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11 George Mason School of Law Contracts II Conditions This file may be downloaded only by registered students in my class, and may not be shared by them.

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Presentation on theme: "11 George Mason School of Law Contracts II Conditions This file may be downloaded only by registered students in my class, and may not be shared by them."— Presentation transcript:

1 11 George Mason School of Law Contracts II Conditions This file may be downloaded only by registered students in my class, and may not be shared by them © F.H. Buckley

2 Next Day  Warranties PLUS Cure 2

3 3 Kinds of Terms  Consider: I promise to help you on your journey, the good Lord willin’ and the crick don’t rise. 3 I’m going to drown

4 4 Kinds of terms  Consider: I promise to help you on your journey provided the crick don’t rise. If the crick rises, am I in breach? 4

5 5 Kinds of terms  Now consider: I promise to help you on your journey provided the crick don’t rise. So this is not a promise: let’s call it a non- promissory condition  If the event in question occurs, I am excused from performance 5

6 6 Kinds of terms  Now consider: I promise the crick won’t rise. If the crick rises, am I in breach? 6

7 7 Kinds of conditions  Now consider: I promise the crick won’t rise. Is there a problem about promising the occurrence of an event over which I have no control? 7

8 8 Kinds of conditions  Now consider: I promise the crick won’t rise. Is there a problem about promising the occurrence of an event over which I have no control?  Ever hear of earthquake insurance? 8

9 9 Different kinds of terms  Some are obligations, some not 9 Promises Other terms: definitions, recitals, non- promissory conditions, etc.

10 Express non-promissory conditions: force majeur clauses  A party is not liable for failure to perform the party's obligations if such failure is as a result of Acts of God (including fire, flood, earthquake, storm, hurricane or other natural disaster), war, invasion, act of foreign enemies, hostilities (regardless of whether war is declared), civil war, rebellion, revolution, insurrection, military or usurped power or confiscation, terrorist activities, nationalization, government sanction, blockage, embargo, labor dispute, strike, lockout or interruption or failure of electricity or telephone service. 10

11 11 When will a court to imply a condition, absent express language? What kind of gap-filling will the court do? 11

12 12 When will a court to imply a condition, absent express language?  Paradine v. Jane at Prince Rupert

13 13 How willing is a court to imply a condition, in the absence of express language?  Paradine v. Jane at 77 “If a lessee covenant to repair a house, though it be burnt by lightning, or thrown down by enemies, yet he ought to repair it.” 13

14 14 How willing is a court to imply a condition, in the absence of express language?  Paradine v. Jane at 77 “If a lessee covenant to repair a house, though it be burnt by lightning, or thrown down by enemies, yet he ought to repair it.” But “If a house be destoyed by tempest, or by enemies, the lessee is excused” (?!?) 14

15 15 How willing is a court to imply a condition, in the absence of express language?  Paradine v. Jane at 77 “If a lessee covenant to repair a house, though it be burnt by lightning, or thrown down by enemies, yet he ought to repair it.” But “If a house be destoyed by tempest, or by enemies, the lessee is excused” (?!?) Does it matter that the leasehold interest had passed? 15

16 16 Stees p.74  What are the possible legal outcomes here? 16 Third and Minnesota, St Paul

17 17 Stees  What are the possible legal outcomes here? Builder assumes risk and is liable Owner assumes risk and is liable No one is liable 17

18 18 Stees  What are the possible legal outcomes here? Builder assumes risk and is liable in damages for non-completion 18

19 19 Stees  What are the possible legal outcomes here? Builder assumes risk and is liable in damages for non-completion  If this seems hard, what might the builder do? 19

20 20 Stees  What are the possible legal outcomes here? Owner assumes risk  And is liable for seller’s damages 20

21 21 Stees  What are the possible legal outcomes here? Owner assumes risk Cf. Restatement § 89 (Modification), Illustration 1: By a written contract A agrees to excavate a cellar for B for a stated price. Solid rock is unexpectedly encountered and A so notifies B. A and B then orally agree that A will remove the rock at a unit price which is reasonable but nine times that used in computing the original price, and A completes the job. B is bound to pay the increased amount. 21

22 22 Stees  What are the possible legal outcomes here? No one is liable The quicksand puts an end to the contract 22

23 23 Stees  What are the possible legal outcomes here?  Can you tell which from the language of the contract? 23

24 24 Stees  What doctrines might a court invoke to put an end to all obligations under the contracts? 24

