Contracts Flashcards

Question

Continuing Offers

Answer 1

* an offer may be a continuing offer; that is an offer to form a series of contracts * watch for facts in which a seller offers to sell to a buyer certain goods for a stated price over a specified time period

Answer 2

* an offer can't be accepted after it has been terminated | * an offer may be terminated by an act of either party or by operation of the law

Answer 3

• an offer may be termination by the offeree's failure to accept within the time specified by the offer or, if no deadline was specified, within a reasonable period (usually 1 month)

Answer 4

* an offer terminates when a offeree rejects it * a rejection is effective when received by the offeror * a statement by the offeree that they do not intend to accept the offer

Answer 5

* a counteroffer is an offer made by the offeree to the offeror that contains the same subject matter as the original offer, but differs in terms; kills the original offer * it is both a reject and a new offer * terminates the original offer and reverses the roles of the parties * the offeree giving a counteroffer becomes the offeror of a new offer, which the other party may accept or reject * mere bargaining does not kill off the original offer and does not constitute a rejection; the test is whether a reasonable person would believe that the original offer had been rejected * mere bargaining = question mark * counteroffer = period

Answer 6

• when an acceptance is made expressly conditional on the acceptance of new terms, it is a rejection of the offer • conditional acceptance is the new offer and the original offeror may form a contract by expressly assenting to the new terms •

Answer 7

* because an option is a contract to keep an offer open, a rejection of or a counteroffer to an option does not constitute a termination of the offer * the offeree is still free to accept the original offer within the option period unless the offeror has detrimentally relied on the offeree's rejection * effective when received

Answer 8

* a retraction of an offer by the offeror * revocation is effective when received by the offeree * a revocation by publication is effective when published * it does not matter whether the recipient actually reads the communication * an offeror may revoke by directly communicating the revocation to the offeree any time prior to acceptance (direct revocation) * an offer made by publication can be directly revoked only by publication through comparable means * an offer may be revoked indirectly if the offeree receives: (1) correct info, (2) from a reliable source, (3) of acts of the offeror that would indicate to a reasonable person that the offeror no longer wishes to make the offer * offeree must know about the revocation; must be aware otherwise it is just an attempted revocation

Answer 9

• offers can be revoked at will by the offeror, even if he has promised not to revoke for a certain period Exceptions: 1) option contract: an option is a distinct contract in which the offeree gives consideration for a promise by the offeror not to revoke an outstanding offer 2) merchant's firm offer (under Article 2 only): (1) if a merchant, (2) offers to buy or sell goods in a signed writing, and (3) the writing gives assurances that it will be held open, the offer is not revocable for lack of consideration during the time stated, or if no time is stated, for a reasonable time (but in no event may such period exceed 3 months even if the offer states more than 3 months) • UCC defines signed/merchant pretty broadly • if it is on letterhead = meets signed requirement 3) [foreseeable] detrimental reliance: when the offeror could reasonably expect that the offeree would rely to their detriment on the offer, and the offeree does so rely, the offer will be held irrevocable as an option contract for a reasonable length of time 4) beginning performance in response to true unilateral contract offer: an offer for a true unilateral contract becomes irrevocable once performance has begun; the offeror must give the offeree a reasonable time to complete performance; the offeree is not bound to complete performance - they may withdraw at any time prior to completion of performance, and there is no acceptance until performance is complete • substantial (mere) preparations to perform (as opposed to beginning of performance) do not make the offer irrevocable but may constitute detrimental reliance sufficient to make the offeror's promise binding to the extent of the detrimental reliance

Answer 10

• death by either party prior to acceptance will terminate a revocable offer The following events will terminate an offer by operation of law: a. death or insanity of either party - need not be communicated to the other party b. destruction of the proposed contract's subject matter c. supervening illegality • death does not automatically terminate a contract that has already been formed - usually go after the estate • death does not terminate irrevocable offers, such as an option contract or unilateral contract

