Contracts Flashcards
A ____ is a legally binding agreement between two or more parties who agree to perform or to refrain from performing some act now or in the future.
Contract
When do contract disputes generally arise?
When there is a promise of future performance.
The party making the promise is subject to the _______ if the promise is not fulfilled and may be required to _______ for failing to perform the contractual promise.
- Sanctions of a court
- Pay damages
True or False: In limited circumstances, a party may be required to perform the promised act (specific performance)
True
List the sources of contract law.
(1) Common Law
(2) Statutory/ Code Law
(3) Treaty Law
(4) Administrative Regulations
What is common law?
Law developed by judges in response to a particular dispute.
Common law governs contracts relating to what?
Services, real estate, and insurance.
A body of statutory law drafted by the American Law Institute (ALI) and adopted by state legislatures to govern certain types of contracts.
Statutory Law (the Uniform Commercial Code (UCC)
Statutory law or the UCC governs contracts for what?
The sale and lease of goods. (i.e. things that are moveable)
When may common law still apply to contracts for the sale of goods?
Where there are no UCC rules to govern an issue.
This is an international treaty adopted by the United States, and is federal law, which governs any contracts between a United States party, and a party in another country for the sale of goods.
The United Nations Convention on Contracts for the International Sale of Goods (CISG)
Initially, contract law emerged from _____.
Common law
(decisions made by courts, not statutes passed by the legislatures.)
Under the doctrine of _____, courts are bound to respect earlier decisions of similar cases.
stare decisis
(precedent)
New situations allow courts to refine or create exceptions to the rules applied in earlier cases.
In a common law system, like the U.S, the cases are ____.
The law
True or False:
Recently, legislatures in all 50 states have enacted laws applicable to contracts.
True
List the different theories of contract law.
(1) Formalists (formalism)
(2) Realists (realism)
(3) Economic Theory
(4) Relational Theory (proponent: Judge Posner)
(5) Critical Legal Studies
Cases must be decided according to a set of universal rules. Describe which theory of contract supra (above) states.
Formalists
Legal rules should be decided on the basis of social interests.
Realists
The “Chicago School - Contracts must be enforced to promote efficiency unless evidence of misconduct such as “fraud” or “duress.”
Economic Theory
Law must become more sensitive to the values and goals of racial minorities and women and not only to serve the interests of white males at the expense of these groups.
Critical Legal Studies
(critical race and feminists theory)
List the elements/requirements of a valid contract.
(1) Agreement
- Offer (one party must offer to enter into a legal agreement)
- Acceptance (another must accept the terms of the offer)
(2) Consideration (legal detriment)
(3) Contractual capacity
- Both parties entering into the contract must be legally competent
- Age,
- Mental competency
(4) Legality
- The goal of the agreement must be legal and not against public policy
True or False:
Each state may regulate contracts in any way a particular state deems proper.
True
“Contract law is a creature of state law.”
True or False:
Generally, states approach contract law in similar ways with subtle differences.
True
True or False:
All matters of contract law are state regulated.
FALSE!
Some matters of contract law are federally regulated
True or False:
Government contracts is an entirely separate field of study.
True
Federal law regulates what?
- The sale of securities,
- Contracts with labor unions
- Certain maritime contracts.
A comprehensive body of statutes governing common business transactions, such as sales of goods, checks, and security interests (creditor’s rights to take property if a debt is not paid)
Uniform Commercial Code (UCC)
Why are uniform rules that apply nationwide needed?
Because businesses sell across state lines.
What does Article 2 of the UCC govern?
Sales of goods.
What does Article 2 of the UCC not apply to?
Contracts for services, real estate, or intangibles (goods that have no physical substance such as intellectual property)
Which states have adopted the UCC to govern the sale of goods?
Every state, except Louisiana
What are “Goods?”
Things moveable at the time of identification to the contract.
Give some examples of Goods
- Goods can be really big (construction cranes, tractors)
- Goods can be intended for permanent installation (a machine to be installed in a factory is a good, a chandelier is a good)
- Goods can be attached to the land, if they will be severed from the land for delivery (crops, timber, oil, gas, minerals, ore)
- Good includes the unborn young of animals, even though the unborn animal cannot be severed from the mother at the time the contract is formed.
Is a contract to sell a calf a sale of goods, even if the calf is not yet born?
Yes
Is money a good?
Money is not a good when it is given for the price of the contract,
but money can be a good, if it being bought and sold (e.g. sale of a coin collection, or a currency exchange.
Are securities goods?
No
They represent ownership of a company - an intangible
List the categories of contracts.
(1) Express
(2) Implied
(3) Quasi-contract
Define the described category of contracts:
Formed by language, oral or written.
Express
Define the described category of contracts:
Formed by manifestations of assent other than oral or written language (by conduct)
Implied
Define the described category of contracts:
- Not contracts at law (i.e. not formed according to law).
- Constructed by courts to avoid unjust enrichment.
- Permits a plaintiff to bring an action to recover any benefit unfairly derived by the defendant.
Quasi-contract
List the types of contracts.
