Home / Summaries / Class notes - (13) MBE: Contracts/Sales / ucc-party-contract

Lectures I-II

16 important questions on Lectures I-II

UCC 2: Modification of payment terms upon finding that buyer is insolvent

If a buyer is insolvent, UCC 2-702 permits the seller to refuse to deliver except for cash, including payment for all goods previously delivered under the K. It doesn't matter if the goods are in transit and  title has passed already.

R2K Typical recession case: Bilateral Ks

The typical case of recession involves a bilateral K where neither party has yet performed; i.e., the duties of both parties are still executory.

R2K Rescission + Unilateral Ks

In a unilateral contract case, a recession promise must be supported by either (A) an offer of new consideration, (B) elements of promissory estoppel (i.e., detrimental reliance), or (C) the offeree's manifestation of an intent to make a gift of the obligation owed to him.
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Note on Impossibility Defense (Excuse from Performance)

The impossibility must be objective--performance cannot be accomplished by anyone.

The physical incapacity of a person necessary to effectuate the K may discharge contractual duties IF that person's performance is clearly impossible. (Usually, this occurs in personal services contracts, where only that one person can perform the required duty).

When do the rights of an intended third-party beneficiary (TPB) vest?

The rights of an intended TPB vest when the beneficiary either: (a) manifests assent to the promise in a manner invited or requested by the parties; (b) brings suit to enforce the promise; or (c) materially changes position in justifiable reliance on the promise.

Mutual Mistake (about Material Facts)

When both parties entering into a K are mistaken about existing facts relating to the agreement, the contract may be voidable by the adversely affected party if:
  • (1) the mistake concerns a basic assumption on which the K is made;
  • (2) the mistake has a material effect on the agreed-upon exchange; and
  • (3) the party seeking avoidance did not assume the risk of the mistake,

Contract Modification: TPB v Promisor

Generally, once a TPB's rights have vested, the original contracting parties (promisor + promisee) may not modify the contract without the TPB's assent. However, the TPB is subject to any defenses that the promisor could have raised against the original promisee  (defenses: impracticability, etc).

TPB Vocab: Promisor, Promisee, Intended Beneficiary

  • Promisor: The party who promises to perform
  • Promisee: The party who secures the promise
  • Intended Beneficiary: A person, who is not a party to the K, but has rights under it because it was intended to benefit her.

Mistake (Unilateral or Mutual) is a defense to?

Mistake is a defense to contract formation.

Implied-in-Fact Contracts: General Rule

An implied-in-fact contract is formed by manifestations of assent other than written or oral language, i.e., by conduct.  Where a person knowingly accepts offered benefits, such conduct (viewed objectively) may be said to manifest an agreement to the conferral of such benefits, resulting in an implied-in-fact K. While acceptance generally must be communicated to an offeror to be effective, courts will often find an acceptance where an offer silently accepts offered benefits.

Unconscionability (Defense to Formation).

For unconscionability, the key Q is whether the contract was arrived at freely by the parties (a "bargained for exchange"). Are there any indications of an inequality in bargaining power or any other factors indicative of hardship or oppression exercised against one party by the other?

Discharge of K: Frustration of Contractual Purpose

Discharge by frustration of contractual purpose requires that, at the time of entering into the K, the parties did not reasonably foresee the occurrence of the act/event leading to the frustration.

UCC: Implied Warranty of Merchantability

In every sale of goods, unless expressly disclaimer, there arises a warranty that the goods will be "merchantable," which means that they will be fit for the ordinary purposes for which such goods are used.

UCC: Disclaiming Warranties

To be effective, a disclaimer must either (a) be part of the offer and acceptance process, or (b) be agreed to by the buyer as a modification.

UCC: Express Warranties - Arise when?

An express warranty will arise from (a) any affirmation of fact or promise made by the seller to the buyer, (b) any description of the goods, or (c) any sample or model . . if the statement, description, sample, or model is PART OF THE BASIS OF THE BARGAIN.

UCC: Modification of Contract for the Sale of Goods

UCC 2-209 provides that an existing K may be modified without additional consideration. However, this rule is subject to 1-203, which provides that every UCC contract imposes an obligation of good faith in its performance and enforcement. Also, 2-209, cmt 2 specifically states that extortion of a "modification" without legitimate commercial reason is ineffective as a violation of good faith.

The question on the page originate from the summary of the following study material:

(13) MBE: Contracts/Sales

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Summaries related to Lectures I-II