ch 11: breaches and stuff of contracts

Question 1

can a contract be voided bc of a mistake

Answer 1

yes

Question 2

what type of mistake makes a contract voidable

Answer 2

mistake of fact

Question 3

mistake of fact must include what

Answer 3

material fact

Question 4

what is material fact

Answer 4

a fact that a reasonable person would consider important when determining action

Question 5

unilateral vs bilateral mistake

Answer 5

uni- 1 party
bi-2 parties

Question 6

unilateral + exeptions

Answer 6

• does not usually give relief unless
• the other party shoulda known abt the mistake
  -substansial mathematical error

Question 7

bilateral contract

Answer 7

-misunderstanding on both parties concerning a basic assumption on which the contract was made.”

-when both parties are mistake abt the same material fact (can be rescinded by either party)

-word/term in the contract may be subject to diff interpretations which does not allow for a meeting of the minds which is why it can be rescinded

Question 7

jet ski example

Answer 7

elena intends to sell jetski to luke for 5,000 dollars but when sending the email she puts 4,000 and he accepts before he is told abt the mistake- this is binding

Question 7

mistakes of value

Answer 7

If a mistake concerns the future market value/ quality of the object of the contract,

-contract enforceable. (not able to be rescinded)

Question 8

violin example

Answer 8

Toby buys a violin for cheap because neither party believes it’s valuable. but it turns out to be rare. Both parties made a mistake of value so→ contract CANNOT be rescinded.

Question 9

When parties form a contract, their agreement establishes the value of the object of their transaction at the ….

Answer 9

moment

Question 10

what is fraudulent misrepresentation

Answer 10

when an innocent party is fraudulently induced into a contract which can be avoided since they did not voluntary consent to the terms

Question 11

T or F- innocent party can either rescind the contract or enforce it and seek damages for
any harm resulting from the fraud

Answer 11

true

Question 12

what 4 things does fraudulent representation need to consist of

Answer 12

1- misrepresentation of material fact

2- intent to deceive

3- innocent party must justifiably rely on misrepresentation

4- to collect damages party must have been harmed as a result

Question 13

1- misrepresentation of material fact

Answer 13

• can be thru words or actions
  -when a party goes outta there way to conceal a fact

-tom selleck suing bs the guy said he was fit for competitions

Question 14

2-There must be an intent to deceive

Answer 14

-Scienter (guilty knowledge) -means the misrepresenting party knows they are misrepresenting facts, showing intent to deceive.

• also applies if someone makes a statement they don’t believe is true or recklessly makes a statement without caring if it’s true or false.

-also met if someone claims a statement is based on personal knowledge or investigation when not

Question 15

3. The innocent party must justifiably rely on the misrepresentation.

Answer 15

-the deceived party must have a real reason for relying on the misinterpretation

-must be an imp factor in which induced the party to entering the contract

-however not justified if the party believed extravagant stuff or if they knew the true facts

Question 16

4. To collect damages, a party must have been harmed as a result of the misrepresentation

Answer 16

-since recessions purpose is to return parties back to position they were before the contract- showing injury is necessary and proof is required

Question 17

undue influence

Answer 17

when a party was entered into a contracted as a result of excessive influence

-ex- old person entered into one by guardian which benefits the guardian

-essential that the party taken advantage of does not exercise free will

Question 18

duress

Answer 18

the use of threats to force someone to enter a party

• ex blackmail

Question 19

how to establish duress

Answer 19

-there must be proof that the threatening party is threatening smth they have no right to do and it usally must be wrongful/illegal

Question 20

Privity of contract

Answer 20

A third party—one who is not a direct party to contract—normally does NOT have rights

Question 21

exceptions to privity of contract

Answer 21

Transfer the rights or duties arising from the contract to another person through an assignment (of rights) or a delegation (of duties).

2. A third party beneficiary contract—a contract in which the parties to the contract intend that the contract benefits a third party.

Question 22

Privity of contract

Answer 22

A third party—one who is not a direct party to contract—normally does NOT have rights

Question 23

exceptions to privity of contract

Answer 23

1. Transfer the rights or duties arising from the contract to another person through an assignment (of rights) or a delegation (of duties). 2. A third party beneficiary contract—a contract in which the parties to the contract intend that the contract benefits a third party.

Question 24

third party beneficiary

Answer 24

someone who directly benefits from 2 ppls contracts meaning they become and intended beneficiary enabling them to have legal rights and can sue

Question 25

holly and fox example

Answer 25

Someone borrowed money from another. That person then loaned money to someone else who promised to pay the person the original lender back. They didn’t. The first guy can sue the third because the third is the promisor.

