Contracts Flashcards
What is a contract?
A legally enforceable promise.
What are the three types of Contracts?
1) Express contracts are formed by language, oral, or written
2) Implied contracts are formed by conduct
3) Quasi-contracts are not contracts at all. But quasi-contract is the name given when an unenforceable contract results in unjust enrichment.
How may a party accept a bilateral offer?
A bilateral contract offer may be accepted in any reasonable way.
How may a party accept a unilateral contract?
A unilateral contract is one in which the offeror requests performance rather than a promise.
The offeror promises to pay upon the completion of the requested act.
Once the act is completed, a contract is formed.
What are the two situations in which a unilateral contract exists?
1) When the offeror clearly (unambiguously) indicates that completion of performance is the only manner of acceptance; and
2) Where there is an offer to the public, such as a reward offer.
What is a merchant under the UCC?
One who regularly deals in goods of the kind sold or who otherwise by their profession holds themselves out as having special knowledge or skills as to the practices or goods involved.
A merchant must be acting in their mercantile capacity in order for the merchant rules to apply.
What are the three elements of a contract?
1) Offer
2) Acceptance
3) Consideration
What is an Offer?
An offer must create a reasonable expectation in the offeree that the offeror is willing to enter into a contract on the basis of the offered terms
Are advertisements considered offers?
No,
Advertisements are usually construed as mere invitations for offers.
An offer must be definite and certain in its terms. The basic inquiry is whether enough of the essential terms have been provided so that a contract including them is capable of being enforced. What must be in an offer?
1) Identification of the offeree
2) Definiteness of Subject Matter
What are required in an offer for real estate transactions?
The offer must identify the LAND and the PRICE terms.
The land must be identified with some particularity but a deed description isn’t necessary.
What are required in an offer for sale of goods?
The QUANTITY must be certain or capable of being made certain.
An offer may be indirectly revoked if the offeree receives:
1) correct information;
2) from a reliable source;
3) of acts of the offeror that would indicate to a reasonable person that the offeror no longer wishes to make the offer.
When is a revocation effective?
A revocation is effective when received by the offeree.
Offers can be revoked by will by the offeror, even if he has promised not to revoke for a certain period, except for the following circumstances:
1) Options
2) Merchant’s Firm Offer under Article 2
3) Detrimental Reliance
4) Beginning Performance in response to true Unilateral contract offer
5) Beginning Performance - offer indifferent as to manner of acceptance
What is an option contract?
An option is a distinct contract in which the offeree gives consideration for a promise by the offeror not to revoke an outstanding offer.
What is a Merchant’s Firm Offer under Article 2?
Under Article 2, if (1) a merchant, (2) offers to buy or sell goods in a signed writing, and (3) the writing gives assurances that it will be held open, the offer is NOT revocable for lack of consideration during the time stated, or if no time is stated, for a reasonable time (not to exceed 3 months)
How may an offer terminate by operation of law?
1) Death or insanity of either party (death or insanity need NOT be communicated to the other party);
2) Destruction of the proposed contract’s subject matter; OR
3) Supervening illegality
What is an Acceptance?
A manifestation of assent to the terms of an offer in any reasonable manner and by any medium reasonable under the circumstances.
How may a party accept an offer for bilateral contract?
By either promising to perform or by the beginning of performance.
How may a party accept an offer for unilateral contract?
If an offer provides that it may be accepted only by performance, the contract is not accepted until performance is COMPLETE.
Under the battle of the forms, the inclusion of additional or different terms by the offeree in a definite and timely acceptance does NOT constitute a rejection and counteroffer, but rather is effective as an acceptance, unless the acceptance is:
Expressly made conditional on assent to the additional or different terms.
Contracts between MERCHANTS - Additional terms usually included if both parties to the contracts are MERCHANTS, additional terms in the acceptance will be included in the contract unless:
1) They materially alter the original terms of the offer, such as by changing a party’s risk or the remedies available;
2) The offer expressly limits acceptance to the terms of the offer; OR
3) The offeror has already objected to the particular terms, or objects within a reasonable time after notice of them is received.
Mailbox Rule - Acceptance by mail or similar means is effective at the moment of dispatch, unless one of these exceptions applies:
1) The offer stipulates that acceptance is not effective until received.
2) An option contract is involved (an acceptance under an option contract is effective only upon receipt)
3) The offeree sends a rejection and then sends an acceptance, in which case whichever arrives first is effective.
4) The offeree sends an acceptance and then a rejection, in which case the acceptance is effective (mailbox rule) UNLESS the rejection arrives first and the offeror detrimentally relies on it.
Courts will enforce a promise as a contract only if it is supported by consideration or a substitute for consideration. What are the two necessary elements to constitute consideration?
1) A Bargained-for exchange between the parties; and
2) Legal value, meaning that which is bargained for must be considered of legal value or it must constitute a benefit to the promisor OR a detriment to the promisee.
Is Preexisting Legal Duty considered as consideration?
No, performing or promising to perform an existing legal duty is insufficient consideration.
