Hyman Rosen wrote:
>
> On 3/10/2010 12:51 PM, RJack wrote:
> > ...blindly confused...
>
> You will let me know when another court reverses CAFC,
Hey Hyman, here's typical outline notes regarding contractual (K)
performance:
-----
A. Promises and Conditions: Planned for impacting of K
Promise: Undertaking to perform or to refrain from performing - -an
actual hinging point of the deal. Failure to perform a promise is a
breach
Condition: an event or occurrence giving rise to or extinguishing a
promises performance. Failure of a condition suspends performance and
therefore no breach, but the party in compliance does not have to
perform. No damages when a party fails to perform a condition.
If term is unclear as to whether it is a condition or a promise, read it
as if its a promise
Look to:
Materiality - the more material a term, the more likely it was intended
to be a promise and not a condition
Language - gives insight into what the intent of the promise was
Circumstances - customs, terms, how these types of Ks are usually
construed
Forfeiture - if forfeiture would result in calling the term a condition
it was probably intended to be a promise
If Default is too possible then the term was meant to be a condition
Who was K written by - if written by non-performing party term was meant
to be a condition
Courts are more likely to find a promise than a condition
If there is no adequate remedy then term was meant to be condition
Types of Conditions:
1) Express: in K
2) Implied: gathered from terms and overall intent of parties
3) Constructive: Court has to assume it for K to work
4) Precedent to performance: something has to occur for other
performance to occur
5) Subsequent: event terminates already underway performance
6) Concurrent
1. Timing of Conditions: Conditions Precedent, Concurrent and
Subsequent
Precedent: when an event must exist or occur before a duty of
performance of a promise arises
Subsequent: when the occurrence of an event extinguishes an
existent duty to perform; the occurrence discharges outstanding
obligation
Conditions Concurrent: when each partys duty to perform is
conditioned upon a simultaneous tender of performance by the other
R224: doesnt differentiate but defines condition as an event,
not certain to occur, before performance under a K becomes due. Events
occurrence can also discharge.
R230: Events that terminate a duty exist if a condition
extinguishing duty exists
2. Limitations on Express Conditions
UCC 2-208/ R 229: Course of performance or practical construction
a) W/K for sales involving repeated occasion for
performance, any course of performance accepted w/out objection is
relevant to determining meaning of K.
b) Express terms are read to be consistent w/each other
unless this would be unreasonable and then express terms control
performance.
When a party continually accepts late payments it cannot suddenly hold
the other party in default for failure to pay on the due date
3. Implied and Constructive Conditions: Court will find these
Constructive conditions: a fact or event, which the parties had no
intention of...unforeseeable
Implied conditions: interpreted from intent and actions of parties
a. Cooperation and Good Faith: implied condition, an
obligation to act in cooperation, good faith and fair dealing.
UC 1-203, 1-201(19), 2-103(i)(b), 2-104 (1): attaches
covenant of GF & FD
R205: Every K imposes duty of GF & FD
a) GF: faithfulness to purpose of K and expectations
b) GF performance: no subterfuge or evasion
4. Order of Performance
Simultaneous performance
If conditions can be done at the same time then the court will say so
If a condition takes longer than another that one will have to start
first
If it is ambiguous, look to what makes sense
5. Tender & Substantial Performance
An offer to perform and the present ability to do so - - forces the
parties to show they are ready to perform
When there are conditions concurrent you cannot put a party in breach
until you tender
Tender excused when no substantial performance
Substantial performance when
a. .Forfeiture will occur if doctrine does not apply
b. non-breaching party has obtained a benefit from the bargain
c. damages are an inadequate remedy for breach
d. look to extent to which breach was in bad faith
e. look to extent to which breaching party has already performed
f. look to whether breaching party will complete performance
A party who has substantially performed will be able to sue on the K
If no substantial performance than party must sue on quantum meruit
A failed condition discharges other party from performing
Broken promise if no substantial performance - can sue on K if
non-breaching party has tendered
B. Adjusting the loss from Breach: restitution and Installment K (UCC) /
Divisible K (Common Law)
Commercial K can be viewed as a single transaction w/ a series of goods
or services/payment installments or as a series of small Ks. This
distinction allows Court latitude in adjudicating material and
immaterial breaches.
1. Perfect Tender Rule: exception to substantial performance
Full tender of perfectly conforming goods is a condition precedent to
the purchasers performance/obligation to pay under the K. The social
interest is usually to keep the deal going if possible and address
damages w/out cancellation, therefore the UCC imports concepts of
curing nonconformity, partial acceptance and installment Ks.
Publishing is a mixed goods/services but it is predominantly a service
and therefore the UCC shouldnt have been used by Trial Court. Perfect
Tender Rule allows buyer to reject any goods that are not perfect.
