Contracts Flashcards

Question

Common Law vs. UCC-2 Differences **Contracts**

Answer 1

1. Acceptance: Mirror Image Rule vs. Battle of the Forms 2. Modification: Common law requires consideration, UCC does not. 3. Promise to Keep Offer Open: Common law has options contracts, UCC has Firm offer, no consideration required, requires it to be in writing and for offer to be made by a merchant. 4. Essential Terms: Common requires parties, price, quantity, timing for performance. UCC requires only quantity and gap fillers apply everything else.

Answer 2

1. **Lapse of time:** * After time stated or within reasonable time) * Offer made in a face-to-face conversation is typically said to lapse at end of convo. 2. **Death or incapacity of either party:** 3. **Revocation by offeror** * Can be revoked at any time for any reason before acceptance, unless option contract. * _Direct_ = direct communication with offeree * _Indirect_ = Offeror takes any action inconsistent with intent to enter into K, and offeree learns oof such action through reliable source. 4. **Rejection by offeree:** * Direct objection or counter offer.

Answer 3

1. Unilateral K = Performance in exchange for promise (Bilateral = promise for a promise.) 2. Offeror not bund until performance is complete. 3. Offeror not bound until performance is completed 4. Offeree never bound. 5. Once performance begins, option K is created. 6. Mere preparations do not constitute an option K.

Answer 4

1. APPLIES ONLY TO ACCEPTANCES 2. Acceptance by mail effective upon DISPATCH. 3. Applies unless offeror provides otherwise. 4. **When REJECTION is mailed BEFORE ACCEPTANCE, whichever arrives first will be effective.**

Answer 5

Acceptance can be by: 1. Seller's promise to ship goods; 2. Seller shipping non-conforming goods, unless seller ships shipment as accommodation ( = a counter offer) 3. Seller shipping conforming goods.

Answer 6

* Rejection of the common law's mirror image rule. * An offeree's nonconforming acceptance or confirmation will operate as a valid acceptance of the offer. * **Additional Terms**: * BETWEEN MERCHANTS, additional terms in acceptance or confirmation become part of contract * EXCEPTIONS: (1) Offer limits acceptance to offers terms; (2) Offeror objects within reasonable time, or (3) Additional terms material alter new terms. * **Different Terms**: * Terms in the two writings dealing with same subject knock each other out.

Answer 7

1. A bargained-for exchange (something was promised in exchange for something of value); OR 2. A benefit to the promisor and a legal detriment to the promisee (Benefit/Detriment test) 3. **Illusory Promise:** An unenforceable promise that is vague and not clear or that one party has consideration while the other does not. (NOT VALID CONSIDERATION) ex. A contract with a bike merchant t buy “as many clothes as I want.” 4. **Gratuitous Promise:** Generally not enforceable.

Answer 8

**Illusory Promise:** ## Footnote An unenforceable promise that is vague and not clear or that one party has consideration while the other does not. (NOT VALID CONSIDERATION) Ex. A contract with a bike merchant to buy “as many bikes as I want.”

Answer 9

A gratuitous promise that a party relied to to their detriment can be enforced as consideration if: 1. A promise 2. Reliance was foreseeable 3. Promisee was induced to rely on promise to his detrimental. 4. Unjust if not enforced ("not fair") NOTE: DAMAGES ARE LIMITED TO RELIANCE DAMAGES. NOTE: CAN BE A SUBSTITUTE FOR CONSIDERATION.

Answer 10

1. **Signed Writing** (writing, quantity, and signed by charged party) 2. **Merchant Confirmation** (Sender & receivers are merchants, writing that is signed and contains quantity, and recipient does not send a written objection within 10 days) 3. **Judicial Admission** (party admits to K formation in court) 4. **Performance** (payment made/accepted or goods have been received/accepted. 5. Specially manufactured goods (goods are unique and cannot be resold in the ordinary course of business) 6. Detrimental reliance.

