Contracts Flashcards
rights of third party beneficiary vest when
the beneficiary (1) manifests assent to the promise in a manner invited or requested by the parties (2) brings suit to enforce the promise; or (3) materially changes his position in justifiable reliance on the promise.
common law modification
a modification of a contract requires consideration because the parties are under preexisting duties to perform. The modern view permits modification without consideration if it is fair and equitable in view of unanticipated circumstances.
Defense of illegality
if the subject matter of the contract became illegal after the offer but before the acceptance, the supervening illegality is deemed to revoke the offer. if the illegality is present at the time of the offer, there is no valid offer. if the illegality arises after formation of a valid contract, it discharges the contract because performance has become impossible. it will be a defense to enforcement of a contract if either the consideration or the subject matter is illegal.
Reformation
Reformation is the remedy whereby the writing setting forth the agreement between the parties is changed so that it conforms to the original intent of the parties, typically in the case of mutual mistake. However, it is also available when the writing is incorrect because of innocent or fraudulent misrepresentation. the writing will be reformed to reflect the expressed intent of the parties.
Ratification
a new valid promise to perform a voidable obligation. Such as a minor ratifying a contract at the age of majority
election waiver
when a condition is not satisfied or a duty of performance is broken and the beneficiary of the condition or duty nevertheless chooses to continue under the contract, a court will hold this to be an election waiver
prospective unwillingness to perform
occurs when one party has reasonable grounds to believe that the other party will be unable or unwilling to perform when performance is due. The effect of this prospective failure would be to allow the seller to suspend further performance until she receives adequate assurances that the buyer’s performance will be forthcoming. If buyer doesn’t provide adequate assurances, the seller can treat this as a repudiation.
C.O.D
buyer generally must pay for the goods on delivery, without inspecting the goods prior to payment.
Laches
equitable defense that arises when a party delays in bringing an equitable action and the delay prejudices the defendant.
Unclean hands
defense that arises when the party seeking specific performance is guilty of some wrongdoing in the transaction being sued upon.
frustration
the following must be shown: (i) there is some supervening act or event leading to the frustration; (ii) at the time of entering into the contract, the parties did not reasonably foresee the act or event occurring; (iii) the purpose of the contract has been completely or almost completely destroyed by this act or event; and (iv) the purpose of the contract was realized by both parties at the time of making the contract.
Mutual mistake
When both parties entering into a contract are mistaken about existing facts 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; and (iii) the party seeking avoidance did not assume the risk of the mistake.
Offer
A manifestation of a willingness to enter into a bargain, the assent of which will conclude the bargain
Must be communicated to the offeree in order to be valid and the terms must be certain
UCC: Normally an offer to purchase goods is sufficient to show a party is willing to enter into a bargain
An offer is valid until
- Revoked: Power of the offeror
* Option K is a limit on the offeror’s power to revoke
* C/L: In order to make an option, it needs to be supported by consideration
* UCC (Firm Offer Rule): A writing, signed by a merchant, giving assurances that the offer will be held open for the time stated and if no time is stated the for a reasonable time (neither of which can exceed 3 months; if stated time exceeds 3 months, the K firm offer is not void but it is only enforceable for 3 months) - Revocation must be communicated to the offeree (expressly or by reliable 3rd party)
- Rejected: Power of the offeree 🡪 offeree can then make a counteroffer & switch power of acceptance
- Lapse of time
- Death of the offeree before acceptance (does not apply to unilateral Ks)
Acceptance for a bilateral contract
Bilateral contract = mutual promises
1. cannot accept by silence unless a reasonable person would not have responded/would have undersstood the silence to consitute acceptance under the cirxumstances which expressed an assent ot the bargain.
2. CL: Mirror image rule (acceptance must match offer)
3. UCC:
* an offer to purchase goods for current or prompt shipment requests acceptance either by: promise to ship or shipment of conforming or nonconforming goods (if nonconforming = performance and breach unless accomodation letter)
* Use battle of th eforms for when there is an offer and acceptance with different terms
acceptance for unilateral contract
*acceptance by full performance
*unilateral K becomes irrevocable when performance begins
Consideration
Bargained-for exchange of promises where one party is doing something that the party is legally entitled not to do and the other party is refraining from doing something they are legally entitled to do
- Forbearance is consideration
- Past consideration is not consideration
- Modification of a CL K requires new consideration because of the pre existing legal duty rule, unless modification was fair and equitable in view of circumstances not anticipated when K was made
- Modification of a UCC K does not require new consideration, only requires good faith
- The court does NOT weigh the adequacy of consideration
Is the K enforceable?