Conformity doesnt mean substantial performance, but complete
performance. Conformity is also measured by the intent of the parties
through the K and their actions. A buyer has a right to reject goods
which fail to conform to express or implied terms of K; therefore unless
goods conform completely, they are non-conforming. One of the implied
terms of all Ks is to deal in good faith. If the seller feels the
goods were rejected in bad faith, they must prove it.
Perfect tender rule does not apply to installment Ks
2. Installment Contacts
UCC 2-307: Unless otherwise agreed upon, all goods must be tendered in a
single delivery and payment is only due on that tender.
Failure of an installment does not constitute failure of the whole K
unless that is an express term.
UCC 2-612: Installment K and Breach:
a) Installment K: one requiring or authorizing delivery of goods
in separate sections.
b) Buyer may reject any of the installments which are
non-conforming if the non- conformity substantially impairs value of
that installment and cannot be cured. BUT if non-conformity doesnt
fall under (3) and the seller gives adequate assurances of its cure,
the buyer must accept.
c) If the non-conformity substantially impairs value of the whole
K, Breach has occurred. BUT the injured party reinstates the K by I)
accepts the non- conformity w/out seasonally notifies of cancellation
OR ii) brings an action only w/respect to past installments or iii)
demands performance in future.
There is an express warranty when descriptions or samples are provided
prior to K. Here there is also an implied warranty of fitness, product
needs to meet purpose it is designed for. Both were breached.
Buyer has the right to reject any installment that was non-conforming,
provided 1) it substantially impaired value of K and 2) there was no
cure for nonconformity and 3) party notified of cancellation. The food
failed to meet the purpose of the K and the time constraint made the
nonconformity substantially impairing.
Aggrieved seller, upon breach of K, can cancel remainder of K w/respect
to undelivered part.
3. Specially Manufactured Goods
Conditions -> Promises
Promises: Dependent -> Independent
Breach: Material -> Immaterial
Performance: Not Substantial -> Substantial
In the context of construction of buildings, substantial performance has
become the basis for granting recovery to the builder even though the
project materially deviates from the K specifications.
Substantial Performance Rule is that you cant recover from a K unless
you have substantially performed your part entirely and according to the
terms. Exceptions include1) laborers who K for personal services and
fail to complete performance on no fault of their own 2) bldg Ks where
structure deviates yet serves same purpose and 3) where contractor
supplies and article different or inferior to that promised.
Doctrine of substantial performance does not apply when performance
rndered makes the use of the product as contemplated by the K
impossible.
Analysis:
1) Was there substantial performance? Test: Did performance/goods
fulfill the essential purpose of the K?
2) If so, compute damages according to incomplete performance including
restitution/quantum meritus.
When a party has not substantially performed Quantum Meruit can be used
to determine damages
K price minus value of uncompleted work OR K price minus price to
finish
Change from the K wont be tolerated if it is so dominant or pervasive
as in any real or substantial measure to frustrate the purpose of the
K. The question of degree is answered by jury and evaluated by 1)
purpose to be served, 2) desire to be gratified (buyers), 3) excuse for
deviation and 4) cruelty of enforcing adherence. The owner is entitled
to the money which will permit him to complete, unless the cost of
completion is grossly and unfairly out of proportion to the goods to be
attained. When that it true, the measure goes from cost of replacement
to difference in value.
R 2nd, 241: Circumstances significant in determining whether a failure
is material:
a) extent to which injured party will be deprived of the expected
benefit
b) extent to which injured party can be adequately compensated
c) extent to which injured parties failure to perform will result
in forfeiture
d) likelihood failing party can cure his failure through
performance or otherwise
e) extent to which failing party acted in good faith.
Would a RP feel this deviation is big or not?
C. Supervening Events: unplanned occurrences
Even though these can render performance impossible, Courts can still
hold parties liable for damages.
More than 1 of the below can apply to a situation.
1. Change of Circumstances: if unforeseen circumstances develop, the
court can fashion a remedy that would make a new K closest to the
parties intentions on the old K
2. Impossibility: performance is literally impossible, cannot
occur. Objectively viewed. No one could have performed. Usually Death
or physical incapacity or destruction of the subject matter w/o fault.
No knowledge element
UCC - impossibility is not a defense unless specific goods were
identified and destroyed
This discharges both parties from performance.
This can also be considered impracticability if performance is
made extreme and unreasonably difficult, expensive or injury or loss
are involved.
Parties cant create the impossibility.
Unless made an express condition of the K, the failure of a supply
source will not be excused. Supplier has duty to re-source if orginal
source fails.
A personal inability to perform doesnt excuse performance.- - the
failure of a supply source will not excuse performance, a supplier has
the duty to get materials from another source
remedy for imp --- restitution for the benefit conferred
3. Impracticability: unanticipated unreasonable difficulty/expense
in performing
No Knowledge element
R261: supervening event imposes such an onerous burden on one
party as to relieve him of duty.
