Contracts Flashcards
1
Q
Condition Precedent
A
If contracting parties expressly agree to a condition precedent—an uncertain future event that must occur before a party’s obligation to perform arises—then performance is not due until the condition is fully satisfied.
This makes performance NOT DUE, does NOT mean K has been breached.
2
Q
Mutual Mistake Elements
A
K generally voidable by party adversely affected if:
(1) mistake existed when K was formed
(2) mistake relates to basic assumption of K
(3) mistake has material impact on transaction, and
(4) adversely affected party did not assume the risk of mistake
NEITHER party can avoid K if mistake can be cured
3
Q
Pre-existing Duty Rule MODERN THIRD PARTY EXCEPTION
A
Consideration exists if preexisting duty owed to THIRD PERSON (ie non party to contract).
4
Q
Promissory Estoppel
Consideration Substitute
Promise to Gift
A
Under the doctrine of promissory estoppel, a party’s promise to make a gift is enforceable if (1) the promisor should reasonably expect the promisee to rely on the promise, (2) the promisee detrimentally relies on the promise, and (3) injustice can be avoided only by enforcement of the promise.
5
Q
UCC SOF Exception for Payment
A
the statute of frauds does not apply when payment for the goods has been made and accepted.
6
Q
Restitution
A
Restitution allows the plaintiff to recover the benefit conferred upon the defendant.
7
Q
Intended Third Party Beneficiary
Definition
A
Someone who receives a direct benefit from the contract because the contracting parties so intended (ex: the contract provides that payment will go directly to a third party)
8
Q
UCC Installment Canceling Rest of Contract After Nonconforming Tender
A
When there is a nonconforming tender or a tender of nonconforming goods under one segment of an installment contract, the buyer may cancel the contract only if the nonconformity substantially impairs the value of the entire contract to the buyer.
9
Q
UCC Irrevocable Firm Offer Requirements
A
(1) The offeror is a merchant
(2) There is a promise that the offer is to remain open
(3) The promise is contained in a signed writing from the offeror
10
Q
Rights of an assignee
A
Takes all the rights of the assignor as in the contract.
Also takes subject to any defenses that could be raised.
11
Q
Risk of Loss: Shipment By Carrier
A
Risk of loss shifts from buyer to seller once the goods are delivered to the carrier.
12
Q
Employment Contract
A
A contract to employ someone for an indefinite or permanent duration typically creates an at-will employment relationship.
At-will employment allows either party to terminate the employment contract at any time for any reason.
13
Q
Material Breach Damages
A
Nonbreaching party can withhold any promised performance and pursue remedies for breach, including damages.
14
Q
What is the UCC Perfect Tender Rule?
A
Perfect goods and perfect delivery in accordance with the K
15
Q
Subcontractor’s Bid
A
A subcontractor’s bid is considered an outstanding offer, so a general contractor is not bound to accept the sub-bid—even if the general contractor is awarded the general contract.
16
Q
Mistake–Unilateral
One side is mistaken as to essential element of K
A
Mistaken party can void K if he didn’t bear risk of mistake and either:
(1) mistake would make enforcement of K unconscionable or (2) non-mistaken party caused the mistake, failed to disclose mistake, or knew/should have known the other party was mistaken
17
Q
To modify a contract for a service, need…:
A
NEED EXTRA Consideriation
18
Q
In a sale of goods for which there was a written offer and a written purported acceptance, if there is not a contract but the parties act as if there is, which of the following is TRUE?
A
Terms on which both writings agree become part of the contract
19
Q
UCC Evidence Hiearchy
A
Greatest priority to lowest: express terms, course of performance, course of dealings, trade usage
20
Q
Damages for Substantial Performance (Minor Breach)
A
A party who substantially performs contractual obligations can generally recover the contract price minus any cost that the nonbreaching party incurred to receive full performance
21
Q
What is a Incidental Beneficiary?
A
Someone who benefits from a contract even if there was no intent to benefit them.
They have no rights to enforce the contract.
22
Q
Parol Evidence Rule Exceptions
A
Situations in which the PER does not apply to bar earlier evidence:
(1) defense to formation (duress, fraud, mistake, etc.)
(2) second separate deal
(3) prior communication designed to interpret an amigious term
(4) SUBSEQUENT modifications
(5) condition precedent to effectiveness
23
Q
UCC Mailbox Rule as to Firm Offers
A
Mailbox rule does NOT apply to firm offers, options, or other irrevocable offers.
