Contract/Sales Flashcards
(125 cards)
1
Q
When to use UCC art. 2
A
for sale of goods! (moveable, personal house)
if contract is mixed goods/services look to the primary purpose (what they wanted when made contract)
2
Q
When to use UCC art. 2A
A
ONLY in Texas
applies to lease of goods (not real property, but ex: lease of a car)
3
Q
What is a Contract and 2 Ways to Create one
A
legally enforceable agreement
- express contract: created by parties (oral or written)
- Implied in fact: created by conduct
4
Q
Restitution/Quasi-Contract
A
protects from unjust enrichment (last resort)
recover value of benefit conferred, not the contract price
5
Q
Bilateral Contract
A
where offer can be accepted in any reasonable way (flexible)
6
Q
Unilateral Contract
A
where offer can be accepted only by performing (not formed until total act of performing complete)
when:
- ‘offer only accepted by performing’
- reward, contest, prize
7
Q
Steps to Analyzing Contract
A
1: was there an offer
2. was offer terminated
3. was offer accepted
8
Q
What is an offer?
A
manifestation of intent to be bound
9
Q
Is an advertisement an offer?
A
generally no b/c no quantity term so unlimited ppl could accept (not fair)
Except: if ad specifies a quantity
10
Q
Open Price Term in Offer
A
Court will infer reasonable price at the time of delivery if price isn’t included
EXCEPT: price must be included for real estate contract
11
Q
Requirement Contracts (UCC Art. 2)
A
ex: ‘i will buy all requirement of beans from seller’
when quantity is measured by buyers needs/requirements a specific number is not required
But buyer can’t take seller by surprise if amount goes up (even in good faith)–can’t be out of line with prior requirements
12
Q
Offers Terminating by Lapse
A
offer lapses after stated term or reasonable time has passed (doesn’t stay open forever)
13
Q
Offers Terminated by Revocation
A
offer terminates when offeror revokes offer
14
Q
Direct Revocation of Offer
A
offerer indicates directly to offeree he changed his mind about the deal (no particular words are necessary)
15
Q
Indirect Revocation of Offer
A
offeror’s conduct indicates a changed mind and offeree was aware of this conduct
16
Q
Option Contract
A
makes offer irrevocable
a promise to keep offer open, that is paid for
no time limit
17
Q
Firm Offer (art. 2)
A
Makes offer irrevocable
if merchant promises in signed writing to keep offer open
Signed: loose interpretation (fax, letterhead, initials)
3 month time limit no matter what!
18
Q
Starting to Perform Under Unilateral Contract
A
makes offer irrevocable
w/unilateral offer, once offeree starts to do the job, the offeror can’t revoke
mere preparation doesn’t count
19
Q
When is Revocation Effective?
A
revocation is effective when it is received (NOT when sent)
20
Q
Rejection of Offer (3 main ways)
A
offer terminates when offeree rejects it by giving inappropriate response:
- Counter Offer (not mere questioning)
- Conditional Acceptance (rejection/counter)
- Acceptance Varying Offer only at common law
21
Q
Acceptance Varying Offer: Common v. UCC
A
Common: must be mirror image so addition/changing terms operates as rejection
UCC: additional/different terms included if:
- both parties merchants and
- not material change (cause hardship/surprise, not customary to industry) and if
- other party didn’t object to it in reasonable time
22
Q
Death of a Party Before Acceptance
A
terminates a revocable offer but not an irrevocable offer
23
Q
Starting Performance for Bilateral v. Unilateral Contracts
A
bilateral: means acceptance and implied promise to finish
unilateral: merely starting isn’t enough, must complete (starting makes it irrevocable)
24
Q
Improper Performance
A
simultaneous acceptance and breach of contract
25
Accommodation Exception to Improper Performance
if seller says he is sending non conforming goods as accommodation it's not acceptance/breach
buyer can send back goods at sellers expense
26
Timing of Acceptance (Mailbox Rule)
acceptance effective when mailed
(remember, revocation effective when received)
burden of lost letter: on offeror (all that matters is that it was mailed correctly)
27
Exceptions to the Mailbox Rule (3)
1. Offer states otherwise (can contract around it)
2. Irrevocable Offer: acceptance effective when received, not when sent b/c they will expire when option is up
3. Rejection sent first: it is a race, and whatever reaches offeror first will be effective
28
Lack of Capacity to Contract
| who (3) and what it means to the contract
1. minors
2. intoxicated
3. retarded
incapacitated person has right to disaffirm (doesn't have to)
29
Incapacitated but then gets Capacity
retaining benefit after capacity obtained means it becomes a valid, enforceable contract b/c person has implied he wants to be bound
30
Exception for Necessaries w/ Minors
incapacitated party is liable for necessaries (food, shelter, clothing, medical) but only reasonable value, not contract price
31
Ambiguity/Misunderstanding in Contract
parties on completely different wavelengths (saying same thing but meaning different things)
ship example
no contract will be made
EXCEPT: if one party knew/reason of the misunderstanding then contract interpreted for innocent party
32
Mutual Mistake
about material/significant facts
- -mistake about value is NOT significant
ex: item destroyed and neither party knew
will destroy contract
33
Unilateral Mistake
one party's mistake is not a fatal flaw
EXCEPT: if other party knew/reason about the other's mistaken belief that lead them to contract
34
What is Consideration, and What can Constitute Consideration (3)
bargained for legal benefit or detriment
1. promise
2. performance
3. forbearance/peace of mind
adequacy of consideration is irrelevant
must be over something legal to do
35
Past Consideration
NOT consideration b/c the work has already been performed
can't bargain about things already done
36
Does Contract Modification Require Consideration?
