Contracts Flashcards

Question

CONSIDERATION: LACK OF CONSIDERATION/SUBSTITUTE - Is Part Payment consideration for a Due & Undisputed Debt?

Answer 1

* *_Consideration/Consideration Substitutes_** * Consideration = bargained-for exchange* * **Due & Undisputed Debt:** part payment is **NO consideration** * **BUT** *written promise* to pay debt barred by SOL is **Enforceable** w/o** **conisderation * Payment of sum smaller than debt due not sufficient consideration UNLESS New/Diff Consideration** ** * **(1)****paid Earlier or** * **(2) in Stock instead of cash**

Answer 2

* *_Consideration/Consideration Substitutes_** * Consideration = bargained-for exchange* * **Promissory Estoppel = Consideration Substitute:** though no consideration, ***Foreseeable*** and ***Detrimental*** **reliance** will make promise enforceable (w/o consideration)

Answer 3

* *_Consideration/Consideration Substitutes_** * Consideration = bargained-for exchange* **NYBE (NY Law of General Obligations):** * If debt _due and undisputed_ --\> No consideration req. if ***Promise to Forgive*** in **signed writing**. * If debt is _time-barred_ --\> **Signed writing** is substitute for consideration (NYBE + MBE) * If it is a _contract modification_ --\> No consideration req. as long as ***Modification Embodied*** in **signed writing**

Answer 4

* *_Parol Evidence Rule_** * For integrated agreement, a court cannot consider parol evidence that contradicts that agreement.* * _Integrated:_ written final deal * _Parol Evidence:_ written OR spoken prior to or contemporaneous with writing _(not after)_ * _Merger Clause:_ highly persuasive only **_Exceptions: Parol Evidence Admissible_** * **Reformation (Scrivener’s Error):** NOT different deal; parol evidence to prove clerical error * **Rescission:** NOT different deal; parol evidence to prove flaw in process makes deal unenforceable. * **Explanation:** parol evidence explains vague terms * **Additional Words Rule:** parol evidence adds term to contract; ONLY for partially integrated agrmnt

Answer 5

**_Unenforceable B/c of Content of Agreement_** **Illegality:** _Public Policy:_ * Covenants Not to Compete: (1) time limitation, (2) geographic limitation; (3) business need * Exculpatory Clause: usually negligence OK BUT NOT intentional torts/gross negligence _Unconscionability:_ * Oppressive terms; unfair surprises at the time of contract in substance/process

Answer 6

**_UCC as Gap-Filler in Sales/Leases of Goods_** ## Footnote _For Risk of Loss in Sale of Goods:_ **(NYBE_)_ _Rules_**: For a **Lease of Goods,** owner/lessor *retains risk of goods* in hands of lessee, ***UNLESS _Finance Lease_*** (e.g. Bank buys, leases to lessee).

Answer 7

**_UCC as Gap-Filler in Sales/Leases of Goods_** _Risk of Loss in Sale of Goods:_ _Rule:_ 1. **Agreement Controls** 2. **Breaching Party is Liable** (EVEN if breach unrelated to loss) 3. **Shipment Contract:** _S_ retains risk until obligation complete 4. **_Destination Contract:_** 1. _Merchant S_ retains risk until B physically receives 2. _Non-merchant S_ has risk until she **tenders** (makes goods available to B: how, where, when to get goods) **Lease of Goods(NYBE)**: _owner/lessor_ retains risk of goods in hands of lessee, UNLESS finance lease (e.g. Bank buys, leases to lessee).

