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Bar Exam > Contracts - General > Flashcards

Contracts - General Flashcards

1
Q

What is a contract?

A

A contract is a legally enforceable agreement.

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2
Q

What is a bilateral contract?

A

A bilateral contract leaves open the method of acceptance.

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3
Q

What is a unilateral contract?

A

A unilateral contract can be accepted only by performance.

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4
Q

In a mixed deal, how do you determine whether to apply Article 2 of UCC or Common Law?

A

Look at the predominant purpose and relative values of each aspect of the contract.

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5
Q

How do we know if there has been a valid offer?

A

Whether a reasonable person in the position of the offeree would believe that his assent will create a contract.

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6
Q

What if the price is missing in a sale contract? (2)

A

Real Estate: no price, no deal

Goods: just look @ intent of parties

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7
Q

What if there is a vague or ambiguous material term in the contract? (2)

A

(1) No deal

(2) Look for “fair, appropriate, reasonable”

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8
Q

Pursuant to an output contract, can the buyer increase the requirements?

A

Yes, so long as the increase is “in line with prior demands.”

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9
Q

Is an advertisement an offer? (3)

A

(1) No, except:
(2) ad in the nature of a reward, or
(3) specific as to quantity and expressly indicates who can accept

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10
Q

How can offers be terminated? (4)

A

(1) Lapse of time
(2) Words/Conduct of the Offeror
(3) Words/conduct of the offeree
(4) Death of either party prior to acceptance

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11
Q

How can an offeror revoke an offer?

A

(1) unambiguous statement to offeree

(2) unambiguous condoct that the offeree is awayre of

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12
Q

When does revocation of an offer become effective?

A

Revocation of an offer becomes effective upon receipt.

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13
Q

What types of offers cannot be revoked? (4)

A

(1) Option contract
(2) Merchant firm offer rule
(3) Foreseeable detrimental reliance
(4) Unilateral contract after performance has started (not just mere preparation)

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14
Q

What is the Merchant Firm Offer Rule?

A

An offer cannot be revoked for up to 3 months, IF:

(1) offer to buy/sell goods
(2) Signed, written promise to keep offer open, and
(3) party is a merchant

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15
Q

How do you apply the Merchant Firm Offer Rule if there is a promise to keep the offer open for more than three months?

A

The agreement defaults to three months.

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16
Q

What is the effect of a conditional acceptance? (“I accept if…”)

A

Deemed a counteroffer, rejection.

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17
Q

What is the effect of the offeree adding additional terms to the contract? (3)

A

(1) @ Common law, this is a rejection.
(2) Under UCC, just need “seasonable expression of acceptance,” and
(3) If both merchants, new terms are automatically incorporated unless the term materially changes the offer or there is objection.

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18
Q

How can an offeree accept? (4)

A

(1) Offeree fully performs
(2) Offeree starts to perform bilateral contract
(3) Offeree promises to perform
(4) Offeree is silent where custom or agreement means silence = acceptance

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19
Q

What if revocation and acceptance are sent at the same time?

A

Contract formed.
Revocation effective upon receipt.
Acceptance effective upon sending.

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20
Q

What if the seller of goods sends the wrong goods? (2)

A

(1) Wrong goods = acceptance + Breach, unless

(2) seller had reasonable belief that an accommodation due to circumstances would work

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21
Q

Can “past consideration” be used to form that basis of a binding contract?

A

(1) Generally no, unless

(2) Action taken in emergency/@ request, then subsequent promise to pay

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22
Q

What is the Preexisting Duty Rule?

A

Preexisting duty ≠ consideration, except:

(1) unforeseen difficulty so severe as to excuse performance, or
(2) 3rd party promise to pay additional consideration

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23
Q

Can past payment for a debt be consideration for release from debt?

A

Only if the debt is not due yet, or if it is undisputed.

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24
Q

When does the Preexisting Duty Rule apply?

A

Applies to Common Law contracts.

Article 2 has no such rule.

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25
Q

What are the elements of Promissory Estoppel? (3)

A

(1) A promise
(2) which was foreseeably and reasonably relied upon to the promisee’s detriment, and
(3) enforcement is necessary to avoid injustice.