- Once a valid K has been created, there needs to be grounds for rescission (i.e. mutual mistake) – unilateral attempts to rescind the K are unenforceable
- Unconscionability 🡪 Unfair surprise (i.e. new material terms) or oppressive terms, which are often hidden (i.e. exculpatory clauses for intentional acts)
- Fraud
- Misrepresentation - Includes false assertions, concealment, or misstatements about a material fact before K formation
- Duress/Coercion 🡪 Includes both economic & physical duress
- Unilateral mistake is not a defense unless the other party knew/should’ve known of the mistake
- Mutual mistake is a defense if both parties are mistaken, mistake concerns a basic assumption of fact,
- Illusory Promise - One of the parties doesn’t actually bind himself to act
- Statute of Frauds (MY LEGS) - Marriage Ks, service Ks incapable of being performed within one Year, Land related Ks, Executor promises, sale of Goods of $500 or more, Sureties (unless the main purpose for making the surety was to secure benefit or advantage for yourself)
- Lack of Capacity - Infants and mentally incompetent persons lack the capacity to contract; Intoxicated persons may lack capacity if the other party has reason to know of the intoxication
- Illegal - Look for an illegal subject mater (which is not enforceable) or an illegal purpose for the K (which is enforceable by the innocent party)
What were the terms of the k?
Parol evidence
UCC default terms
- Parol Evidence Rule - A fully integrated K may not be altered or varied by the introduction of prior or contemporaneous statements (oral or written) that contradict the terms of the writing, unless an exception applies:
* Parol evidence can be used for defenses to K formation
* Parol evidence can be used to establish oral conditions
* Parol evidence can be used to explain, interpret, or supplement - UCC - Any course of performance, trade usage, course of dealing can be used to explain or supplement a K
- UCC Default Terms: Delivery and ROL
* Shipment K OR FOB Seller’s place of business = Buyer has ROL (seller must get goods to carrier)
* Destination K OR FOB Buyer’s Address = Seller has ROL (seller must get goods to buyer) - Under the UCC, a Time is of the Essence Clause is implied in a K for the Sale of Goods
Did parties perfrom under the terms of the K
Nonperformance
Nonperformance of the K is a breach unless the duties are discharged or excused
Discharged
1. impossibility
2. impracticability
3. frustration of purpose
Excused
1. conditions/non-occurrence of conditions
- perspective inability to perform (insecurity) - Request adequate assurances (need reasonable grounds) and treat as breach if party doesn’t give assurances in a reasonable time
- anticipatory breach - clear, unequivocal statement that a 3rd party intends not to perform.
* general options: - treat statement as present breach and sue
- wait for time performance is due and then sue
- request further assurances
- do nothing
- personal services Ks can be excused by illness
Did the parties perform under the terms of the K?
CL substantial performance
If one party has substantially performed, the other party is obligated to perform and complete performance
Less than perfect performance by one party does not excuse the other party from his obligation
“Substantial” is usually considered at least halfway complete
If performance is delayed in a personal services K, the K cannot be canceled unless there is a material breach
Material vs. Minor Breach:
Will the aggrieved party receive the substantial benefit of her bargain?
Yes = Minor Breach
No = Material Breach
DId the parites perform under the terms of the K?
UCC perfect Tender Rule
Seller must send conforming goods (i.e. goods that conform to the specifications of the K)
If perfect tender rule is violated, then the buyer can accept or reject in whole or in part (buyer must notify seller that goods are nonconforming)
The buyer must give the seller time to cure up and until the date performance is due if seller notifies buyer of his intent to cure
Was there a valid change in the parties to the K or the K obligations?
novation vs. delegation
With a novation the parties agree to substitute a new party to perform and the original party is excused from performance, whereas delegation does not require both parties’ agreement and does not excuse the delegator’s liability on the K
Was there a valid change in the parties to the K or the K obligations?
Accord & Satisfaction
Accord - Exists where one party to an existing K agrees to accept a different performance in lieu of the original promise or performance
Satisfaction - Performance of the accord agreement
