Contracts Flashcards
(109 cards)
1
Q
Four elements of a contract
A
Offer
Acceptance
(together = “mutual assent.”)
Consideration or a substitute
no defenses to formation
2
Q
What is the applicable law for contracts?
A
Article 2 of the UCC for sale of goods; common law for all other types of contracts
3
Q
Rule for the formation of contract under UCC – recite at beginning of every essay
A
“A contract for sale of goods may be made in any manner sufficient to show agreement,” including conduct by both parties showing recognizing of the existence of such K.
4
Q
In a mixed contract, which law governs?
A
The predominant purpose of the contract determines which law governs.
5
Q
Definition of an “offer”
A
1) a manifestation of intent to contract by one partner; 2) with definite or reasonably certain terms;
3) that is communicated to an identified offeree.
6
Q
Definition of “acceptance”
A
manifestation of assent to the terms of the offer, which indicates a commitment to be bound.
7
Q
Impact of start of performance on bilateral v. unilateral contracts:
A
Bilateral K: the start of performance manifests acceptance
Unilateral K: start of performance only makes an offer irrevocable and the offer is accepted only when performance is complete
8
Q
Form of offer termination:
A
1)rejection or counter-offer by the offeree
2) lapse of time
3) revocation by the offeror
4) death/incapacity of either party
9
Q
how can offers be revoked?
A
usually any time before acceptance through unambiguous words or conduct by the offeror to the offeree indicating an unwillingness or inability to contract.
10
Q
When is revocation of an offer effective?
A
When received by the offeree
11
Q
How can offers be terminated when communicated indirectly?
A
When the offeror takes definite action inconsistent with an intention to enter into the proposed contract and (2) the offeree acquires reliable information to that effect
12
Q
What kinds of offers are irrevocable?
A
1) option contracts (consideration given for promise to keep offer open)
2) a Merchant’s firm offer
3) offers that were relied on to the offeree’s detriment
13
Q
What is a merchant’s firm offer?
A
(1) an offer to buy or sell goods
2) by a merchant, aka, a person who deals in goods OF THAT KIND
3) in a signed writing
4) which states that the offer will be held open and is not revocable during the time stated (if no time offer is stated) but no more than 3 months
5) and the assurance to keep the offer open is separately signed by the offeror if the form is signed by the offeree.
It is enforceable without consideration
14
Q
When is a rejection effective?
A
Upon recept of the offeror.
15
Q
Can offer be accepted after it is rejected?
A
No, not unless there is an agreement to the contrary.
16
Q
What is a counteroffer?
A
It is both a rejection of the original offer AND a new offer. A Q or request for unspecified changed terms (which no substitute terms are offered) is NOT a counteroffer, and still allows for the acceptance of the offer.
17
Q
When is an offer deemed accepted?
A
When it is sent or communicated, e.g., placed in the mail
18
Q
hen is an offer deemed revoked?
A
Only when received by the offeree.
19
Q
Mailbox rule
A
If offeror mails a letter revoking the offer but the offeree sends a letter to the offeror accepting BEFORE receiving the revocation letter, then a valid K has been formed.
20
Q
What is the mirror image rule?
A
An acceptance must exactly mirror the offer. Acceptance with any changes constitutes a counter offer, which revokes the original offer. This is the CL rule
21
Q
What is the mirror image rule under the UCC?
A
There is no mirror image rule under teh UCC; it does not apply. Acceptance does NOT have to mirror the offer and the acceptance may include different or additional terms, without revocation of the offer and thus constituting a valid K.
22
Q
What impact do changes to K have under the UCC?
A
The offeree’s different or additional terms are deemed included in the K only if (1) both parties are merchants, (2) the term is not a material change, (3) the offer does not expressly limit acceptance to the exact terms of the offer; (4) no objection was made within a reasonable time.
23
Q
What is the definition of a material change?
A
One that is likely to cause hardship or surprise to the offeror, ie disclaimer of warranties, an arbitration clause, payment of shipping/handling fees.
24
Q
What happens if the terms of an agreement are not certain? Example of invalid K?
A
The agreement is indefinite and is not enforceable. Contract that is indefinite as to duration is generally invalid and unenforceable.
25
What are the essential terms for a sale of goods under the UCC?
Only the quantity, even if missing price, because a reasonable price term (determined at time goods are delivered) will be supplied under the UCC)
26
Absence of specified place for delivery of goods?