Under the UCC, a merchant’s offer to sell goods is firm (i.e., irrevocable) if it is made in a signed writing that assures that the offer will remain open.
Acceptance of a firm or otherwise irrevocable offer is effective only if it is received by the offeror before the offer expires.
24
Q
Mailbox Rule
Acceptance effective when sent UNLESS
A
Acceptance sent by mail is effective when the letter is sent.
UNLESS:
(1) offeree sends something else back first like rejection (first received is effective)
(2) does not apply to option contracts
25
Donee Beneficiary
A donee beneficiary is a intended beneificiary of a gift promise.
Donee beneficiary can generally only sue the promisor because the promisee is under no obligation to the donee beneficiary.
BUT the donee beneficiary may also sue the promisee if: (1) the promisee told the donee beneficiary about the contract, (2) the promisee should have reasonably foreseen reliance, and (3) the donee beneficiary justifiably and detrimentally relied on the contract.
26
MINORS
Lack capacity to contract under age 18. Contract is voidable by the *minor*
So the minor can either:
(1) **void** the contract before or soon after turning 18 by (i) **disaffirming** the contract and (ii) **returning** any **still-existing benefit** under the contract OR
(2) can **ratify** the contract after turning 18 by **keeping the benefits** of the contract **or** otherwise **agreeing to be bound by it**--eg, by attempting to render performance of or payment under the contract.
27
UCC PER Consistent Terms
The UCC presumes that a writing is partially integrated, so extrinsic evidence of additional consistent terms is admissible unless the parties "certainly" would have included the terms in the written contract.
**However, contradictory terms are not admissible.**
28
Warranty of Fitness for a Particular Purpose Requirements
Implied whenever the seller has reason to know that (1) the buyer has a particular use for the goods, and (2) the buyer is relying upon the seller's skill/expertise to select a good.
A disclaimer must be in **writing** and be conspicuous.
29
Buyer's duty of good faith & fair dealing under requirements contract
A requirements contract is an exclusive agreement between a buyer and a seller for the sale of as many goods as the buyer requires during a specified period.
The buyer's purchase of the goods from another seller violates the implied duty of good faith and fair dealing and constitutes a breach of contract.
30
UCC Additional Terms
*1 or less parties are merchants*
effective unless it is expressly conditioned on the offeror's assent to the new terms.
## Footnote
New/different terms are treated as proposed additions to the K that must be separately accepted by offeror.
31
Unilateral Mistake Simplified
When *one party* is mistaken as to an essential element of the contract, the mistaken party can void the contract **if she did not bear the risk** of mistake and the **non-mistaken party caused** the mistake, **had a duty to disclose or failed t**o disclose the mistake, or **knew or should have** known that the other party was mistaken.
32
Quasi in Rem
A "quasi in rem" remedy is effective against a defendant in reference to *property*, while an "in personam" remedy is effective against a *defendant directly*.
In personam remedies are available for most causes of action, including quasi-contract. A plaintiff can recover in quasi-contract—despite having no contractual relationship with the defendant—if the plaintiff conferred a **non-gratuitous** and **measurable benefit** on the defendant that resulted in **unjust enrichment** because:
* the defendant had the opportunity to decline the benefit but knowingly accepted it or
* the plaintiff had a reasonable excuse for not giving the defendant an opportunity to decline.
33
UCC Nonconforming goods
| What can the buyer do
Buyer can accept or reject nonconforming goods in whole or in part and, in either event, recover damages for breach.
34
Bilateral K notice
Offeree must give notice of acceptance
35
Mailbox Rule
| Revocation
Revoking acceptance is effective upon receipt
36
Implied Warranty of Merchantability Defect Disclaimer
warranty may be disclaimed for defects that an examination would have revealed if, before entering the contract, the buyer examined the goods as fully as desired or *refused to examine them.*
37
(Gratuitous) Assignment Automatic Revocation
A gratuitous assignment—i.e., an assignment that is not supported by consideration—is automatically revoked upon the death, incapacity, or bankruptcy of the assignor.
38
Installment Contract Payment
Payment by the buyer is due upon EACH delivery unless the price cannot be apportioned.
39
What is a Output Contract?
Seller agrees to sell all that she manufactures of a product to the buyer
40
Accord and Satisfaction.
Where the new consideration is worth less than what was agreed to in the original contract, it will be sufficient only if:
(1) there is a good-faith dispute as to the amount owed OR (2) the new consideration is of a different type than what was owed under the original contract.