R262:
UCC 2-615: Excuse by failure of presupposed conditions
a) Seller is not in breach if performance has been rendered
impractical and seller is in conformity w/ (b) and (c).
b) Seller must allocate production and deliveries among his
customers, inc. non-K long term customers.
c) Seller must seasonally notify buyer of non or partial
delivery.
UN Convention S79:
1. Party is not liable if he proved the failure was due to
unforeseeable impediment.
2. If parties failure is due to a 3rd parties failure, both
he and the 3rd party must meet criteria (1).
3. Excuse is only good as long as impediment exists.
4. Party must notify w/in reasonable time.
Where performance depends on the existence of a given thing when
writing the K, and that thing either ceases to exist or never existed,
performance is excused.
Party cant be required to perform when conditions for performance
are radically different from what was anticipated.
Because CRTs were reluctant to excuse, parties used Act of God
clauses to accommodate these types of situations. These clauses are
now implied in all K.
Impracticability must exist as to a material promise of the K. BASIC
ASSUMPTION OF THE K MUST CAUSE THE IMPRACTICABILITY
Performance is legally impossible when it is deemed commercially
impracticable due to excessive or unreasonable costs not contemplated by
either party
4. Frustration of K: when unforeseen supervening events render
purpose of K meaningless.
R 265:
R 266:
5. Mistake: parties did not intend to perform under these
circumstances.
Knowledge element - if any party knew then no mistake
R 152:
Two ideas run parallel w/impossibility doctrine: deal is unlikely
to be sensible any more and that it is inequitable to force
performance (of dmgs) of a K where there world be a gross inequality in
what parties were exchanging. Remember parties can negotiate these
risks and allocate them w/in K, through prices, contingencies, etc.
Courts can fashion an equitable remedy or modification based if
performance was premised on a mutual mistake of fact in a long-term
partially executed K.
4 factors to consider when modifying a long term K w/a
mutual mistake:
1) parties pre-vision of the risks which ultimately upset
the balance,
2) parties attempt at risk limitation,
3) existence of severe out-of-pocket losses and
4) industry standards for dealing.
With a mistake by one or both parties, there is no real intent of
the parties.
A party who misleads another is not engaged in a situation of mutual
mistake and is estopped from claiming the k is anything but what the
other is led to believe
D. Effect of nonperformance by one party
Impact of nonperformance will have 2 aspects: damages and/or suspension
or termination of other parties performance obligation. If the
nonperformance is not very important (immaterial breach), the
disappointed party gets damages; If the failure to perform is
significant (material breach), it will not only produce damages but
threaten security of relationship and thus terminate or suspend it.
No performance by any party is required until tender
1. Material v Immaterial breach A party seeking to repudiate a K
must prove a material breach by the other party
Operative legal questions:
1) Does nonperformance justify suspension of counter-performance?
2) Is nonperformance serious enough to consider the K terminated by the
failure of performance?
R241: Evaluate seriousness of failure to perform according to following
factors:
a) extent to which injured party will be deprived of the expected
benefit
b) extent to which injured party can be adequately compensated
c) likelihood that failing party will suffer forfeiture
d) likelihood failing party will be able to correct it
e) extent to which behavior of failing party comports w/good faith
and fair dealing
R242: Evaluating whether nonperformance warrants K termination
a) if breach meets criteria in R241, K terminates
b) If injured party doesnt think or cant mitigate damages
c) The extent to which the agreement provides for performance w/out
delay. A material breach does not automatically discharge unless the K
indicates that performance on that day is essential.
In determining the materiality of a failure:
a) extent to which injured party will be deprived of the expected
benefit
b) extent to which injured party can be adequately compensated
c) extent to which failing party has partly performed or made
preparations to perform
d) Is it a greater (or lessor) hardship on the failing party to
perform if K is terminated
e) Is the failure to perform willful, negligent or innocent?
f) Is it more or less certain that the party will continue to fail
to perform?
Here, Ps failure to quickly come and clean tomato (P finally showed)
isnt a material breach and therefore Ds failure to pay constitutes a
material breach and P gets dmgs.
2. Situation types of nonperformance
Common breach scenarios are:
a. Late performance: can be a material breach
i) Late payment: treated as a minor or immaterial breach; seller
continues to deliver, provide service, etc. Seller must put buyer on
notice before seller puts K into breach or else seller will be liable
(UCC always wants to keep K going)
ii) Late delivery of goods, services: treated as a material breach more
often than a late payment: damages are hard to compute- lost
opportunity, idle machinery and workers- delay in delivery can often be
means to terminate K or at least to allow buyer to mitigate.