25 25 Stees  What doctrines might a court invoke to put an end to all obligations under the contracts? Mistake Frustration/Impracticability Condition 25

26 26 Stees  Mistake Restatement § 152(1) Where a mistake of both parties at the time of contract was made as to a basic assumption on which the contract was made has a material effect on the agreed exchange of performances, the contract is voidable by the adversely affected party unless he bears the risk of the mistake …. 26

27 27 Stees  Mistake No mistake if Assumption of risk Restatement § 154 A party bears the risk of mistake when the risk is allocated to him by agreement of the parties, or he is aware, at the time the contract is made, that he has only limited knowledge with respect to the facts to which the mistake relates but treats his limited knowledge as sufficient, or the risk is allocated to him by the court on the ground that it is reasonable in the circumstances to do so. 27

28 28 Stees  Frustration or Impracticability Restatement § 261 Where, after a contract is made, a party’s performance is made impracticable without his fault by the occurrence of an event the non-occurrence of which was a basic assumption on which the contract was made, his duty to render that performance is discharged, unless the language or the circumstances indicate the contrary. 28

29 29 Stees  (Non-promissory) Condition Restatement § 224 A condition is an event, not certain to occur, which must occur, unless its non-occurrence is excused, before performance under a contract becomes due. 29

30 30 Stees  (Non-promissory) Condition Restatement § 224 A condition is an event, not certain to occur, which must occur, unless its non-occurrence is excused, before performance under a contract becomes due. Restatement § 225(3) Non-occurrence of a condition is not a breach by a party unless he is under a duty that the condition occur 30

31 31 Stees  What did the court decide? 31

32 32 Stees  What did the court decide? The contractor must perform his engagement, unless prevented by the act of God, the law, or the other party A presumption against non-promissory conditions that excuse performance 32

33 33 Stees  What did the court decide? He must perform his engagement, unless prevented by the act of God, the law, or the other party If the parties had bargained for an excuse, the courts would honor this. What if we thought we knew how they would have bargained had they put their minds to it? 33

34 34 Stees  What did the court decide? He must perform his engagement, unless prevent by the act of God, the law, or the other party If the parties had bargained for an excuse, the courts would honor this. What if we thought we knew how they would have bargained had they put their minds to it? And just how do you think they would have bargained? 34

35 35 Stees  What did the court decide? Quicksand as an informational problem  Who was in the best position to discover or know of the problem? 35

36 36 Stees  What if one party is contractually bound to perform according to specifications that are defective? U.S. v. Spearin at 78 36

37 37 Stees  If contractors are liable for breach of promise, what remedies might be available to plaintiff homeowners? 37

38 38 Stees  If contractors are liable for breach of promise, what remedies might be available to plaintiff-homeowners? Damages for breach (give plaintiff the benefit of the bargain less the contract price) 38

39 39 Stees  If contractors are liable for breach of promise, what remedies might be available to plaintiff-homeowners? Damages for breach (give plaintiff the benefit of the bargain less the contract price) Set aside (rescind) the contract (absolve plaintiff from paying the price) 39

40 40 Stees  Set aside the contract (absolve plaintiff from paying the price)  Confusingly, this remedy is available when the promise in question is a condition 40

41 41 Now it gets confusing  So the term condition can mean two entirely different things That wasn’t very smart, was it? 41

42 Two kinds of conditions  Non-promissory conditions are not promises and excuse performance by either party on their occurrence 42

43 Two kinds of conditions  Promissory Conditions  are promises (for which the innocent party may receive consequential damages on breach)  and conditions (which excuse performance by the innocent party) 43

44 44 Different kinds of conditions  Some are obligations, some not 44 Promissory Conditions Non-promissory Conditions

45 Promissory conditions: The example at 615  I agree to sell you my dog for $400, delivery at your house on Thursday.  I come to your house with my dog on Thursday. You tell me you want it but that you can’t pay me till Saturday  Do I have to deliver the dog on Thursday? 45

46 Promissory conditions  UCC § 2-511(1). Unless otherwise agreed, tender of payment is a condition to the seller's duty to tender and complete any delivery. 46

47 Promissory conditions  UCC § 2-511(1). Unless otherwise agreed, tender of payment is a condition to the seller's duty to tender and complete any delivery.  This is a promissory condition (i.e., you are in breach if you don’t pay) 47