41
Under the UCC, an acceptance that contains new/different terms is...
is still an acceptance so long as assent to the new or revised terms is not required.
And if at least one of the contracting parties is a *nonmerchant*, then the new or revised terms are *merely treated as proposed* additions to the contract.
42
Substitute Contract
| Different than Accord
A substitute contract is a second agreement that immediately discharges the original contract such that the remedy for breach is limited to the terms of the second contract.
43
Mailbox Rule Exception? Option Ks
If there is an option contract or firm offer, the acceptance is only valid when received before the offer expires.
44
Advertisements
Generally considered invitations to deal. BUT if very specific can be a K.
45
UCC Sale of Assorted Goods
The UCC imposes a duty on the buyer of assorted goods to specify the assortment unless the contract states otherwise.
The seller can treat the buyer's failure to specify the assortment as a breach** only if it materially impacts the seller's performance.**
46
UCC Parol Evidence Rule
| Contradicts vs Supplements
The UCC presumes that a written contract is partially integrated.
As a result, evidence that **supplements** the written contract is *admissible*—but evidence that **contradict**s the writing is *inadmissible*—under the parol evidence rule.
47
Auction Sales
During a *reserve* auction, the auctioneer may withdraw goods from auction prior to completion of the sale (e.g., before the auctioneer's hammer falls).
At a *no-reserve* auction, goods generally cannot be withdrawn after the auctioneer calls for bids.
| *No-reserve (special announcement required)*
48
UCC Price Gap Filler
The UCC "fills the gaps" for many missing terms in a contract for the sale of goods.
If the contract omits a price term or if the parties agree to set the price in the future but fail to do so, t**hen the UCC supplies a reasonable price at the time of delivery.**
49
PER Simplified
Partially Integrated: admissible to supplement but NOT contradict
Fully integrated: not admissible to supplement NOR contradict. Can only raise other exceptions.
50
**After Buyer Rejects Nonconforming Goods**
| UCC
First, rejects the goods.
After rejection, the buyer has an **obligation to take reasonable care of any goods** in its possession until the seller has had a reasonable amount of time to retrieve them.
When, as here, the seller does not retrieve the goods or provide further instructions, *the buyer may generally choose to store, reship, or sell* the goods on the seller's behalf.
**However, the buyer is REQUIRED TO SELL the goods on the seller's behalf if:**
1. if the buyer is a merchant
2. the goods are perishable
3. and there is no local agent to whom the goods can be returned.
51
Delegation NOT permitted when
- other contracting party has a substantial interest in having the delegating party perform (eg. in personal services contract involving taste or special skill) OR
- delegation is prohibited by contract
52
Unilateral Mistake: have to prove?
| One party is mistaken
Allows the adversely affected party to rescind **if**: (a) she can prove all the elements of mutual mistake; AND (b) either: the mistake would make the contract unconscionable OR the other side knew of, had reason to know of, or caused the mistake.
53
Forced Auction Sale: Seller's Bid
A winning bidder may avoid an auction sale or pay the price of the last good-faith bid if the auctioneer (1) knowingly accepted a bid by the seller or on the seller's behalf or (2) procured the seller's bid to drive up the price.
However, the winning bidder may not do so if the seller bid at a forced sale or gave notice reserving the right to bid.
54
Quanity in UCC and Requirement/Output Contracts
A contract must therefore specify a quantity that is **certain or determinable** by reference to objective facts, such as the buyer's *actual requirements or the seller's actual output* in a requirements or output contract.
If it does not, the contract fails for indefiniteness.
55
Has a contract been formed when a buyer of goods purports to accept a seller’s offer in a document that constitutes a definite and seasonable expression of acceptance that is sent within a reasonable time, but states a different term from that contained in the offer?
Yes, if the acceptance is not expressly made conditional upon assent to the different term.
56
UCC Presumption of Partial Integration
Goes away with a merger clause
57
Consequential Damages?
losses that arose from the nonbreaching party's **special circumstances** that were **reasonably foreseeable** to the breaching party when the contract was made
| NOT recoverable unless foreseeable
58
Ways to discharge contractual ob
59
Taking back a repudiation
Repudation retraction allowed unless the promisee (1) acts in reliance on the repudiation, (2) signifies acceptance of the repudiation, (3) commences an action for breach of contract
60
Assignment
Transfer of rights under a contract
61
When can seller cure UCC non-conforming goods?
(1) the time for performance has not yet elapsed; OR
(2) the seller had a reasonable belief that the buyer would accept despite the nonconformity.