Lessees & Lessors : Lease is viewed as a conveyance of property rights
as well as a K, lessee invests heavily in property by improvements and
reliance of that property for continuation of enterprise. Policy
dictates that forfeiture of property is the exception; conveyance of
right secures economic growth and commercial stability. Therefore,
unless breach by lessee is material, lessor cant rescind k under any
circumstances. Late payment is not material. Even though K has time is
of the essence clause w/regard to payments, they are too common place
and unless lateness causes injury they have no significance.
R 241: determination how material the breach is:
a) extent to which injured party will be deprived of the
expected benefit
b) extent to which injured party can be adequately
compensated
c) extent to which injured parties failure to perform will
result in forfeiture
d) likelihood failing party can cure his failure through
performance or otherwise
e) extent to which failing party acted in good faith.
b. Defective Performance: More likely to be considers a material
breach than a late performance.
i) Defective method or amount of payment: Never considered a material
breach because it is easily rectified. UCC 2-511: Any type of payment
used in ordinary course of business is acceptable unless seller
specifies and gives buyer ample time to comply.
ii) Defective Delivery in quantity or quality: Inured party is
responsible to mitigate damages; failure to do so can bar some
recovery. Question is when termination can occur. Making determination
on whether injury is a material breach is risky for injured party; if
injured party terminates and Court doesnt view it as a material breach,
they can be liable for damages. Law wants to encourage parties to
contract; they balance need to enforce K stability and award damages to
injured party. UCC 2-601: Buyers rights on improper delivery: If
delivery fails in any respect to conform w/ K, the buyer can a) reject
the whole OR b) accept the whole OR c) accept some and reject the rest
UCC 2-612: Installment K and Breach:
1) Installment K: one requiring or authorizing delivery of
goods in separate sections.
2) Buyer may reject any of the installments which are
non-conforming if the non- conformity substantially impairs value of
that installment and cannot be cured. BUT if non-conformity doesnt
fall under (3) and the seller gives adequate assurances of its
cure, the buyer must accept.
3) If the non-conformity substantially impairs value of the
whole K, Breach has occurred. BUT the injured party reinstates the
K by I) accepts the non- conformity w/out seasonally notifies of
cancellation OR ii) brings an action only w/respect to past
installments or iii) demands performance in future.
A k specification addressing a material incident like shipment
quantities is a warranty, a condition precedent whose failure allows
injured party to terminate K. Seller is bound to deliver stipulated
qty. Sellers failure to do so allows buyer to rescind, provided they
assert that right in a timely manner.
A party who is the recipient of defective performance may not
unreasonably demand assurances before suspending performance.
E. Release: operates to allocate risk when 1) a party about to engage in
a risky activity gives another party a release of potential liability or
2) a party settling a claim releases another party from further
liability.
In either situation, a mistake of fact, an assumption which the release
is based on, is wrong.
Wests Ann. Cal. Civ. Code 1541: A creditor can give a debtor a release
either 1) in writing or 2) w/new consideration.
Wests Ann. Cal. Civ. Code 1542: A general release only covers claims
known about at time release is issued.
In order to be effective, a release needs to be clear, unambiguous and
that it expresses an agreement to release a party from liability for
negligence.
Release is not effective when it covers unforeseen consequences, ex:
latent injuries, that if known, the party would not have signed the
release. (Based on idea of mutual mistake.)
F. Breach of Warranty
1. Express
2. Implied
a. Title
b. Merchantability - - the product is suitable for the
purposes for which it is sold
3. Exclusion - - a warranty can be waived but waiver must be
express, unequivocal, and knowing
G. Anticipatory Repudiation A party breaches before the contract is even
to start
In Anticipatory repudiation - a party can bring an action upon breach,
they need not wait until the K would have taken effect
Anticipatory breach of a bilateral K:
1) Express repudiation - refusal to perform
2) Implied repudiation - events are out of the parties power to
perform
A party to a K for sale of goods can demand assurances of performance.
If a party breaches and the subject matter is destroyed without fault
the damages for breach are limited to the time from breach to
destruction
Repudiation does not apply to unilateral Ks
-----
Hth.
regards,
alexander.
P.S. "I'm insufficiently motivated to go set up a GNU/Linux system
so that I can do the builds."
Hyman Rosen <hyro...@mail.com> The Silliest GPL 'Advocate'
P.P.S. "Of course correlation implies causation! Without this
fundamental principle, no science would ever make any progress."
Hyman Rosen <hyro...@mail.com> The Silliest GPL 'Advocate'
--
http://gng.z505.com/index.htm
(GNG is a derecursive recursive derecursion which pwns GNU since it can
be infinitely looped as GNGNGNGNG...NGNGNG... and can be said backwards
too, whereas GNU cannot.)
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