Answer 11

* an acceptance is a manifestation of assent to the terms of an offer * language of offer controls acceptance

Answer 12

* only the person to whom an offer is address has the power of acceptance * a member of a class to which an offer has been directed also has the power to accept * an offeree's power of acceptance cannot be assigned, but if offeree paid consideration to keep the offer open, the right to accept is transferable * offeree must know of the offer in order to accept it for both unilateral/bilateral contracts

Answer 13

* unless an offer specifically provides that it may be accepted only though performance, it will be construed as an offer to enter into a bilateral contract and may be accepted either by a promise to perform or by the beginning of performance (you can still withdraw at any time, but it is a breach) * an offer is construed as inviting acceptance in any reasonable manner and by any medium reasonable under the circumstances * unless the offer says otherwise, acceptance of an offer to enter into a bilateral contract must be communicated to the offeror * silence as an acceptance: a court may find silence works as an acceptance if, because of prior dealings or trade practices, it would be commercially reasonable for the offeror to consider silence an acceptance; if the recipient of services knows or should have known that the services were being rendered with the expectation of compensation and, by a word, could have prevented the mistake, the recipient may be held to have accepted the offer if they fail to speak

Answer 14

* under Article 2, an offer to buy goods for current or prompt shipment is construed as inviting acceptance either by a promise to ship or by current or prompt shipment of conforming or nonconforming goods * the shipment of nonconforming goods is an acceptance creating a bilateral contract as well as ab reach of the contract unless the seller reasonably notifies the buyer that a shipment of nonconforming goods is offered only as an accommodation * buyer is not required to accept the accommodation goods and may reject then * if the buyer rejects, the shipper isn't in breach and may reclaim the accommodation goods, because the tender does not constitute an acceptance of the buyer's original offer * accommodation shipment rule applies only when shipment is used as a form of acceptance

Answer 15

* a unilateral is not accepted until performance is completed * the offeree must know of the offer to accept * must notify offeror within a reasonable time after performance has been completed except if: (1) offeror has waived notice; or (2) the offeree's performance would normally come to the offeror's attention within a reasonable time * the beginning of performance may create an option so that the offer is irrevocable * offeree is not obligated to complete performance merely because they have begun performance, as only complete performance constitutes an acceptance of the offer

Answer 16

* at common law, any different or additional terms in the acceptance make the response a rejection and counteroffer * under the UCC, the inclusion of additional or different terms by the offeree in a definite and timely acceptance does not constitute a rejection and counteroffer, but rather is effective as an acceptance, unless the acceptance is expressly made conditional on assent to the additional or different terms * whether the additional or different terms become part of the contract depends on whether or not both parties are merchants * offeree's additional terms are not part of the contract unless: both parties are merchants, it is not a material change (fact question), the offer expressly limits acceptance to the terms of the offer, or the offeror does not object to it within a reasonable time * if any party to the contract is not a merchant, the additional or different terms are considered to be mere proposals to modify the contract that do not become part of the contract unless the offeror expressly agrees * material change causes hardship/surprise to the offeror * industry custom is not a material change

Answer 17

• if any party to the contract is not a merchant, the additional or different terms are considered to be mere proposals to modify the contract that do not because part of the contract unless the offeror expressly agrees

Answer 18

* depending on the jurisdiction, different terms are treated either the same as additional terms or knocked out * gaps left by knockout terms are filled by UCC * must be a meeting of the minds * watch for differences in the price, quantity, or quality terms

Answer 19

• a merchant's memo confirming an oral agreement that contains different or additional terms is also subject to the battle of the forms provisions

Answer 20

• in situations in which it cannot be determined with certainty which specific communication was the offer and which the acceptance but the parties act as though there is a contract, the UCC considers this a bind contract even though the moment of its making is uncertain

Answer 21

• acceptance by mail or similar means is effective at the moment of dispatch, provided that the mail is properly addressed and stamped, unless one of these exceptions applies: 1) the offer stipulates that the acceptance is not effective until received 2) an option contract is involved (an acceptance under an option contract is effective only upon receipt) 3) the offeree sends a rejection and then sends an acceptance, in which case whichever arrives first is effective 4) the offeree sends an acceptance and then a rejection, in which case the acceptance is effective (mailbox rule applies) unless the rejection arrives first and the offeror detrimentally relies on it

Answer 22

• an acceptance transmitted by unauthorized means or improperly transmitted by authorized means may still be effective if it is actually received by the offeror while the offer is still in existence.