Unless otherwise specified, the place for delivery of goods is the seller's place of business (or his residence if he has none."
27
Under the UCC, what may supplement the terms of an agreement?
Parties course of performance, course of dealing, or usage of trade.
28
Remedy if a contract is unenforceable as indefinite?
quantum meruit and recover the reasonable value of benefit conferred to the other party.
29
What is consideration?
The bargained for exchange of a promise for a return promise or performance that benefits the promisor or causes detriment to the promisee.
30
What is the material benefit rule? And when doesn't it apply (2)
(1) Material Benefit Rule: a promise made in recognition of a benefit previously received by the promisor from the promisee sis binding even without consideration to the extent necessary to prevent injustice, e.g., promise to correct a mistake or provide emergency services or necessities.
Doesn't apply when the benefit was conferred as a gift or the value of the promise is disproportional to the benefit conferred.
31
What is Promissory estoppel/detrimental reliance
Ks that lack consideration may still be enforced to avoid injustice under the doctrine of promissory estoppel. It applies when (1) a party reasonably and foreseeably relied to his detriment on the promise of the other party and 2) the promisor should have reasonably expected a change in position in reliance of the promise and 3) enforcement is necessary to avoid injustice.
32
Does the settlement or release or legal claims constitute valid consideration?
yes.
33
CL rule regarding the modification of contracts and consideration
Under common law, contract modifications must be supported by consideration. Past performance or performance of a preexisting duty is not treated as adequate consideration.
34
What are exceptions to the pre-existing duty rule?
1) an addition or change in the performance or promise; OR 2) a fair and equitable modification due to changed circumstances AND the contract is not yet fully performed by either party (usually the unanticipated circumstance must be severe or far beyond what was foreseen)
35
UCC rule regarding consideration and contract modifications:
there is no consideration requirement for contract modifications made in good faith. However, modifications must be inn writing if (a0 they fall within the statute of frauds), OR (b) the original contract states that modifications must be made in writing.
36
What does "good faith" mean under the UCC?
honesty in fact and observance of reasonable commercial standards of fair dealing
37
What are the seven defenses to enforceability of a contract?
1) Incapacity; 2) duress; 3) undue influence; 4) Mutual mistake; 5) misrepresentation; 6) Illegality or contrary to public policy; 7)Unconscionability
38
Who lacks capacity to contract?
Minors and those who lack the mental capacity to understand the meaning and effect of a contract. BUT minors may be found to contract for necessities.
39
Incapacity as a contract defense -- voidable or void?
Voidable by the person who lacks capacity
40
What are the two kinds of duress, both defenses to contract enforceability?
1) physical compulsion (physically forcing someone to sign or making someone agree via gunpoint
2) economic distress = 1) personnel makes an improper threat, that 2) induces a party, 3) who has no reasonable alternative but to enter into the K. A mere threat to breach a contract is insufficient.
41
Duress -- void or voidable?
Physical compulsion = void; economic duress = voidable
42
What is undue influence, the contract enforceability defense?
1) the unfair persuasion of a person, 2) who is either a) under the domination of the person exercising the influence or b) justified in assuming that person will not act inn a manner inconsistent with his welfare because of the relationship between them (parent and child, husband wife, etc)
43
Undue influence -- void or voidable?
If contract is inducted by the other contracting party, then voidable by the victim. If contract induced by a third party, then it's voidable by the victim UNLESS the other party to the contract 1) gives value or materially relies, 2) in good faith, an 3) without reason to know of the undue influence on the transaction
44
Mistake as a contract defense -- mutual versus unilateral
K is voidable when there is a mutual mistake. Mutual mistake = 1) both parties are mistaken as to a basic assumption on which the contract is made; 2) the mistake is material to the K; 3) the person asserting the mistake did not bear the risk of the mistake.
Unilateral mistake is generally NOT a valid defense to contract formation.
45
What is the definition of a unilateral mistake?
(1) mistake by one party, 2) that is unknown to the other party, 3) concerning a basic assumption, 4) that has a material effect.
46
When is unilateral mistake a defense against contract formation?
if one party knew or had reason to believe that the other party was mistaken OR the mistake would make enforcement of the contract unconscionable, then it's voidable by the mistaken party.
47
When there is a unilateral mistake as to price, will the equitable remedy of rescission or reformation be allowed?