Answer 8

**_UCC as Gap-Filler in Sales/Leases of Goods_** ***S’s Delivery Obligation*** in: **_Common Carrier Contracts_** * **_(1) Shipment-K:_** S obligation compete before receipt * (1) *goods to carrier*; * (2) delivery arrangements; * (3) notify B * _**(2) Destination-K**:_ S has obligation to get *goods to* B @ *specific destination *; “_FOB (Buyer’s City)_" * **Note:** FOB always followed by location and **Risk of Loss** ("**ROL**") pases to B @ _named location_. * If Seller's location --\> Shipment * If Buyer's location --\> Destination **_Non-Carrier Case_** * **(3) No Use of Common Carrier-K:**. B either picks up or S delivers depending on whether S is S=M or S≠M --\> * If **S/M** --\> ROL passes when B takes **physical possession.** * BUT If S≠M, ROL passes to B upon **Tender of Delivery. (Pay then)**

Answer 9

**_Conduct Can:_** * **Explain Words** in the Contract * **Fill Gaps** in the Contract * *_Order of Importance of Conduct:_** * *1. Course of Performance:** what parties have done under this contract? * *2. Course of Dealing:** what these parties have done in earlier similar contracts * *3. Custom & Usage:** what is the custom in the industry in similar situations?

Answer 10

* **Cure:** S can CURE less-than-perfect tender **before contract Deadline Date** * S can cure by re-attempting **perfect tender** * **Availability:** If S can show that B had previously accepted imperfect tender, S will get opportunity to cure.

Answer 11

**_Performance in Sales of Goods Contracts_** * _Perfect Tender:_ general standard for sales of goods; * **less-than perfect tender = breach** and B has option to **reject** and not **pay**

Answer 12

**Installment Sales Contract** are **Not Subject to Perfect Tender** **Rule:** ONLY if explicit in contract language (NOT just b/c S made installment delivery); **Principle:** Continuing relationship = mistakes can be fixed in future

Answer 13

* **Acceptance of Goods**: Once goods accepted goods CAN'T be rejected * **Req.:** reasonable time for opportunity to **inspect** and **payment before inspection** is NOT acceptance.

Answer 14

* **GENERAL RULE:** B cannot revoke acceptance of goods * **EXCEPTION: Revocation of Acceptance OK when ** (1) something really wrong with goods(non-confirmity substantially impairs value) & (2) that was difficult to discover (latent defect). * **Note:** **Immediate act**=rejection; **Later act**=revocation * **B's Payment Obligation:** check OK by deadline, but S’s allowed to **refuse it (reasonable time allowed)** * **Consequence of Rejection/Revocation of Acceptance** * **Return:** Buyer can return goods to seller at seller’s expense * **Refund:** Buyer can get back any $$ paid for the goods * **Dmgs:** Buyer can get dmgs from seller for K-breach

Answer 15

**_Performance in Sales of Goods Contracts_** * _Perfect Tender:_ general std for sales of goods; less-than perfect tender (breach): B has option to reject and not pay * _Cure:_ less-than-perfect tender before contract deadline date: S can cure by re-attempting perfect tender * If S can show that B had previously accepted imperfect tender, S will get opportunity to cure. * _Installment Sales Contract Not Subject to Perfect Tender Rule:_ ONLY if explicit in contract language (NOT just b/c S made installment delivery); * Continuing relationship = mistakes fixed in future * _Acceptance of Goods:_ accepted goods **CAN'T** be rejected * Requires reasonable time for opportunity to inspect and payment before inspection is NOT acceptance. * _Revocation of Acceptance:_ (1) something really wrong with goods, (2) that is difficult to discover. * Immediate act=rejection; later act=revocation * _Payment:_ check OK by deadline, but S’s option to reject

Answer 16

_**Express Warranties**:_ statement of fact or promises, NOT opinions (puffing) CANNOT be Disclaimed [Seller]

Answer 17

_**Implied Warranty of Merchantability**:_ goods sold by merchant who *regularly sells such goods,* must be fit for their ordinary purpose [Merchant]

Answer 18

_**Implied Warranty of Fitness for Particular Purpose**:_ if B has particular purpose known to merchant [Seller]

Answer 19

**(NYBE)****Leases**do h**_ave_** warranties of fitness/merchantability**.**

Answer 20

**_Disclaimer of Implied Warranties:_** * Magic Phrases: “as is” “w/all faults” * Conspicuous Writing of Disclaimer

Answer 21

* ***Remedies*** for BOTH implied & express warranties ***can be limited UNLESS unconscionable*** * Limitations on personal injuries in consumer goods is ***_prima facie unconscionable_***

Answer 22

**_4 LATER AGREEMENTS that EXCUSE Contract PERFORMANCE_** **_Accord and Satisfaction:_** * New agreement between parties which agrees t**o discharge old contract if accord is satisfied instead.** * **Breach of Accord**: sue on original deal OR accord * Cashing check marked “paid in full” of disputed debt **_Modification → Substituted Agreement:_** * New agreement immediately discharges old contract, regardless of performance on modification **_Novation:_** * Mutually-agreed upon substitution of a new party to the contract: steps into the shoes of the existing party **_Rescission → Cancellation:_** * If neither party has accomplished full performance both parties can mutually agree to rescind contract.

