Contracts Flashcards
1
Q
Implied Warranty of Title
A
Implied warranty that there is:
1. Good title to the goods;
2. A rightful transfer of the goods;
3. No liens or security interests attached to the goods.
Implied warranty of title can only be disclaimed by specific language (“no warranties”), or circumstances which give the buyer reason to expect that the seller does not claim unencumbered title (i.e., an estate sale).
2
Q
Face-to-Face Conversation Rule
A
An offer made at common law in a face to face conversation generally lapses at the end of the conversation.
3
Q
Warranty of Fitness for a Particular Purpose
A
Warranty that the goods are being sold for the particular purpose intended by the buyer.
Only applies when:
1. The seller knew about the particular purpose, AND
2. The buyer relied on the seller’s expertise.
Negated when:
1. A disclaimer is written/clear/conspicuous, OR
2. The goods have a patent defect.
4
Q
Four Ways to Terminate Acceptance
A
- Lapse of time.
- Death/incapacity of either party.
- Revocation by the offeror.
- Rejection by the offeree.
5
Q
Offers for a Reward
A
Offers for a reward are unilateral offers because they are communications that promise a reward in exchange for performance of a specific task. A person can accept the offer by performing that task (but beware of the pre-existing duty rule).
6
Q
Commercial Advertisements as Offers
A
American Rule: Ads/catalogs/price lists are invitations for offers, since the responses may exceed available supply of goods or services.
Exception — Language that identifies who gets the limited supply, such as “first come, first served,” or “first 10 customers”.
7
Q
Elements of an Offer
A
- Outward manifestation (oral, written, or by conduct) of
- A signal that acceptance will conclude the deal.
8
Q
Warranty of Merchantability
A
Warranty that the goods are fit for the ordinary purpose for which they are used. Only applies when the seller is a merchant.
Disclaimed by:
1. Specific use of the word “merchantability” conspicuously, and
2. Any other language or circumstances. (“As is”, or patent defects)
9
Q
Express Warranties
A
Any affirmation of promise or fact, description of goods, or sample/model.
Do not have to include the words “warrant” or “guarantee”.
Exception — When the affirmation is too vague, or constitutes “sales talk”/”puffing”.
10
Q
Missing Terms (UCC)
A
Under the UCC, where there are pertinent missing terms, the UCC default rules will apply.
11
Q
Missing Price Term (UCC)
A
Replaced with the reasonable market price at the time of delivery.
12
Q
Missing Time Term (UCC)
A
Replaced with a “reasonable time”.
13
Q
Missing Place of Delivery Term (UCC)
A
Replaced with the seller’s place of business.
14
Q
Common Law Default for Missing Price
A
When no price is discussed for a service contract, the common law default is the “reasonable value for services rendered”.
15
Q
Indirect Revocation
A
Occurs when:
1. The offeror takes action that is inconsistent with the intent to go through with the offer, AND
2. The offeree learns of such actions from a reliable source.
16
Q
Irrevocable Offers
A
American Rule: An offeror can revoke even if they gave a specific time to accept.
Option Contracts: A promise to keep the option open with consideration is irrevocable.
Reliance/Construction Contracts: An offer is irrevocable when the offeree detrimentally relies.
17
Q
UCC “Firm Offer” Rule
A
A “firm offer” is irrevocable under the UCC. A firm offer is created when the seller is a merchant and promises in signed writing to keep an offer open in exchange for consideration.
A firm offer will only last for the period of time stated in the offer. If no time period is stated, the offer will stay open for a max. of 3 months.
18
Q
Mirror Image Rule
A
At common law, acceptance of an offer must mirror the terms of the offer exactly, and any variation is a counter offer (and thus a rejection).
19
Q
Bilateral Contract
A
A promise exchanged for a promise. Once promises are exchanged, BOTH parties are bound.
20
Q
Unilateral Contract
A
An offer seeking performance in return. The offeror is not bound until the offeree completes performances. An offeree is NEVER bound.
21
Q
Revoking a Unilateral Contract
A
Unilateral contracts can only be accepted via completion of performance (and the acceptance does not have to be communicated).