Answer 11

1. **Implied Warranty of Title (applies to property)**: Title is good, no encumbrances 2. **Implied Warranty of Merchantability:** Goods are fit for ordinary purpose for which they are used. NOTE: Seller must be a merchant. Ex. A toaster is going to toast. 3. **Implied Warranty of Fitness for a Particular Purpose**: Goods are fit for the particular purpose for which buyer intends to use the. NOTE: Seller must know the particular purpose and buyer relies on seller's expertise.

Answer 12

= when seller expressly makes promises as a part of the basis of the bargain. * Any affirmation of promise or fact * Any description of the goods * No need to use the words “warranty” or guarantee. However, vague “sales talk” statements are considered puffery.

Answer 13

1. **Trade Usage:** **What all members oof the trade do**; Any _practice or method of dealing having such regularity in a trade_ as to justify an expectation that it would be observed in respect to the transaction in question. 2. **Regular Course of Dealing**: _What the parties did in their previous conduc_t that is expected to establish a common basis of understanding in interpreting their subsequent transactions. 3. **Regular course of Performance**: How the parties acted under their current contract; When a contract involves repeated occasions for performance by a party and the other party accepts it, with knowledge of the performance and opportunity to object. * Admissible to supplement terms and explain ambiguities * Inadmissible to contradict express terms. * If conflict: Course of Performance \> Course of Dealing \> Trade Usage

Answer 14

= a clause providing that the terms of a contract is the complete and final agreement between the parties. (Parole Evidence Rule)

Answer 15

1. **Does NOT apply to subsequent agreement** (these are allowed) 2. **Does NOT apply too collateral agreement** (agreements made that are entirely distinct from the subject agreement are allowed) 3. **Does NOT apply to attacks on the validity of the agreement** (allowed to show duress, fraud, mistake, for failure of a condition precedent.) 4. **UCC Exceptions:** Evidence course of performance, course oof dealing, and trade usage allowed in too supplement, even if completely integrated.

Answer 16

Buyer has obligation to accept and pay for goods, seller has obligation to deliver goods. Risk of Loss allocates loss in the event that something happens to the goods before buyer receives them. 1. **Carrier**: When parties of a K agree to use a common carrier: * ROL transfers to buyer when goods are delivered to the carrier, and buyer bears ROL if goods are damaged in transit. 2. **Non-Carrier**: When parties do not agree to use a common carrier: * If seller is a merchant, ROL shifts to buyer once goods are delivered. (HIGHER STANDARD FOR MERCHANTS, RESPONSIBLE FOR LONGER AMOUNT OF TIME) * If seller is not a merchant, ROL transfers to buyer as soon as goods are made available (tendered).

Answer 17

1. **Common Law Pre-Existing Duty Rule**: A promise to increase compensation for duties already owed in unenforceable because there is no consideration for the modification (NO BARGAINED-FOR EXCHANGE) * **EXAMPLE**: Contractor and homeowner enter into K for one price. Contractor asks for more money because price to materials increase, and owner agrees to pay more. Owner's promise to pay more is NOT enforceable because contractor has pre-existing duty. * **EXCEPTIONS**: Reliance (homeowner agrees and contractor acts in reliance) or mutual modification due to unforeseen circumstances (ex. Strikes, shortages, economic depression, war, and changed construction conditions like a sinkhole, etc.)

Answer 18

An agreement modifying a contract needs to additional consideration, as long as it is made in good faith. * Good Faith = honesty in fact in the conduct or transaction * Purpose: To allow contracting parties to freely adapt to changing circumstances

Answer 19

1. Unilateral Mistake: When at least one party is mistaken about material fact(s) * Voidable when unconscionable (Ex. Party miscalculated bid by error, r other party realizes bid was significantly lower than all other bids) 1. Mutual Mistake: * Mistake is made by both parties at the time the K was made * Mistake involved a basic assumption on which the contract as made * Mistake material affects the contract * K is avoidable only by adversely affected party. * Example: Contract for sale of farm land. Both parties believed there was an adequate water source to water the plants being grown, but it wasn't. Voidable by buyer. NOTE: Does not apply when party assumes the risk.

