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SP_C&T_LS1_La_Puma_FinaI_2012FL
1)
APPLICABLE LAW
The UCC governs contracts for the sale of goods. Goods are defined as
moveable, tangible items.
Here, the contract between Mason (M) and Brickco(C) is for the sale of bricks.
Bricks are moveable tangible items. Thus, the UCC will govern, good
Certain provisions in the UCC apply specially to merchants. A merchant is one
who deals regularly in goods of the kind or who holds himself out as having
knowledge and/or skill of the goods.
The special rules for merchants will apply in this case because Brickco is a brick
supplier and Mason does brickwork and thus purchases bricks on a regular
basis, good
FORMATION
A valid contract requires: offer, acceptance, consideration, and no defenses to
formation.
OFFER
An offer is a manifestation of a present intent to contract demonstrated by a
promise, commitment, or undertaking, stated in definite and certain terms and
communicated to the offeree.
April 1 Advertisement
The Mason's advertisement was not an offer because M did not demonstrate and
a present intent to be bound nor was it communicated to an identified offeree.
Rather, the advertisement was an invitation for bids, which required the bids be
submitted in writing on or by May 1. good
May 15 Fax
The President of B faxed M in response to M's advertisement. This fax
constitutes an offer for the sale of goods. The terms were sufficiently certain and
definite because, as required by the UCC, it stated the quantity (8,000) and the
subject matter (bricks). Further, there was an intent to be bound which was
demonstrated by stating that B "would supply 8,000" bricks. Lastly, the fax was
sent to M and thus was communicated to an identifiable offeree.
Merchant Firm Offer Rule
If a merchant offers to buy or sell goods in a signed writing that gives assurances
that the offer will be held open for a stated period of time, the option contract will
not be irrevocable for lack of consideration. Here, B's offered to sell bricks in a
writing [fax] signed by B's president [authorized agent] that gave assurances that
the offer would be held open until June 1. Thus, the offer to sell the books is
irrevocable until the time stated despite lack of consideration. Not quite. Its open
for 30 days because trade magazine said all offers irrevocable for 30 days. The
June 1 date is a date acceptance must be received by and is arguable negated
by the merchant firm offer rule.
ACCEPTANCE
An acceptance is a manifestation of assent to the terms of an offer. While the CL
requires the acceptance to mirror the offere, the UCC does not. UCC 2-207
provides that an acceptance with additional or different terms constitutes a valid
acceptance.
Here, M accepted B's offer on June 1 when M sent B a letter indicated that M
"accepted [B's] offer of May 15." The letter also included additional [bricks be fully
warranted] and different terms [quantity: $10,000 and Delivery to job site.] M's
acceptance, despite different and additional terms, constitutes a valid
acceptance to B's offer. [Whether these terms become part of contract will be
discussed below.]
Mail Box Rule:
The mailbox rule dictates that an acceptance is effective upon dispatch.
Here, M mailed the acceptance letter to B on June 1. M's acceptance was
effective on June 1 and, thus, he accepted before the offer was revoked by lapse
of time.
There is an exception that applies. See previous comment.
CONSIDERATION
Consideration is a bargained for exchange wherein the promise induces the
detriment and the detriment induces the promise.
Here, there is adequate consideration because the contract is a promise to pay
.50 cents per brick in exchange for a promise to sell bricks.
Statute of Frauds
Certain contracts must be evidenced in a writing signed by the party to be bound.
Contracts that must satisfy the statute of frauds includes contracts for sale of
goods exceeding $500.
The contract between M & B is a contract for the sale of goods and the price
exceeds $500. [ 8,000 bricks x 50 cents=$4,000] As such, the contract must
satisfy the statute of frauds in order to be enforceable.
The statute of frauds is satisfied in this case by either the fax (offer) sent by B's
president on May 15 because it is signed by party to be bound (President is an
authorized agent who can sign on B's behalf, signature requirement satisfied
even with B's stationary) and states the quantity (8,000 bricks.) nice problem
solving
TERMS
Here, there is an issue regarding what the parties agreed to in terms of quantity,
whether the bricks are to be delivered, and whether the bricks are to be fully
warranted.
Battle of the Forms
Whether additional or different terms becomes part of the contract depends on
whether the contract is between merchants. If the contract is between merchants,
as is the case here, then additional terms become part of the contract unless : (1)
the offer is expressly limited to its term; (2) they materially alter [surprise and
undue hardship]; or (3) the other party has objected within a reasonable time.
Additional Terms: Full Warranty
The offer was not expressly limited to its terms, therefore, whether the request
that the bricks be fully warranted will depend on whether that term materially
alters the contract or whether B objected within a reasonable time.
M will argue that the term "full warranty" does not materially alter the contract
because every contract by a merchant who deals regularly in goods of the kind
has an implied warranty of merchantability {goods will be fit for their ordinary
purpose]. As such, the request that the bricks be fully warranted does not add to
the contract as this term was already implied (and had not been previously
disclaimed.) good. And you are correct
B will argue that it objected to this term on June 2 when the president e-mailed M
regarding the price but also stating that the bricks would be "as is".
M will prevail and the "full warranty" will become part of the contract because
disclaimers must be made at the time of contracting, not after the fact, as is the
case here. And further, the term does not materially alter the contract since there
was already an implied warranty of merchantability.