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26
Q

Who lacks capacity to contract? (3)

A

(1) Infant (under 18)
(2) Mentally incompetent
(3) Intoxicated, if other party has reason to know

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27
Q

Can a contract with a party that lacks capacity be enforced? (4)

A

(1) Generally no, but
(2) Person lacking capacity may enforce
(3) If party retains benefits then gains capacity contract is enforceable, and
(4) person lacking capacity must still pay for necessities

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28
Q

What types of contracts fall within the Statute of Frauds? (6)

A

(1) Promise in consideration of marriage
(2) Promise by executor to pay obligation of estate from own funds
(3) Promise to answer for debts if others fail to pay
(4) Service contract not capable of being performed within one year
(5) Transfer of real estate interest for more than one year
(6) Sale of goods valued at $500 or more

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29
Q

What ways can the Statute of Frauds be satisfied?

A

(1) Performance
(2) Writing
(3) Judicial admission of sale of goods agreement

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30
Q

Does partial performance of service contracts satisfy the Statute of Frauds?

A

No, to satisfy the Statute of Frauds by performance of a service contract, performance must be complete.

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31
Q

Does partial performance of a sale of ordinary goods satisfy the Statute of Frauds?

A

Yes, but only to the extent of that part of performance.

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32
Q

Does partial performance of sale of specially manufactured goods satisfy the Statute of Frauds?

A

The Statute of Frauds is satisfied as soon as the seller makes “substantial beginning” of making/obtaining the goods.

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33
Q

Does partial performance of a Real Estate Transfer contract satisfy the Statute of Frauds?

A

Yes, if 2 of these 3 are satisfied:

1) payment (full or close to full
(2) Possession
(3) Transferee has made improvements

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34
Q

What must be in a writing to satisfy the Statute of Frauds for a non-UCC contract?

A

(1) All materials terms, and

2) signature of person to be charged (∆

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35
Q

What must be in a writing to satisfy the Statute of Frauds for a UCC contract?

A

(1) All material terms
(2) Signed by ∆, and
(3) Quantity of sale

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36
Q

What is the exception to the signature requirement of the Statute of Frauds writing for a UCC contract?

A

Merchant Confirmatory Memorandum Rule:

(1) If both parties are merchants and
(2) a person receives a signed writing w/ quantity term that claims that is a contract
(3) fails to respond w/in 10 days of receipt

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37
Q

What is the Equal Dignity Rule?

A

An agency contract must be in writing IF:

the underlying contact being entered into by the agent is within the Statute of Frauds

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38
Q

When must there be written evidence of a contract modification?

A

When, after the modification, the contract falls within the Statute of Frauds

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39
Q

What is the effect of “modifications to this contract must be in writing” clauses?

A

Common Law: clause is ignored

UCC: clause is upheld unless waived

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40
Q

Can a contract for something illegal be enforced? (2)

A

(1) Contracts with illegal subject matter are not enforceable.
(2) Contracts with an illegal purpose are enforceable only by a party that was not aware of the illegal purpose.

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41
Q

What is the effect of an innocent misrepresentation in a contract deal?

A

Even if person was honestly mistaken, a misrepresentation can make an agreement unenforceable.

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42
Q

What are the tests for unconscionability, and to what point in time is the test applied?

A

Tests:
(1) “unfair surprise”
(2) “oppressive terms”
Tested @ time of formation.

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43
Q

When will ambiguities in words in the agreement destroy the contract?

A

When:

(1) ambiguous material terms in the contract are open to at least two reasonable interpretations,
(2) each party attaches a different meaning to the terms, and
(3) neither party knows or has reason to know the term could have multiple meanings

44
Q

What happens if one party is aware that a material term in a contract could have more than one reasonable meaning?

A

The contract is still formed, under the conditions of the innocent party.

45
Q

Will a mutual mistake of fact destroy a contract?

A

Yes, if:

(1) Both parties are mistaken
(2) about a basic assumption of fact, and
(3) that materially affects the agreed exchange

46
Q

Do mutual mistakes of subject matter (what it is) destroy a contract?