Question 26

Definition of “Third Party Beneficiary

Answer 26

One for whose benefit a promise is made in a contract but who is not a party to the contract

Question 27

Incidental Beneficiary

Answer 27

third person who unintentionally benefits from a contract between two other parties. However, because the contract wasn't made with the intent of benefiting them, they generally have no legal rights to enforce the contract.

Question 28

what is the most common way to discharge/terminate contractual duties

Answer 28

by performance of the duties

Question 29

discharge meaning

Answer 29

the end of an obligation when both sides have their duties in the contract, or when something occurs (like an event or a legal rule) that frees them from having to continue.

Question 30

Definition of “Performance”

Answer 30

fulfillment of duties arising under a contract with another

Question 31

In most contracts, promises of performance are not expressly conditioned/ qualified but are absolute promises T or F

Answer 31

T

Question 32

Absolute promises

Answer 32

are commitments in a contract that must be performed and if not then .the parties will be in breach of contract.

Question 33

Condition

Answer 33

requirement in a contract that depends on something happening in the future. If that thing doesn’t happen, the contract is canceled.

Question 34

Condition Precedent

Answer 34

Condition that must be fulfilled b4 a party’s performance can be required.

Question 35

tender

Answer 35

offer to perform by a person who is ready, willing, and able to do so

Question 36

2 types of performance

Answer 36

-complete -substansial

Question 37

complete performance

Answer 37

when parties beformance is as agreed and perfect

Question 38

Substantial Performance

Answer 38

A party who in good faith performs substantially ALL of the terms of a contract can enforce the contract under the doctrine of substantial performance.

Question 39

requirements to qualify as substantial performance

Answer 39

1-The party must act in good faith—if they intentionally fail to follow the contract, it’s a breach. 2. The work done must be close to what was promised, with only minor differences that can be fixed with money. 3.The result must provide almost the same benefits as originally agreed in the contract.

Question 40

- If performance IS substantial, the other party’s duty

Answer 40

remains absolute

Question 41

If performance is NOT substantial

Answer 41

then there is material breach and the other party is entitled to damages

Question 42

damages

Answer 42

the cost to fix the work and make it match the contract, but only if that cost is reasonable.

Question 43

if the cost is reasonable

Answer 43

then compliance

Question 44

If the cost is unreasonable

Answer 44

damages are based on the difference in value between what was done and what would have been done if the contract had been fully completed.

Question 45

Jacob & Youngs v. Kent, Kent

Answer 45

Kent hired J&Y’s to install plumbing, he specified a certain brand in the contract. J&Y used a comparable brand. Kent refused to pay, and the court sided with J&Y (construction company) because the method that they used was not greatly far off from the original promised method. Therefore they substantially performed the contract.

Question 46

t or f a nonbreaching party is excused from the performance of contractual duties.

Answer 46

t

Question 47

Breach of contract

Answer 47

not doing what you promised in a contract.

Question 48

material breach

Answer 48

when the performance is not at least substantial, meaning it’s a major failure. If this happens, the other party doesn’t have to fulfill their part of the contract and can sue for damages caused by the breach.

Question 49

A minor breach

Answer 49

means the nonbreaching party might pause their duties until the issue is fixed, but they still need to perform their obligations. Once the minor breach is resolved, they must continue fulfilling the contract.

Question 50

ANY contract can be discharged by agreement

Answer 50

of both of the parties

Question 51

Rescission

Answer 51

process by which a contract is canceled/ terminated, and the parties are returned to the positions they occupied before forming it.

Question 52

Mutual Rescission:

Answer 52

agreement btw the parties to cancel their contract, releasing them from further contractual obligations.

Question 53

for mutal recission what must occur

Answer 53

a new agreement w new offer acceptance and consideration

Question 54

Agreements to rescind most executory contracts

Answer 54

are still enforceable whether in writing

Question 55

Uniform Commercial Code (UCC)- rescind a sales contract

Answer 55

agreements to rescind a sales contract must be in writing if the original contract requires written rescission.

Question 56

Release

Answer 56

contract in which one party forfeits the right to pursue a legal claim against the other party.

Question 57

Discharge by Operation of Law

Answer 57

contractual duties may be discharged by operation of law. include material alteration of the contract, an applicable statute of limitations, bankruptcy, impossibility or impracticabil

Question 58

Material Alteration of the Contract

Answer 58

To prevent changes to written contracts, the law allows an innocent party to be released from the contract if the other party makes a significant alteration without permission and the unware party discoveres it

Question 59

2. Statutes of Limitations

Answer 59

set a time limit for when a party can sue for a specific reason. After this period ends, they can no longer file a lawsuit.