What are the exceptions to the Preexisting legal duty rule?
There is consideration for a pre-existing duty if:
1) New or different consideration is promised
2) The promise is to ratify a voidable obligation
3) The preexisting duty is owed to a third party rather than to the promisor;
4) There is an honest dispute as to the duty; OR
5) There are unforeseen circumstances sufficient to discharge a party (such as impracticability), or under the modern view, if the modification is fair and equitable in view of circumstances not anticipated when the contract was made.
Under the UCC, must there be consideration for a good faith agreement modifying a contract?
No consideration is necessary.
Under general common law, a contract can’t be modified unless the modification is supported by new consideration. The modern view permits modification without consideration if:
1) The modification is due to circumstances that were unanticipated by the parties when the contract was made; and
2) It is fair and equitable.
[Promissory Estoppel] Consideration is not necessary if the facts indicate that the promisor should be estopped from not performing. A promise is enforceable if necessary to prevent injustice if:
1) A promise;
2) Enforcement is necessary for interest of justice;
3) The promisor should reasonably expect to induce action or forbearance; and
4) Such action or forbearance is in fact induced.
Contracts induced by duress are voidable and may be rescinded so long as they are not affirmed. Duress occurs when a party’s assent is procured by an improper threat. Withholding something someone wants or needs will constitute economic duress if:
1) The party threatens to commit a wrongful act that would seriously threaten the other contracting party’s property or finances; and
2) There are no adequate means available to prevent the threatened loss.
Contracts induced by undue influence are voidable and may be rescinded so long as they are not affirmed. Undue influence concerns often arise when the dominant party is in a confidential or caregiver relationship with the influenced party. Undue Influence elements are:
1) Undue susceptibility to pressure by one party; and
2) Excessive pressure by the other party.
If the contract includes a term with at least two possible meanings, the result depends on the parties’ awareness of the ambiguity:
Neither party aware - no contract unless both parties intended the same meaning;
Both parties aware - no contract unless both parties intended the same meaning; or
One party aware - binding contract based on what the ignorant party reasonably believed to be the meaning of ambiguous words
If both parties entering into a contract are mistaken about existing facts (not future happenings) relating to the agreement, the contract may be voidable by the adversely affected party if:
1) The mistake concerns a basic assumption on which the contract is made;
2) The mistake has a material effect on the agreed-upon exchange; AND
3) The party seeking avoidance did NOT assume the risk of the mistake.
If only one of the parties is mistaken about facts relating to the agreement, the mistake will NOT prevent formation of a contract. But, if the nonmistaken party knew or had reason to know of the mistake made by the other party, the contract is:
Voidable by the mistaken party.
If the promises exchanged both lack consideration, NO CONTRACT exists. In this situation, one of the promises is always _______
illusory.
What agreements must be evidenced by a writing signed by the party sought to be bound under the Statute of Frauds?
Marriage
contract last longer than one Year
Land sale contracts
Executor or administrator promises personally to pay estate debts
Goods over $500
Suretyship promises
Part performance takes a sale of goods contract out of the SoF when:
1) The goods have been specifically manufactured; OR
2) The goods have been either paid for or accepted.
The SoF doesn’t require a formal written contract. The Statute requires only one or more writings that:
1) Reasonably identify the subject matter of the contract;
2) Indicate that a contract has been made between the parties; and
3) State with reasonable certainty the essential terms.
What are the two components to determine if the writing is an “integration?”
1) Whether the writing was intended as the final expression of the agreement; and
2) Whether the integration was intended to be complete or partial.
Evidence is admissible to show the parties’ intent.
What is the course of dealing?
The sequence of conduct concerning previous transactions between the parties to a particular transaction that may be regarded as establishing a common basis of their understanding.
What is a usage of trade?
A practice or method of dealing, regularly observed in a particular business setting so as to justify an expectation that it will be followed in the transaction in question.
What is course of performance?
If a contract involves repeated occasions for performance by either party and the other party has the opportunity to object to such performance, any course of performance accepted or acquiesced to is relevant in determining the meaning of the contract.
What is the hierarchy for the UCC Gap Fillers?
Express terms
Course of Performance
Course of Dealing
Usage of Trade
What is an Express Warranty?
Any affirmation of fact or promise made by the seller to the buyer, any description of the goods, and any sample or model creates an express warranty if the statement, description, sample or model is part of the basis of the bargain.
A statement relating merely to the value of the goods doesn’t create an express warranty.
What is an Implied Warranty of Merchantability?
Implied in EVERY contract for sale by a merchant who deals in goods of the kind sold, there is a warranty that the goods are merchantable. To be merchantable, goods must be at least be “fit for the ordinary purpose for which such goods are used.”
What is an Implied Warranty of Fitness for a Particular purpose?
A warranty will also be implied in a contract for the sale of goods whenever (1) any seller, merchant or not, has reason to know the particular purpose for which the goods are to be used and that the buyer is relying on the seller’s skill/judgment to select suitable goods; and (2) the buyer in fact relies on the seller’s skill or judgment.