48 Promissory conditions Turn this around  I agree to buy your dog for $400 at your house on Thursday.  I come to your house with $400 on Thursday, but you tell me you won’t give me the dog till Saturday  Do I have to pay you on Thursday? 48

49 Promissory conditions  UCC § 2-507(1). Tender of delivery is a condition to the buyer's duty to accept the goods 49

50 What does “condition” mean here?  Not every promise is a promissory condition, but only those promises which must be performed as a condition of the other party’s duty of performance Tender or delivery and payment as mutual conditions Both parties to stand “ready, willing and able” to perform 50

51 Promissory and non-promissory conditions  In what respect do promissory and non-promissory conditions resemble each other? 51

52 Promissory and non-promissory conditions  In what respect do promissory and non-promissory conditions resemble each other? The non-breaching party is excused from performance of a promissory condition, and both parties are excused on the occurrence of a non-promissory condition 52

53 Promissory and non-promissory conditions  In what respect do promissory and non-promissory conditions NOT resemble each other? 53

54 Promissory and non-promissory conditions  In what respect do promissory and non-promissory conditions NOT resemble each other? The breaching party is liable for damages on breach of a promissory condition, but not on the occurrence of a non- promissory condition 54

55 55 What about non-sale of goods  When does a promise amount to a promissory condition? 55

56 56 What about non-sale of goods  § 234(1). Order of Performances--Where all or part of the performances to be exchanged under an exchange of promises can be rendered simultaneously, they are to that extent due simultaneously, unless the language or the circumstances indicate the contrary. 56

57 57 What about non-sale of goods  § 234(1). Order of Performances Where all or part of the performances to be exchanged under an exchange of promises can be rendered simultaneously, they are to that extent due simultaneously, unless the language or the circumstances indicate the contrary.  I.e., a presumption of conditions 57

58 58 What about non-sale of goods  § 234(2) Except to the extent stated in Subsection (1), where the performance of only one party under such an exchange requires a period of time, his performance is due at an earlier time than that of the other party, unless the language or the circumstances indicate the contrary. 58

59 59 What about non-sale of goods  § 234(2) Except to the extent stated in Subsection (1), where the performance of only one party under such an exchange requires a period of time, his performance is due at an earlier time than that of the other party, unless the language or the circumstances indicate the contrary. So he has to do everything before the other party has to perform 59

60 60 What about non-sale of goods  § 234(2) Except to the extent stated in Subsection (1), where the performance of only one party under such an exchange requires a period of time, his performance is due at an earlier time than that of the other party, unless the language or the circumstances indicate the contrary.  “Work before pay” 60

61 61 Promissory conditions  When I agree to build you a house, when do you have to pay? 61

62 62 Work before Pay Stewart v. Newbury at 619  What did the contract say about progress payments? 62

63 63 Work before Pay Stewart v. Newbury at 619  What did the contract say about progress payments? The presumption: If you want progress payments, you have to bargain for them 63

64 64 The duty to be ready, willing and able Bell v. Elder at

65 65 Bell v. Elder  What were the obligations of the parties as to performance?  Seller to provide the water, power and roads  Buyer to pay a hook-up fee and apply for a building permit 65

66 66 Bell v. Elder 66 ElderslandBell The remedy sought: Purchaser Bell sues to recover deposit because Elders failed to supply water

67 67 Bell v. Elder  Was the buyer acting opportunistically? 67

68 68 Bell v. Elder  Here there was no order as to when each party should do their work and “work before pay” applied to both parties  Presumption of simultaneous performances 68

69 69 Divisibility  Can a party in breach of a promissory condition resist forfeiture by asserting that conditions are divisible? 69

70 70 Divisibility  Suppose that a builder contracts to build seven motels in seven different cities. Separate payment and completion schedule for each motel. Builder defaults on last motel. Could buyer rescind on all? 70

71 71 Divisibility  Restatement § 240. If the performances to be exchanged under an exchange of promises can be apportioned into corresponding pairs of part performances so that the parts of each pair are properly regarded as agreed equivalents, a party’s performance of his part of such a pair has the same effect on the other’s duties to render performance of the agreed equivalent as it would have if only that pair of performances had been promised. 71

72 72 Divisibility  Restatement § 240. If the performances to be exchanged under an exchange of promises can be apportioned into corresponding pairs of part performances so that the parts of each pair are properly regarded as agreed equivalents, a party’s performance of his part of such a pair has the same effect on the other’s duties to render performance of the agreed equivalent as it would have if only that pair of performances had been promised. 72

