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Contracts/Sales II
Oregon State Bar 2013
46
Law
Professional
06/28/2013

Additional Law Flashcards

 


 

Cards

Term
Mutual Rescission
Definition
Contract may be discharged by EXPRESS AGREEMENT

Consideration is releasing obligation when duties are executory on both sides (i.e. a performed unilateral contract may require consideration or consideration substitute)

Can be oral

SPOT: 3rd Party Beneficiaries
Term
Unilateral rescission
Definition
Results when one of the parties to the contract desires to rescind it.

Grounds: mistake, misrepresentation, and failure of consideration
Term
Discharge by Novation
Definition
Occurs when a new contract substitutes a new party to receive benefits and assume duties under old contract.

1. Previous contract
2. An agreement among ALL parties to the new contract
3. Extinguishment of duties between original parties
4. A valid and enforceable new contract
Term
Discharge by Release
Definition
A release or contract not to sue will discharge contractual duties.

Usually must be in writing and evidence of consideration or promissory estoppel.
Term
Discharge by substituted contract
Definition
A contract may be discharged by a substituted contract. This occurs when the parties to a contract enter into a second contract that immediately revokes the first contract expressly or impliedly.
Term
Accord
Definition
Accord = an agreement in which one party to an existing contract agrees to accept in lieu of performance some other consideration.

An accord must be supported by consideration. If lesser value, must be a different type of consideration.

Partial payment is an accord only if there is a bona fide dispute
Term
Satisfaction
Definition
Performance of the accord agreement.

Debtor breach = creditor may sue on either the original contract or the accord agreement.

Creditor breach = debtor can raise accord as an affirmative defense or initiate subsequent action.
Term
Checks Tendered as Payment in Full
Definition
If debt is uncertain or subject to bona fide dispute

good faith tender and acceptance of a check that CONSPICUOUSLY STATES that check is full satisfaction = ACCORD + SATISFACTION
Term
Breach
Definition
1. Promisor is under an absolute duty to perform

2. Absolute duty has not been discharged

3. Failure to perform will result in breach

4. Nonbreaching party is WILLING AND ABLE to perform
Term
Minor breach
Definition
A breach is minor if obligee gets substantial benefit of the bargain

BOTH PARTIES still has duty of performance

Minor breach merely entitles non breaching party to offset
Term
Material breach
Definition
When obligee does not receive the substantial benefit of the bargain

Nonbreaching party can treat contract as ended and has an immediate right for damages
Term
Materiality of breach
Definition
1. Adequacy of benefit received
2. Adequacy of compensation
3. Extent of part performance
4. Hardship
5. Negligent or willful behavior
6. Likelihood that the breaching party will perform
Term
Perfect Tender Rule (UCC)
Definition
If goods or their delivery fail to conform to the contract in any way, the buyer generally may reject all, accept all, or accept any commercial units and reject rest
Term
Right to Reject + Acceptance
Definition
Acceptance terminates right to reject

1. After opportunity to inspect, indicates that they are conforming

2. Fails to reject in reasonable time

3. Does an act inconsistent with ownership
Term
Buyer's responsibility for goods after rejection
Definition
Generally, hold them with reasonable care and obey any reasonable instructions.

No Instructions:
1. Reship
2. Store them
3. Resell on account (can get expenses and comish)
Term
Buyer's right to revoke acceptance
Definition
Revocation of acceptance has effect of rejection

1. Have a defect that substantially impairs value
2. Accepted them on reasonable belief defect would be cured OR difficulty of discovering defect
3. Reasonable time.
Term
Installment Contracts
Definition
In an installment contract, an installment can be ejected only if nonconformity substantially impairs the value of that installment and cannot be cured.

Whole contract is breached only if nonconformity substantially impairs the value of the entire contract
Term
Seller's Right to Cure
Definition
1. Can cure with time provided for performance by giving reasonable notice and tendering conforming goods

2. Within reasonable time if seller reasonably believe would be acceptance with or without money allowance

Look at trade practices or course of dealing
Term
Specific performance
Definition
If the legal remedy is inadequate, the nonbreaching party may seek a court order to perform.

Land and Unique Goods

Not Available for services (could try injunction)
Term
Covenant not to compete
Definition
Are enforceable if services rendered are unique and covenant is reasonable.

Reasonable:
1. Necessary to protect a legitimate interest
2. Reasonable geographic scope and duration
3. Not harm the public
Term
UCC: Buyer's non-monetary remedies
Definition
1. Cancellation
2. Replevy identified goods
3. Buyer's right to specific performance
4. Seller can withhold goods
5. Seller can recover goods (see slide)
6. Force goods on buyer (no cover available)
Term
Seller's Right to Recover Goods
Definition
Insolvency: recover within 10 days of receipt

Can stop shipment by a bailee to an insolvent buyer

Can stop shipment if buyer breaches
Term
Right to demand assurances
Definition
If a party reasonably fears that the other party will not perform, he may demand assurances that the performance will be forthcoming at proper time.