Question 60

Bankruptcy

Answer 60

. Bankruptcy: attempts to allocate a debtor’s assets to creditors in a fair and equitable fashion. Once the assets have been allocated, the debtor receives a discharge in bankruptcy i. Ordinarily PREVENTS the creditors from enforcing most of the debtor’s contracts.

Question 61

Impossibility of Performance:

Answer 61

After a contract has been made, supervening events may make performance impossible in an objective sense -applies only if the event could not have been forseen

Question 62

objective impossibility

Answer 62

literally cannot be done

Question 63

subjective impossibility

Answer 63

-impossible for them not anyone to perfrom -"i simply cant do it" -results in a breach of contract

Question 64

When Performance Is Impossible (3)

Answer 64

-when one of the parties dies or becomes incapacitated -when the specific subject matter is destroyed -when law redners performance illegal

Question 65

Temporary Impossibility

Answer 65

If Temporary Impossibility arises, once the temporary event ends, the parties ordinarily must perform the contract as originally planned.

Question 66

Commercial Impracticability

Answer 66

Courts may also excuse parties from their performance when it becomes SIGNIFICANTLY difficult or expensive than the parties originally contemplated at the time the contract was formed. - The added burden of performing not only must be EXTREME but also must NOT have been known or reasonably foreseeable by the parties when the contract was made. - Usually involves an event that increases the cost or difficulty of performance

Question 67

Frustration of Purpose

Answer 67

A contract will be discharged if supervening (following) circumstances make it impossible to attain the purpose both parties had in mind when they made the contract. -Must NOT have been reasonably foreseeable

Question 68

damages of a breached contract

Answer 68

Courts say that innocent parties are to be placed in the position they would have occupied HAD the contract been fully performed.

Question 69

4 types of damages

Answer 69

-compensatory -consequential -punitive -nominal

Question 70

Compensatory

Answer 70

Compensatory Damages that compensate the nonbreaching party for loss of bargain Compensate only the damages proven to be caused by the loss of the bargain -college example

Question 71

consequential damages

Answer 71

Foreseeable losses happening bc of a breach of contract Ex- a seller fails to deliver goods knowing the buyer plans to resell them immediately which can let the reseller receive lost profits as consequential damages

Question 72

punitive damages

Answer 72

Not generally awarded as the focus is on the compensating the party for loss not punish the wrongdoer However if breach involves a tort- punitive and reg damages may be allowed

Question 73

Nominal

Answer 73

When there is no actual fnan loss from a breach but it is still recognized Damages usually small like $1 - just to show principle

Question 74

Standard measure

Answer 74

For compensatory damages to cover the diff btw the value of promised and actual performance

Question 75

incidental damages

Answer 75

Expenses that are caused directly by a breach of contract ex-If a supplier fails to deliver goods, and the buyer has to pay extra to get the goods from another supplier

Question 76

Sale of goods

Answer 76

Difference btw contract price and market price at term of the breach

Question 77

Sellers breach

Answer 77

when seller breaches real estate contract the remedy=specific performance in which buyer is awarded the property

Question 78

what if specific performance isnt possible

Answer 78

the diff is btw the contract and market price of the land

Question 79

Buyers breach

Answer 79

also the diff btw contract price and market price

Question 80

Minority rule-

Answer 80

if the seller’s breach is unintentional, the buyer can only recover their down payment and any expenses, returning the buyer to their pre-sale position instead of giving them the benefit of the bargain.

Question 80

Rescission

Answer 80

Canceling the contract and returning both parties to their original positions.

Question 81

duty to mitigate

Answer 81

it is the innocent parties duty to mitigate or limit the damages and without doing this the court may reduce their damages they can earn

Question 82

what happens if damages and money are not enough to fix the breach of the contract

Answer 82

nonbreaching party can go to court for equitable remedy which include -rescission -restitution -specific performance -refromation

Question 83

Waiver of breach

Answer 83

When nonbreaching party decides to accept not good performance instead of demanding full performance Means they give up the right to demand perfect performance

Question 84

Restitution

Answer 84

Recovering any benefits conferred to the other party under the contract.

Question 85

Reformation

Answer 85

Changing the contract to reflect what the parties actually intended.

Question 86

when is refromation used

Answer 86

-cases of fraud or mutual mistakes, such as clerical errors. -incorrect written statements, ex they agreed orally but it was written down wrong Covenant not to compete -written non-compete agreement is deemed too restrictive (in terms of time or area), courts may reform the terms to make them reasonable instead of voiding the entire contract.