73 73 Divisibility  Same case, but now: All motels built to the same specifications Builder to be paid $7M for the seven motels. 73

74 74 Divisibility  Same case, but now: All motels built to the same specifications Builder to be paid $7M for the seven motels  Restatement § 240, illustration 5 74

75 75 John. v. United Advertising 620  Are highway signs different? 75 Englewood CO

76 76 John v. United Advertsing  Are highway signs different? Is this like losing your GPS signal at a crucial point?  “Take the first available U-Turn” 76

77 77 John v. United Advertsing  What are the options for the court? 77

78 78 John v. United Advertsing  What are the options for the court?  Set aside the entire contract  Set aside the severable parts of it 78

79 79 John v. United Advertsing  A “material failure” of the entire contract?  Restatement § 237. Except as stated in § 240, it is a condition of each party’s remaining duties to render performances to be exchanged under an exchange of promises that there be no uncured material failure by the other party to render any such performance due at an earlier time.  Was it that? 79

80 80 John v. United Advertsing  A “material failure” of the entire contract?  Materiality defined in Restatement 241: will damages suffice? Is cure possible? Unjust forfeiture? 80

81 81 John v. United Advertsing  A severable contract Sever the breaches and enforce as to the rest? Suppose the contract had been for a lump sum payment? 81

82 82 Divisibility in the UCC  UCC § Delivery in Single Lot or Several Lots. Unless otherwise agreed all goods called for by a contract for sale must be tendered in a single delivery and payment is due only on such tender but where the circumstances give either party the right to make or demand delivery in lots the price if it can be apportioned may be demanded for each lot. A presumption of non-divisibility 82

83 83 Divisibility in the UCC  UCC § Delivery in Single Lot or Several Lots. Unless otherwise agreed all goods called for by a contract for sale must be tendered in a single delivery and payment is due only on such tender but where the circumstances give either party the right to make or demand delivery in lots the price if it can be apportioned may be demanded for each lot. But this might be rebutted if separate deliveries contemplated 83

84 84 UCC § 2-612: Installment Contracts  § 2-612(1) An "installment contract" is one which requires or authorizes the delivery of goods in separate lots to be separately accepted, even though the contract contains a clause "each delivery is a separate contract" or its equivalent 84

85 85 UCC § 2-612: Installment Contracts  § 2-612(2) The buyer may reject any installment which is non-conforming if the non- conformity substantially impairs the value of that installment and cannot be cured or if the non-conformity is a defect in the required documents 85

86 86 UCC § 2-612: Installment Contracts  § 2-612(3) Whenever non-conformity or default with respect to one or more installments substantially impairs the value of the whole contract there is a breach of the whole. 86

87 87 Promises vs. Conditions 87 Promissory Conditions Non- promissory Conditions Bare promises

88 88 Three different kinds of terms  Non-promissory conditions  On its occurrence both parties excused  Promissory conditions  On its breach, innocent party may rescind or sue for damages  Bare promises  On its breach, innocent party can sue for damages, but not rescind 88

89 89 Howard at

90 90 Howard  What are the farmer’s remedies if he did not comply with clause 5(b)? 90

91 91 Howard  What are the farmer’s remedies if he did not comply with clause 5(b)?  Could he be sued for failure to comply with it? 91

92 92 Howard  What are the farmer’s remedies if he did not comply with clause 5(b)?  Could he be sued for failure to comply with it?  So a non-promissory condition 92

93 93 Howard  And for non-compliance with Clause 5(f)? 93

94 94 Howard  Qu. Clause 5(f) If this is not met, Can Howard recover? If this is not met, is Howard liable in damages? 94

95 95 Howard  What are the options? 95

96 96 Howard  What are the options?  Bare promise: Not a condition precedent, but a promise that the event will happen, breach of which gives FCIC a damages remedy at best  Promissory condition: A promise that the event will happen plus non-occurrence excuses the other party from performance  Condition precedent: No promise that event will happen, but non-performance excuses both parties 96

97 97 Howard  What are the options?  Held a Bare promise 97

98 98 What are the presumptions in the Restatement?  Restatement § 227(1) In resolving doubts as to whether an event is made a condition of an obligor's duty, and as to the nature of such an event, an interpretation is preferred that will reduce the obligee's risk of forfeiture, unless the event is within the obligee's control or the circumstances indicate that he has assumed the risk. 98