Answer 23

**_Performance of C/L Contracts_** * **Anticipatory Repudiation:** unequivocal indication of non-performance (not just a request for more money).

Answer 24

**_Performance of C/L Contracts_** * Substantial performance makes breach immaterial and non-breaching party must still perform (sue for damages) (e. g. use of Reading Pipe instead of Cohoe Pipe)* * **General Rule:** Any breach, even **immaterial breach = damages** * Partial performance **that is NOT substantial performance** is a breach so there is NO contract, and **non-breaching party does NOT have to perform** (pay) * BUT _breaching party_ can sue **in quasi-contract** for work completed. * Express divisible contract divides payment on per-unit basis, so --\> examine performance on per-unit basis.

Answer 25

**_Impossibility_** * Increased cost is NOT an excuse * Destruction of necessary object (concert hall) IS an excuse * Death of necessary person is only an excuse where the person is unique (e.g. architect) **Frustration of Specific Known Purpose:** * At time of contract both parties know specific purpose for contract which is then frustrated: **Performance Excused** (e.g. rent apt to see parade which is then cancelled). **_Sale of Goods_** * **S has Risk of Loss:** destruction of goods excuses * **B has Risk:** destruction does not excuse (must pay) * **Fungible Good:** destruction of S’s quantity of fungible good NOT an excuse: can be replaced * **Commercial Impracticability:** may excuse (1) crop failures for specifically ID’able crop; (2) labor strike; (3) weather problems; (4) trade embargoes.

Answer 26

**_Delegation: Transfer of Duties_** _**General Rule**:_ contract can be delegated to 3rd party(3P) for performance **_Exceptions:_** * Contract prohibits delegation/assignment * Contracting party has specific skills/rep (artist). **_Breach:_** * Delegating Party **is liable** to other contracting party for breach by delegatee (3P). * Delegatee (3P) is **NOT liable** to **original non-delegating party** for breach, UNLESS delegatee assumes the duty by promising to perform.

Answer 27

* *_Assignment: Transfer of Benefits_** * Assignor assigns contract benefits; obligor must perform* **_Requires_**: present (NOT future) lang. (“I assign” NOT “I promise to assign.”; NO CONSIDERATION; +$5k must be in writing _**Restrictions in Contract (**Prohibition vs. Invalidation)_ * **Prohibition: “not assignable”:** assignee w/o knowledge of prohibition CAN still enforce against obligor. * **Invalidation:** “assignments are void”: NO enforcement against obligor (regardless of knowledge) * ** C/L Limitation:** assignment cannot change obligor’s duties significantly **_Rights and Defenses:_** assignee steps into obligor’s shoes, so * Assignee CAN sue obligor for breach * Obligor has same defenses vs. assignee as vs. assignor * Payment to assignor OK until obligor knows of assignment **_Multiple Assignments:_** gift assignments **(no consid**) = last in time wins; but if consid, 1st assignee wins, but 2nd can sue assignor

Answer 28

**_Contract Formation_** **_Quasi Contract:_** 2 Situations * No contract but ***detriment*** to one party * No ***express contract provision*** **_to deal_** with problem (e.g. what to do with deposit if contract is breached).

