K Interpretation
The Perfect Tender Rule is only applicable to transactions for goods, T/F?
True. It is only available under UCC Article 2, so it is only for sale of goods transactions.
All material breaches are total breaches, T/F?
False. A breach that would qualify as material may be curable by the breacher. If so, the breach does not become material and total unless the breacher fails to cure it.
Unconscionability requires a finding of both procedural and substantive unconscionability, but a greater showing of one reduces the strength needed to be shown of the other, T/F?
True. Remember the ”sliding scale” test.
A K is only discharged for impracticability if costs rise this much or more.
more than double
A farmer contracted with his neighbor for the neighbor to supply the farmer with water for irrigation, at a fixed price. In reliance on the contract, the farmer planted crops that required a large amount of irrigation. Before the time for performance was due, the neighbor repudiated the contract even though he had adequate water that he could supply to the farmer. The farmer sued the neighbor, seeking specific performance of the contract.
Which of the following facts, if true, would NOT support the farmer's claim for specific performance?
A. The farmer was unable to obtain a similar quantity of water from another source.
B. The neighbor was insolvent.
C. The farmer had never before grown this particular crop, making his damages speculative.
D. The contract terms also called for the neighbor to install and satisfactorily maintain an irrigation system.
Answer option D is correct. When an enforceable contract is breached, the injured party may have a right to specific performance of the contracted duty. A court will not order specific performance unless
(1) the terms of the contract are sufficiently definite,
(2) the order will not be disproportionately burdensome for the court to enforce,
(3) and damages will be inadequate. Additionally, a court will not order specific performance for a contract to render personal services.
When can you always use parole evidence?
To show there is no K at all
A woman hired a chef to cook a meal for a private party. The chef lived on a small island off the coast of the mainland. The only way to get to the island from the mainland was a local ferry. Two weeks before the date of the party, the only ferryboat sunk. The chef called the woman and told her that he would not be able to cook for her party, because he was stuck on the island due to lack of ferry service. The woman told the chef that she would be canceling their contract and hiring someone else to cook for the party. The next day, one of the chef's friends told him that he could take the chef to the mainland on his private boat. The chef called the woman and told her that he was retracting his repudiation and would be able to perform. The chef did not give any explanation to the woman about how he would be able to get to the mainland from the island. The woman had not yet hired a different chef.
May the chef validly retract his repudiation?
A. Yes, because the woman has not yet hired another chef in reliance on his repudiation.
B. Yes, because the original repudiation was conditional on the lack of transportation to the mainland, and that situation has ceased to exist.
C. No, because the chef's statement to the woman is insufficient to give adequate assurance to the woman of his ability to perform.
D. No, because the woman told him that she accepted his repudiation.
Answer option D is correct. A party commits anticipatory repudiation by either giving a statement clearly indicating the intent to breach or taking an action that renders him unable to perform. Any anticipatory repudiation that has not become final may be retracted, and the injured party may no longer sue before a breach occurs, unless the anticipatory repudiation has become final, and therefore cannot be retracted. The anticipatory repudiation is considered final when either the injured party has materially changed position in reliance on the repudiation or where the injured party has indicated to the repudiating party that the anticipatory repudiation is considered final.
A lender demands that a struggling business sign a harsh repayment agreement, or they’ll call in the debt. No external cause created the hardship. Duress?
no; this is hard bargaining, not wrongful threat
A contractor agrees to deliver materials “even if there is a hurricane.” A hurricane destroys the warehouse.
Does the contractor have a viable excuse defense under default doctrines? Why or why not?
no, because parties can assume risk in the contract and override the default excuse doctrines.
A gun dealer agreed to sell a gun to a purchaser for $500. The dealer had acquired the gun for $425, and thus stood to make a profit of $75 on the transaction. The purchaser made a down payment of $100. Before the purchaser took possession of the gun, the state government passed a new law forbidding sales of that model of gun. The purchaser sued the dealer for the return of his $100 down payment.
How will a court likely rule?