| UCC v. Common
Common: new consideration is req to modify contract
-performing pre-existing duty is not enough
UCC: consideration is not req to modify contract for sale of goods, if modification done in good faith
37
Partial Payment of Debt
| due/undisputed v. not due/disputed
Partial Payment if Due/Undisputed:
-ex: X owes Visa 5K, but they orally agree visa take 2K. Visa then demands other 3K. X must pay b/c there was no consideration for the agreement
Partial Payment if Not Due/Disputed
-agreeing to pay some amount early or to end good faith dispute would be consideration and it would be ok for partial payment to forgive the debt
38
Time Barred Debts
written promise to pay a debt that can't be collected on b/c of the stat of limitations is enforceable even w/o consideration
39
Promissory Estoppel as Substitue for Consideration
foreseeable reliance may make a promise enforceable even w/o consideration (like for promises)
40
SoF: When a Writing is Required (5)
1. Interest in real property (sale, lease, easement, by owner or agent)
2. Performance of Contract Can't be Completed w/in A Year (look at what is theoretically possible v. impossible on calendar)
3. Sale of Goods for 500 or more
4. Suretyship
5. Contract Modification, if contract as modified comes w/in SoF (over 500, longer than a year) or if contract forbids oral modifications (art. 2 only-common law doesn't let ppl add to SoF)
41
What is a Satisfactory Writing?
| UCC v. Common and 2 requirements each
Art 2:
1. have quantity and
2. signed by party to be charged (so can be one way street depending on who signed)
Common
1. all material terms (who, what)
2. signed by person its being enforced against
42
Real Property Exception to SoF (2)
1. lease of 1 yr or less
2. Part Performance
- requires 2 of the three:
1. some payment
2. possession
3. improvements on property
43
Work Contracts Exception to SoF
work contract for year or more must be in SoF but if it wasn't and they worked full time on oral contract they can still get paid.
if didn't work full year, can't recover on contract (use restitution)
44
Sale of Goods Exception to SoF
sale of goods of 500 or more in SoF
Exception: goods accepted and paid for (but only those goods actually accepted/paid for, not whole contract--so works only if goods are easily divisible. Shipments of bats v. downpayment on boat)
45
Custom Made Goods as Exception to SoF
only if there has been a substantial beginning and they are not suitable for resale
46
Judicial Admission as Exception to SoF
in judicial proceeding someone says contract happened
47
Merchants Confirmatory Memo as Exception to SoF (3 elements)
one party can use it's own signed writing to satisfy SoF against the other party if:
1. both are merchants
2. writing claims agreement and has quantity and
3. no written objection w/in 10 days
48
Main Purpose of Suretyship Exception to SoF
when the promise to pay actually benefits the surety and not the primary payer
49
When Does the Parole Evidence Rule Come into Play and What does it Do?
comes into play only if there is a written contract
keeps out PRIOR or CONTEMPORANEOUS agreements (oral or written) that contradicts the later writing b/c you assume the last writing is complete
doesn't keep out evidence of formation defects
50
Exceptions to Parole Evidence
(5)
(the evidence can get in)
1. Typo
2. defense against formation (ex: misrep)
3. interpret vague/ambiguous term
4. Add partially integrated writing (not all terms are included. the ballroom/sleeping ex)
5. All Later events
51
Merger Clause and Parole Evidence
ex: 'this contract is limited to terms here'
means writing is complete, can't be supplanted (everything before has merged into the agreement so you can't add anything)
52
Conduct to Explain Terms/Fill in Gaps
1. Course of Performance: how parties performed
2. Course of Dealing: what they did before
3. Usage of Trade: what others do in similar contracts
53
Seller's Express Warranty
(doesn't have to use words 'i warrant')
any statement of fact/description of goods as opposed to sellers opinion
ex: promise about goods or use of model/sample
54
Implied Warranty of Merchantability
| what it is and it's 2 elements
says: goods are fit for ordinary purpose. Implied if:
1. seller is a merchant
2. Seller deals in goods of this kind (so he has special knowledge)
55
Implied Warranty of Fitness for Particular Purpose
says: goods are fit for buyers particular use/purpose. implied if:
1. seller knows buyer has a special purpose and
2. seller knows buyer is relying on seller to select suitable goods
(seller doesn't have to be merchant!!)