Answer 23

•if a contract is not formed by parties' communications, but they begin to perform as if they formed a contract, a contract is formed

Answer 24

* an auction sale is with reserve unless the goods are explicitly put up without reserve * with reserve means the auctioneer may withdraw the goods at any time until he announces completion of the sale

Answer 25

* courts will enforce a promise as a contract only if it is supported by consideration or a substitute for consideration * basically, two elements are necessary to constitute consideration: (1) a bargained for exchange between the parties; and (2) legal value, meaning that which is bargained for must be considered of legal value or, as it is traditionally stated, it must constitute a benefit to the promisor or a detriment to the promisee * there is no bargain involved when one party gives a gift to another * the element of consideration requires that the promise induce the detriment and the detriment induce the promise * an act of forbearance by the promisee (or a promise to act or forbear) is sufficient consideration to form a contract if it benefits the promisor * benefit does not have to be economic * past consideration is not consideration

Answer 26

• courts do not inquire into the adequacy or fairness of consideration •

Answer 27

* legal detriment results if the promisee does something they are not legally obligated to do or refrains from doing something they have a legal right to do * a legal benefit is the reverse: it is forbearance or performance of an act that the promisor was not legally entitled to demand or expect

Answer 28

• performing or promising to perform an existing legal duty is insufficient legal consideration • exceptions: 1) new or different consideration is promised 2) the promise is to ratify a voidable obligation 3) the preexisting duty is owed to a third person rather than to the promisor 4) there is an honest dispute as to the duty 5) there are unforeseen circumstances sufficient to discharge a party (such as impracticability), or under the modern view, if the modification is fair and equitable in view of the circumstances not anticipated when the contract was made • a good faith agreement modifying a contract subject to the UCC needs no consideration to be binding (just need good faith)

Answer 29

* Under general contract law, a contract can't be modified unless the modification is supported by new consideration * The modern view, however, permits modification without consideration if: (1) the modification is due to circumstances that were unanticipated by the parties when the contract was made and (2) it is fair and equitable * Under the UCC, consideration isn't necessary to modify; all the parties need are good faith promises of new and different terms

Answer 30

* partial payment of a debt that is due and undisputed: there is no consideration for that and it will not be enforceable * if you agree to pay back the debt early, or if there was a good faith dispute over whether that debt was due, then you can liquidate it for a reduced sum

Answer 31

• a promise to refrain from suing on a claim constitutes consideration if the claim is valid or the claimant in good faith believed the claim was valid

Answer 32

• promissory estoppel = promise + performance • it is only the right answer on bar exam if there is no consideration • promise made, reasonably foreseeable, detrimental reliance - justice requires enforcement • consideration is not necessary if the facts indicate that the promisor should be estopped from not performing • a promise is enforceable if necessary to prevent injustice if: a. the promisor should reasonably expect to induce action or forbearance b. such action or forbearance is in fact induced • depending on the court, it may award expectation damages (what was promised under the contract) or reliance damages (under second restatement) (whatever the promisee spent in reliance on the promise)

Answer 33

• contract rights may still be unenforceable because there is a defect in capacity making the obligations voidable by one of the parties, because there is a defense to formation of contract, or because a defense to enforcement of certain terms exists