Therefore, once an offeree beings performance an offeror may not revoke. However, mere preparations do not count.
22
Q
Common Law Mailbox Rule
A
ACCEPTANCE by mail is effective upon dispatch. Applies only to acceptances, not revocations or rejections.
But, if the rejection is mailed before the acceptance — whichever arrives first will be effective.
23
Q
Mailbox Rule Re: Option Contracts
A
Restatement/Majority Rule: The mailbox rule does not apply to option contracts. Acceptance of option contracts are only effective upon receipt.
24
Q
UCC Acceptance by Shipment
A
Under the UCC, a seller of goods can accept a buyer’s offer to buy goods in three ways:
1. A promise to ship goods;
2. Shipping the conforming goods; or
3. Shipping nonconforming goods, unless the shipment is an accommodation/counteroffer.
25
Additional/Different Terms (UCC)
Between _merchants_, additional terms in an acceptance become a part of the contract.
Except when —
1. The offer **expressly limits** the acceptance to its own terms;
2. If the offeror **objects** to the additional terms within a reasonable time.
3. If the additional terms would **materially alter** the contract.
Terms that materially alter the contract are those that would result in _surprise_ or _hardship_ if incorporated, such as the disclaimer of warranties or shortening a deadline.
26
Knockout Rule
Majority Rule: Different terms in the two writings (the offer and acceptance) dealing with the same topic knock each other out.
Minority Rule: Different terms are treated as mere proposals which the offeror is free to accept or reject (treated like a consumer).
Example — Offer has a choice of law provisions for NY, acceptance has a choice of law provisions for CA; the choice of law provisions is considered excluded from the contract altogether.
27
Bargain Theory
A promise is supported by consideration if it was based on a "bargained-for" exchange — a quid pro quo for making the promise.
28
Benefit/Detriment Test
Consideration based on whether there is a benefit to the promisor and/or a detriment to the promisee.
Whether the promisee is:
1. Doing something he had a legal right NOT to do; or
2. Foregoing something that he HAD a legal right to do.
29
Illusory Promise
Illusory promises are a promise of performance that **leaves the performance to the unlimited discretion of the promising party**. Illusory promises are not supported by consideration.
Example — "You paint my portrait, and I will pay you $1,000 if I decide I want to buy it."
However, so long as the right to cancel is limited in _some_ manner (usually with a requirement of notice), it will not render an agreement illusory/invalid.
Example — The right to cancel a contract if a "suitable alternative becomes available."
30
Past/Moral Consideration
General Rule: A promise in exchange for something already given or performed is not supported by consideration.
Minority Rule: "Material Benefit Test". A promise made for past performance is enforceable if the promisee conferred a benefit on the promisor (not a 3rd party), and the benefit was material.
31
Material Benefit Test Re: Past Consideration
MINORITY rule! A promise made for past performance is enforceable if the promisee conferred a material benefit on the promisor (not a 3rd party), and the benefit was material.
32
Promissory Estoppel
When a promisee reasonably relies to their detriment on a gratuitous promise, they may be able to enforce the promise even without consideration.
Elements —
1. A promise;
2. With foreseeable reliance;
3. And actual reliance, as induced by the promise; and
4. Injustice without enforcement.
33
Statute of Frauds
If a contract falls under the SoF, it must be in writing and signed by the party against whom enforcement is sought.
34
Contracts Subject to the Statute of Frauds
MY LEGS!
Marriage contracts.
Year or more contracts.
Land sale contracts.
Executor/Administrator.
Guarantee/suretyship.
Sale of goods for $500 or more.
35
Year+ Contracts under the Statute of Frauds
Performance of the contract is measured from when the contract was made, not from the date of performance.
If it is theoretically possible to complete the performance within a year, the Statute of Frauds will not apply.
36
Main Purpose Doctrine (Guarantee/Suretyship Agreements)
Guarantee contracts are generally subject to the Statute of Frauds, however, under the Main Purpose Doctrine, where the main purpose is for the guarantor's own economic interest, the agreement is not governed by the SoF.