A. The dealer must return the $100 down payment to prevent unjust enrichment of the dealer.
B. The dealer must return the $100 down payment to prevent unjust loss for the purchaser.
C. The dealer does not need to return the $100 down payment, because he is the nonbreaching party.
D. The dealer must return only $25 of the down payment, so that he will still earn $75, his original expectation interest under the contract.
Answer option A is correct. A party may recover restitution to prevent unjust enrichment when the duties of performance under a contract are discharged due to death, impossibility, impracticality, frustration of purpose, or nonoccurrence of a condition. The goal of restitution damages is to prevent unjust enrichment.
Here, a subsequently passed law made performance of the contract impossible. The purchaser had rendered partial performance by paying $100 to the dealer. The dealer benefited by $100 due to the purchaser's actions. Therefore, a court will likely rule that the dealer must return the $100 so that he is not unjustly enriched.
This is the default presumption courts make about the level of integration in a contract, absent clear evidence to the contrary.
that the contract is partially integrated
On June 5 Parker, a homeowner, contracted with Dennis, a landscaper to do landscaping work around Parker’s home beginning June 25. On June 10, Dennis told Parker he wasn’t going to show up because he had obtained a more lucrative job across town that would keep him and his crew busy for the next six months. Which statement is most correct?
(A) Parker may bring suit immediately against Dennis.
(B) Parker does not have standing to bring suit against Dennis until June 25
(C) Parker may bring suit immediately for an injunction under the doctrine of anticipatory repudiation, but must wait until June 25 to sue for damages
(D) Parker will only be able to bring suit once he hires a replacement landscaper because it will not be until then that he will be able to establish damages, if any.
(A) Parker may bring suit immediately against Dennis.
Seller knows his refrigerator is missing the cooling system that all refrigerators must be equipped with to cool food. Seller did not remove the cooling system, as it was missing when he got it. Seller sold refrigerator to Buyer for $500. Buyer did not ask about the cooling system because he assumed when someone sells a refrigerator it comes with it. But he did say to Seller, “I don’t understand how refrigerators work, but I’m sure glad it does.” Seller said nothing in response. The fridge without a cooling system has market value of $50. Buyer would now like to bring suit to void the contract. Assume it was R. for buyer not to discover the missing system. In Buyer v. Seller, Buyer will likely:
(A) Prevail on a valid claim of misrepresentation
(B) Prevail, because Seller took affirmative action to conceal a fact
(C) Lose, because Buyer did not ask about the system
(D) Lose, because Seller never said anything regarding the system
(A) Prevail on a valid claim of misrepresentation
Farmer contracted to sell Rancher 25,000 bushels of corn raised to Rancher's specifications, for Rancher's pesticide and hormone-free organic beef operation. Due to a drought, Farmer could only produce 10,000 bushels of corn, and was unable to buy additional corn that met Rancher's specifications. When Rancher sues, Farmer will:
a) successfully argue for discharge based on impracticability.
b) successfully argue for discharge based on impossibility.
c) successfully argue for discharge based on frustration of purpose.
d) be liable for breach, because Farmer assumed the risk of loss.'
B.
It is literally impossible for Farmer to perform, because the remaining subject matter of the contract (15,000 additional bushels of corn raised to Rancher's specifications) is unavailable.
\Even if a drought is something that the parties might reasonably anticipate, not being able to acquire from another source is not something that could have reasonably been anticipated. A is incorrect, the cost of performance has not increased, rather there is no way for Farmer to obtain an additional 15,000 bushels of corn raised to Rancher's specifications.
C is incorrect, as there is nothing to indicate that either party's purpose in forming the contract has been frustrated.
D is incorrect, there is no information on how or whether the parties allocated risk of loss.
P contracted with D whereby D was to build a solar power system on P’s property for $ 50,000, of which $2,500 was profit. The K called for a project completion date of March 1. Additionally, there was a liquidated damages clause: “each day the project is behind D would have to pay $200 to P. D completed the project on April 1. P brought suit for damages seeking $6,200 ($200/day for 31 days between March 1 and April1 based on the liquidated damages clause. In P’s action for breach of K seeking damages based on the liquidated damages clause, P should:
(A) Prevail bc the clause is reasonable in light of the actual damages & the anticipated damages at the time the K was entered into.