No, because price/value is not considered material.
48
What is the contract formation defense of fraudulent misrepresentation? and is it void or voidable?
When one party 1) knowingly, 2) makes a false representation, 3) of a fact, 4) and the other party reasonably relies on the misrepresentation to their detriment. Voidable by the injured party.
49
What is non-fraudulent misrepresentation and when is it a defense against contract formation?
Non-fraudulent misrepresentation occurs when there is 1) a statement of material fact, 2) by a party or agent, 3) that is false (but no wrongdoing), 4) inducing the contract and 5) the other party reasonably relies on the misrepresentation to his detriment. K is voidable by the injured party, unless there was no justifiable reliance on the misrepresented fact.
50
Impact of concealment as a contract defense?
equivalent to misrepresentation (a false statement of fact.
51
Duty to disclose information prior to contracting?
Generally no. Exceptions: a) a fiduciary relationship exists, b) it is necessary to correct an earlier mistake, c) active concealment of a material fact occurs, or d) a person selling real property and knows material facts that affect the value of the property and the buyer is unaware and cannot reasonably discover.
52
Illegality and/or contrary to public policy as a K formation defense
Courts will not enforce contracts that are illegal or contrary to public policy. Such contracts are void if the illegality existed at the time of the contract formation. If was legal at time of formation but subsequently became illegal, performance is discharged. A contract with an illegal purpose is voidable by a party who didn't know of its illegal purpose.
53
What is the unconsciouability defense to contract formation?
Occurs when a contract or term shocks the conscience of the court. Made inn light of the setting, purpose and effect of transaction.
54
What factors will a court consider in determining unconscionability as a K defense?
weakness in the contract nrpocess similar to a lack of capacity, fraud, and other invalidating cause, such as public policy grounds. Inadequacy of consideration alone does not invalidate a contract. Unconscionability usually occurs when there are both substantive and procedural unconscionability.
55
What is procedural unconscionabiility?
one party to the contract has a superior bargaining position over the other party and uses that power to their advantage, e.g., unfair pressure or bargaining pressures.
56
What is substantive unconscionability?
Contract containsn terms that are obviously unfair and one-sided.
57
What are the remedies if a court finds a contract unconscionable?
refuse to enforce the contract, enforce the contract without the unconscionable term, or limit the application of any unconscionable term.
58
What is the statute of frauds? -- 6 contracts that require:
Doctrine that requires a signed writing for certain contracts, namely: 1) marriage contracts, 2) suretyships (where guarantor promises to take on the debt of another) unless the main purpose exception applies -- the surety's main purpose is making the promise was to benefit himself; 3) contracts that cannot be fully performed inn a year from the date the contract is entered into (no possible way); 4) contracts for sale of real property or creating interest in property, e.g., easements over 1 year, leases over 1 year, mortgages, fixtures); 5) promises to pay an estate's debt from personal funds of the executor; 6) contracts for the sale of goods for $500 or more.
59
Exceptions to UCC requirement that all contracts for $500 or more be in writing:
1) merchant's confirmatory memo
2) goods accepted or paid for
3) custom made goods
4) admission during judicial proceding
60
Merchants Confirmatory Memo
In a sale of goods between two merchants (people dealing in goods of the kind), a writing that confirms the agreement is sufficient if it is signed by the party ENFORCING it (not the party enforced again), as long as the party against whom it is enforced did not promptly object within 10 days after receipt
61
How to satisfy the statute of frauds writing requirement
Writing must be (1) signed by the party to be charged; (2) reasonably identify the subject matter of the contract; (3) indicate that a contract has been made by the parties; (4) and state the essential terms with reasonable certainty. Could be formal or informal, including an email.
62
What is a fully integrated writing?
A complete and exclusive statement of the terms, discharging prior agreements to the extent that they are within its scope
63
Effect of a merger clause?
Evidence that the writing is complete on its face and fully integrated and therefore cannot be supplemented with additional consistent terms.
64
What is a partially integrated writing?
It is a contract that does NOT contain a complete statement of all the terms the parties agreed to and, as such, the proof of additional terms is allowed if the terms do not contract the writing.
65
UCC presumption re: integration
UCC presumes all writings to be partial integrations
66
What is the parol evidence rule?
A party cannot introduce evidence of a prior or contemporaneous agreement that contracts a later writing.