(1) Bilateral
(2) Unilateral
Describe how Bilateral contracts are formed.
Exchange of mutual promises (a promise for a promise)
EX: I promise to sell you my car for $6000, and you promise to pay that amount for my car.
Describe how Unilateral contracts are formed.
Acceptance by performance.
- The offer requests a performance rather than a promise
- The offeror-promisor promises to pay upon completion of the requested act by the offeree/promissee.
- Enforced if offeree/promise substantially performs.
Explain the Objective Theory of Contracts
- The element of intent must be determined
- Intent cannot be determined by subjectivity or solely on the belief of one party.
- Judged by outward, objective facts as interpreted by a reasonable person.
True or False:
Intent can be determined by subjectivity or solely on the belief of one party.
False!
Intent CANNOT be determined by subjectivity or solely on the belief of one party.
Objective facts include, but are not limited to:
- What the party sad when entering into the contract.
- How the party acted or appeared (intent may be shown by conduct as well as by oral or written words).
- The circumstances surrounding the transaction.
List the three primary questions for contract formation.
(1) Was there mutual assent? - (a) Offer and Acceptance plus
(b) Was there Consideration or some substitute for consideration?
(2) Are there any defenses to the creation of the contract?
- E.g. fraud, duress, mutual mistake, unconscionability?
Case Law: Ray, Lonergan, Cook, Sateriale
Define assent.
Agreement or approval.
What is the function of contract law?
It was designed to provide stability and predictability.
True or False:
Depending on the transaction, courts differ about whether a digital download of software or music are considered goods or services.
True
True or False:
Debt instruments and insurance policies are NOT goods.
True. They are NOT,
True or False:
Admission tickets are not goods (the concert or game is a service, and is the core of the sale, not the ticket).
True
True or False:
Some contracts involve a mix of goods and services.
True
For example, construction contracts involve both supplies of materials and labor.
The ____ applies if the predominant purpose of the contract is a sale of goods as opposed to services.
UCC
True or False:
Sometimes, these contracts are severable to prevent confusion about the governing law.
True
Severable: capable of being divided into legally independent rights or obligations.
List the introductory cases describing hoq methods of contracting have changed over time.
(1) Allen v. Bissinger
(2) Meye v. Unber Technologies
List the case that present the “objective” approach to contract formation.
Ray v. William G. Eurice & Bros., Inc.
What was the Issue and Holding in Ray v. William G. Eurice & Bros., Inc.
Issue:
- Whether there is mutual assent where one party is mistaken about the terms of the contract?
Held:
- Absent fraud, duress, misrepresentation, mutual mistake, or any misconduct, one who makes a written offer which is accepted, or who manifests acceptance of the terms of a writing which he should reasonably understand to be an offer or proposed contract is bound by the contract though ignorant of the terms of the writing or its proper interpretation.
Describe mutual assent in subjective theory v. objective theory.
Subjective Theory: “Meeting of the Minds”
Objective Theory: Objective manifestation of assent
How was mutual assent determined in Allen v. Bissinger?
Mutual assent found where offer was accepted based on the reasonable person standard.
How was mutual assent determined in Meyer v. Uber?
Mutual assent where arbitration agreement not explicit and conspicuous because user on inquiry notice and by clicking on hyperlink manifested his assent to the agreement.
pp. 18-31
Who won in Allen v. Bissinger?
Who won in Meyer v. Uber?
What is an offer defined?
R2K 24 (Offer Defined)
“An offer is the manifestation of willingness to enter into a bargain, so made as to justify another person in understanding that his assent to that bargain is invited and will conclude it.”
Restatement (Second) of Contracts, § 24
To qualify as an offer, the proposal must be _______.
Sufficiently definite.
True or False:
To qualify as an offer, it also depends on all the surrounding circumstances.
True
What are the two principal requirements for an enforceable agreement?
(1) Assent
(2) Definiteness
(The nature of offers slide)
Describe the terms of definiteness.
(1) The identification of the parties;
(2) The identification of the object or subject matter of the contract;
(3) Quantity
(4) Work to be performed;
(5) Identification of goods, services, and lands;
(6) The consideration to be paid; (or any other form of consideration)
(7) The time of payment, delivery or performance.
Describe Acceptance
R2K § 50
(1) Acceptance of an offer is a manifestation of assent to the terms thereof made by the offeree in a manner invited or required by the offer.
(2) Acceptance by performance requires that at least part of what the offer requests be performed or tendered and includes acceptance by a performance which operates as a return promise.
(3) Acceptance by a promise requires that the offeree complete every act essential to the making of the promise.
What are the three kinds of acceptance?
(1) Acceptance of the Offer Defined
(2) Acceptance by Performance
(3) Acceptance by a Promise
Acceptance of an offer is a __________ to the terms thereof made by the offeree in a manner invited or required by the offer.
Manifestation of assent
Describe the difference between offeror v . offeree.
The offeror is the party who makes the offer. The offeree is the person who either accepts or does not accept the offer
Describe what an acceptance by performance requires.
At least part of what the offer requests be performed
- Acceptance by a performance operates as a return promise.
