Contract Terms Part 3

Covenant

a promise to act or to refrain from acting. It is not dependent upon the other party's acts nor upon other events and, if the covenanting party breaches it, the other party may bring an action for breach

Warranty

A type of covenant in which one party attests to certain facts, assurance, or statement regarding the existence or accuracy of specific facts or the condition, quality, quantity, or nature of a good

UCC Express Warranties

a seller affirms a fact or makes a promise to the buyer which relates to the goods and becomes part of the basis of the bargain, the affirmation or promise creates an express warranty that the goods conform to the affirmation or promise

UCC Cumulation and Conflict of Warranties

multiple warranties must be interpreted in a way such that the warranties are consistent and cumulative

UCC Cumulation and Conflict of Warranties If not Reasonable

1) exact or technical specifications displace an inconsistent sample or model or general language of description, 2) a sample from an existing bulk displaces inconsistent general language of description, and 3) express warranties displace inconsistent implied warranties other than an implied warranty of fitness for a particular purpose.

condition

an act or event which affects a duty to render a performance. It may be express or implied, and may be precedent, concurrent, or subsequent

Condition Precedent

related to an event, other than a lapse of time, which must occur before a duty on the part of the defendant will arise. It may arise out of an express or implied term of the contract

Condition Concurrent

a type of condition precedent which exists when the parties to a contract are bound to render performance at the same time

Condition Subsequent

is related to an event which, by agreement of the parties, operates to terminate a duty of performance after it has arisen

Express Condition

is stated in the contract and generally will be strictly and literally enforced by the courts

Implied-in-Fact Condition

is one which is necessary to the performance of the contract between the parties and therefore is deemed to have been intended by the parties, but is not expressly stated

Constructive Condition

an implied-in-law condition, which the law will enforce even though the parties did not agree to it. Such conditions are implied by the law to promote justice

Doctrine of Constructive Conditions

the fulfillment of a promise in a bilateral contract can be construed to be a condition of the other party's performance even in the absence of an express provision to that effect

Implied Condition of Cooperation

is implied in a contract whenever the cooperation of the promisee is necessary for the performance of the promise

Satisfaction of Condition

In order to sue a defendant for failure to perform, the plaintiff must show that he has satisfied his own conditions or that his conditions are excused

Substantial Performance

a plaintiff who has failed to perform a constructive condition in a minor or immaterial respect may nevertheless recover on the contract. In order to recover, the plaintiff must prove: 1) the defendant got substantially what he bargained for, 2) the defendant can be reimbursed for what he did not receive, 3) there will be a great hardship on the plaintiff if he is denied recovery under the contract, and 4) the deviation was not willful

Divisible (or Severable) Contract

is a bilateral contract in which the performance is divided into two or more separate units, either as to subject matter or time, and performance of each part by one party is the agreed exchange for a corresponding part by the other party

Excuse of Condition

An excuse of condition occurs when the plaintiff's duty to perform is excused because the defendant has defaulted

Waiver of Condition

results when a party to a contract voluntarily relinquishes his or her known right to assert the non-performance of a condition. It can be given by express agreement or by conduct

Prospective Failure of Condition

occurs when an anticipatory breach is present and will excuse the non-breaching party from his or her performance

Anticipatory Breach

when one party to a contract makes it clear prior to the time performance is due that he or she will not perform. An anticipatory breach may be expressed in words or by action. The promisee may elect to sue immediately for damages or may wait until after performance has become due to then file suit

Anticipatory Repudiation

is a form of anticipatory breach in which a party verbally and unequivocally repudiates a contract before performance has become due

Voluntary Disablement

is a form of anticipatory breach in which a party's conduct makes it so that he cannot perform his own conditions

Impossibility of Performance

a contract will be released from an obligation to perform when, neither from his act nor from his neglect, and prior to being in default, it has become impossible for said party to perform

Equitable Estoppel

a party who has taken unfair advantage of another, by using false statements or conduct to induce the other person to act or promise to act, is barred from asserting a failure of condition against that other person

Discharge of Defendant's Duty to Perform

Once the plaintiff has either performed all his required conditions or has been excused from such performance, the defendant's duty to perform arises, unless the defendant's duty to perform is discharged

Merger

is said to have occurred in a contractual situation when one contract supersedes or incorporates another

modification

is a subsequent agreement entered into for consideration for purposes of modifying the prior contract. The Parol Evidence Rule only bars evidence related to agreements made prior to or concurrently with the written contract

Mutual Rescission

is an agreement by the parties to an existing executory contract to consider their contract null and void. This rescission is a contract in itself and requires mutual assent and consideration

Release

at common law, was a complete discharge of existing contractual obligations given by one party to the contract to the other in a written document under seal. Modernly, in those jurisdictions that do not use the formal seal, a release is generally considered valid if supported by consideration

Accord and Satisfaction

1. an accord is an agreement to compromise a good faith dispute 2. satisfaction is the acceptance of the compromise, which discharges the original obligation

Novation

is a new contract that is, It requires the replacement of one of the previously contracting parties with a new party who neither owed the previous duty nor was entitled to its performance