Seller must give notice of intent to cure.
62
Negotiable Instrument (like a check)
If a debt is disputed in good faith, then the debtor can offer to satisfy the debt by giving the creditor a check with a conspicuous "payment in full" notation.
But if the debt is certain and undisputed, then it cannot be satisfied by a check for a lesser amount—even if the creditor cashes the check.
63
What can be recovered in K breach
* **Expectation damages:** the value of performance without the breach
* **incidental damages** – compensation for commercially reasonable expenses incurred as a result of the other party's breach
* **consequential damages** – compensation for losses that do not flow directly and immediately from the other party's breach, *including lost profits*, **BUT MUST NOT BE TOO SPECULATIVE**
64
UCC SOF Confirming Memo
The failure to object to a confirming memo within 10 days will SATISFY the SOF ONLY IF **BOTH** parties are **MERCHANTS**.
Need only be **signed by ONE** merchant tho.
65
Offeree's counteroffer
Serves as a rejection and a new offer. A mere inquiry is NOT a counteroffer and will NOT terminate an offer.
66
Wrongful Interference
| Waiver of Condition
A condition will be waived if the other party wrongfully interferes with or hinders the occurence of the condition.
Judged by good faith standard.
67
Anticipatory Repudiation
Timing and requirements
When a promisor repudiates a promise BEFORE the time for performance is due.
Repudation must be clear and unequivocal, either by conduct or words.
68
Compensatory Damages
Primary: includes expectation damages, incidental damages, consequential damages
69
UCC Additional Terms: Battle of the Forms
*Both parties are merchants*
Unless...
K is formed with additional terms **unless**:
(1) the new term **materially alters** the deal
(2) the initial offer **expressly limits** acceptance to its terms; or
(3) the offeror **rejects** within a reasonable amount of time
## Footnote
Terms that materially alter a K include a warranty disclaimer or severe limitations on a party's remedies.
70
When nonoccurence of condition is excused?
Waiver, Wrongful Interference, Estoppel, Disproportiante forfeiture
71
Mailbox Rule
| Acceptance then rejection
Acceptance will control even if offeror receives rejection first
## Footnote
But if offeror detrimentally relies on rejection then offeree estopped from enforcing K.
72
Common Law Parol Evidence Rule
| Contradicts + Supplements
The parol evidence rule generally **bars** evidence of prior or contemporaneous agreements that supplement or contradict the terms of a written contract that is **completely integrated.**
In contrast, evidence of prior or contemporaneous communications is **admissible to supplement** (i.e., add to), but not to contradict, a **partially integrated** agreement.
73
Death During an Option K
An exception exists for an offer that is an option, ***which does not terminate upon death because consideration was paid to keep the offer open during the option period***, and the offer is therefore made irrevocable during that period.
74
Requirements Contract & Perfect Tender Rule
Under a requirements contract, still must make perfect tender of goods.
## Footnote
Example Question 9583: Here, the owner and the farmer had a requirements contract. However, the farmer delivered substantially more dairy products than the owner reasonably required, thereby making a nonconforming tender of goods.
75
Reliance Damages?
When expectation damages cannot be calculated with reasonable certainty.
Goal: to put a party in the same economic position that it would be in if the contract had never been created.
The nonbreaching party may recover for any expenses incurred in reasonable reliance that the contract would be performed.
However, recovery of reliance damages may be reduced by the amount spent by the nonbreaching party on **materials that could reasonably be repurposed for another job.**
76
UCC Entrustment of Goods
**A merchant entrusted with goods** has the power to convey **good title** to a buyer in the ordinary course.
A buyer in the ordinary course is someone who buys goods (1) in good faith, (2) without knowledge that the sale violates the owner's rights to the goods, and (3) from a merchant in the business of selling goods of that kind.
## Footnote
*However, the owner may have a cause of action against the furrier (e.g., breach of contract, conversion).
77
What is the Material Benefit Rule?
When a party performs an unrequested service for another party that constitutes a material benefit, the performing party can enforce a promise of payment after the service is rendered
78
Damages in Real Estate
In real-estate contracts requiring delivery of possession, late delivery is a breach that entitles the buyer to expectation damages measured by the fair market rental value of the property for the time the buyer was denied possession.
79
Real Estate SOF Exception
Most jurisdictions **require two** of the three following acts to establish sufficient part performance:
(i) payment of all or part of the purchase price;
(ii) possession by the purchaser; or
(iii) substantial improvement of the property by the purchaser.