56
Disclaimers for Warranties
seller CNA disclaim implied but not express warranties
magic words: 'as is' or 'with all faults'
not: no implied warrant of merchantability or fitness (unless it is very conspicuous)
57
Can Seller Limit Buyer's Remedies in Contract?
Yes, for breach of warranty (express or implied) if it is not unconscionable
limiting remedies for personal injury in consumer goods is considered uncons.
58
Presumptions for Risk of Loss (3)
1. contract can control who has risk
| 2. breaching party bears risk even if breach unrelated to loss
59
Shipment Contract
Where Seller Completes Delivery Obligations
Risk is then on the buyer.
Seller must:
1. get goods to common carrier
2. make delivery arrangements and
3. notify the buyer
Shipment contracts are presumed
60
Destination Contract
seller must et the goods all the way to the specified destination before risk transfers to buyer
61
FOB
free on board + name of city
risk passes to buyer at name of city
(if location is where seller is = shipment contract
if location is where buyer is = destination contract)
62
If It's not a Shipment Situation, who has risk of loss?
| buyer is picking it up or the seller is dropping it off
Seller is Merchant: seller bears risk until buyer gets possession
Seller is not a Merchant: buyer bears risk of loss once seller makes goods available
63
if newly constructed building is destroyed?
all loss is on contractor
64
Performance Requirement: UCC v. Common law
UCC:
-Perfect tender rule: seller must deliver the perfect goods in right place/right time and if not buyer has right to reject
Common Law:
- -performance doesn't have to be perfect, substantial performance is all that is req (almost is good enough)
- party can't commit material breach
65
Option to Cure for UCC
seller who fails to make perfect tender has option to cure:
if time in contract has not expired: seller has option to cure within that time
if time has expired: no option to cure unless seller had reason to believe the buyer would take the not perfect goods due to prior dealings
66
Installment Contracts in UCC
req/authorizes delivery in separate installments
perfect tender rule doesn't imply so buyer can only reject for substantial impairment
reject installment if substantial impairment in installment
reject contract if entire contract has become substantially impaired
67
Implied Acceptance
buyer keeps goods after having opportunity to inspect them (merely paying not enough)
68
Consequences of Accepting Goods
once accepted, you can't reject
buyer can get damages if seller is in breach
69
Consequences of Rejection/revocation of acceptance
return: buyer return goods at sellers expense
refund: buyer get money back he's paid for goods
damages: buyer get damages from seller for breach
70
Seller's Right to Refuse a Check
seller has right to refuse taking a personal check but if he does, the buyer has a reasonable time to get cash, even though contract deadline passed
71
If seller's performance isn't perfect, what can buyer do? (3)
what can buyer do in common law?
UCC
1. reject all goods, not just the non conforming ones
2. accept all goods, not just conforming ones
3. accept some goods, reject rest
get damages no matter what
Common:
buyer always get damages but only excused from contract if breach is material (breaching party get restitution for work done)
72
Finishing Contract Late
not a material breach unless time is of the essence
73
Divisible Contract
when payment can be made on a per unit basis, the breaching party can recover the contract price for any unit on which he substantially performed
74
Anticipatory Repudiation
Excuse to contract unless redacted. must be very clear that there will be a breach.
if so, can stop and immediately sue for damages.
person w/anticipatory repudiation can change his mind and contract can resume as long as other party hasn't relied on breach
75
Failure to Give Adequate Assurances
if other party is only unsure of ability to finish, ask for this (it's not anticipatory repudiation)
buyer can, in writing, ask seller for adequate assurances about quality of goods
but can't use it to rewrite the contract (just pay me in cash now) or demand particular assurances (just must be adequate)
76
Later Agreements by the Parties (4)
1. Rescission
- agreement to cancel contract
- each party must have some performance remaining
2. Modification
- agreement to replace existing contract w/new one
- replaces old contract immediately, so can only sue on new one
3. Accord/Satisfaction
-agreement to accept performance in future satisfaction of an existing duty
(satisfaction is the performance of the accord)
4. Novation:
- agreement to substitute new party for existing one
- if original parties don't consent, no novation
77
Impossibility (aka Impracticability for Art. 2)
later unforeseen event makes performance impossible so provides seller w/excuse
78
Is destruction of something necessary for performance an excuse b/c of impossibility/impracticability?