99 99 What are the presumptions in the Restatement?  Restatement § 227(1) In resolving doubts as to whether an event is made a condition of an obligor's duty, and as to the nature of such an event, an interpretation is preferred that will reduce the obligee's risk of forfeiture, unless the event is within the obligee's control or the circumstances indicate that he has assumed the risk. So a presumption against promissory and non-promissory conditions 99

100 100 What are the presumptions in the Restatement?  Restatement § 227(2) Unless the contract is of a type under which only one party generally undertakes duties, when it is doubtful whether (a) a duty is imposed on an obligee that an event occur, or (b) the event is made a condition of the obligor's duty, or (c) the event is made a condition of the obligor's duty and a duty is imposed on the obligee that the event occur, (a) = bare promise by obligee (b) = non-promissory condition (c) = promissory condition by obligee 100

101 101 What are the presumptions in the Restatement?  Restatement § 227(2) Unless the contract is of a type under which only one party generally undertakes duties, when it is doubtful whether (a) a duty is imposed on an obligee that an event occur, or (b) the event is made a condition of the obligor's duty, or (c) the event is made a condition of the obligor's duty and a duty is imposed on the obligee that the event occur, the first interpretation is preferred if the event is within the obligee's control. I.e., bare promise 101

102 102 Recall the different kind of terms in Howard 102 Promissory Conditions Non- promissory Conditions Bare promises

103 103 Non-promissory Conditions  Restatement § 224 A condition is an event, not certain to occur, which must occur, unless its non-occurrence is excused, before performance under a contract becomes due. 103

104 104 Promissory Conditions  Restatement § 225(3) Non-occurrence of a condition is not a breach by a party unless he is under a duty that the condition occur 104

105 105 Promises and Conditions Conditions Conditions PrecedentPromissory No liability if non-occurrence Liability if non-occurrence Restatement § 224Restatement § 225(3 )

106 106 Promises and Conditions Promises ConditionsBare Promises (Warranties)

107 107 Promises and Conditions Promises ConditionsWarranties Election Forfeiture DamagesDamages only

108 108 Conditions precedent and subsequent  What’s the difference? 108

109 Defining Conditions  Conditions precedent: The obligations of the parties will not arise if x has occurred.  Conditions subsequent: The obligations of the parties are suspended if x occurs. 109

110 110 Conditions precedent and subsequent  Conditions precedent Restatement § 224 A condition is an event, not certain to occur, which must occur, unless its non-occurrence is excused, before performance under a contract becomes due. 110

111 111 Conditions precedent and subsequent  Conditions subsequent Restatement § 230 “the occurrence of an event is to terminate an obligor’s duty”  Cf. Restatement § 224 cmt e 111

112 112 Conditions precedent and subsequent  Conditions subsequent Restatement § 230 “the occurrence of an event is to terminate an obligor’s duty” But not under 230(2) if the obligor is in breach of duties of good faith and fair dealing or no undue hardship to obligor 112

113 113 What are the presumptions in the Restatement?  Restatement § 227(3) An interpretation is preferred under which an event is a condition of an obligor’s duty is preferred over an interpretation under which the non-occurrence of the event is a ground for discharge of that duty after it becomes a duty to perform That is, a presumption of a condition precedent over a condition subsequent 113

114 114 Conditions precedent and subsequent  Gray v. Gardner at

115 115 Conditions precedent and subsequent  Gray v. Gardner Parties bargain for a price by providing that the contract is void if a greater amount of sperm oil arrive than in the same period of the prior year  Buyer to pay a premium if a shortage 115

116 116 Conditions precedent and subsequent  Gray v. Gardner Parties bargain for a price by providing that the contract is void if a greater amount of sperm oil arrive than in the same period of the prior year  If a condition precedent the contract did not arise, as the plaintiff must show the condition happened 116

117 117 Conditions precedent and subsequent  Gray v. Gardner Parties bargain for a price by providing that the contract is void if a greater amount of sperm oil arrive than in the same period of the prior year  If a condition subsequent the contract did arise, and the onus is on the defendant to show the condition happened 117

118 118 Conditions precedent and subsequent  Gray v. Gardner Parties bargain for a price by providing that the contract is void if a greater amount of sperm oil arrive than in the same period of the prior year  Held a condition subsequent: onus on defendant 118

