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Class 35, Tuesday, April 18

Class 35, Tuesday, April 18. Announcements Old Exams perhaps try the following: Spring 1995, questions II and IV; Spring 1997, section 3, questions I, II, and III (ignore 3rd party beneficiary issue) (ignore also mistake, changed circumstances)

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Class 35, Tuesday, April 18

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  1. Class 35, Tuesday, April 18 Announcements Old Exams perhaps try the following: Spring 1995, questions II and IV; Spring 1997, section 3, questions I, II, and III (ignore 3rd party beneficiary issue) (ignore also mistake, changed circumstances) Thursday 743-78 (skim the last case—Hornell Brewing, but pay attention to the notes following, pp. 776-78, , along with the relevant UCC provisions) Friday 779-804; conditions handout Today’s agenda Policing modifications Alaska Packers v. Domenico Kelsey-Hayes Co. v. Galtaco Redlaw Castings Corp. Brookside Farms v. Mama Rizzo’s Problem 8-3 Class 35

  2. Today is a good day to learn that contracts can be modified after K formation, although not all modifications will be enforceable. Class 35

  3. spotting the issue • after K formation, one or the other or both parties seek a modification of their agreement • if after the parties agree on the modification, one party doesn’t perform as required based on the modified K, the issue then is whether the modification is enforceable Class 35

  4. Alaska Packers’ Association v. DomenicoUnited States Court of Appeals117 F. 99 (9th Cir.) Class 35

  5. Who are the parties and what is their relationship? • Who is suing whom? What is the legal basis for the claim? • More specifically, what did Alaska Packers do or not do which constitutes breach? Class 35

  6. What defense or defenses does Alaska Packers assert? • Who won at trial? • What is the primary issue on appeal? Class 35

  7. on what basis did the trial court find for the workers? Class 35

  8. How effective is the pre-existing duty rule in policing bargaining behavior with regard to modifications? Class 35

  9. does the Restatement follow the pre-existing duty rule? • does the Restatement have an exception to it? Class 35

  10. Kelsey-Hayes Co. v. Galtaco Redlaw Castings Corp.United States District Court749 F. Supp. 794 (E.D. Mich. 1990) Class 35

  11. who are the parties and what is their relationship? • what is the subject matter of their agreement? Class 35

  12. what facts led up to this dispute? Class 35

  13. does Michigan appear to follow the pre-existing duty with regard to K modifications? • What doctrine does the appellate court apply? Class 35

  14. what about the UCC? what argument does Galtaco make re: the duress doctrine and UCC 2-209? Class 35

  15. indirect policing—pre-existing duty rule • problems because too easy to circumvent • hawk, horse, robe • rescission, express or implied • direct—duress and other policing doctrines that look at bargaining behavior • other ways? Class 35

  16. Restatement approach—see 73 & 89 § 89. Modification Of Executory Contract A promise modifying a duty under a contract not fully performed on either side is binding(a) if the modification is fair and equitable in view of circumstances not anticipated by the parties when the contract was made; or(b) to the extent provided by statute; or(c) to the extent that justice requires enforcement in view of material change of position in reliance on the promise. Class 35

  17. 2-209(1) • Roth good faith test • Party may in good faith seek a modification when unforeseen economic exigencies existed which would prompt an ordinary merchant to seek a modification in order to avoid a loss on the contract • BUT--bad faith to attempt to coerce the other party by threatening breach • BUT--this bad faith presumption may be rebutted if the party threatening to not perform did honestly believe that it had a legal defense to the duty of performance. Class 35

  18. today • are there other ways to resist an agreed upon modification? • if modification not in writing, • statute of frauds (where applicable) • no-oral-modification clause (if Art. 2 of UCC applies) • often in conjunction with a no waiver clause Class 35

  19. Brookside Farms v. Mama Rizzo’s, Inc.United States District Court873 F. Supp. 1029 (S.D. Texas 1995) Class 35

  20. what is the subject matter of this contract between Brookside Farms and MRI? • what are the relevant terms of this original K? Class 35