Common law: yes, excuse for non performance
UCC: yes but:
- seller w/risk of loss when goods destroyed excused
- seller excused only if damaged goods had been IDed in contract (set aside for this particular sale)
79
Supervening Government Regulations
excuses contract if stat. passed that prohibits contract's function or action
80
Increased Cost of Sellers Performance
MBE: never excuses seller's performance
Texas: may excuse seller's performance. look at:
- how much he's loosing and
- percentage increase
81
Frustration of Buyer's Primary Purpose
excuse for contract only if seller knew of buyer's purpose when they entered contract
82
Failure of Express Condition
| what it is, language used, and 2 types
express condition: limits obligations made by other contract lang but doesn't create independent obligation
lang: 'if' 'as long as' 'when' 'provided/on condition'
strict compliance w/condition required
ex: I will buy house provided it appraises for 2 million dollars
1. Condition Precedent: event happens, then contract. 'if it rains, then..'
2. Condition Subsequent: event cuts off obligation 'until --- you can do...'
83
Satisfaction Clauses
will only pay if satisfied
satisfaction is measured by reasonable person unless it is for work of art or matters of personal taste
84
2 Ways to Excuse a Condition
1. Failure to Cooperate
- person protected by condition does't try to fulfill her part of bargain
2. Waiver
- voluntarily give up protection of condition
85
Specific Performance as a Remedy
- real property
- UCC if goods are unique (including antiques) or there is an inability to buy substitute goods
- never service contracts
86
Unpaid Seller's Right to Reclaim Goods
generally no right to get goods back from buyer who hasn't paid
Exception: buyer is insolvent when he receives goods and seller makes demand w/in 10 days
(don't assume insolvency!)
But if buyer has sold goods to BFP third party no right for seller to reclaim EXCEPT seller can reclaim goods from anyone if buyer misrepresented his solvency to seller in writing w/in 3 months before delivery
87
Liquidated Damgages are Upheld if (2)
(and UCC exception)
(and what is best way to go about it)
1. damages are difficult to estimate at time of contract and
2. reasonable forecast of probable damages (not a penalty)
- reasonableness measured at time time of the contract
UCC: liquidated damages can be reasonable at time of contract or in light of actual damages--either valid
Better if per diem, graduated amount than one overall lump sum
88
Expectation Damages
put injured party in as good a position as full performance would
89
Common Law Expectation damages
What someone expected to get paid
what someone expected to make (expenditures and profit)
90
UCC Expectation damages for Buyer (3 options)
1. Cover Damages: cover price - contract price
- getting goods elsewhere
- if covered in good faith
2. Market Damages: market price-contract price
- if buyer doesn't bother to cover/doesn't cover in good faith
3. Loss in value: value as promised - value delivered
- if buyer keeps non conforming goods
91
UCC Expectation damages for Seller (4 options)
1. Resale damages: contract price-resale price
- if resells in good faith
- no damages if you resell for contract price
2. market damages: contract price -market price
- doesn't resell in good faith or not at all
3. Lost Profit: if seller is a volume dealer (unlimited supply so lost ability to sell two instead of one)
- must pay lost profits from breach
4. Contract price: for custom goods for buyer
- can't resell b/c custom or made to order
- buyer gets the stuff
92
Incidental Damages
cost to injured party of transporting/caring for goods and arranging substitute transaction
93
Consequential Damages
damages reasonably foreseeable to breaching party at time of contract--based on what the parties are told
not available to seller under UCC 2
94
Avoidable Damages
| UCC v. Common and what a comparable job is
common: can't recover if didn't mitigate w/reasonable effort (ex: don't have to take another job, but you're damages will be reduced by what you could make)
- comparable job: same kind of work in same city
UCC: don't have to do anything, no such thing as avoidable damages
95
Entrustment (UCC)
when owner entrusts goods to merchant who deals in goods of that kind (ex: jewelry dealer) he has no rights against a BFP who buys his stuff
-sue jeweler for conversion
96
Third Party Beneficiary
| what is it and who are parties
when 2 ppl enter into a contract intended to benefit a third party
Third Party beneficiary: person not party to contract but has rights b/c contract intended for her
Promisor: person who promises to perform for third party beneficiary
Promisee: person who secures the promise
97
Incidental v. Intended Third Party Beneficiary
Incidental: person benefited by contract on accident, contract wasn't made for her
-no rights
intended: contract for that person. right to enforce
98
Donee v. Creditor Beneficiary
donee: person getting performance as a gift
creditor: person getting performance to repay debt (rare)
99
Rescission/Modification of Third Party Beneficiary Contract
