Contracts MEE

What law governs a contract that includes both goods and services?

If a contract includes both goods and services, courts apply the predominant purpose test to determine whether to apply common law (services) or UCC Article 2 (goods).

Under common law, when can a party recover under a contract despite not fully performing?

A party may recover under the contract if they have substantially performed, which means the breach is minor and the non-breaching party has received the substantial benefit of the bargain.

What is the effect of a material breach under the common law?

A material breach occurs when the non-breaching party does not receive the substantial benefit of the bargain. It excuses the non-breaching party’s performance and bars the breaching party from recovering under the contract.

Can a breaching party who materially breached recover in restitution?

A breaching party may recover in restitution only if the breach was not willful. Courts generally deny restitution for intentional or willful breaches.

What is the general measure of damages for defective or unfinished construction?

The measure is the cost of completion or repair, plus any damages for delay or defects, minus any payments already made to the breaching party.

When can a materially breaching party recover in restitution?

A materially breaching party may recover in restitution only if the breach was not willful. Courts usually deny restitution for intentional or willful breaches.

When will a court decline to award cost of repair damages?

If the cost to repair would cause economic waste—i.e., it is grossly disproportionate to the benefit gained—the court may instead award diminution in market value damages.

What is economic waste in the context of construction damages?

When the cost to correct a defect is disproportionate to its value, making it unreasonable to award cost of repair.

What is the rule for recovering lost profits (consequential damages) in a breach of contract action under common law?

To recover lost profits, the party must show that the profits were: (1) foreseeable, (2) caused by the breach, and (3) provable with reasonable certainty—often shown through a history of profitability.

When are consequential damages not recoverable in a contract action?

Consequential damages are not recoverable if they were not reasonably foreseeable to the breaching party at the time of contracting.

What is the duty to mitigate damages in contract law?

The non-breaching party has a duty to take reasonable steps to mitigate damages caused by the breach. Failure to mitigate will reduce the recoverable damages by the amount that could have been avoided through reasonable efforts.

How are damages adjusted if the non-breaching party fails to mitigate?

If the non-breaching party fails to mitigate, the amount they could have reasonably avoided is subtracted from the damages they would otherwise recover.

What is anticipatory repudiation in contract law?

Anticipatory repudiation occurs when a party unequivocally communicates, by words or conduct, that they will not perform their obligations under the contract when performance is due.

What remedies are available to the non-breaching party after anticipatory repudiation?

Upon anticipatory repudiation, the non-breaching party may:

(1) treat the repudiation as a breach and sue immediately;

(2) suspend their own performance; or

(3) wait for the repudiating party to perform

What are expectation damages in a contract breach?

Expectation damages seek to put the non-breaching party in the position they would have been in had the contract been fully performed, by awarding the benefit of the bargain.

What is the difference between general and consequential damages in a contract action?

General damages are those that arise naturally and directly from the breach (e.g., cost of cover), while consequential damages are losses that result from special circumstances beyond the contract and require that the breaching party had reason to know of them at the time of contracting.

When a transaction involves both goods and services, how do you determine if UCC Article 2 or common law applies?

The predominant purpose test is used: if the sale of goods predominates, the UCC applies; if services predominate, the common law governs.

What does Article 2 of the UCC govern?

Contracts for the sale of goods.

What does common law govern in contract law?

Contracts involving services, real estate, or employment.

What is the Parol Evidence Rule under common law?

The Parol Evidence Rule prohibits the admission of prior or contemporaneous external evidence that contradicts the terms of an integrated written agreement.

When does the Parol Evidence Rule apply?

Only if the written agreement is integrated—i.e., intended by the parties as a final expression of their agreement.

What is a total integration?

A writing that completely expresses all terms of the parties’ agreement, barring the introduction of any contradictory or additional terms.

What is a partial integration?

A writing that expresses agreement on some but not all terms, allowing consistent additional terms to be introduced.

What is the significance of a merger clause?

A merger clause is strong evidence that the writing is a complete integration of the parties’ agreement.

What is the rule for contract modification under common law?

Contract modifications must be supported by new consideration on both sides to be enforceable.

Can an oral modification to a written contract be valid under common law?