(B) Lose, bc the clause is unreasonable in light of the action damages & the anticipated damages at the time the K was entered into.
(C) Prevail, but only up to the value of $2,500 profit expected under the K.
(D) Lose, bc the actual damages from late completion are easy to prove.
(D) Lose because the actual damages from the late completion are easy to prove. Liquidated Damages RS§ 356(1) A requirement of an enforceable liquidated damages clause is that actual damages must not be easily determined and provable. Here, the exact amount of damages caused by the delay is calculable.
A prospective car buyer was searching for used cars on a car dealership's website. The buyer located five cars of the particular make, model, and year that the buyer wanted to purchase. The buyer sent an email to the dealership and asked to purchase "a 2017 Chevrolet Equinox for $12,000." The dealership accepted the offer by return email. When the buyer went to consummate the car purchase, the dealership realized that the buyer had intended to purchase a different 2017 Chevrolet Equinox that was worth considerably more than $12,000.
How is a court most likely to resolve the parties' misunderstanding?
A. Interpret the contract based on the dealership's understanding.
B. Interpret the contract based on the buyer's understanding.
C. Determine that there was a lack of mutual assent only as to which car the buyer intended to purchase and void only that term.
D. Determine that there was a lack of mutual assent between the parties and void the contract.
Answer option D is correct. The terms of a contract must be reasonably certain in order for a court to enforce the agreement.
In most cases involving uncertainty, a court must clarify the meaning of an indefinite, ambiguous, or omitted term.
A term is indefinite if it is left open or uncertain. If an indefinite term is essential, then a court will likely void the contract for indefiniteness. Generally, essential terms include the contract's subject matter (e.g., the land in a real estate contract); price or other consideration, whether definitely fixed or ascertainable with reference to some objective standard or formula; the quantity of goods or other things to be sold; the contract's duration; and the timing of each party's performance.
Here, the particular car the parties intended to be the subject of the transaction is an indefinite, essential term. Therefore, a court is most likely to determine that there was a lack of mutual assent between the parties and void the contract.
Answer options A, B, and C are, therefore, incorrect, because each misstates how a court is likely to resolve a misunderstanding between contractual parties about an indefinite, essential contract term.
An event planner entered into a contract with a florist under which the florist would design and provide, for $750, 50 floral centerpieces for a dinner meeting. A condition in the contract specified that the florist would provide a sample centerpiece to the planner before the event for the planner's approval. The florist prepared the sample centerpiece and contacted the planner to arrange for the sample's delivery. The planner told the florist that the sample was not necessary and that the florist should proceed with preparing the 50 centerpieces. The florist prepared and delivered the centerpieces in accordance with the contract. Thereafter, the planner refused to pay the florist's bill on the ground that the florist had failed to provide a sample centerpiece to the planner for the planner's approval as required by the parties' contract.
Is the planner obligated to pay the florist's bill?
A. No, because the contract expressly made the delivery and approval of a sample a condition of the contract.
B. No, because the sample's delivery and approval were a material part of the parties' bargain.
C. Yes, because the florist substantially performed the florist's duties under the contract.
D. Yes, because the planner expressly waived the condition requiring delivery and approval of a sample.
Answer option D is correct. A party to a contract may avoid the party's performance if a contractual condition has not occurred, and the nonoccurrence is not excused. However, if there is an excuse for the nonoccurrence of a condition, performance is due even though the condition did not occur. The most common excuses for nonoccurrence are estoppel, waiver, and disproportionate forfeiture. The excuse of waiver provides that an obligor's duty of performance arises despite the nonoccurrence of a condition if the obligor waives the condition. Subject to the contract, the obligor may waive the condition by
(1) expressly communicating intent to waive the condition or
(2) accepting the obligee's performance despite knowing of the nonoccurrence of the condition. Here, because the planner expressly waived the condition requiring the florist to provide a sample, the planner is obligated to pay the florist's bill.
