Law of Contracts Short Essay 2 04 15 2014 Facts Quest Resources INC Quest contracts with Ring Communications Corporation RCC for RCC to design build and install an all weather communications system for Quest s field operations Once the system is installed it functions effectively in only good weather RCC refuses to make the necessary repairs which can cost tens of thousands of dollars Questions 1 Explain whether RCC has breached the contract In your answer discuss if the doctrine of substantial performance is of any help to RCC 2 Assume there is a breach of contract What remedies if any does Quest have against RCC Formation of Sales Lease Contracts Part 2 04 15 2014 Learning Objectives To learn the changes UCC 2 makes to the reasonably definite terms requirement of an offer To learn the liberalized acceptance and consideration rules of UCC 2 Capacity and Legality Not modified or altered by UCC 2 Formation of Sales Lease Contracts Offer At common law once a valid offer is unequivocally accepted a binding contract is formed o UCC is more flexible allows for open pricing payment delivery terms Offer Open Terms 1 UCC 2 204 Open Terms apply a remedy Offer Open Terms 2 Key Concepts o Even if terms are undetermined a contract may still exist o Indefiniteness is acceptable as long as the parties intended to make a contract there is a reasonable basis for a court to o No Open Quantity Generally courts will not impose a quantity there is no remedy o Open Delivery Term Unless otherwise agreed buyer takes delivery at the Seller s place of business UCC2 308 a Offer Open Terms 3 Open Price Term If parties have not agreed on pricing court can determine reasonable price at the time of delivery UCC2 305 Open Payment Term Unless otherwise agreed payment is due on delivery COD UCC2 310 a Requirements Contract buyer agrees to purchase what the buyer Output Contract Buyer agrees to buy all of seller s production or Quantity Exceptions needs or requires output Merchant s Firm Offer Offer made by merchant in a signed writing is irrevocable for reasonable period of time No consideration necessary The offer must be in writing signed by the Offeror Acceptance 1 acceptance Methods of Acceptance Offeror can control the means of Under the UCC Mailbox Rule is modified o Any reasonable means of acceptance under the circumstances is permitted Acceptance 2 Methods of Acceptance Continued o Promise to ship or prompt shipment is acceptance Shipment of nonconforming goods is both an acceptance a breach unless goods sent as an accommodation to buyer with prompt notice to buyer Acceptance 3 Additional Terms o If one party is a Merchant Contract is formed according to original terms of the offer o If both parties are Merchants Contract incorporates new terms unless Original offer expressly limits terms Material Change quantity price etc Offeror objects within reasonable time Acceptance Conditioned on Offeror s Assent o If Offeree s assent contains additional or different terms and it is conditioned on Offeror s assent it is not an acceptance Additional Terms may be Stricken o Contract will consist of terms in which the parties agree o Court may strike conflicting or additional terms Consideration UCC changes the common law rule requiring consideration o Modifications do not need considerations o Modifications must be made in good faith Common Law Rule requires additional consideration for modification When Modification without consideration does require a writing o Merchant non merchant contracts in which merchant supplies the forms o Modifications that trigger Statute of Fraud Issues Breach of Contracts Remedies Part 1 2 04 15 2014 Part 1 Learning Objectives breaching party Identify money damages are available to the innocent non Identify situations when the non breaching party has a duty to attempt to minimize his damages Most Common Remedies Money Damages Rescission Restitution Specific Performance Contract Reformation Recovery Based on Quasi Contract Money Damages Compensatory Damages o Compensates non breaching party for loss of the bargain o Damages actually sustained out of pocket directly arising from breach Standard Measure Difference between value of promised performance value of actual performance o Incidental Damages Expenses cause directly by breach of contract o Measurement of Damages Sale of Goods Difference between contract market price OR difference between contract price that of substitute goods cover Sale of Land Specific Performance Damages Consequential Special Damages Foreseeable Losses o Breaching party is aware or should be aware cause the injury party additional loss Hadley Vs Baxendale 1854 Breaching party must be aware of extraordinary circumstances by extension Intent to re sell Punitive Damages Nominal Damages goods Punitive Damages Punish or deter future conduct o Generally not available for mere breach of contract o Usually tort e g fraud is also involved Nominal Damages No financial loss Liquidated Damages Specific amount agreed to be paid as damages in the event of future breach Enforceability Court asks two questions o When contract was entered into was it apparent damages would be difficult to estimate in the event of a breach o Was the amount set as damages a reasonable estimate and not excessive Liquidated Damages Provisions Example Construction contracts sales of real estate luggage entrusted to airlines Penalties Designed to penalize unenforceable Mitigation of Damages When breach of contract occurs the innocent injured party is generally held to a duty to reduce the damages that he or she Duty owed depends on the nature of the contract e g employment suffered or a lease Part 2 Learning Objectives Equitable Remedies Rescission Understand how equitable remedies differ from monetary damages Identify situations that serve to waive a breach of contract o Remedy whereby a contract is canceled and the parties are restored to the original positions that they occupied prior to o Both parties must return goods property or money Rescission does not always call for restitution Restitution is called for in some cases not involving the transactions Restitution previously conveyed o Notes rescission Specific Performance o Equitable remedy calling for the performance of the act promised in the contract Provides Remedy In Cases Involving Sale of Land Specially manufactured goods or goods identified to a contract NEVER in contracts for personal services Reformation intentions Allows a contract