67
What are the four exceptions to the parol evidence rule?
1) to correct a clerical error or typo
2) to establish a defense against formation (that K wasn't valid in the first instance)
3) to interpret vague or ambiguous terms, but courts will interpret words to represent their ordinary or plain meaning
4) to supplement a partially integrated writing
68
Carrier v. non carrier case
Carrier case = sale in which parties intended goods to be moved by a carrier, e.g., you order something online
Non carrier case = sale in which parties did not intend the goods to be moved, e.g., you buy groceries.
69
What is a shipment contract?
K that requires seller to ship goods by carrier but doesn't require him to deliver them to a particular destination. Risk of loss passes to buyer at time the goods are delivered to the carrier.
70
What is a destination contract?
Contract that requires the seller to deliver goods to a particular destination. Risk of loss passes to the buyer when the goods are tendered to the buyer at the destination.
71
What does FOB mean?
"Free on board." Always followed by a location and that's the location at which risk of loss passes to the buyer.
72
Performance at common law versus UCC
Common law: party's basic duty is to substantially perform all that is called for
UCC: requires a perfect tender
73
UCC duty of good faith?
Defined as honest in fact and the observance of reasonable commercial standards of fair dealing. In the case of the merchant, it extends to the observance of reasonable commercial standards of fair dealing in the trade.
74
Frustration of purpose doctrine
discharges performance under a contract if the purpose of the contract no longer exists. Performance is excused if 1) a party's principal purpose is frustrated through no fault of his own by (2) an unforeseeable superseding event outside the parties' control and 3) both parties knew of the purpose at the time of formation. E.g., rented a venue for specific purpose and subsequent event renders the purpose moot.
75
What is a material breach under common law (how courts determine?)
The extent of the benefit deprived to the injuries party, i.e., what iss the extent of performance; (2) the adequacy of compensation for loss to the non-breaching party; 30 the extent the breaching party will suffer hardship; 4) the likelihood that the breaching party will cure; 5) the absence of good faith or fair dealing.
76
Remedy for a minor breach under common law?
Party still has to perform but can recover damages.
77
What is a divisible contract
(1) the performance of each party is divided into two or more parts, (2) the number of parts due from each party is the same, and (3) the performance of each part is agreed as equivalents.
If so, party is entitled to agreed-upon equivalent even if party fails to perform other parts.
78
What is a divisible contract under uCC?
Installment contract
79
What are two exceptions to the perfect tender rule under the UCC?
(1) if the seller has the right to cure or (2) in the installment contract context.
80
When does the seller have the right to cure under the UCC?
1) if the time for performance has not yet expired or 2) the seller is allowed reasonable time to substitute tender if it had reasonable grounds to believe the goods would be accepted, .e.g, previously nonconforming goods had been accepted in the past.
81
When does acceptance of goods occur under the UCC?
when the buyer, after reasonable opportunity to inspect the goods, signifies to the seller that the good are confirming or that he will take/retain them despite the non-conformity and b) fails to reject after a reasonable opportunity to inspect them or c) does any act inconsistent with the seller's ownership of the goods.
82
When may a buyer revoke acceptance?
1) nonconformity substantially impairs the value of the goods AND 2) (a) the defect was difficult to discover (latent defect), (b) acceptance was reasonably induced by the seller's assurances or (c) the buyer accepted the goods on the reasonable assumption the defect would be cured.
83
It buyer successfully revokes acceptance, what is he entitled to?
Return of the purchase price.
84
When may a non-breaching party seek damages BEFORE the time of performance is due? And what is it called?
When an anticipatory repudiation occurs, namely, when a party unequivocally communicates he is unable or unwilling to perform.
85
When can a party who has anticipatorily breached its contract retract its repudiation and restore contract?
They can unless the aggrieved party has (1) cancelled, (2) materially changed its position, or (3) indicated it considers the repudiation final.
86
What is adequate assurances? What happens if other party doesn't provide?
A party with reasonable grounds for being insecure about the other party's performance may demand in writing adequate assurances from the other party that it will perform in accordance with the contract. Party asked to give them, and DOES NOT, then party may treat that as an anticipatory repudiation
87
What can the non-breaching party do when an anticipatory repudiation occurs? (4)
(1) treat the contract as repudiated and sue for damages; (2) treat the contract as discharged; (3) wait until performance is due and sue when performance does not occur; (4) urge the party to perform.
