Performance, Breach and Discharge

Contracts

NON-carrier contract - Seller is a Merchant

If the seller is a merchant, the risk of loss is with the seller until the buyer takes possession

NON-carrier contract - Seller is NOT a merchant

If the seller is NOT a merchant, the risk of loss is on the seller until they tender them to the buyer (make them available)

Carrier contract - Shipment contract (default)

The risk of loss is on the seller until they give them to the carrier

Carrier contract - Destination contract

The risk of loss shifts to the buyer when goods are delivered to the DESTINATION

FOB seller

Shipment contract

FOB ANYWHERE ELSE

Destination contract

Requirements contract

“I promise to give you all the widgets I can make.” - Did you act in GOOD FAITH?!

Modification

Modifying a material term of the contract

Common law contract modifications

Requires additional consideration

UCC contract modifications

No consideration, only good faith needed

Modification - oral or written?

Can be both

UCC Modifications

Clauses prohibiting oral modifications are valid

Mutual modification

Unforeseen circumstances lead both parties to agree to a change - OK as long as it’s FAIR AND REASONABLE

Condition Precedent

An event has to happen prior to the performance of the contract

Condition Concurrent

An event must occur at the time of the performance of the contract

Condition Subsequent

An event must occur after performance of the contract

Waiver of Condition

If a condition is waived, you must perform per usual

Bad Faith

If one party acts in bad faith, the condition is excused and, they must perform anyway

Conditions Excused

1. Waiver

2. Bad Faith

3. Avoiding Forefiture

Generally, time is NOT of the essence

UNLESS STATED, and then it becomes a condition in the contract

Good faith is

Implied in every contract

Nonconforming goods

If I deliver nonconforming goods, the buyer may:

• reject

• accept

• reject in part or accept in part

Reasonable amount of time

If you reject nonconforming goods, you must do so in a

The amount of the goods in the original contract

If you choose to accept nonconforming goods, you must pay

Nonconforming Goods Delivered on Delivery Date

If the seller sends nonconforming goods but had a reason to believe the buyer would have accepted them as is, then the seller can fix the delivery if they give notice and cure within a reasonable amount of time

Nonconforming Goods Delivered Prior Notice to Delivery Date

If the seller realizes their goods are nonconforming before the delivery date, the buyer must give them time to cure before the delivery date

Installment contract

Delivering goods in several different shipments

It does not mean a total breach of contract if you CAN fix it

If only one installment in an installment contract is nonconforming,

You can be held in total breach

If one installment of an installment contract will materially ruin the entire contract,

Accommodation

Can be accepted or rejected

Impracticability

Unforeseen circumstances that now make the performance of the contract so difficult or expensive can discharge performance

Impossibility

Objectively, no one can perform because it is literally impossible

UCC Impossibility Examples

1. If the goods are destroyed

2. Illegality

Temporary Impossibility Exception

The issue of impossibility can only be raised if it is impossible to perform forever

Contemplated events

If the parties knew of or prepared for certain contingencies, they cannot then raise the defense of impossibility.

Frustration of Purpose

If the core purpose of the contract (the reason you entered into the contract in the first place) no longer exists, the parties may be discharged for performance

Anticipatory Repudiation

Before the contract is performed, one party unequivocally refuses to perform. (You can hold the party in breach immediately, if you please)

Semi-anticipatory repudiation

If someone acts like they aren’t going to perform, you can demand reassurances from them, and then you must give them a reasonable amount of time to perform.

Demand Assurances

• Demand when doubtful about performance

• The party must respond in a reasonable amount of time - 30 DAYS

• UCC: demand must be in WRITING

Can the repudiating party retract its repudiation?

Yes, unless the other party has already sued you, you have accepted the repudiation, or you have relied on the repudiation