Answer 34

• infants generally lack capacity to enter into a contract binding on themselves • intoxicated people - even voluntary a) voidable if the other person had reason to know of the intoxication b) the intoxicated person may affirm the contract upon recovery c) quasi-contractual recovery for necessaries furnished during the period of incapacity • mentally incompetent a) may disaffirm when lucid or by a later appointed legal representative b) may affirm during a lucid interval or upon complete recovery, even without formal restoration by judicial action c) contract is voidable d) liable in quasi-contract for necessaries e) a mentally incompetent person has no ability to contract once a guardian has been appointed; any attempted contracts by an incapacitated person who is under a guardianship are void • an incapacitated individual has the right to disaffirm their contract - but they do not have to • even if you believed they weren't a minor, it does not matter

Answer 35

* retaining benefits after gaining capacity * usually give them about a month after their 18th birthday to disaffirm or not (usually expressly or by conduct) * failing to disaffirm the contract within a reasonable time after reaching majority will result in implied affirmation

Answer 36

* an incapacitated individual is still liable for necessaries (food, shelter, medical care, clothing) * capacity defense to the contract price, but the minor will be liable in restitution for the value of the benefits received (FMV)

Answer 37

• contracts induced by duress or undue influence are voidable and may be rescinded as long as they are not affirmed • taking advantage of another person's economic needs is not duress, but withholding something someone wants or needs will constitute economic duress if: 1) the party threatens to commit a wrongful act that would seriously threaten the other contracting party's property or finances; 2) there are no adequate means available to prevent the threatened loss •undue influence (usually when dominant party is in a confidential or caregiver relationship with the influenced party: 1) undue susceptibility to pressure by one party 2) excessive pressure by the other party

Answer 38

• if the contract includes a term with at least two possibly meanings, the result depends on the parties' awareness of the ambiguity: a) neither party aware - no contract unless both parties intended the same meaning b) both parties aware - no contract unless both parties intended the same meaning c) one party aware - binding contract based on what the ignorant party reasonably believed to be the meaning of the ambiguous words •subjective intent is taken into account

Answer 39

• if both parties entering into a contract are mistaken about existing facts (not future happenings) relating to the agreement, the contract may be voidable by the adversely affected party if: (i) the mistake concerns a basic assumption on which the contract is made (ii) the mistake has a material effect on the agreed-upon exchange (iii) the party seeking avoidance did not assume the risk of the mistake •not a defense if the party asserting mistake as a defense bore the risk that the assumption was mistaken •if the parties to a contract make assumptions as to the value of the subject matter, mistakes in those assumptions will generally not be remedied because both parties usually assume the risk that their assumption as to value is wrong

Answer 40

* if only one of the parties is mistaken about facts relating to the agreement, the mistake will not prevent formation of a contract * if the non-mistaken party knew or had reason to know of the mistake made by the other party, the contract is voidable by the mistaken party * as with mutual mistake, the mistake must have a material effect on the agreed-upon exchange, and the mistaken party must not have borne the risk of the mistake * no relief unless it is a palpable, obvious mistake

Answer 41

* applies to both common law and UCC * empowers a court to refuse to enforce all or part of your contract * unfair surprise and oppressive terms, tested when the contract formed * unfair price alone is not a ground for unconscionability * determined by the circumstances as they existed at the time the contract was formed

Answer 42

• in most instances, an oral contract is valid • certain agreements, by statute, must be evidenced by a writing signed by the party sought to be bound • there are 6 - MYLEGS - (marriage, year, land sales, executors, goods for $500+, sureties • lifetime employment contracts are not subject to the statute of frauds 1) marriage - contracts where marriage is consideration; not just a promise to marry 2) performance not within 1 year from date of contract - a promise that by its terms cannot be performed within one year is subject to the statute of frauds; part performance does not satisfy the statute of frauds in this case; date runs from the date of the agreement and not from the date of performance; even if the contract can't be performed within a year, full performance by one party will remove it from the statute; it just has to be impossible to be completed within one year 3) interest in land: a promise creating an interest in land must be evidenced by a writing - includes sale of real property, leases for more than 1 year, easements of more than one year, mortgages, fixtures, minerals (or the like) or structure if they are to be severed by the buyer •equal dignity rule • contracts to build a building or to find a buyer for a seller (for example, a broker's contract) do not create an interest in land • full performance by the seller will take the contract out of the statue of frauds • part performance by the buyer may also remove the contract from the statute 4) executor or administrator promises personally to pay estate debts: a promise by an executor or administrator to pay the estate's debt out of their own funds must be evidenced by a writing 5) Goods priced at $500 or more: a writing is sufficient even though it omits or incorrectly states a term, but the contract is not enforceable beyond the quantity of goods shown in the writing 6) sureties: a person guaranteeing the debts of another person • must be collateral to another person's promise to pay, and not a primary purpose