Answer 20

* Occurs when both parties attach a different meaning to the same term. * When one party is aware of the other party's assumption, the first party will be bound by the other party's assumption. Parties enter into K for chickens. Party #1 thinks there is only one type of chicken (broiler chickens). Party #1 Knows there is two types of chickens, broiler and stew chickens, AND KNOWS PARTY #1 EXPECTS BROOILER CHICKENS. Party #2 is bound by Party #1's assumption.

Answer 21

= incorrect or fraudulent misrepresentations of facts during contract negotiations that causes reliance on the part of the other party. * Misrepresentation MUST BE INTENTIONAL AND MATERIAL for defense to apply * If misrepresentation, K is VOIDABLE or able to be REFORMED. * Example: Misrepresenting a cubic zirconia as a diamond in a transaction.

Answer 22

1. The occurrence of an event, the non-occurrence which was a basic assumption of the contract. 2. Party must not have caused the occurrence. 3. Party must not have assumed the risk. 4. Events that cause impossibility: * Illegality fo subject matter * the subject matter (property) is destroyed * One of the parties die/become incapacitated * Natural forces interrupt the K * Performance will put party is substantial risk of physical harm (ex. Hired t out shingles on a roof, but them it is discovered that the roof is unsound.)

Answer 23

1. Occurrence of a contingency (future event), the **non-occurrence of which was a basic assumption of the contract** 2. Contingency was **unforeseen** 3. Contingency caused a **serious financial burden** 4. Party claiming the defense **did not cause the supervening event or assume the risk.**

Answer 24

= when an unforeseen event undercuts a **party's purpose** of entering into the contract in the first place.

Answer 25

* **Accord:** A NEW AGREEMENT in which the promisor in a contract promises to perform a different obligation than the one he is contractually bound t operfoorm, and the proomisee agrees to oaccept the different obligation. * Satisfaction: The performance of the accord. * Consideration required. (Is usually less in value than the original consideration)

Answer 26

1. Anticipatory Repudiation can be established by either: * Party's definitive statement that it will breach; or * Voluntary act that render's a party unable to perform. * **Revocation:** Can be revoked unless other party acts in reliance of the repudiation (ex. orders from another seller), commences an action for breach, or accepts the repudiation by communicating acceptance to party. * **RIGHTS AFTER REPUDIATION:** Party can cancel the K, ignore the repudiation, or commence an action for breach or specific performance. 2. If AR cannot be established but party has reason to suspect repudiation by another party, party has a right to make a demand for **adequate assurances**. * If adequate assurances not given = repudiation * **Under UCC: Adequate assurances must be made within 30 days.**

Answer 27

1. **Material Breach:** If breach is serious enough, court will treat it as a breach oof an express condition and the aggrieved party is generally discharged from his contractual obligations. 2. **Substantial Performance:** If breach is less serious and party has rendered substantial performance, court will treat performance as “close enough” and the aggrieved party will not be discharged.

Answer 28

Failure for the performance of one aspect of the contract will not necessarily result in a breach of the entire contract. These concepts are similar to the concept of an installment contract. Ex. * For the first month, the company will purchase 500 bushels of Gala apples at a rate of $7 per bushel. * In month two, the company will require a shipment of 500 bushels of Fuji apples at a rate of $8 per bushel. * In month three, they will receive 500 bushels of Pink Lady apples at $9 per bushel. * After that, the same cycle continues throughout the next three years. * If the vendor supplying the fruit were to accidentally ship the customer pomegranates in the third month instead of the apples, they would have [breached the contract](https://www.upcounsel.com/breach-of-contracts). However, since they had successfully performed the first three months of the contract, they will be entitled to payment for that since the breach did not occur until the delivery in month four.

Answer 29

**Under the Perfect tender rule, terms of a contract are enforced exactly, with each term treated as an express condition.** **If seller fails to make perfect tender, buyer has 3 options:** 1. **_Accept the goods_** * Buyer must have reasonable time to inspect the goods and signify acceptance by: (1) stating that good conform; (2) accepting the non-conforming goods; or (3) not accepting the non-conforming goods but failing to reject. * If buyer accepts, he is obligated to pay K price. * Buyer can revoke acceptance if non-conformity substantially impairs value of goods and EITHER the buyer accepted because he did not know of nonconformity OR seller promised too but failed to cure defect. * **Right to Cure**: Must be before K deadline. If after K deadline, must have reasonable belief that delivery was acceptable (due to trade usage, course of dealing, or course of performance) must give reasonable notice to buyer and deliver within reasonable time. 2. **_Reject the goods_** * Must reject within a reasonable time and notify seller. if not, it is deemed accepted. * Buyer then has option to sue for damages unless cure applies. 3. **_Accept in part, reject in part_** * Can one do s oil commercial units of shipment