Until assurances are received, can suspend performance

Grounds for insecurity vs. clear indication
Term
Expectation damages
Definition
Sufficient damages for her to buy a substitute performance

Benefit of the bargain
Term
Reliance damages
Definition
Reliance damages award the plaintiff the cost of her performance

They are designed to put the plaintiff in the position she would have been in had the contract never been performed
Term
Consequential damages
Definition
losses any reasonable person would have forseen would occur from a breach at the time of entry into the contract.

Only recoverable by buyer
Term
Incidental damages
Definition
Incidental damages include expenses reasonably incurred as a result of the buyer or seller's breach
Term
Certainty rule
Definition
Plaintiff must prove that the losses suffered were certain in their nature and not too speculative.

Traditional rule: lost profits were not recoverable.
Term
Liquidated damages
Definition
Parties to a contract stipulate what damages are to be paid in the event of a breach.

Must be reasonable in view of the actual or anticipated harm caused by the breach.

Damages were: (1) difficult to estimate at time contract was formed and (2) amount agreed upon was a reasonable forecast in case of breach.
Term
Damages when:
(a) seller does not deliver
(b) buyer rejects
(c) buyer revokes acceptance
Definition
Difference between contract price
AND
Market Price (time of breach)
OR Cover Price (reasonable)

PLUS: Incidental and Consequential Damages
LESS Costs Saved
Term
Damages when:

Seller Delivers Nonconforming Goods and Buyer Accepts
Definition
Difference between value of goods as delivered AND

Value they would have had under contract

Plus: Incidental and consequential damages

*Buyer must notify within reasonable time
Term
Damages when:

Seller Anticipatorily Breaches Contract
Definition
Difference between market price at the time the buyer learned of the breach and contract price.
Term
Damages when:

Buyer Repudiates or Refuses to Accept Goods
Definition
1. Recover difference between market price (at place of delivery) and contract price

2. Resell the goods and recover difference between contract price and resale price

3. PERHAPS Lost profits (difference between contract price and cost)
Term
Lost Volume Seller
Definition
If the seller can obtain all the goods he can sell, then he is a lost volume seller.
Term
Damages when:

Buyer accepts good
Definition
Action for price
Term
Employment Contracts: Breach by Employer
Definition
Full Contract Price

REGARDLESS OF WHEN BREACH OCCURS
Term
Employment Contracts: Breach by Employee
Definition
Standard measure of damages
1. Cost to replace employee
2. Difference between costs

Note: Employee may have a right to quantum meruit if breach was unintentional
Term
Construction Contracts
Definition
Owner Breach: Builder is entitled to profits

Builder breach: Cost of completion plus reasonable compensation for delay
BUT, most courts will allow for offset to avoid unjust enrichment
Term
Acceleration clause
Definition
Renders entire amount due on any late payment.

General rule: if a contract calls for payments in installments, there is only a partial breach
Term
Mitigation
Definition
The nonbreaching party cannot recover avoidable damages. But, a party may recover the expenses of mitigation (incidentals)

If continuing work will decrease damages, can continue work

NOTE: failure to mitigate only reduces recovery
Term
Implied in law or quasi contract
Definition
When a contract is unenforceable or no contract between the parties exists, an action to recover restitutionary damages

Measure of damages is the benefit conferred

1. Plaintiff conferred a benefit
2. Plaintiff had a reasonable expectation of compensation
3. Defendant knew or had reason to know of expectation
4. Defendant would be unjustly enriched
Term
Rescission
Definition
Remedy whereby the original contract is considered voidable and rescinded.

Examples: mutual mistake; unilateral mistake; misrepresentation of law or fact, duress, undue influence, illegality, lack of capacity, or failure of consideration.
Term
Reformation
Definition
A remedy whereby the writing setting forth the agreement between the parties is changed so that it conforms to original intent.

Mutual mistake or unilateral mistake w/ knowledge

Parol evidence rule and statute of frauds do not apply
Term
Statute of Limitations for UCC
Definition
4 years
Term
Entrusting
Definition
Entrusting goods to a merchant who deals in goods of that kind gives him the power to transfer all rights to the entruster in the ordinary course of business
Term
Voidable Title
Definition
Generally, if a sale is induced by fraud the seller can rescind the sale and recover the goods from the fraudulent buyer.

However, the defrauded seller may not recover the goods from a good faith purchaser for value who bought from the fraudulent buyer

If a thief steals from a buyer, the thief is unable to pass title
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