A

Yes. An agreement formed under mutual mistake of what the subject matter of the agreement actually is, is not an enforceable contract.

47
Q

Do mutual mistakes of a subject matter’s value destroy a contract?

A

No.

48
Q

Will a unilateral mistake of material fact destroy a contract?

A

Generally no, unless:

-it is a “palpable” obvious mistake that the other party should have known was a mistake

49
Q

What counts as parol evidence?

A

(1) words of the parties (terms)
(2) written or oral
(3) That comes before integration of a final written contract

50
Q

What four fact patterns are most common for testing the Parol Evidence Rule?

A

(1) Changing the written deal
(2) Establishing a defense to enforcement of the written deal
(3) Explaining a term in a written deal
(4) Adding to the written deal

51
Q

What is a merger clause in a contract?

A

A merger clause states that this is the “final and complete agreement.” (merging all prior negotiations/agreements)

52
Q

What triggers the Parol Evidence Rule?

A

A written agreement that the court finds is the final agreement

53
Q

How does the court apply the Parol Evidence Rule to situations where a party is attempting to change the written deal? (2)

A

(1) Court will not consider earlier agreements that are the source of terms and inconsistent with the terms in the written contract.
(2) Court may look at earlier agreements to see if there was a mistake in integration of final agreement.

54
Q

How does the court apply the Parol Evidence Rule to situations where a party is trying to establish a defense to enforcement of a written deal?

A

Court may consider earlier words of the parties for determining whether there is a defense like fraud, misrepresentation, or duress.

55
Q

How does the Court apply the Parol Evidence Rule to situations where there are ambiguities in the written agreement?

A

The Court may look to past agreements to try to understand the meaning of terms.

56
Q

How does the Court apply the Parol Evidence Rule to situations where a party is trying to add something to the written agreement?

A

The court will not consider earlier agreements as a source of consistent, additional terms unless:
-Court finds that the written agreement was only a partial integration.

57
Q

Other than words, what do courts examine to determine the terms of a contract? (3)

A

(1) Course of performance (current deal)
(2) course of dealing (prior deals)
(3) Custom and Usage (industry, locality, etc.)

58
Q

What is the default rule for sale of goods if place of delivery is not agreed upon?

A

Delivery is at seller’s place of business.

59
Q

What is the difference between a shipment contract and a destination contract?

A

(1) Shipment contract means seller completes obligations when it:
- (a) gets goods to common carrier
- (b) makes reasonable arrangements for delivery, and
- (c) notifies the buyer
(2) Destination contract means seller completes obligations when goods arrive @ buyer’s place

60
Q

How do you know if it is a shipment contract or a destination contract?

A

Assume shipment contract unless you see “FOB”

“FOB (S’s location)” = shipment contract
“FOB (anywhere else)” = destination contract

61
Q

What are the rules regarding risk of loss of goods? (4)

A

(1) If parties assign risk, go with it.
(2) If one party breaches (even in an unrelated way), the breaching party takes risk
(3) If goods being delivered by common carrier, risk shifts to buyer once seller completes its delivery
(4) If none of above apply:
- (a) if seller is merchant, risk shifts upon receipt
- (b) If seller is not merchant, risk shifts upon seller “tendering” the goods

62
Q

What three types of warranties of qualities apply for sales of goods?

A

(1) Express Warranties
(2) Implied Warranty of Merchantability
(3) Implied Warranty of Fitness for a Particular Purpose

63
Q

What is an implied warranty of merchantability and when does it apply? (2)

A

(1) An automatic warranty that the goods being sold are fit for the ordinary purpose for which such goods are used.
(2) Only applies to sales by merchant sellers who deal in goods of that kind

64
Q

When does an implied warranty of fitness for a particular purpose apply? (3)

A

Triggering Facts:

(1) buyer has particular purpose
(2) buyer is relying on seller to select suitable goods
(3) seller has reason to know the purpose and reliance

65
Q

How can warranties be disclaimed? (2)

A

(1) Express warranties cannot be disclaimed

(2) Implied warranties must have conspicuous language such as “as is” or “with all faults”

66
Q

Are clauses that limit remedies do to failure of goods enforceable? (2)

A

(1) Generally yes, so long as they aren’t unconscionable.