Answer 29

**_Contract Formation_** ## Footnote **_Implied in Fact_**: implied through party conduct (e.g. patient undergoes surgery after repeated promises of success by doctor

Answer 30

* *_3rd Party Beneficiary (TPB)_** * Promisee contracts with promisor that promisor will render some performance that will benefit TPB.* TPB must be **explicitly named** in the contract, or else she is ONLY an incidental beneficiary w/no contract right of enforcement **_Rights Vest in TPB_** **ONLY if** _TPB has_(1) knowledge PLUS (2.a) detrimental reliance OR (2.b) assent as requested **_Rights of TPB_** * TBP has contract law right of enforcement even w/o consideration w/ promisor. * However, TPB is subject to any defenses promisor has against promisee. * TPB also has NO right to sue promisee unless TPB is a creditor of promisee.

Answer 31

Contracts usually _Bilateral_ (an exchange of promises: promise for a promise) _Unilateral:_ exchange of act for promise; **MUST clearly state that performance is the ONLY means of acceptance.**

Answer 32

**_Void Contract_** * _Void K_ has no legal efect from beginning and ***Cannot be Enforced* by either party.** **_Voidable Contract_** * _Voidable K_ is one that one or both parties may elect to avoid (ex. by raising a defense that makes it voidable like infancy or mental illness). **An aggrieved party *may elect to ENFORCE* a Voidable K** **_Uneforceable Contract_** * _Unforceable K_ is an agrmt that is otherwise invalid but may not be enforceable b/c of an extraneous defense to K formation (ex. SOL or SOF).

Answer 33

**_Irrevocable Offers_** * **_Options_:** Offeree gives consideration for a promise by the offeror not to revoke an outstanding offer. * Can be held open for as long as parties specify. * **_Merchant's Firm Offer under Art 2_:** If (i) merchant, (ii) offers to sell goods in a signed writing and (iii) writing gives assurance that it will be held open --\> Offer is not revocable for lack of consideration duringtime stated, or if no time stated,for reaosnable time (that cannot exceed 3 months). * 3 Month Limit ONLY applies to offers **W/O support by Consideration** * If consideration --\> prob Option and thus no time limit.

Answer 34

**_CREATION OF CONTRACT_** When seeking to enforce a k or obtain damages ct must determine existing of a K **_Questions to Always Ask:_** 1. Was there **mutual assent**? 2. Was there **consideration** or substitute for consideraiton? 3. Are there any **defenses** to the creation of the contract?

Answer 35

**_A Breach of K occurs when:_** * (1) an absolute_ Duty to Perform_, And * (2) _Duty_ has _Not been Performed_ **ONLY for NYBE: Know Whether Breach is MInor or Material** * _Amt of Benefit_ Received by Non-Breaching Party * _Adequacy_ of Compensation * Extent of _Part Performance_ * _Hardship_ to Breaching K * _Negligent or Willful Behavior_ of Breaching K * _Likelihood_ Breaching Party w/ _Perform Remainder_ of K **Nonbreaching K must show** (1) willing and (2) able to perform

Answer 36

Yes, if down payment constitutes a valid liquidated dmg clause **Req. for Valid Liquidated Dmgs Clause:** difficult to ascertain and amount must be a reasonable forecast

Answer 37

**_Material Breach Occurs:_** when non-breaching party does not receive ***the Substantial Benefit*** of bargain b/c of * **(a) Non-Performance** or * **(b) Defective Performance** **Ex:** H sells interest in Company-D for 5-yr employement K w/ Company-E for salary of $3K a month and special position. Company-E removes H from special positon. * **Benefit:** Salary and Position * Benefit not realized when Company-E removed H from position.

Answer 38

**_CONTRACT MODIFICATION_** **Consideration:** CL reqs. modification w/ consideration but **UCC permits new/diff terms** to sales K **w/o consideration** **Writing:** Written can be modified orally but if SOG modified for $500 or more in w/t SOF --\> writing needed * **Only UCC Ks** can prohibit oral modification

Answer 39

**Analysis**: Ct looks to intent to determine whether condition or promise exist. If doubtful --\> Ct construe as promise. **_Absolute Promise v. Condition_** **Absolute Promise: **Commmitment to do or refrain form doing something. * If promise is unconditional--\> failure to perform to term is breac of k * **Result**: Gives rise to liability **Condition: **Condition is a promise *modifier*. **Tells you that** **If:** (1) X occurs or fails to occur OR (2) if X occurs party is released from duty to perform. * **Types:** Condition Precedent, Conidtion Concurrent; Condition Subsequent * NO breach of promise UNTIL promisor is under an immediate duty to perform (condition *may* create duty) * **Failure** of contractual provision that is only a **condition is not a breach** * But **discharges liability of promisor** whose obligation was based on the condition * **Result:** Relieves a part of the obligation ot perform **Remedy**: (1) If conditions fails/occurs + (2) one party fully/partially performed --\> recovery through unjust enrichment

