Select Page

Contracts II
University of Toledo School of Law
Davis, Benjamin G.

Contracts II Outline and Issue Spotter – Professor Davis – Spring 2013

Problems in Contract Law, Cases and Materials by Knapp, Crystal and Prince (Seventh Edition

2012) – Chapters 7-12

ISSUE SPOTTER

A. Common Law

0. What law applies? Common Law

1. What are the promises that each party has made? Is there a Third Party Beneficiary? Is there an Assignment of Rights? Is there a Delegation of Duties?

2. Was there any bargaining misconduct (minority, mental incapacity, duress, undue influence, misrepresentation, non-disclosure, unconscionability, public policy) that should lead to us avoiding the enforcement of the contract?

3. When are the performances supposed to be done? Can they be done at the same time or does one party have to perform before the other party has to perform its obligations?

4. Did one party anticipatorily repudiate its performance? Has the injured party locked in the situation or does that party still have time to retract its repudiation?

5. Are we in a situation where a request for assurances is appropriate? Was it done? If done, what was the response of the other party? Should the other party to the contract be considered to have anticipatorily repudiated?

6. Did each party do their performance when it was due? If not, why not? Was there an express condition that did not occur? If there was such an express condition, is that condition excused so that performance came due? Was there a justification for non-performance (unilateral mistake, mutual mistake, impossibility, impracticability, frustration of purpose or modification) that would excuse performance? (If a modification start back at one with the analysis and continue through the rest of the questions as appropriate).

7. Was there a failure to perform that is a breach? By which party first? Either by (a) failure of a condition to occur or by (b) a failure to perform when performance was due (breach), is there an uncured material failure that suspends the obligation of the other party to perform?

8. Is this contract divisible in that I can find agreed equivalents – making it possible to look at this as a partial breach situation – or do we have to think of total breach?

9. Is this contract an installment contract – making it possible to look at this as a partial breach situation – or do we have to think of total breach?

10. If there is an uncured material failure for failure to perform when performance was due, is it of the kind that rises to the level of a partial breach (duty to perform of the non-breaching party will remain and actual damages will be a remedy)? An immaterial breach (Jacobs and Young) would suggest that there is an uncured immaterial failure or substantial performance – and we would have a partial breach meaning the performance of the injured party is still due but they can collect some actual damages. A material breach would possibly still be a partial breach or might be so bad that it is a total breach (duty to perform of non-breaching party is discharged and injured party can sue for its actual and future damages). Analyze this under the material and total breach sections at 241 and 242 of the Restatement.

11. Was the non-breaching party ready willing and able to perform? How is that demonstrated in the facts?

12. To what remedies are the injured party entitled? Which type of damages? Are expectation damages sufficient? Should we provide reliance damages? Should we provide restitution (think in terms of breach but also avoiding enforcement situations and justification for non-performance situations)? Is the breaching party entitled to restitution from the injured party? If the damage remedy is inadequate, is there something in equity (specific performance, injunctions, or agreed remedies) that should be applied?

B. UCC

0. What law applies? UCC

1. What are the promises that each party has made? Is there a Third Party Beneficiary? Is there an Assignment of Rights? Is there a Delegation of Duties?

2. Was there any bargaining misconduct (minority, mental incapacity, duress, undue influence, misrepresentation, non-disclosure, unconscionability, public policy) that should lead to us avoiding the enforcement of the contract?

3. When are the performances supposed to be done? Can they be done at the same time or does one party have to perform before the other party has to perform its obligations?

4. Did one party anticipatorily repudiate its performance? Has the injured party locked in the situation or does that party still have time to retract its repudiation?

5. Are we in a situation where a request for assurances is appropriate? Was it done? If done, what was the response of the other party? Should the other party to the contract be considered to have anticipatorily repudiated?

6. Did each party do their performance when it was due? If not, why not? Was there an express condition that did not occur? If there was such an express condition, is that condition excused so that performance came due? Was there a justification for non-performance (unilateral mistake, mutual mistake, impossibility, impracticability, frustration of purpose or modification) that would excuse performance? (If a modification start back at one with the analysis and continue through the rest of the questions as appropriate).

7. Was there a perfect tender? Was there acceptance? Was there rejection? Was there revocation of acceptance?

8. Is this contract divisible in that I can find agreed equivalents making it possible to look at this under substantial performance?