119 119 Drafting CP and CS clauses  Draft the Gray v. Gardner promise as a CP as a CS 119

120 120 Attorney-approval clauses at 635  I agree “subject to my lawyer’s approval.” Gaglia v. Kirchner  If a buyer has an attorney approval clause, and the attorney wants changes, can the seller back out? 120

121 121 Modification, Waiver, Estoppel: Clark v. West at The dirty little secret of textbook publishing revealed

122 122 Modification, Waiver, Estoppel  Distinguish Modifications, waiver, estoppel 122

123 123 Modification, Waiver, Estoppel  Modifications are bilateral agreements to vary obligations under a contract Promises are modified 123

124 124 Modification, Waiver, Estoppel  Modifications are bilateral agreements to vary obligations under a contract  Waivers are unilateral acts by one party to excuse another’s performance of an obligation Conditions are waived 124

125 125 Modification, Waiver, Estoppel  Modifications are bilateral agreements to vary obligations under a contract  Waivers are unilateral acts by one party to excuse another’s performance of an obligation  (Promissory) Estoppel bars a promisor from enforcing a right where he knows that a promisee has detrimentally relied on him. 125

126 126 Agreement Required? Reliance required? Modification Waiver Estoppel Modification, Waiver, Estoppel at common law

127 127 Agreement Required? Reliance required? Modificationyesno Waiver Estoppel Modification, Waiver, Estoppel at common law

128 128 Agreement Required? Reliance required? Modificationyesno Waiverno Estoppel Modification, Waiver, Estoppel at common law

129 129 Agreement Required? Reliance required? Modificationyesno Waiverno Estoppelnoyes Modification, Waiver, Estoppel at common law

130 130 Clark v. West  What was the promise? Now you know why textbooks are so long. 130

131 131 Clark v. West  What was the promise? Now you know why textbooks are so long.  Facts alleged on 636 Would this be enough for an estoppel? A waiver? 131

132 132 (1) An agreement modifying a contract within this Article needs no consideration to be binding. (2) A signed agreement which excludes modification or rescission except by a signed writing cannot be otherwise modified or rescinded, but except as between merchants such a requirement on a form supplied by the merchant must be separately signed by the other party. (3) The requirements of the statute of frauds section of this Article (Section 2-201) must be satisfied if the contract as modified is within its provisions. (4) Although an attempt at modification or rescission does not satisfy the requirements of subsection (2) or (3) it can operate as a waiver. (5) A party who has made a waiver affecting an executory portion of the contract may retract the waiver by reasonable notification received by the other party that strict performance will be required of any term waived, unless the retraction would be unjust in view of a material change of position in reliance on the waiver. UCC § Modification, Rescission and Waiver

133 133 Wisconsin Knife Works at 639  What was the contract?

134 134 Wisconsin Knife Works at 639  What was the contract? Spade Bits Metal Crafters Wisconsin Black & Decker Spade bit blank

135 135 Wisconsin Knife Works  What was the contract? Wisconsin orders 280,000 blanks from Metal Crafters in Aug-Sept 1981 for delivery in Oct-Nov New purchase orders in July 1982 Seller not able to deliver until December 1982—13 months late Jan 1983—144,000 blanks produced but Wisconsin rescinds 135

136 136 Wisconsin Knife Works  What was the evidence of modification and what are the problems under the UCC? 136

137 (1) An agreement modifying a contract within this Article needs no consideration to be binding. Posner: Replaced by good faith § Obligation of Good Faith. Every contract or duty within [the Uniform Commercial Code] imposes an obligation of good faith in its performance and enforcement. The UCC: Consideration is out

138 138 A signed agreement which excludes modification or rescission except by a signed writing cannot be otherwise modified or rescinded, but except as between merchants such a requirement on a form supplied by the merchant must be separately signed by the other party. What was the problem with UCC 2-209(2)?

139 139 Was there a signed modification here? Why would Wisconsin have wanted a “no modification” clause and why are they standard? What was the problem with UCC 2-209(2)?

140 140 A signed agreement which excludes modification or rescission except by a signed writing cannot be otherwise modified or rescinded, but except as between merchants such a requirement on a form supplied by the merchant must be separately signed by the other party. Does this refer to the agreement or to the modification? What does the proviso do?

141 141 A signed agreement which excludes modification or rescission except by a signed writing cannot be otherwise modified or rescinded, but except as between merchants such a requirement on a form supplied by the merchant must be separately signed by the other party. What does this mean? What does the proviso do?