Answer 43

* to determine whether the SOFs is satisfied and the contract is enforceable look carefully for a writing signed by the party to be charged (that is, sued). If only one party signed the writing, first check to see if the signature is of the party being sued. If not consider whether the merchants' confirmatory memo rule applies. If not merchants, the rule doesn't apply and the signature of one party cannot bind the other. * SWAP: when a writing signed by a party to be charged is not required for a sale of goods, even if for $500 or more: specially made goods, written confirmation by a merchant, admission in court, or performance (these facts take the contract out of the SOFs) * SOFs does not require a formal written contract * can be a receipt, a letter, a check with details in the memo line, or a written offer that was accepted orally * SOFs requires only one or more writings that (1) reasonably identify the subject matter of the contract, (2) indicate that a contract has been made between the parties, and (3) state with reasonable certainty the. essential terms * sale of goods: 1) quantity term and 2) defendant's signature * employment contracts: must state length of employment * writings evidence land sale contracts must contain a description of the land and the price * contracts for services must contain all material terms and defendant's signature (common law rules)

Answer 44

* noncompliance with the statute of frauds renders the contract unenforceable at the option of the party to be charged; person being sued can raise lack of sufficient writing as an affirmative defense * if it is not raised as a defense, it is waived

Answer 45

• a written contract can be modified orally, but the modification must be in writing if the contract as modified falls within the statute of frauds

Answer 46

* common law: even if a written contract expressly provides that it may be modified only by a writing, the parties can orally modify the contract; clauses are enforceable and we assume they have been orally waived * UCC: if a contract explicitly provides that it may not be modified or rescinded except by a signed writing, that provision is given effect; if the contract is between a merchant and non-merchant, however, this provision requires the non-merchant's separate signature.

Answer 47

* leases less than 1 year (can be oral) * if a seller conveys property to the buyer (that is, they full perform), the seller can enforce the buyer's oral promise to pay * part performance of real estate contracts that unequivocally indicates that the parties have contracted for the sale of land takes the contract out of the SOFs (payment, possession, improvement) (just need 2 of the 3 to satisfy Statute of Frauds without writing)

Answer 48

• as noted above, an oral contract that cannot be completed within 1 year but has been fully performed by one party is enforceable; partial performance does not satisfy statute of frauds

Answer 49

* part performance takes a sale of goods contract out of the statute of frauds when (1) the goods have been specially manufactured, or (2) the goods have been either paid for or accepted * if a sales contract is only partially paid for or accepted, the contract is enforceable only to the extent of the partial payment or acceptance * if an indivisible item is partially paid for, most courts hold that the statute of frauds is satisfied for the whole item

Answer 50

• specially manufactured goods - not suitable for sale to others by the seller in the ordinary course of business - seller made a substantial beginning in their manufacture or commitments for their purchase before notice of repudiation is received • admissions in pleadings or court -agreement admitted to under oath enforceable without writing • merchants - confirmatory memo rule - in contracts between merchants, if one party, within a reasonable time after an oral agreement has been made, sends to the other party written confirmation of the understanding that is sufficient under the statute of frauds to bind the sender (quantity terms), it will also bind the recipient if: (1) they have reason to know of the confirmation's contents; and (2) they do not object to the writing within 10 days of receipt