Promisor/promisee can rescind and modify contract until rights of third party vest. Vest when:
1. third party assents
2. third party learns/relies
3. third party sues to enforce
(but contract language will prevail)
100
Promisor liability to third party beneficiary
third party can sue breaching promisor even though there is no privity of contract
steps into shoes of promisee (so promisor can assert defenses against third party he could against promisee)
101
Promisee Liability to third party beneficiary
if promisor doesn't perform as promised the promisee is only liable if:
1. third party beneficiary was a credit beneficiary
102
Promisor Liability to Promisee
promisee can recover damages from promisor if no performance
but if it's a donee beneficiary there isn't a lot of damage
103
Delegation of Duties
transfer of a burden under a contract
contractual duties can be delegated w/o consent of person who is owed the performance (obligee)
104
Exceptions to Delegation of Duties (2)
1. contract language controls (if it prohibits delegation or assignment then you can't)
2. if it says no delegation it also means assignment and vice versa
105
Rights of the Obligee under Delegation of Duties
1. delegating party is still liable, since obligee never gave up any rights
2. delegatee who gets consideration is also liable (delegating party gets pushed down to surety)
106
Assignment of Rights
| what is it, the 2 steps to do it
transfer of the benefit under a contract
two ppl make a contract then one transfers his rights in the contract (like to receive money) to a third party
1. make a contract
2. assign rights under the contract w/present language of transfer ('i assign...i transfer')
107
Is consideration required for an assignment of rights?
No, b/c gift assignments are ok.
But gift assignments are easily revocable by the original party accepting the benefit
if there as consideration for the assignment then it can't be revoked
108
Restrictions on assignments of rights
1. contract language
- if it says 'rights under this contract are not assignable' it's ok to assign
- if it says 'all assignments under this contract are void' then not ok to assign
2. can't substantially change duties of obligor
- assignment of right to payment not substantial
- assignment of services is substantial
109
Can you assign a requirement contract?
yes, as long as the assignee's requirements are not out of line with the assignor
110
Who is Liable in an Assignment?
if original party didn't do work: material breach, original parties sue
if assigned party doesn't get money: can sue original parties-steps into shoes of assigning party
only required to pay assigned party when notified
111
Multiple Gift Assignments
last gratuitous assignee prevails over the earlier ones because each later one revokes the earlier one
112
Multiple Assignments for Consideration
first assignment for consideration prevails over all later assignments for consideration and any prior assignments for gift
Except: later assignee for consideration will win if he doesn't know of earlier assignment and is first to get payment/judgment against obligor (not just to notify but first to get judgment)
113
Which Contracts can't be assigned? (2)
1. long term contracts
| 2. unique personal service
114
If landowner breaches contract for construction after work has started but before it is complete?
contractor gets profits he would have gotten + cost incurred
he can stop work as soon as breach occurs
115
if landowner breaches construction contract before work starts
contractor can get profits he would have earned
116
Buyers right to Replevy
when seller refuses to deliver goods, buyer can recover them if:
1. goods are IDed in the contract
2. Buyer is unable to cover (get substitute goods after reasonable effort)
117
Warranty of Title and Warranty Against Infringements
warranty of title: seller's implied warranty that he had clear title to sell the item
warranty against infringements: implied w/merchants only, that the item is free of trademark/patent issues
118
CIF Shipment
price in contract includes goods, shipping, insurance
119
Illusory
a promise with unqualified right to cancel/withdraw at any time by one party
- promisor not bound to perform in the end
- lacking consideration
120
If Place of Delivery of Time of Payment not specified in contract
assume sellers place for delivery and assume payment upon delivery
121
Firm Officer Elements
must be in writing
must be signed by person making the offer
3 months
122
send in order can be accepted by
sending buyer notice you got order and will be sending the stuff
prompt shipment of conforming goods
prompt shipment of non conforming goods would be acceptance and breach unless notification of accommodation
123
things that must be in writing (6)
```
marriage
years
land
executor (out of pocket)
goods over 500
surety
```
124
Promissory Estoppel (consideration substitute) (4)
1. promise by P
2. reasonable expectation of reliance when made
3. actual reliance
4. interest of justice
125
assignments can be revoked unless (3)
1. assignee collects (b/c gift/deal is complete)
2. consideration given for assignment
3. assignee detrimentally relied
revoked if assignor collects from creditor