Answer 40

**_Buyer's Dmgs_** * Measured @ time B learns of breach* (1) S does not deliver or B reject goods/revoke accept: * **K-$** **(**MINUS) **MP-$** OR **Cost of Replace** * **[PLUS] Incident** or **Consequential** Dmgs * If any, **less** expenses save as result of S' breach (2) S delivers NonConforming Goods that B accepts: * **Value of Delivered Good** (MINUS) **Value of Good in K** * [PLUS] **Incident** or **Consequential** Dmgs (3) S antiicpatorily breaches K: * **MP-$ **@ _time B knows_ of breach (MINUS) * **K-$** **Note:** For **Consequential** dmgs, If S knew of B's general or particual req. and loss could not be covered then S liable

Answer 41

**_Sellers's Dmgs_** * Seller's Dmgs: Measured @ time for Delivery* (1) B wrongfully Repudiates or Refuses to Accept Conforming Goods: * (i) **MP-$** (@ Time & Deliv Pl) [MINUS] **K-$** * (ii) Resell Goods(RSP) gets diference of **MP-$** [MINUS] **RSP-$ ** * (iii) If S is *Loss Volume Seller* --\>* Lost Profits Rule* Applies then **K-$** [MINUS] **_$ to S_** * ONLY applies when S has **Unlimited Inventory** (ex. would have sold 2 widgets instead of 1) * If S' supply limited, then must use other two measures --\> (i) or (ii) (2) B Accepts Goods - Action for Price **Circumstance**: (i) B does not pay or (ii) B does not accept Goods and S cannot resell at Reasonable Price or (iii) Goods lost/damaged when risk of loss is on B * Action for **Full K-$**

Answer 42

**_Land Sale_** Contract Price [MINUS] Fair Market Value of Land

Answer 43

**_Employment Contract_** * Breach by Employer: **Full K-$** * Breach by Employee: **$ to Replace Employee** **_Construction Contract_** * Breach by Owner: B gets **profits from K-$** [PLUS] **Costs Expended** * Breach by Builder: **$ of Completion** [PLUS] **Reasonable Comp for Delay**

Answer 44

**_Mitigation_ (Δ Affirmative Defense)** ***Π must mitigate or recovery (comparable benefit***) --\>* **Only reduces recovery and No Duty if Specially Mfg* **_Duty for Types of K:_** * _Employment_: RC to find same Kind/Rank/Grade * _K for SOG:_ S cannot bring Action a/gst Pf for Full K-# Unless no reasonable sell-$ or dmg/risk loss on B * _Mfgr:_ Stop Working but if completionn reduces dmgs --\> work * _Construction K:_ Stop Working

Answer 45

The **Common Law** covers anything but sales of goods or leases.

Answer 46

UCC Art. 2A covers leases of GOODS + Sale of Interest in Real Property (NOT buildings/land)

Answer 47

**Difference between K price and cost of replacement goods = COVER** ## Footnote **Req:** Reasonable K for substitute goods in **good faith** and **without delay** **Availability**: Not available if Buyer bore risk of loss

Answer 48

**This is a Destination Contract** * **Seller** bears initial **ROL until GOODs DELIVERED to Buyer's DOOR** * **ROL *shifts to* Buyer** as soon as carrier delivers.

Answer 49

**This is a Shipment Contract** * **Seller** bears initial **ROL until DELIVERY to CARRIER** * **ROL *shifts to* Buyer** as soon as Seller completes delivery obligations. * **Note**: * applies under the UCC, * Seller must deliver goods to licensed carrer +send docs + notify of hopment

Answer 50

**F.O.B**.: Free on Board

Contracts Flashcards

(75 cards)