Answer 51

* a party can sue for the reasonable value of the services or part performance rendered, or the restitution of any other benefit that has been conferred * if part performance rendered takes the contract out of SOFs, the performing party has the option of suing on the contract for expectation damages rather than merely in restitution for the value of the benefit conferred

Answer 52

* for common law Ks, acceptance must mirror the offer's terms; it cannot omit or add new terms * for UCC Ks, acceptance with different terms may be valid (no mirror image rule)

Answer 53

* an acceptance that proposes additional or different terms from those offered operates as a valid acceptance, unless it expressly requires assent to the additional terms * Effect: additional or different terms will be considered proposals to modify the the K; they do not become part of the K unless the offeror expressly agrees (if one party is not a merchant) * Where both parties are merchants: additional terms become part of the K unless they materially change the offer, or offeror objects within a reasonable time, or the offer expressly limits acceptance to the terms of the offer,

Answer 54

* when the parties to a contract express their agreement in a writing with the intent that it embody the final express of their bargain, the writing is an integration * any other expressions - written or oral - made prior to the writing, as well as any oral expressions contemporaneous with the writing, are inadmissible to vary the terms of the writing * this rule does not apply to oral agreements * parol evidence is written or oral prior evidence * parol evidence only looks at what happened before the writing not after

Answer 55

1) whether the writing was intended as the final expression of the agreement; and 2) whether the integration was intended to be complete or partial. Evidence is admissible to show the parties' intent

Answer 56

* if integration is complete, the writing cannot be contradicted or supplemented * if the integration is partial, the writing may not be contradicted but may be supplemented by providing consistent additional terms * the UCC presumes all writings are partial integrations

Answer 57

• a merger clause recites that the agreement is the complete agreement between the parties

Answer 58

* you can introduce parol evidence as a defense to formation | * can be used to show formation defects (fraud, duress, mistake, and illegality) through extrinsic evidence

Answer 59

* if there is uncertainty or ambiguity in the written agreement's terms or a dispute as to the meaning of those terms, parol evidence can be received to aid the fact finder in reaching a correct interpretation of the agreement * if the meaning of the agreement is plain, parol evidence is inadmissible

Answer 60

• parol evidence does not bar extrinsic evidence showing the true consideration paid (such as evidence that the consideration stated in the contract was never paid)

Answer 61

•if a party to a written agreement alleges facts (for example, mistake) entitling him to reformation of the agreement, the parol evidence rule is inapplicable

Answer 62

•parol evidence can be offered to show subsequent modifications a written contract

Answer 63

• can bring in parol evidence to correct an error/typo

Answer 64

• parties conduct under prior installments of current contract

Answer 65

•parties' conduct in prior contracts

Answer 66

• community norms of which the parties either are or should be aware

Answer 67

* any affirmation of fact or promise made by the seller to the buyer, any description of the goods, and any sample or model creates an express warranty if the statement, description, sample, or model is part of the basis of the bargain * to be a part of the basis - the buyer must have relied on it when they entered into the contract * a statement relating merely to the value of the goods, or a statement purporting to be only the seller's opinion or commendation of the goods, doesn't create an express warranty

Answer 68

* implied in every contract for sale by a merchant who deals in good of the kind sold, there is a warranty that the goods are merchantable * to be merchantable, the goods must at least be fit for the ordinary purpose for which such goods are used * goods fit for ordinary, foreseeable purpose * absolute liability imposed on certain sellers * makes no difference that the seller didn't know of the defect or that they couldn't have discovered it

Answer 69

• assent procured by improper threat

Answer 70

* withholding something a person wants/needs * the contracting party threatening to commit a wrongful act that would seriously threaten other contracting party's property or finances and there are no adequate means available to prevent the threatened loss

Answer 71

* undue susceptibility to pressure by one party * excessive pressure by the other party * often arise when the dominant party is in a confidential or caregiver relationship with the influenced party

Answer 72

* may seek it when legal remedies are not adequate (subject matter of contract is rare/unique) * land sale contracts = unique

Contracts Flashcards

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