2. CHAPTER 11 The Law of Contracts and Sales - II
THE LEGAL ENVIRONMENT OF BUSINESS
CHAPTER 11
The Law of Contracts and Sales - II
© 2006 Prentice Hall
Ch. 11-2

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

4. Discharge by Performance
Complete Performance
Substantial Performance
Most terms completed
Honest effort
No willful noncompletion
Only minor items not done

5. Material Breach Is substantial breach May also be intentional
Breaching party may usually “cure”

6. Sales of Goods
UCC Art 2 requires that goods conform to the description
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

7. Discharge by Mutual Agreement
Rescission
Accord and satisfaction
Novation

8. 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

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

10. 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.

11. Remedies for Breach Legal Remedies Money Damages Compensatory Nominal
Punitive
Liquidated
Incidental and Consequential

12. Equitable Remedies Rescission Reformation Specific Performance
Injunction

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

14. 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

15. 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.

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

17. Remedies for Breach of Sales Contracts
UCC Article 2 Remedies for Seller
Cancel (f)
Withhold delivery (a)
Resell (d)
Recover the purchase price (1)
Damages where Buyer breaches 2-708(1)
Reclaim goods

18. Remedies for Buyer Under UCC Article 2
Specific performance 2-716(2)
Cancel 2-711(1)
Right to reject goods
Partially accept goods 2-714(1)

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

20. 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

21. CISG Major Differences with UCC
In the rules of contract formation
Offer and acceptance
Mirror image rule
Mailbox rule
Statute of frauds and parol evidence rule
Consideration

22. 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