A woman agreed to sell a parcel of land to a man. The woman and the man both believed that the woman had good title to the land, but neither of them knew for certain. Neither party ran a title check to verify the woman's good title. The contract for the sale of the land stated that the woman was conveying all the title that she had to the land, but the contract made no explicit representation that the woman's title was good. The woman's title to the land was in fact defective due to a lien on the property of which neither party knew.
If the man sues to void the contract for the sale of land, is he likely to succeed?
A. Yes, because the court will allocate the risk of mistake to the seller of the property.
B. Yes, because both the parties mistakenly believed that the woman had good title to the land.
C. No, because the contract allocates the risk of mistake to the man by making no guarantees about the soundness of the woman's title to the land.
D. No, because only mistaken beliefs of fact, not mistaken beliefs of law or legal consequences, will void a contract on the grounds of mistake.
Answer option C is correct. A party bears the risk of mistake of fact when
(1) the parties agreed in the contract to allocate the risk to that party,
(2) a court allocates the risk to that party because the risk is reasonable under the circumstances, or
(3) the party was consciously ignorant of the relevant facts.
A contractual provision that agrees to allocate the risk to a certain party does not need to explicitly state that one party bears the risk of mistake. Such a conclusion may be inferred from the language of the contract.
Mill contracted to pay Lumberjack $8 per cord to cut and deliver pulpwood from a particular tract of land. Before the first delivery was due, a fire destroyed most of the trees on the land, except for trees on a mountain that could only be cut and delivered at a cost to Lumberjack of $20 per cord. Lumberjack refuses to deliver pulpwood from the mountain, and Mill sues for breach. Lumberjack will be:
a) successful in arguing for discharge based on impossibility.
b) successful in arguing for discharge based on impracticability.
c) unsuccessful in avoiding liability for breach.
d) successful in arguing for discharge based on frustration of purpose.
With the increased cost so that Lumberjack will lose money if Lumberjack performs, the cost of performance has substantially increased sufficient to support discharge based on impracticability.
A and D are incorrect, as the facts support only impracticability.
C is incorrect, as the facts support impracticability.
An entrepreneur wanted to open a store that sold sports memorabilia. The entrepreneur contracted to lease a commercial building for $2,000 per month, for one year. In preparation for opening the store, the entrepreneur purchased $30,000 worth of sports memorabilia that he planned to sell in the store. Prior to the starting date on the lease, the building owner repudiated the contract and leased the building to someone else. The entrepreneur resold the memorabilia he had purchased. Due to increased demand for sports memorabilia, the entrepreneur was able to sell all of the items he had purchased for $50,000. He expended $1,000 in advertising and other incidental expenses in selling the memorabilia.
If the entrepreneur sues the building owner seeking reliance damages, how much, if anything, is a court likely to award?
A$0.
B$1,000.
C$30,000.
D$31,000.
Answer option A is correct. Reliance damages serve as an alternative to expectation damages and are typically awarded when the injured party relied on the contract but cannot prove any lost profits. When awarding reliance damages, the court will set an amount that places the injured party in the position that he would have been in had the contract never been made. To calculate the amount of reliance damages, the court will consider the loss incurred by the injured party in reliance on the contract, including expenditures made while performing or preparing for the contract.
A fine-art auction house sent its standard consignment agreement to a prospective consignor in furtherance of an arrangement in which the auction house would accept a drawing from the consignor's art collection for sale at its upcoming auction. One of the agreement's provisions specified that "if, in the auction house's best judgment, a consigned work should be reframed and/or remounted in order to be presented more favorably at auction, the consignor authorizes the auction house to reframe or remount the work at the consignor's expense, to be deducted from the auction proceeds." The consignor signed the agreement and responded, "All of the terms in the agreement are fine except the reframing/remounting provision. I will authorize up to $400 for reframing/remounting, in advance. However, if the reframing/remounting cost is estimated to exceed $400, you agree to obtain my prior, express approval of the reframing/remounting expense."
Which of the following findings, if any, could support a court's decision that the consignor's preauthorization provision was part of the parties' consignment agreement?