  21. among other things . . . • 1. requirements K • 2. sale of basil leaves • 3. minimum 91,000 lbs for this one-year term • 4. daily deliveries--minimum 350 pounds to a max of 800 pounds • 5. price dependent on growing season--june 1 to sept. 30, $3.80/lb; oct 1 to may 31, 5.00/lb • 6. payment due within 15 days of delivery • 7. no oral modification clause • 8. no waiver clause Class 35

  22. what immediate problem presented itself after K formation? • how did the parties resolve this problem? Class 35

  23. how did this change the obligations of the parties? • was this modification evidenced in a signed writing? • under the NOM clause, which party must have “signed” the writing evidencing the modification? Class 35

  24. what did MRI’s Franklin promise re: this price change and MRI’s copy of the original K? • did he keep this promise? • did any other writings reflect the price change? Class 35

  25. how long did the parties perform under this new price term? • then what happened? Class 35

  26. did the failure of MRI to order basil between Nov. 17, 1993, and Jan. 9, 1994, constitute breach by MRI? • what happened when MRI resumed its orders? Class 35

  27. as with the original modification, was there a promise by MRI to make notations reflecting the new prices to the original K? • were the new prices reflected in any writings? Class 35

  28. how long did the parties perform without any problems? • then what happened? • what duties does Brookside Farms claim that MRI breached? Class 35

  29. p. 697, middle—court states, “Neither party . . . has pointed out that the contract in dispute falls within the Statute of Frauds.” • why is this an odd thing for the court to point out? • some confusion re: 2-209(3) and 2-201 Class 35

  30. application of 2-201 • narrow estoppel, at least for first change • what about subsequent changes? Class 35

  31. § 2-209. Modification, Rescission and Waiver. • (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. Class 35

  32. (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. Class 35

  33. (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. Class 35

  34. (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. Class 35

  35. Section 21 of their K • The failure of either party to this Agreement to demand full performance of any of its provisions by the other party shall not constitute a waiver of performance unless the party failing to demand performance states in a writing signed by party that the party is waiving that performance. The waiver of any breach of any of the provisions of this Agreement by the parties shall not constitute a continuing waiver or a waiver of any subsequent breach by either party of the same or any other provisions of this Agreement. Class 35

  36. what does the court make of this “no-waiver” clause? • court ultimately finesses things by bringing back the statute of frauds Class 35

  37. Note 4, p. 703 • accord and satisfaction • “payment in full” check Class 35

  38. Problem 8-3 • sale of goods? • changed circumstances excusing Waller Bros. from having to perform • Modification • UCC 2-209(1); good faith • Restatement 73 & 89(a) and (c) • Duress • no-oral-modification clause • UCC 2-209(2), (4), (5) • common law—generally ineffective Class 35

  39. Note 4, p. 703 • accord and satisfaction • “payment in full” check • point of emphasis—amount in question must be unliquidated for a payment in full check to be effective Class 35

  40. Justifications for nonperformance • A sues B • K • A asserts that B breached a duty owed under K • If K existed, and B owed this duty, and B did not do the duty, B will be liable unless B was justified in not performing because of ____________ • previous chapter—justifications covered were mistake, mutual and unilateral; changed circumstances and impossibility, impracticability, and frustration of purpose • this chapter—justifications include material breach by the other party; anticipatory repudiation by the other party; and the operation of express conditions Class 35

  41. Typical Executory K prelim. executory negotiations period breach -----------------|-------------------------|--------------|------- t K formation performance due (1) mutual assent (2) consideration Class 35

  42. End of Class Old Exams perhaps try the following: Spring 1995, questions II and IV; Spring 1997, section 3, questions I, II, and III (ignore 3rd party beneficiary issue) (ignore also mistake, changed circumstances) Thursday 743-78 (skim the last case— Hornell Brewing, but pay attention to the notes following, pp. 776-78, , along with the relevant UCC provisions) Friday 779-804; conditions handout Class 35

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