Yes, but only if supported by valid consideration.

What kind of performance constitutes sufficient consideration for a contract modification at common law?

Consideration requires new obligations or a bargained-for exchange; performing a pre-existing duty is not valid consideration.

Does the Parol Evidence Rule apply to modifications made after the written contract was formed?

No, the PER only excludes evidence of prior or contemporaneous agreements, not subsequent modifications.

When does Article 2 of the UCC apply to a transaction?

Article 2 of the UCC applies to transactions involving the sale of goods, which are defined as tangible personal property.

When is there an implied warranty of fitness for a particular purpose?

An implied warranty of fitness for a particular purpose arises when the seller has reason to know that the buyer has a particular use for the goods and that the buyer is relying on the seller’s skill or judgment to select suitable goods.

How can a seller disclaim the implied warranty of fitness for a particular purpose?

A seller can disclaim the implied warranty of fitness by making a written disclaimer that is conspicuous enough that a reasonable person would notice it.

Is a disclaimer valid if it is hidden in fine print on the back of a contract?

A disclaimer is not valid if it is not conspicuous; hiding it in fine print on the back of a contract without drawing attention to it makes it unenforceable.

What happens if the implied warranty of fitness is not properly disclaimed?

If the implied warranty is not properly disclaimed and the goods are not fit for the buyer’s particular purpose, then the goods do not conform to the contract and the seller is in breach.

When can a buyer reject nonconforming goods under the UCC?

A buyer can reject goods if either the goods or the tender of delivery is nonconforming, as long as the buyer gives timely notice to the seller before accepting the goods.

When does payment constitute acceptance under the UCC?

Payment does not constitute acceptance if the buyer did not have a reasonable opportunity to inspect the goods before payment.

What are the requirements for revoking acceptance of goods?

A buyer may revoke acceptance of goods if the nonconformity substantially impairs the value of the goods, the buyer accepted them without knowing of the nonconformity, and acceptance was reasonably induced by difficulty of discovery or the seller’s assurances.

What damages can a buyer recover after rejecting or revoking acceptance of goods?

A buyer may recover the purchase price and may also be entitled to expectation damages, incidental damages, and consequential damages.

How are expectation damages calculated under the UCC?

Expectation damages are calculated as the difference between the contract price and the market price of conforming goods.

What are incidental damages under the UCC?

Incidental damages are expenses incurred in handling, inspecting, returning, or caring for nonconforming goods after a breach.

What are consequential damages under the UCC?

Consequential damages are losses resulting from the buyer's particular needs which the seller knew or had reason to know about at the time of contracting.

When is a contract formed under the UCC?

A contract is formed under the UCC when both parties intend to enter into a contract and there is a reasonably certain basis for giving a remedy.

What terms are essential to form a contract under the UCC?

Other than the identity of the parties and subject matter, quantity is the only essential term for forming a contract under the UCC.

What is required for a contract for the sale of goods $500 or more to be enforceable under the Statute of Frauds?

It must be in writing and signed by the party to be charged.

What must a writing under the UCC Statute of Frauds contain?

It must (1) indicate a contract has been made, (2) identify the parties, (3) state a quantity term, and (4) be signed by the party to be charged.

How can a mistake or omission in a UCC writing affect its enforceability?

A mistake or omitted term does not destroy the writing's validity; omitted terms can be proved by parol evidence, but enforcement is limited to the quantity stated.

What is the partial performance exception to the UCC Statute of Frauds?

A contract is enforceable to the extent that goods have been received and accepted, or payment has been made and accepted.

When does a confirmatory memorandum between merchants satisfy the UCC Statute of Frauds?

If a written confirmation is sent and the receiving party does not object in writing within 10 days, the contract is enforceable even without their signature.

Who qualifies as a merchant under the UCC?

A merchant is one who regularly deals in the goods involved or holds themselves out as having special knowledge or skill in those goods.

Can an unsigned handwritten note satisfy the Statute of Frauds?

No, unless it contains a symbol adopted with present intent to authenticate it, such as a signature or company letterhead.

What happens if a writing under the UCC only states a quantity less than the original oral agreement?

Enforcement is limited to the quantity term actually stated in the writing.