(2) prima facie unconscionable to limit personal injury liability

67
Q

How do we know if a service contract has been performed properly?

A

Look to the terms of the contract.

68
Q

What if goods don’t conform to the contract’s terms?

A

Buyer may refuse. This is the Perfect Tender Rule.

69
Q

If a seller of goods tenders non-conforming goods, can the seller fix the problem? (2)

A

(1) Yes, if the time for performance has not expired.
(2) If goods are already due, seller can cure only if he had reasonable grounds for believing that the improper tender would be acceptable

70
Q

What if one installment of an installment sales contract contains non-conforming goods?

A

Buyer may only reject if there is substantial impairment in that installment that can’t be cured

71
Q

Can a buyer ever revoke his acceptance of goods? (3)

A

Yes, if:

(1) the nonconformity substantially impairs value of goods
(2) excusable ignorance of the grounds for revocation (reasonable reliance on seller’s assurance), and
(3) revocation occurs w/in a reasonable time after discovery of nonconformity

72
Q

What are the rules on payment for goods?

A

(1) Cash unless otherwise agreed
(2) Buyer may use check, but
(3) Seller may reject check, but that will give buyer additional reasonable time

73
Q

When is a court most likely to grant specific performance as a remedy? (2)

A

Real estate sale or sale of unique goods (art, antiques)

74
Q

Will a court adjust the terms of the contract as a remedy?

A

Almost never, but might in a case of mistake or clerical error.

75
Q

When can a seller get goods back that buyer failed to pay for? (3 requirements)

A

Reclaimation Requirements:

(1) buyer was insolvent at time it received goods, and
(2) seller demands return w/in 10 days of receipt (or “reasonable” time if buyer expressed solvency), and
(3) buyer still has goods at time of demand

76
Q

What if someone wrongfully sells a person’s property to a bona fide purchaser 3rd party? Who gets the property? (2)

A

(1) If wrongful seller deals in this kind of good, then BFP gets to keep the property
(2) If wrongful seller is not merchant in this kind of goods, original owner gets property back.

77
Q

What are the possible ways to measure money damages for breach?

A

(1) Expectation Interest (put π where he would have been)
(2) Reliance Interest (put π in prior position)
(3) Restitution Interest (put ∆ in prior position_

78
Q

What is a “lost volume seller” situation?

A

Where there would have been two sales, but due to breach there ends up only being one, this is not full mitigation of damages- it is a lost sale.

79
Q

What are the responsibilities and limits of the duty to mitigate?

A

(1) No recovery for damages that court have been avoidable w/o undue burden on plaintiff
(2) No duty to accept different/inferior alternative

80
Q

Beyond the contract remedy, what other damages may a plaintiff recover? (2)

A

(1) incidental damages for dealing w/ breach

(2) consequential damages that ∆ could reasonably foresee

81
Q

Other than the duty to mitigate, what other limitation is there on plaintiff’s ability to recover damages?

A

Damages are limited to those that are reasonably certain.

look for new businesses w/o past earnings

82
Q

What are the rules and concerns on liquidated damages clauses?

A

(1) No penalties.
(2) Valid if:
- (a) damages were difficult to forecast at the time of formation
- (b) clause reasonably forecasts damages
(3) Red flag: lump sum w/o regard to severity of breach

83
Q

What is a performance condition?

A

Contract structure such that performance of one party is conditioned upon some other occurrence.

84
Q

How does the court analyze performance conditions in contracts where the condition is the personal approval of one party?

A

The condition is satisfied if a reasonable person would approve, unless the subject is art or other inherently discretionary item.

85
Q

What if a party to the contract unambiguously states that they will not perform?

A

If this is prior to when performance is due, the other party is excused from performance. This is called anticipatory repudiation.

86
Q

Can anticipatory repudiation be retracted?

A

Yes, so long as there has not been material change in position by the other party.

87
Q

What is rescission?