Frustration of Purpose

a party to a contract will be discharged from an obligation to perform when an unanticipated event occurs after the formation of the contract, with a result that the parties' main purpose in making the contract has become so frustrated that the benefit to be received by one party from the other party is now totally destroyed or materially impaired

Economic or Commercial Impracticability

performance is not totally impossible, a party will be discharged from an obligation to perform when an unanticipated difficulty has occurred after the formation of the contract, the performance would be vastly different than that intended by the parties

Failure of Consideration

ccurs when the subject matter of the consideration ceases to exist or becomes worthless even though valid consideration was present when the parties first contracted

Failure of Condition

occurs when one party fails to perform his condition, resulting in a breach of contract. The non-breaching party’s own duty of performance is discharged. T

Breach of Contract

occurs when one party to a contract fails to perform pursuant to the terms of the contract

Material Breach

it is so substantial that it defeats the purpose of the parties in making the contract or if it is so significant as to destroy the value of the contract. the plaintiff is justified in treating the entire transaction as ended and may thereafter sue for damages

Minor Breach

Breach by Tendering Non-conforming Goods

Under the UCC. 1. tender of non-conforming goods is a breach unless buyer is notified that they are an accommodation 2. installment contracts: a. a non-conforming shipment may be rejected b. not a breach of the whole contract unless the value of the whole is substantially impaired

Cure

Under the UCC, if non-conforming goods are tendered and rejected, the seller may notify the buyer that he intends to rectify the problem as long as the time for performance has not passed

General Damages

are those which are the direct, natural, or probable losses caused by a breach.

Special Damages

1. unique to individual case 2. must be specially pleaded and proved 3. defendant knew or should have foreseen the loss at time of creation of contract

Consequential Damages

1. same as special damages 2. must be foreseeable at time of creation of contract

Compensatory Damages

include both general and special damages, and are awarded to the non-breaching party to place that party in the same position that he or she would have been in, had the contract been performed as agreed

Reliance Measure of Compensatory Damages (Reliance Damages)

When the expectancy cannot be calculated to a reasonable certainty, then the court may award damages according to the calculation of what the plaintiff expended in reliance on the contract

Liquidated Damages

1. agreed to in a contract 2. sole remedy where valid must not be punitive, as proved by showing: a. damages would have been difficult to ascertain at creation of contract b. amount is a reasonable forecast of damages

Nominal Damages

are given by the court to a non-breaching party who has suffered no damages or who has been unable to prove damages at trial, but who nevertheless has been wronged and is entitled to a judgment for technical breach of contract.

Doctrine of Avoidable Consequences

the plaintiff must use ordinary care to mitigate his damages. If the defendant can show that the plaintiff failed to mitigate damages, the plaintiff's recovery may be reduced

Legal vs. Equitable Remedies

An equitable remedy will only be awarded if the available legal remedies are inadequate. Legal remedies may be inadequate for many reasons, including situations in which the dollar damages are too small or too speculative etc.

Quasi Contract

is an equitable remedy which allows the plaintiff to recover a benefit that was conferred upon the defendant despite the absence of a contract, usually because of a special relationship between the parties

Quantum Meruit

refers to the reasonable value deserved for one's labor, and is awarded in a quasi-contract claim

Quantum Valebant

refers to reasonable value that is deserved as payment for goods, and is awarded in a quasi-contract claim

Equitable Rescission or Cancellation

is an equitable remedy which prevents unjust enrichment by cancelling the contract and restoring the parties to their pre-contractual positions for such reasons as fraud, undue influence, duress, mistake, or substantial breach

Restitution

may be awarded as either a legal or equitable remedy, to prevent unjust enrichment to the defendant

Reformation

is an equitable remedy in which the court modifies a written contract to reflect the actual intent of the parties in a situation where the contract is not an accurate representation of the parties' agreement

Injunction

is an equitable remedy in which a court issues an order commanding or preventing an action

UCC: Buyer's Remedies Prior to Acceptance of Goods

if non-conforming goods are delivered to the buyer, the buyer has several options, including holding the goods as a security for damages, canceling the contract, recovering payments already made, or suing for damages or specific performance

UCC: Buyer's Remedies After Acceptance of Goods

if the buyer accepts a shipment of non-conforming goods, the buyer must pay the contract price but may subtract the difference between the value of the accepted goods and the value of the goods if they had conformed, plus incidental and consequential costs, but minus expenses saved by the seller's breach

UCC: Seller's Remedies Prior to Buyer's Acceptance of Goods

if the buyer breaches the contract before the buyer has accepted the seller's goods, the seller can cancel contract; withhold delivery; stop shipment of goods which are already in transit; or, if the goods are unfinished, the seller may stop production and sell the materials as scrap or finish production and resell the goods

Lost Volume Seller

is a seller who does not recover the profit lost by a buyer's breach via reselling the goods because the seller would have made the second sale anyway

Seller's Remedies after Buyer's Acceptance of Goods

Under the UCC, if a buyer has already accepted the seller's goods and then breaches the contract, the seller may recover the goods or sue for the contract price