What does acceptance by a promise require?
That the offeree complete every act essential to the making of the promise.
Professor Corbin elaborates on these doctrinal principles in the following terms:
An acceptance is a voluntary act of the offeree whereby he exercises the power conferred on him by the offer, and thereby creates the set of legal relations called a contract. What acts are sufficient to secure this purpose? We must look first to the terms in which the offer was expressed, either by words or by other conduct. The offeror is the creator of the power and at the time of its creation he has full control over both the fact of its existence and its terms. The offeror has, in the beginning, full power to determine the acts that are to constitute acceptance. After he has once created the power, he may lose his control over it, and may become disabled to change or revoke it; but the fact that, in the beginning, the offeror has full control … is the characteristic that distinguishes contractual relations from noncontractual ones. After the offeror has created the power [of acceptance], the legal consequences are out of his hands, and he may be brought into numerous consequential relations of which he did not dream, and to which he might not have consented. These later relations are nevertheless called contractual.
Describe R2K 36
Methods of Termination of the Power of Acceptance
(1) An offeree’s power of acceptance may be terminated by
(a) rejection or counter-offer by the
offeree, or
(b) lapse of time, or
(c) revocation by the offeror, (before
accepted), or
(d) death or incapacity of the offeror or
offeree
(2) In addition, an offeree’s power of acceptance is terminated by the non-occurrence of any condition of acceptance under the terms of the offer,
What case cites and applies many classical rules of offer and acceptance? What were they as expressed in the Restatement (Second) of Contracts?
Normile v. Miller
(1) The power of acceptance created by an offer will be terminated by the offeree’s rejection. §36
(2) An acceptance must be unequivocal and unqualified in order for a contract to be formed. §§57 and 58
(3) A “qualified acceptance” constitutes only a counter-offer, §59, and as such will have the same effect as a rejection, insofar as the original power of acceptance is concerned. §39
Describe Rule §57
Effect of Equivocal Acceptance
Where notification is essential to acceptance by promise, the offeror is not bound by an acceptance in equivocal terms unless he reasonably understands it as an acceptance.
(R2C citation)
Equivocal Definition: Equivocal is something that has double sense; that which is open to two or more interpretations.
Describe Rule §58
Necessity of Acceptance Complying with Terms of Offer:
An acceptance must comply with the requirements of the offer as to the promise to be made or the performance to be rendered.
(R2C citation)
Describe Rule §69
Acceptance by Silence or Exercise of Dominion:
(1) Where an offeree fails to reply to an offer, his silence and inaction operate as an acceptance in the following cases only:
(a) Where an offeree takes the benefit of offered services with reasonable opportunity to reject them and reason to know that they were offered with the expectation of compensation.
(b) Where the offeror has stated or given the offeree reason to understand that assent may be manifested by silence or inaction, and the offeree in remaining silent and inactive intends to accept the offer.
(c) Where because of previous dealings or otherwise, it is reasonable that the offeree should notify the offeror if he does not intent to accept.
(2) An offeree who does any act inconsistent with the offeror’s ownership of offered property is bound in accordance with the offered terms unless they are manifestly unreasonable. But if the act is wrongful as against the offeror it is an acceptance only if ratified by him.
(R2C citation)
Describe Rule §59
Purported Acceptance Which Ads Qualifications:
A reply to an offer which purports to accept it but is condition on the offeror’s assent to terms additional to or different from those offered is not an acceptance but is a counter-offer.
(a) Qualified acceptance. A qualified conditional acceptance proposes an exchange different from that proposed by the original offeror. Such a proposal is a counter-offer and ordinarily terminates the power of acceptance of the original offeree.
(R2C citation)
Describe Rule § 39
Counter-Offers:
(1) A counter-offer is an offer made by an offeree to his offeror relating to the same matter as the original offer and proposing a substituted bargain differing from that proposed by the original offer.
(2) An offeree’s power of acceptance is terminated by his making of a counter-offer, unless the offeror has manifested a contrary intention or unless the counter-offer manifests a contrary intention of the offeree.
(R2C citation)
§69 Continued:
Exceptional cases where silence is acceptance fall into two main classes:
(1) Those where the offeree silently takes offered benefits, and
(2) Those where one party relies on the other party’s manifestation of intention that silence may operate as acceptance.
(R2C citation)
- The offeror is the ____ of the offer
- The offeree has the power of ______ that is created by the offer
- Master
- acceptance
The power of acceptance s terminated if:
(1) The offeree rejects the offer
(2) The offeror revokes the offer before acceptance
(3) Death or incapacity of either party (offeror or offeree)
§36
Describe R2K §§57 & 58
An acceptance must be unequivocal and unqualified for contract formation (i.e. must be clear, unambiguous, and unequivocal)
(professor slides)
Describe R2K §69
What are the exceptions?
Generally, silence is not acceptance
In certain limited circumstances, silence can be interpreted as acceptance, subject to the Statute of Frauds
(a) where the offeree silently takes offered benefits.
(b) Where one party relies on the other party’s manifestation of intention that silence may operate as an acceptance
(slides)