Different Terms: Quantity & Delivery
The courts are split when it comes to how to handle "different terms". Most courts
apply the "knock out" rule which provides that the terms of the contract consist of
those which the parties agree and any conflicting terms are knocked out and the
UCC gap fillers come in.
First, the acceptance first stated that "we accept your offer" but then went on to
request that 10,000 [instead of the 8,000 that was offered] be delivered by B to
M. This is conflicts with the original offer in two respects: (1) quantity and (2)
delivery.
First, in regards to the different term for delivery, M and B's terms will be knocked
out (since they conflict) and the gap filler for delivery will come in and govern the
contract. However, the main issue here is the different term in acceptance
regarding quantity as quantity is an essential term for a contract and cannot be
replaced by a Gap filler.
M will argue that he initially made an invitation to accept bids for 10,000 bricks
and therefore the contract should be for 10,000. M's argument will likely fail
though since in response to the invitation for bids B sent in a valid offer with a
stated quantity of 8,000 bricks and M sent a letter which clearly stated that M
"accepted your offer." As such, the court will likely find that, in regards to the
quantity, the term is 8,000 bricks. Nice problem solving.
ANTICIPATORY REPUDIATION
Anticipatory repudiation occurs when one party, prior to time for performance,
unequivocally indicates that he will not perform when performance becomes due.
The innocent party has 4 options: (1) treat anticipatory repudiation as breach and
sue immediately; (2) urge the party to perform; (3) view it as an offer to rescind
and cancel the contract; or (4) wait and see if they perform.
Here, M will argue that B anticipatory repudiated the contract on June 2 when B's
emailed M and informed M that it was only prepared to offer the bricks at 75
cents [instead of 50 cents]. M will argue that this is sufficient to show that B did
not intend to perform its duties under the K [ sell bricks at price of 50 cents] when
the time for performance became due. In response it seems M attempted to urge
B to perform under the original terms of the contract but the attempt was futile.
As such, M's best option would be to treat the contract as breached [material
breach as no substantial benefit delivered] and sue immediately.
good
Impracticability
A party's duty to perform may be discharged if a supervening event, which its
occurrence was a basic assumption of the contract, arises and makes
performance extremely difficult or unreasonably expensive. However, a mere
increase in expense will not be sufficient to discharge one's duty.
B will argue that his duty to perform under the contract has been discharged by
impracticability since he can no longer perform at the 50 cent per brick rate
because of an unexpected cost in ingredients. However, this argument will fail
since mere increase in costs / decrease in the profitability of a contract will not be
sufficient to justify discharging B's duty to perform.
Since B's duty to perform has not been discharged, failure to perform B's duty's
under the contract when performance becomes due will constitute a breach.
Breach
Since B's duty to perform has not been discharged and B anticipatory repudiated
the contract on June 2, M may treat the contract as having been breached and
sue B for damages, [this is precisely what M informed B it would be doing.]
Remedies
Expectation damages are awarded to give the aggrieved party the benefit of the
bargain-meaning, to put the party in the place he would have been had the
contract been performed as promised.
Duty to Mitigate:
In the case of breach, the innocent party has a duty to mitigate damages
incurred. A failure to do so will result in a reduction of damages award. The
award is reduced by amount of money that could have been avoided had the
party properly mitigated.
M fulfilled his duty to mitigate when he promptly secured a commitment from the
next lowest bidder, good
Cost of Cover
One measure of expectation damages is the cost of cover (i.e. the cost of
obtaining substitute goods.)
Here, in response to B's anticipatory repudiation (breach) M obtained covered by
contracting with Redco (R). As such, M is entitled to the difference between the
contract price (50 cents) and the cover price ($1.00). Since the contract between
M and B was for 8,000 bricks and M purchased 10,000 bricks from R, M will only
be entitled to cost of cover for 8,000 bricks. Thus, the court will likely award M the
cost of cover in the amount of $4,000. [$8,000 (cover price) minus $4,000 (K
price)=$4.0001 good. Is there an argument though that he can get $1.00 a brick
for the remaining 2000 bricks since B knew M needed 10K bricks?
Consequential Damages
A buyer may recover consequential damages that were foreseeable to a
reasonable person at the time of contracting
Here, M received $1,000 less from the Contractor because of M's late
performance. As a result of B's breach M had to go out and find another brick
supplier and this caused M to provide C with late performance. If B knew that the
reason why M was purchasing the bricks from B [ bricks were to be used for job
with C] then it would be reasonably foreseeable at the time of contracting the B's
breach would require M to go out and find an alternative source and thus could
affect M's timely performance. B did know. Was in trade advertisement.
B will argue that it did not know of the contract between M and C and thus it was
not foreseeable M would incur a loss of $1,000 due to late performance. M on the
other hand will argue that even if B did not know the specific job M needed the
bricks for, B at least knew or should have known that M, a bricklayer, was
purchasing the bricks for a job. Thus, M will argue that it was indeed reasonably
foreseeable that breach by B would require M to go out and find an alternative
source which would likely have an effect on the timeliness of M's performance..
use the facts from the trade magazine here to help you . Good problem solving.
The court will likely agree with M, that it was reasonably foreseeable that B's
breach would result impact the contracts M had with third parties since M would
have to go out and find substitute bricks in order to perform.
Conclusion
M will be able to recover the cost of cover for the 8,000 bricks it purchased from
R [$4,000]. Additionally, M will likely also recover the $1,000 he did not receive
from in contract with C as a result of B's breach.
Nice exam.
See comments above. 77
END OF EXAM