A. The parties' agreement was a completely integrated agreement.
B. The parties' agreement was a partially integrated agreement.
C. The parties' agreement had a merger clause.
D. There are no findings that could support a court's decision that the consignor's preauthorization provision was part of the parties' consignment agreement.
Answer option B is correct. A partially integrated agreement is a final but incomplete statement of the parties' intent regarding the contract's subject matter. The parol evidence rule excludes extrinsic evidence of prior or contemporaneous agreements or negotiations that are inconsistent with a partially integrated agreement. Accordingly, a court may use extrinsic evidence to add terms to the contract, but not to contradict it. SeeRestatement (Second) of Contracts §§ 213(1), 214-16, with comments. Therefore, here, a finding that the parties' agreement was a partially integrated agreement could support a court's decision that the consignor's preauthorization provision was part of the parties' consignment agreement because the provision does not contradict the contract's terms, but rather supplements them.
Answer option A is incorrect because a completely integrated agreement is the full and final expression of the parties' intent regarding the contract's subject matter. The parol evidence rule excludes extrinsic evidence of prior or contemporaneous oral or written agreements or negotiations that are within the scope of the completely integrated agreement. In other words, the court may not use extrinsic evidence to contradict or supplement (i.e., add to) the contract in any way. See id. at §§ 213(1)-(2), 214-16, with comments. Therefore, if a court were to find that the parties' agreement was a completely integrated agreement, that finding could not support a court's decision that the consignor's preauthorization provision was part of the parties' consignment agreement because the provision would add to the contract.
Answer option C is incorrect because a merger clause is a contractual provision that is intended to invoke the parol evidence rule. A typical merger clause provides that (1) there are no representations, promises, or agreements between the parties except those stated in the contract, or that (2) all prior negotiations or correspondence between the parties are merged with and superseded by the contract. Generally, a merger clause is strong, but not conclusive, evidence that the contract is completely integrated. Some courts may presume that a contract with a merger clause is completely integrated, absent contrary evidence. See 29A Am. Jur. 2d Evidence § 1107, Westlaw (database updated Aug. 2018); Restatement (Second) of Contracts § 216 cmt. e. Therefore, because a finding that a contract has a merger clause is strong evidence that a contract is completely integrated and, therefore, not amenable to any modification or supplementation, this finding could not support a court's decision that the consignor's preauthorization provision was part of the parties' consignment agreement.
Answer option D is incorrect because, as noted above, a finding that the parties' agreement was a partially integrated agreement could support a court's decision that the consignor's preauthorization provision was part of the parties' consignment agreement.
A recent law school graduate signed an employment contract with a law firm to begin working the next month. As part of the contract, the graduate agreed to reject any other offers of employment, and she in fact rejected two subsequent offers from other firms. Two weeks before her starting date, the graduate learned from a reliable source that the firm that she was going to work for had declared bankruptcy.
If the graduate immediately seeks legal advice regarding her options, what course of action should the advising attorney recommend to best protect the graduate's interests?
A. The graduate should demand adequate assurance of employment from the law firm and may not accept employment with another firm, but she may wait to reject any further offers until she receives assurances.
B. The graduate should demand adequate assurance of employment from the law firm but must continue to reject any further offers.
C. The graduate should immediately seek another offer and sue the firm for a remedy to compensate her for the previously rejected offers.
D. The graduate should immediately seek another offer and, if she does not receive a comparable offer, then she should sue the firm for a remedy for prospective lost earnings.
Answer option A is correct. If a party to a contract has reasonable grounds to believe that the other party will be unable to perform, the first party may suspend his own performance and demand adequate assurance; if adequate assurance is not provided within a reasonable time, then the suspending party may treat the prospective inability to perform as an anticipatory repudiation and sue for a remedy.
Here, the law firm's insolvency would constitute a reasonable ground to believe that the firm will be unable to employ the graduate. Thus, she is entitled to demand assurances and to suspend her own performance by waiting to reject any further offers that she receives. Answer option B is incorrect because the graduate may suspend her own performance while waiting for adequate assurances, meaning that she need not continue to reject any further offers she receives.