88
What is accord and satisfaction
Contract principle whereby party is excused from obligation when there has been an accord and satisfaction. An accord is an executory contract between the parties promising to relieve a party of their contractual obligations in return for a specific act and upon satisfaction of that act, the person is excused from further performance. If the party fails to satisfy the accord, the other party may sue under (1) the original contract or (2) the accord terms.
89
Implied warranty of merchantability
under Article II of the UCC, the implied warranty of merchantability is implied in all sales of goods contracts and requires that all goods sold by a MERCHANT must be fit for their ordinary purpose.
90
Implied warranty of fitness for a particular purpose is created when?
When (1) a seller knows or has reason to know of a buyer's particular purpose for which the goods are required and (2) the buyer relies on the seller's skill or judgement to select or furnish suitable goods.
91
Warranty of title
Under the UCC, warranty of title is implied in all sales of goods contracts and includes the following warranties (1) title conveyed is good and its transfer rightful and (2) the goods shall be delivered free from any security interest other other lien or encumbrance, unless the buyer has knowledge of the same.
92
What happens when an intended third-party beneficiary asserts a claim?
The party has the same rights as those in privity of contract and can alert a claim for breach
93
What is an intended third party beneficiary?
Not a party to the contract but has rights under the contract because the contracting parties contemplated that their respective performances were intended to benefit an identified third party.
94
When can an intended third-party beneficiary enforce rights?
Only when they've vested. Rights vest when the third party beneficiary has (1) manifested assent to the promise under the contract, (20 detrimentally relied on the contract, or 3) brings suit to enforce the contract. once rights have vested, the K cannot change or be modified without the third-party consent.
95
How can right and benefit under a contract be transferred to a third party?
(1) assignor manifests his intent to tranfser the rights, (2) the assignee assents to the assignment.
96
What is the effect of consideration on an assignment of rights?
It makes the assignment irrevocable. Gratuitous assignments may be subsequently revoked.
97
What happens if terms of a contract prohibit the transfer of rights?
If rights are assigned, the assignor is liable for damages, but the assignment is still valid and enforceable by the assignee.
98
What happens if the contract invalidates all assignments?
If the rights are assigned, then the assignment is void.
99
May an assignee sue an obligor for non-performance?
Yes. Any defense to enforcement that could be used against the assignor may be used againsst the assignee.
100
What happens when there are multiple gratuitous assignments?
The last assignee prevails.
101
hat happens if there are multiple assignments for consideration?
The first assignment prevails unless the later assignment has no notice of the earlier assignment and is the first to obtain payment or indicia of ownership.
102
Common law remedy for contract breach
The general measure of damages for breach of contract are expectation damages.
103
What are expectation damages?
Attempt to put the non-breaching party in the same psoition they would have been in but for the breach. Damages must be (1) caused by the defendant, (2) foreseeable, (3) certain (not speculative), (4) unavoidable (P must take reasonable steps to mitigate losses
104
What are consequential damages?
They are damages that arise indirectly from the breach, and are awarded because of the injured party's special circumstances, e.g., lost profits
105
When can you recover consequential damages?
Damages must be (1) reasonably foreseeable, (2) arise from the P's special circumstances that the D knew or had reason to know of, (3). reasonably certain
106
When. is specific. performance available as a remedy to a contract breach?
It's an equitable remedy and it's available only if monetary damages are inadequate to compensate an injured party.
107
Are contract duties delegable? What are the exceptions?
Yes, UNLESS
1) the contract prohibits delegations or assignments
2) the delegation is against public policy
3) the contract is for personal services that calls for the exercise of personal skill or discretion
4) the delegation materially alters the expectancy of the obligee (the party to which the duty is owed).
108
UCC Seller's Remedies
When a buyer breaches a contract for sale of goods, the seller can: (1) withhold delivery; (2) cancel; (3) recover cover damages (difference between resale price and contract price) (4) recover market damages; (5) recover lost profits; (6) stop delivery when the buyer breachers, or (7) reply identified goods in certain instances when the buyer is insolvent.
109
What is restitution?
Also unjust enrichment or quantum merit -- awarded to prevent unjust enrichment and is available when one party confers a benefit onto another party (even if there is no enforceable contract). Damages will be awarded based on the value of the benefit conferred.
