The Legal Environment of Business A Critical Thinking Approach 5th Edition Nancy K. Kubasek Bartley A. Brennan M. Neil Browne

The Law of Contracts and Sales - II THE LEGAL ENVIRONMENT OF BUSINESS CHAPTER 11 The Law of Contracts and Sales - II

Discharging a Contract By Performance By Mutual Agreement By Conditions By Impossibility of Performance By Commercial Impracticability

Discharge by Performance Complete Performance Substantial Performance Most terms completed Honest effort No willful departure from the terms Only minor items not done

Material Breach Elements: Note: If breach is material, the injured party may end the contract and sue for damages. Elements: It is a substantial breach May also be intentional Breaching party may usually “cure”

Sales of Goods UCC Article 2 requires that goods conform to the description Note: Where Seller ships nonconforming goods, Buyer may: Reject all goods Accept all goods Accept some and reject some Notify Seller of defects and allow cure

Discharge by Mutual Agreement Rescission Accord and satisfaction Novation

Discharge by Condition Conditions Precedent An event that must take place in order for a contractual duty to arise Conditions Subsequent An event in the future which, if it takes place following execution of the contract, extinguishes the duty to perform

Discharge by Impossibility of Performance Where unforeseeable events either make performance physically impossible or legally impossible, or extremely expensive to perform

Impossibility of Performance Death or illness of promisor Change in the law Destruction of the subject matter Commercial Impracticability Performance is possible, but impractical due to unforeseeable costs.

Remedies for Breach Legal Remedies Money Damages Compensatory Nominal Punitive Liquidated Incidental and Consequential Note: In Arrowhead School district case, the liquidated damages clause was enforceable.

Remedies for Breach Equitable Remedies Rescission Reformation Specific Performance Injunction

Rescission Definition: “Tearing up the contract” or canceling the contract Application: In cases of fraud, duress, mistake, or undue influence

Reformation Definition: Amending the terms of the contract to reflect what has later come to be known as the parties true intent Application: In cases of clerical or typographical errors

Specific Performance Definition: An order from the court directing a party to perform according the terms of the contract Application: Usually ordered in cases involving sale of unique items where there is no available substitute for the subject matter in the contract, (i.e., land) Note: It is a requirement for specific performance that damages at law are not adequate.

Injunctions Definition: A court order directing a party to stop doing something. This may be temporary or permanent. Application: Upon a showing that, without an injunction, there will be irreparable harm to plaintiff, and that money damages are inadequate

Remedies for Breach of Sales Contracts 2-702 Reclaim goods 2-708(1) Damages where Buyer breaches 2-709(1) Recover the purchase price 2-703(d) Resell 2-703(a) Withhold Delivery 2-703(f) Cancel Article 2 Section Seller’s Remedies

Remedies for Breach of Sales Contracts 2-714(1) Partially accept goods 2-608(1), (2) Revoke acceptance 2-601 Right to reject goods 2-711(1) Cancel 2-716(2) Specific Performance Article 2 Section Buyer’s Remedies

Electronic Contracts E-signatures: Federal and State law UCITA: Introduced in several states: enacted in only Maryland and Virginia Addresses issues related to electronic contracts Coverage: computer information transactions

International Contracts Convention on Contracts for the International Sale of Goods (CISG) Coverage: CISG signatory countries and others who opt in Parties may also opt out As a treaty, CISG is superior to state law

Major Differences between CISG & UCC on contract formation requirements Offer and acceptance Mirror image rule Mailbox rule Statute of frauds and parol evidence rule Consideration

Summary Contracts can be discharged in several ways. Remedies for breach can be legal and/or equitable. There is a trend toward more uniform contract law (via the UCC and the CISG). E-commerce has created new challenges.

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