Answer 30

1. **Minors:** * K is voidable by minor, but can be ratified once they turn 18. * If K was for necessities (ex. hotel when minor is stranded) the minor is NOT liable for damages or the value of the goods/services, but must returns any goods received. 2. **Mental Incompetence:** * Lacks capacity to contract if mentally incompetent at time of K * Can ratify if later becomes competent * Obligated to return goods and (UNLIKE MINORS) is liable for damages and value of goods/services * Same as for necessities

Answer 31

1. Fraudulent Misrepresentation 2. Non-fraudulent (Negligent) Misrepresentation 3. Fraudulent Non-disclosure 4. Duress 5. Undue Influence 6. Unconscionability 7. Public Policy (K was illegal or done for purpose of committing crime)

Answer 32

Two Types: 1. **Procedural (Unfair bargaining process)**: Created an absence of choice for aggrieved party. 2. **Substantive (Unfair terms):** Terms are unreasonably favorable for one party. **Legal Consequences:** Refuse to enforce K or cut out offending clause and enforce remainder.

Answer 33

Only buyer can recover. Applies to damages that were reasonably foreseeable by seller at the time of contracting.

Answer 34

When there is a breach, buyer can cover the loss by acting in good faith and without reasonable delay by contracting with another party for the purchase off replacement goods.

Answer 35

Offers and acceptances are held to a reasonable listener standard. This means that a statement or action will constitute an offer or acceptance if a reasonable person listening or viewing would conclude it was an offer or acceptance.

Answer 36

A collateral agreement (separate agreement) is allowed in as extrinsic evidence if: * It does not contradict the final, written agreement, and * the agreement does not contains terms that would normally be included in the ofinal agreement.

Answer 37

* Courts decide * Will look at factors such as the use of merger clauses, or whether it contains all the usual terms that are normally included in a contract of the such. (All necessary terms present)

Answer 38

1. UCC or Common Law? 2. 2. Is there a K? 3. Is K legally enforceable? (Defenses to formation) 4. What are the terms to K? (Interpretation, gap fillers, default rules) 5. Was K properly performed? (breach, assignment, delegation, TBP) 6. Any excuse for non0performance? (then, no breach) 7. Remedies

Answer 39

1. **Common Law**: K's for services, real property 2. **UCC Art. 2**: K's for sale of goods (tangible, moveable)

Answer 40

= A **manifestation of willingness** to enter into a **bargain** made as to justify another person in understanding that his **assent** to that bargain is **invited to conclude it.** Requires **material terms** * Must not be vague * CL requires price, parties, and subject; * UCC only says K must have a quantity term.

Answer 41

= no offer. Exceptions: 1. Advertisement for reward = unilateral offer 2. Advertisement **IS** an offer **IF** it specifies _limited quantity_ & _who can accept_ 3. Price quote can be offer if sent in response to inquiry.

Answer 42

1. _Lapse of time_: Reasonable time OR Time stated in offer passes 2. _Death/incapacity_ of a party **before acceptance** (Exception: irrevocable offers) 3. _Revocation_ **before acceptance** 4. _Rejection_ * Counteroffer * Conditional acceptance * Additional Terms (rejection = CL only, mirror image rule)

Answer 43

Offer is irrevocable for up to _3 months_ if: * Offer is for sale of goods (_UCC_); * _Offeror is a merchant_; and * Promise to keep offer open is _in writing, signed by offeror_ NOTE: No consideration necessary. NOTE: Differs from Option K under CL

Answer 44

1. Offeror promises not to revoke or to hold offer open; AND 2. Promise is supported by payment or other consideration

Answer 45

1. Unilateral offer by offeror 2. Start of performance by offeree 3. Makes offer irrevocable for reasonable amount of time to complete performance NOTE: Mere preparation is not enough to meet requirements for start of performance. [However, mere preparation may be enough for detrimental reliance.]