A

Rescission is the agreement of the two parties to mutually excuse each other’s remaining performance.

88
Q

What is accord and satisfaction? (3)

A

(1) accord = an agreement by the parties to accept a different form of performance in satisfaction of an existing obligation
(2) satisfaction = the agreed upon different performance
(3) Failure to satisfy means other party may sue for original performance or for the accord agreement

89
Q

What is mutual modification of a contract?

A

An agreement by the parties to substitute a new agreement in satisfaction of existing obligations.

90
Q

What is novation and what does it do? How is it different from delegation? (3)

A

(1) Novation = agreement between both parties to substitute in a new party
(2) Valid novation excuses the replaced party
(3) In contrast, delegation does not require mutual agreement, and does not excuse liability of the original parties

91
Q

When does an unforeseen event excuse performance?

A

(1) If now performance is impossible
(2) If “special” person dies (no good replacement)
(3) Performance is now illegal

92
Q

When is a 3rd party able to enforce a contract? (2)

A

(1) When the parties intended to benefit the 3rd party, and

2) 3rd party was aware of contract and relied (rights have vested

93
Q

With respect to 3rd party beneficiaries, who may sue whom? (4)

A

(1) Beneficiary may sue promisor directly
(2) Promisee can sue promisor directly
(3) Donee beneficiary cannot sue promisee
(4) Creditor beneficiary can sue promisee

94
Q

How do we know if a 3rd Party beneficiary is a donee beneficiary or a creditor beneficiary?

A

Assume donee, unless promisee owes beneficiary money

95
Q

What is an assignment of a contract, and how does it occur?

A

Assignment = transfer of contract rights.

Two Steps:

(1) Contract formed between two parties
(2) 1 party later transfers rights to 3rd Party

96
Q

What are the vocabulary terms of “assignment?” (3)

A

(1) assignor: transferring party
(2) assignee: party receiving rights via transfer
(3) Obligor: remaining original party

97
Q

What are the vocabulary terms related to 3rd Party beneficiaries? (2)

A

(1) Promisor: person who will be ultimately giving benefit to 3rd Party beneficiary
(2) Promisee: person who obtains the promise that will later benefit 3rd Party

98
Q

What types of contract provisions may limit the effects of contract assignment? (2)

A

(1) Prohibition against assignment: takes away right to assign, but not the power (breach + obligor liability to the assignee)
(2) Invalidation: takes away right and power to assign (breach + obligor not liable to assignee)

99
Q

What are the common law rules on contract assignments?

A

(1) Validity test: does the assignment substantially change the duties of the obligor?
(2) ex: assignment of right to payment, no real change in duty, OKAY

100
Q

What should you look for to identify proper assignment?

A

(1) PRESENT assignment
(2) promise to assign ≠ valid assignment
(3) Consideration not required for assignment; can be gift assignment

101
Q

What if a contract has been assigned multiple times? Who is the valid assignee?

A

(1) For gratuitous assignments, last assignee wins (gift freely revocable)
(2) For assignments for consideration, first assignee wins, unless:
- (a) later assignee does not know of prior assignee, and
- (b) is the first to obtain payment, judgment, novation, or indicia of ownerships

102
Q

What remedies do snubbed assignees have in instances of multiple assignments for consideration?

A

(1) Assignment for consideration carries a warranty that rights are assignable and enforceable

103
Q

What is the difference between assignment and delegation of a contract?

A

(1) assignment gives the benefits to a 3rd Party
(2) Delegation gives the duties to a 3rd Party
(3) Delegee cannot sue the obligee directly to be paid

104
Q

What are the limits on the right to delegate a contract’s duties?

A

(1) Prohibition in contract (“no assignment” also means “no delegation”)
(2) If contract calls for special skills, no delegation
(3) If person to perform has a very special reputation, no delegation

105
Q

What if the delegatee to a contract does not perform?

A

(1) Delegating party can sue if there was consideration for delegation
(2) Obligee can sue delegating party for breach
(3) If delegation was for consideration, obligee can sue delegatee as an intended 3rd Party beneficiary

Bar Exam (26 decks)

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