Business Law I: Contracts II Flashcards Preview

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Flashcards in Business Law I: Contracts II Deck (41):
1

Consideration

Benefit promised by offeror (promisor) and legal detriment promised or performed by offeree (promisee)

2

Legal Detriment

Doing what you are free not to do and not doing what you are free to do

3

Preexisting duty and consideration

You cannot obtain more detriment from the other party in order to perform something you are already legally obligated to do

4

Exceptions to preexisting rule

1. Rescission/new contract
2. UCC modification for contracts for the sales of goods
3. Unforeseen hardship

5

UCC Requirements Contract

Buyer agrees to purchase all he/she needs for his/her home or business from the seller (i.e. propane)

6

UCC Output Contract

Seller agrees to sell all that it produces to a particular buyer

7

Accord and Satisfaction

Accord = agreement to waive legal rights, releasing another party from legal obligation

Satisfaction = actual payment of the amounts agreed to in the accord

8

Liquidated Debt

amount due and owed is clear to both parties

9

Unliquidated Debt

parties acknowledge that money is due and owed, but the disagree on the amount

10

Estoppal

Legal principle that bars a party from denying or alleging a certain fact owning to that party's previous conduct, allegation or denial.

Conceptually, estoppel is meant to prevent people from being unjustly wronged by the inconsistencies of another person's words or actions.

11

Statute of Frauds

Requires certain types of contracts to be in writing to be enforceable. (those contracts that people are most likely to lie about to secure benefit)

12

Types of contracts that must be in writing under Statute of Frauds (5)

1. Guaranty of debt contracts
2. Contracts involving interest in real property
3. Contracts impossible to perform within one year of formation
4. Contracts for the sale of goods > $500
5. Promises of executors for personal liability for debts of estate

13

Guarantor

Person who guarantees to pay for someone else's debt if he/she should default on a loan obligation.

14

Partial performance exception to real property rule (3)

1. Payment of some or all of purchase price has been made
2. Buyer is in possession of land by living there or proceeding to develop it
3. Buyer has made valuable improvements

15

Exception to UCC Statue of Frauds: Merchant confirmation memo between merchants

If one merchant sends another merchant a written confirmation, and other merchant does not object in writing within 10 days, the oral contract is enforceable by either party even though only signed by one

16

Exception to UCC Statue of Frauds: Special ordered goods

An oral contract for special ordered goods (goods that seller cannot resell in ordinary course of business) is enforceable if seller has substantially begun performance

17

Exception to UCC Statue of Frauds: Admission under oath

Any admission under oath that an oral contract was made removes Statue of Frauds as defense

18

Exception to UCC Statue of Frauds: Performance by buyer

If the buyer takes possession or makes a payment acceted by the seller, the Statute of Frauds is removed (oral contract enforced), at least to the quantity accepted or purchases.

19

Parole Evidence Rule

"If what you wanted is not in the contract but promised as an aside in negotiations, you cannot bring that up later and expect to get it"

20

Defenses to Formation (5)

1. Mistake
2. Fraud/Misrepresentation
3. Duress
4. Undue Influence
5. Illegality

21

Unilateral Mistake

Binding on mistaken party unless:
1. Other party knows/should have known about mistake
2. Mistake is material and obvious
3. Error was due to mathematical calculation

22

Bilateral (mutual) Mistake

If both parties are mistaken and the mistake is one that involves the identity, existence or quantity of the subject matter, the contract cannot be enforced by either party

23

Elements of Misrepresentation/Fraud

1. Misrepresentation of statement of fact
2. Intent to deceive
3. Material
4. Reliance on the misrepresentation

24

Exculpatory Clauses

Clause in contract that disclaims any liability regardless of fault

25

Conditions for performance (3)

1. Precedent - must be present/occur before a party has duty to perform
2. Subsequent - must be present/occur after a duty to perform has arisen
3. Concurrent - duty to perform dependent upon other party's duty to perform at same time

26

Discharge: Release

Discharge of a party's obligation... usually must be in writing, given in voluntary good faith, with consideration

27

Discharge: Waiver

By nonbreaching party... relinquishment of rights related to the other party and his/her breach

28

Discharge: Mutual Rescission

Enforceable mutual agreement to discharge all contract obligations/restore parties to precontract positions

29

Discharge: Novation

By agreement b/w original parties and through valid subsequent contract, new party is substituted for one of the original parties discharging duties under original contract

30

Discharge: Accord and Satisfaction

Original contract can be satisfied either by completion of original performance or by a different performance

31

Discharge: Operation of Law (6)

1. Statute of limitations - 4 yrs for goods/starts when cause of action arises
2. Bankruptcy
3. Discharge by impossibility/impracticability
4. Death/Insanity
5. Illegality
6. Commercial Impracticability (i.e. extreme difficulty/cost)

32

Discharge: Performance

1. Each party has completed obligations
2. Substantial performance - any deviation from terms was done in good faith/practical purposes
3. Personal satisfaction - requires satisfaction or approval
4. Anticipatory breach

33

Discharge: Material Breach

If one party materially breaches contract, the other side is not obligated to perform

34

Remedy: Monetary Damages (6)

1. Nominal - small
2. Compensatory - all costs/loss actually suffered
3. Incidental - incurred by nonbreacher due to breach
4. Consequential - any forseeable loss known to breacher
5. Punitive - awarded to punish wrongdoer
6. Liquidated - parties agree in contract to sum paid in case of breach

35

Remedy: Mitigation of Damages

Nonbreaching party often has duty to reduce amount of damages owed (i.e. re-lease an apt so person who breached doesn't have as much to pay)

36

Remedy: Equity (4)

1. Specific Performance - unique goods
2. Rescission/Restitution - restore precontract positions
3. Reformation - rewrite contract
4. Quasi-contract recovery - given when no contract

37

Assignment/Delegation

Any right can be assigned/delegated unless exception applies

38

Assignment Exceptions (4)

1. Prohibited by contract terms (anti-assignment clause)
2. Prohibited by statute
3. Prohibited by personal contracts
4. Prohibited due to increased material risks to obligor

39

Delegation Exceptions (3)

1. Prohibited by contract terms
2. Contract based on personal skills of obligor
3. Contract performance will materially vary from that expected by obligee

40

Rights of parties under assignment/delegation (4)

1. Assignee/delegate can acquire no better rights than possessed by assignor/delegator
2. Assignment not binding on other party to contract until obligor has notice of assignment
3. Defenses the original contracting party had now below to the third party assignee/delegate
4. Assignment does not waive/eliminate contract rights of original party to contract

41

Third-Party Beneficiaries (3)

1. Donee (intended) beneficiary
2. Creditor Benificiary
3. Incidental beneficiary - receives unintended benefit/no legal rights