Answer 46

1. Offeree relied on offer 2. Reliance was to offeree's detriment 3. Reliance was reasonably foreseeable **NOTE**: Often comes up with GC and Sub-C contracts when GC bids on larger K

Answer 47

1. **Offeree starts to perform** 2. **Delayed Communications** 1. All communications other than acceptance = effective when received 2. Acceptance generally effective when mailed (Mailbox Rule) 3. Rejection mailed before acceptance = first to be received is effective 4. Cannot use mailbox rule to meet an option K deadline - actual receipt must be by deadline. 3. **UCC Seller of Goods send Wrong Goods** 1. _General rule_: Sending wrong good is a simultaneous acceptance and breach of K 2. _Exception_: When sending nonconforming goods is made as an accommodation, then it is a counteroffer and no breach; seller must give reasonable notice that it is sending nonconforming goods.

Answer 48

= a bargained for exchange (look for a promise or a detriment).

Answer 49

= substitute for consideration (only use if there isn't any) 1. **A promise** by offeror 2. **Reliance** on promise by offeree that is _reasonable_, _foreseeable_, and _detrimental_, and 3. Enforcement of promise is necessary to **avoid injustice**.

Answer 50

1. Minors 2. Mental incompetents (lack ability to understand K) 3. Intoxicated persons (IF other party knew of intoxication)

Answer 51

1. Promises to answer for debts of another (Suretyship) 2. K for services not capable of full performance within 1 year 3. Transfer of interest in real estate (except leases 1 year or less) 4. Sale of goods $500 or more

Answer 52

**Common Law**: 1. K must contain all material terms (parties, price, and subject) 2. Signed by party against whom enforcement is sought **UCC Art. 2**: 1. Writing must indicate K for sale of goods 2. Contains a quantity term 3. Signed by the defendant 4. Exception b/tw Merchants: signed writing by one merchant to another where the recipient does not timely respond is enough to satisfy S of F. Also means merchants cannot reject by failing to respond. **Judicial Admission**: D asserting S of F defense admits in a pleading or testimony (under oath) that a K existed = satisfied (even if not in writing)

Answer 53

Contracts for the sale of goods (UCC) Good faith = honesty in fact and observance of reasonable commercial standards of fair dealing Performance of K: UCC imposes obligation; seller general must make perfect tender and fulfill delivery obligations

Answer 54

NOTE: On an essay, make sure to distinguish between and separate equitable and legal remedies. **RULE: A court will ONLY award equitable remedies when there is no adequate legal remedies.**

Answer 55

NOTE: Only awarded when there is no adequate legal remedy available. 1. Specific Performance and Injunctions 2. Rescission and Contract Reformation 3. Quiet Title and Ejectment (Property Contracts) 4. Unjust Enrichment and Quasi-Contract

Answer 56

= Types of equitable remedies (awarded only when no legal remedy available) 1. **Specific Performance**: Court is ordering a party to do something * **RULE:** Court will award specific performance when the _subject matter of the contract is unique._ * **NOTE:** NOT available for employment K's or contract involving personal services. * **NOTE: More liberal under the UCC - “Unique” = cannot find substitute.** 2. **Injunction:** Court is ordering a party not to do something * **RULE:** A court will award an injunction when it is necessary to prevent _irreparable harm_ * **NOTE:** In property K's, a piece of land is automatically considered unique.

Answer 57

= Types of equitable remedies (awarded only when no legal remedies) 1. **Rescission:** Contract is cancelled and parties are put back into same position they were in before they entered into the contract. * **RULE:** Court may rescind a contract when a party can successfully assert an affirmative defense such as _misrepresentation_, _mutual mistake_, _duress_, or _undue influence_. 2. **Contract Reformation:** Is the rewriting of a contract by a court to represent the _“true intent” of the parties._ * **RULE:** Court may reform a contract when a party can successfully assert an affirmative defense such as _misrepresentation_ or _mutual mistake_.