9. Is this contract an installment contract – making it possible to look at this under substantial performance?

10. Proceed through the analysis of Buyer’s and Seller’s Remedies provided in the note contained in the DavisBoxes II.

Summary of Buyers’ Remedies under the UCC

Introduction. UCC §2-711 outlines buyers’ remedies. The Code rejects the doctrine of “election of remedies,” so many remedies are cumulative rather than alternative. The Code retains, however, the basic principle of compensation, §1-106, so multiple remedies are not available if the result would be compensation in excess of the harm suffered.

I. Buyers’ Remedies in General.

a. Cancellation is available. UCC §2-711(1) if the seller fails to deliver the goods, or repudiates the contract (UCC §§2-610, 2-611), or if the buyer rightfully rejects or revokes acceptance of the goods because they fail to conform to the contract (breach of warranty, for example).

b. Cancellation is different from “rescission.” Cancellation is termination of a contract for breach and similar to a declaration of total breach under the common law (See Notes 1 and 2 on pages 821-822), while rescission is termination of the contract for some other reason, such as mistake, and seeks to return the parties to status quo ante.

c. A buyer who cancels the contract may recover “so much of the price as has been paid,” plus damages, measured under either the section on “cover” (UCC §2-712) or “market damages” (UCC §2-713), both of which are discussed below.

d. The buyer who accepts and retains goods notwithstanding a nonconformity in the seller’s tender may be entitled to a remedy under UCC §2-714.

e. The buyer who does not receive the goods and does not elect to cancel the contract may seek specific performance under UCC §2-716.

II. Acceptance, Rejection and Revocation of Acceptance

a. The right to cancel often turns on whether the buyer has rightfully and effectively rejected the goods or rightfully revoked acceptance. UCC §2-711(1).

1. Whether rejection is rightful or wrongful turns on the presence of grounds for rejection. Determination of the buyer’s right to reject begins with the perf

er is entitled to recover incidental and consequential damages under UCC §2-715.

b. If the goods have not been accepted, (e.g., nondelivery, repudiation, rightful rejection, or rightful revocation of acceptance), the buyer may recover damages under either the market value measure, UCC §2-713, or the “cover” section, §2-712. Cover is the preferred remedy under the Code because it more precisely compensates the buyer for the loss resulting from the breach. In either case the buyer is also entitled to recover incidental and consequential damages under UCC §2-715.

c. Specific Performance. UCC §2-716 provides for specific performance when the goods are “unique or in other proper circumstances.” While the Code liberalizes the use of specific performance to some degree, the section “continues in general prior policy as to specific performance and injunction against breach.” Comment 1.

d. Other Buyers’ Remedies.

1. Right to set off damages against the amount of the purchase price still due the seller. UCC §2-717.

2. Security interest in goods in the possession of the buyer for any payments made on the purchase price plus expenses. UCC §2-711(3).

3. Right of restitution when buyer is in breach for any payments made to the seller, less the seller’s damages. UCC §2-718(2).

4. Right to recover liquidated damages if the contract provides for a valid liquidated damages clause. UCC §2-718(1).

5. Right to the replevin goods in certain circumstances. UCC §2-716(3).

OUTLINE

I. BOX ONE aka Avoiding Enforcement

a. Minority

i. Minors (commonly referred to as infants) – Do not have the judgment to protect themselves in the marketplace

1. Rst § 14. Infants – Unless a statute provides otherwise, a natural person has the capacity to incur only voidable contractual duties until the beginning of the day before the person’s 18th bday

2. Traditional Rule – Allows minors to disaffirm of avoid K, even if full performance & minor cannot return to adult what was received

a. Return only what is still possessed or any identifiable proceeds

b. Absent showing minor misrepresented age or willfully destroyed prop

c. Dodson court applied traditional rule and required restitution

d. The minor is liable for the reasonable value of “necessaries”

i. Usually limited to items that one needs to live, such as food, clothing, and shelter

ii. Medical services

iii. Apartment lease, no if could return home

iv. Legal services possibly if a right taken away

e. K not void, but voidable

f. Age of majority 18

i. Once reaching, minor must act w/in reasonable time to disaffirm

g. Courts divided on employment Ks once benefits received

h. Many courts hold minor can disaffirm pre- and post injury release agreements signed by a parent

i. Marriage can lead to emancipation & dissolve inability to K

ii. Slave Codes – At CL during slavery, no enslaved person had legal capacity to K

1. Restrictions place on other people of color

2. Largely removed w/ enactment of fed & state civil rights laws