fix sum agreed on between the parties of a contract to be paid as ascertained damages by the party who breaches the contract (security deposits on apartments)

Insurable interest

a legal right in something

Nominal Damages

a token sum, such as one dollar, given to an injured plaintiff who demonstrates a breach but no serious inquiry, cannot prove damages.

Scrivener's Error

a typo

Negotiation

always involves compromise

rider

an amendment or addition to a contract

Preliminary injunction

an order issued early in a lawsuit prohibiting a party from doing something during the course of the lawsuit. May be granted only upon: 1. likely imparable harm 2. likelihood of success on the merits or sufficiently serious question going to merits to make them fair ground litigation.

entrusting

any entrusting of goods to a merchant who deals in goods of that kind gives him the power to transfer all rights of the entrusted to a buyer in the ordinary course of the business

Implied warranties

are created by the code itself, not by any act or statement of the seller

Restitution Interest

designed to return to the injured party a benefit he has conferred on the other party

Not enforceable contract

due to statute of frauds: must be in writing

Substantial impairment

sometimes the code holds buyer to a higher standard & makes it more difficult to refuse good. -the buyer is revoking acceptance -buyer is rejecting an installment

Representations and Warranties

statements of fact about the present or past - they are true when the contract is signed

Different terms

terms that contradict those in the offer

Perfect tender rule

the buyer may reject the goods if they fail in any respect to conform to the contract

Ownership

the code must sometimes determine the rightful owner when more than one person claims to own something. -existence and identification

Existence

the goods must be identified to the contract before the title can pass

Insurable interest - seller

the seller retains an insurable interest in goods as long as she has either title to the goods or a security interest in them.

Additional terms

those that raise issues not covered in the offer