Note that she would be wise not to accept any such offer, however, because the law firm may in fact provide adequate assurances, in which case the graduate is bound by the original terms. Accordingly, answer option D is incorrect.
A woman owned a plot of fallow farmland. She entered into an oral agreement with a farmer on the following terms: the farmer would immediately take possession of the land and start farming it. The farmer would pay 25 percent of his earnings from the sale of his crops to the woman until he had paid enough to pay off the purchase price, at which point he would own the land. The parties anticipated that it would take three years of harvests for the farmer to earn enough to pay for the property. The farmer moved onto the land and immediately installed an irrigation system and built a farmhouse. After six months, the farmer told the woman that the farmland was not nearly as fertile as he had hoped and that therefore he did not want to continue with the agreement to purchase the land.
If the woman sues the farmer, is a court likely to enforce the oral contract, despite the Statute of Frauds?
A. Yes, because the farmer already took possession of the property.
B. Yes, because the farmer made significant improvements to the property.
C. No, because it is for a contract with a duration of over one year.
D. No, because it is a contract for land and no relevant exception applies.
Answer option D is correct. The Statute of Frauds forbids the enforcement of a contract unless it is set down in a signed writing. There are six classes of contracts that fall within the Statute of Frauds:
(1) marriage contracts,
(2) contracts that cannot be performed within one year,
(3) land contracts,
(4) executor-administrator contracts,
(5) sale of goods contracts for $500 or more, and
(6) suretyship contracts.
For land contracts, an exception exists if the injured party has incurred a detriment by making significant repairs or improvements to the land.
Vine & Co., a Napa winery, enters into a five-year exclusive supply contract with TerraGlass, a European bottle manufacturer. A year into the deal, new EU environmental laws—proposed but not yet passed when the contract was formed—ban the export of non-recyclable glass, which includes TerraGlass’s entire line. TerraGlass claims impracticability due to the new regulation.
Which of the following is the most accurate legal analysis?
A. TerraGlass is excused because a government regulation made performance impossible, satisfying the test for impracticability.
B. TerraGlass is not excused because the regulation was foreseeable and the risk should have been contractually allocated.
C. TerraGlass is excused because under UCC § 2-615, government prohibitions always excuse performance regardless of foreseeability.
D. TerraGlass is not excused because it should have anticipated the regulation and sourced recyclable glass in advance.
B. TerraGlass is not excused because the regulation was foreseeable and the risk should have been contractually allocated.
Even though government regulations can support an excuse under impracticability, courts often analyze whether the risk was foreseeable at the time of contracting and whether the party should have provided for it.
The proposed regulation was in public discourse at the time of contracting, meaning TerraGlass arguably assumed the risk by not including protective terms (e.g., force majeure or price adjustment clauses).
Under both UCC and common law, foreseeability without allocation usually bars excuse
A car dealership entered into a written agreement with an eight-year-old child in which the dealership would sell the child a used sedan for $10,000, as long as the child paid $2,000 up front. The child paid the $2,000 up front but then refused to accept delivery of the vehicle and refused to pay the additional $8,000. Both the dealership and the child brought suit against one another for damages.
Which party is most likely to prevail?
A. The child, because the child partially performed and the contract was voidable.
B. The child, because the dealership was in breach of the contract.
C. The dealership, because the child breached the contract by refusing to pay the $8,000.
D. The dealership, because the dealership had performed its part of the contract.
Answer option A is correct. A contract implied by a court to prevent unjust enrichment, known as a quasi-contract, allows a party to recover restitution, even when there is not an enforceable contract or even any contract at all. See Restatement (Second) of Contracts § 376 (1981). Specifically, the restatement notes that a "party who has avoided a contract on the ground of lack of capacity, mistake, misrepresentation, duress, undue influence or abuse of a fiduciary relation is entitled to restitution for any benefit that he has conferred on the other party by way of part performance or reliance." Id. Here, a court would find that an eight-year-old child lacked capacity to enter into a contract with a car dealership for the sale of a car.