142 142 A signed agreement which excludes modification or rescission except by a signed writing cannot be otherwise modified or rescinded, but except as between merchants such a requirement on a form supplied by the merchant must be separately signed by the other party. UCC 1-201(37): “Signed” includes any symbol executed or adopted with present intention to adopt or execute a writing What does the proviso do?

143 143 A signed agreement which excludes modification or rescission except by a signed writing cannot be otherwise modified or rescinded, but except as between merchants such a requirement on a form supplied by the merchant must be separately signed by the other party. I.e., consumer must sign

144 144 How did Posner decide on modifications? Posner on modifications

145 145 How did Posner decide on waiver? Posner on waiver

146 (4) Although an attempt at modification or rescission does not satisfy the requirements of subsection (2) or (3) it can operate as a waiver. Note how this supplements the bias against forfeiture How did Posner decide on Waiver?

147 147 Wisconsin Knife Works  When does something which fails as a modification succeed as a waiver in (4)? “can operate as a waiver” 147

148 148 Wisconsin Knife Works  Does something which fails as a modification always succeed as a waiver in 2-209(4)? 148

149 149 Wisconsin Knife Works  When does something which fails as a modification succeed as a waiver in (4)? Posner: so as not to render 2-209(2) otiose, let’s add a reliance requirement to 2-209(4) 149

150 150 Wisconsin Knife Works  When does something which fails as a modification succeed as a waiver in (4)? Posner: so as not to render 2-209(2) otiose, let’s add a reliance requirement to 2-209(4) But is 2-209(5) then otiose? 150

151 151 Wisconsin Knife Works  But is 2-209(5) then otiose?  2-209(5) A party who has made a waiver affecting an executory portion of the contract may retract the waiver by reasonable notification received by the other party that strict performance will be required of any term waived, unless the retraction would be unjust in view of a material change of position in reliance on the waiver. 151

152 152 Wisconsin Knife Works  How to reconcile the provisions:  If there is a no modification clause, the waiver doesn’t work without reliance  If there isn’t a no modification clause, then no reliance needed, but under (5), one who waives can’t retract if the other party relies 152

153 153 Wisconsin Knife Works  Why does Easterbrook dissent? 153

154 154 Wisconsin Knife Works  Why does Easterbrook dissent? Waiver has never required reliance 154

155 155 Wisconsin Knife Works  UCC § Waiver or Renunciation of Claim or Right After Breach. Any claim or right arising out of an alleged breach can be discharged in whole or in part without consideration by a written waiver or renunciation signed and delivered by the aggrieved party. 155

156 156 Wisconsin Knife Works  How to reconcile the provisions Waiver in 2-209(4) might encompass either past or future performance Estoppel in 2-209(5) refers only to future (executory) performance 156

157 157 Wisconsin Knife Works  So how would Easterbrook prevent (2) from being otiose? 157

158 158 Wisconsin Knife Works  So how would Easterbrook prevent (2) from being otiose? A stricter standard of proof as to intention? 158

159 159 Agreement Required? Reliance required? Modificationyesno Waiverno Estoppelnoyes Avoiding forfeiture: Common Law

160 160 Agreement Required? Reliance required? Modification no consideration needed 2-209(1) Good Faith in § But no modification clause enforced 2-209(2) no Waiver Estoppel Avoiding forfeiture: UCC

161 161 Agreement Required? Reliance required? Modification WaiverNo Yes: Posner No: Easterbrook Estoppel Avoiding forfeiture: UCC

162 162 Agreement Required? Reliance required? Modification Waiver EstoppelNo Executory only (5) Avoiding forfeiture: UCC

163 163 Why no waiver in Suzuki at 646? 163

164 164 Why no waiver in Suzuki at 657?  Did Suzuki waive Kummer’s failure to order Suzuki parts? 164

165 165 Why no waiver in Suzuki at 657?  The onus of proof to satisfy 2-209(4)  unequivocal and unambiguous actions needed for a waiver 165

166 166 Why no waiver in Suzuki?  Termination clauses and agency costs Wisconsin Fair Dealership Law, 1974  Cancellation and alteration of dealerships. No grantor, directly or through any officer, agent or employee, may terminate, cancel, fail to renew or substantially change the competitive circumstances of a dealership agreement without good cause. The burden of proving good cause is on the grantor. 166


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