80
New promise to pay a debt
A new promise to pay a debt after the statute of limitations has run is enforceable **without** any new consideration.
When the new promise is an express promise, most jurisdictions require that the new promise be **in writing and signed by the debtor** to be enforceable.
81
Ways to Terminate an Offer
1. revokes by express commnication
2. constructive revocation
3. Rejects
4. counteroffer
5. Offeree dies
6. A reasonable amount of time passes
7. by law: **subject matter of offer is destroyed or becomes illegal**
82
If consideration was paid for an option contract....
the offer can be terminated at an earlier date—e.g., if the offeree makes a counteroffer.
83
When an offeree begins performance of a unilateral contract, which of the following statements is TRUE?
The offeror cannot require the offeree to complete performance of the contract
84
What is needed for K modification under CL?
The parties must agree AND there must be **new** consideration unless modification is fair and equitable due to unanticipated circumstances.
85
Payment on Divisible Contracts
When a party performs one part of a divisible or installment contract, that party is *generally entitled to the agreed equivalent for that part—even if the party fails to perform the other parts of the contract.* In other words, that party's performance of the entire contract is generally not a condition precedent to the other party's duty to perform.
Courts prefer to interpret contracts as divisible for reasons having to do with fairness. **However, courts will not do so if the contract expressly states that it is indivisible or payment is due upon completion of the entire contract.**
86
Recovery by Breacher for committing a material breach
A party who commits a material breach can recover only for any **benefit conferred on the nonbreaching party minus damages for the breach.**
87
Delegation
Transfer of Duties and obligations under the K
88
Unilateral K
Notice
Offeree **not** required to give notice after completing performance *unless* the offer requires notice OR the offeror would not learn of the completed performance within a reasonable time.
89
Delegation **Prohibition**
Delegation of contractual duties is not permitted when (1) the contract prohibits delegation or (2) the other party to the contract has a substantial interest in having the delegating party perform.
Otherwise, delegation is permitted, and the other party to the contract must accept performance by the delegatee.
90
Intended Beneficiary Rights Vesting
DO have contractual rights and may sue to enforce those rights once they **vest**
**Vesting occurs when**
(1) beneficiary detrimentally relies on the rights created, (2) manifests assent to the contract at one party's request, OR (3) files a lawsuit to enforce the contract.
**Until vested, the contracting parties can modify or rescind the contract without the beneficiary's consent**
91
Insecurity about prospective ability to perform
Mere insecurity about the party's prospective ability to perform is **NOT a repudiation**, but it does give the other party t**he right to demand assurance of performance**.
Under the UCC, which governs contracts for the sale of goods (e.g., tomatoes), the demand for assurances must be made in writing.
Failure to provide adequate assurance within a reasonable time—not to exceed 30 days under the UCC—constitutes a breach.
92
Assignment is revocable unless:
* obligor already performed
* document symbolizing assigned right (eg, stock certificate) delivered
* written & signed assignment delivered
* promissory estoppel applies
93
UCC Firm Offer Timing
Under the UCC, a firm offer is irrevocable for the time stated in the offer or, if no time is stated, for a reasonable time.
But in either case, the period of irrevocability cannot exceed three months unless consideration is given to keep the offer open longer.
94
UCC Installment K Nonconforming Tender
If the seller makes a nonconforming tender or tenders nonconforming goods under one segment of an installment contract, t**he buyer can reject only if the nonconformity:**
i) Substantially impairs the value of that shipment to the buyer; and
ii) Cannot be cured.
If the seller makes adequate assurances that he can cure the nonconformity, then the buyer must accept the shipment. UCC § 2-612(2).
95
Common Law Pre-Existing Duty
Under the common law, modification of an existing contract is permitted if it is supported by new consideration—**not a promise to perform a preexisting legal duty.**
However, a modification is permitted if one party agrees to compensate the other due to **unanticipated difficulties** so long as the modification is fair and equitable.
96
What are incidental damages?
Reimbursement for commercially reasonable expenses that the nonbreaching party incurred as a result of the breach
97
Material Benefit Rule Exception
The material benefit rule is **not** enforced when the performing party rendered the services **WITHOUT** the expectation of compensation.
98
Mailbox Rule
| Rejection then Acceptance
Mailbox rule does NOT apply; first one received will prevail.
## Footnote
Offeror need not actually read the received communication
99
PER UCC Does not Apply When
* raising a defense to formation or enforcement
* **proving a condition precedent to existence of the K**
* Interpreting/clarifying ambiguity in K
