Contracts: Performance through Anticipatory Repudiation
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warrant of merchantability: Implicit in every sale of goods contract in which the seller is a merchant is a warranty of merchantability that promises that the items sold will work in accordance with expectations.
Waiving the right to a guarantee that items purchased will work properly is foregoing a significant right under the contract.
Any written disclaimer from merchantability is required to be conspicuous within the contract, so it is likely to be a material term of a contract between at least one merchant.
performance: express conditions: types of waiver
- party receiving protection of the condition may waive by:
- -words or conduct OR
- -wrongful interference or by hindering the occurrence of the condition (judged by good-faith standard) --> absolute duty to perform
- -condition is not a material part of the agreement
performance: implied conditions: rule for constructive condition of exchange (CCE) under common law
A party satisfies CCE if there is:
- - substantial performance;
- - no material breach; and
- - the breach is not willful
UCC performance: requires perfect tender
UCC performance: perfect tender= perfect good and perfect delivery
UCC performance: buyer make revoke their acceptance of the goods
UCC performance: if seller fails to tender perfect goods, and time left on the contract or seller had reasonable grounds to believe that the buyer would accept, the buyer must give seller chance to cure
UCC performace: if installment contract (though default is one delivery of all the goods), buyer can only reject if substantial impairment of the installment that can't be cured
UCC performance: delivery can be at seller's place of business, shipment contract or destination contract
performance: shipment: UCC: perfect tender: delivery: shipment contract requirements
- - goods to a common carrier;
- - make arrangements for delivery; and
- - notify the buyer
performance: shipment of nonconforming goods: general rule
A buyer may reject goods as nonconforming
performance: shipment of nonconforming goods: seller's right to cure
seller may have right to cure after shipment of nonconforming goods if there is still left on the contract and he seasonably notifies the buyer of intent to cure.
* this does not change buyer's right to reject the whole, accept the whole, or accept some.
performance: risk of loss: what are the steps to determine who bears the loss when goods damaged or destroyed before the buyer receives them?
1. Check whether the parties have already dealt with the risk in the contract. If so, their agreement will control.
2. If not, ask whether either party has breached (can be any other part of the contract unrelated to delivery). If so, that breaching party bears the risk of loss.
- 3. If no breach, and the goods are being shipped, ask what type of delivery contract.
- ~ if shipment contract: risk of loss with buyer
- ~ if delivery contract: risk of loss with seller
- 4. If no breach, and for all other cases not involving goods via shipment, ask if seller is a merchant.
- ~ if yes, risk of loss with seller until buyer receives the goods
- ~ if no, risk of loss moves to the buyer when the seller tenders the goods.
performance: impossibility/impracticability: look for these types of fact patterns
- - performance becomes illegal after the contract is formed
- - subject matter of the contract is destroyed
- - a services contract with a "special person," and the performing party dies or is incapacitated;
- - BUT something that just makes performance more expensive than expected will not normally excuse.
anticipatory repudiation under the UCC: can repudiate if an unequivocal refusal or a party creates a reasonable grounds for insecurity and fails to provide adequate assurances within 30 days of demand for assurances
breach: anticipatory repudiation: two options for nonbreaching party when other party repudiates performance
- 1. treat repudiation as a breach and sue immediately for damages
- ~ BUT nonbreaching party cannot sue early if only thing left is payment, must wait until end of contract terms
2. ignore the repudiation and demand performance
damages under UCC for failing to deliver goods= cost of cover: the difference between the contract price and the market value of the goods.
damages: not liable for damages that were not contemplated by the parties of the contract. Note that recovery for incidental beneficiaries must be based on asserting rights of the contract, not personal injury beyond the contemplation of the contracting parties.
parol evidence rule: if parties had conversations about a condition that would be required in order for the contract to be enforced, evidence of those conversations can be admitted despite the general parol evidence to exclude pre-contract negotiations.
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