37
Part Performance of a Land Sale Contract
To establish a valid contract under the Statute of Frauds via part performance, a showing of any combination of the following three are required:
1. **Payment** of all or part of the contract price;
2. **Taking possession** of the land; and/or
3. Making **substantial improvement** to the property.
If you've paid for the land, taken possession of the land, or have already made substantial improvements to the land, a signed writing is NOT REQUIRED.
38
5 Ways to Satisfy the UCC Statute of Frauds
1. A signed writing.
2. *Merchant's confirmation*.
3. Judicial admission.
4. Partial performance.
5. Specially manufactured goods.
39
Satisfying the Statute of Frauds with Merchant Confirmation
When two merchants enter into an oral agreement in which one merchant sends the other a confirmation of the agreement, the Statute of Frauds is satisfies against the recipient merchant if:
1. Both the recipient and the sender are merchants;
2. The writing is in confirmation of an oral contract and contains a quantity; and
3. The recipient does not send a written objection within 10 days.
40
UCC Default Provisions
"Gap Fillers". When a contract does not address the matter, the UCC default provisions are used to fill in the gaps. Parties are always free to contract otherwise.
41
Implied Warranties for the Sale of Goods
Warranty of **Title**;
Warranty of **Merchantability**;
Warranty of **Fitness for a Particular Purpose**;
Obligation of **Good Faith and Fair Dealing**.
42
Interpreting Ambiguous Language
Objective meaning trumps subjective meaning, except when one party knows about the other party's subjective meaning.
43
Contra Proferentem
Ambiguous terms are construed against the drafter.
44
Extrinsic Evidence Re: Gap Fillers/Resolving Ambiguity
To resolve ambiguity or fill gaps, extrinsic evidence can be admitted to establish:
1. Course of Performance;
2. Course of Dealing; and
3. Usage of Trade;
If they conflict, course of performance trumps course of dealing and usage of trade, and course of dealing trumps usage of trade.
45
Complete Integration
Contracts intended to represent a **complete** and **totally exclusive statement of ALL terms** are a complete integration.
Merger clauses ("everything we've ever said before now is merged into this contract") will create a complete integration.
46
Parol Evidence Rule for Complete Integrations
Parol evidence is not admissible to supplement or replace terms, but it IS admissible to explain or interpret terms.
47
Partial Integration
Terms within a contract are intended to be a final expression as to **only those specific terms**.
Parol evidence is admissible to explain or interpret terms, AND to supplement and add terms.
48
UCC Difference in the Parol Evidence Rule for Complete Integrations
Trade Usage/Course of Dealing/Course of Performance are still admissible to supplement a completely integrated contract, even with a merger clause.
However, parol evidence is still not otherwise admissible to supplement, explain, or interpret terms.
49
Parol Evidence Rule
Governs the admissibility of oral/documentary evidence of negotiations and other communications between parties that took place prior to or contemporaneously with the execution of a contract.
Parol evidence is never admissible to contradict, is always admissible to explain or interpret, and is sometimes admissible to supplement terms of the contract ,depending on if it was a complete or partial integration.
50
When the Parol Evidence Rule Does Not Apply
The PER does not apply to:
1. **Subsequent** agreements;
2. **Collateral** agreements (agreements that are entirely distinct from the agreement at issue); or
3. **Attacks on the validity** of the agreement via mistake/duress, fraud, reformation, or
4. _Failure of an oral condition precedent_ to the agreement.
51
Carrier vs. Non-Carrier Cases
Carrier: Parties agree to use a common carrier. The risk of loss will depend on whether it was a Shipment or Destination contract.
Non-Carrier: No common carrier used. The risk of loss will depend on if the parties are merchants or non-merchants.
52
Risk of Loss for Non-Carrier Cases
If the seller is NOT a merchant — the risk of loss transfers to the buyer as soon as the goods are made available to them.
If the seller IS a merchant — the risk of loss transfers to the buyer once the goods are physically in the buyer's possession.
53
Remedy for a Seller's Risk of Loss
Seller must provide a replacement of the goods.
54
Remedy for a Buyer's Risk of Loss
Buyer must pay the seller regardless.
55
Risk of Loss for Carrier Cases
Shipment Contract — Risk of loss passes to the buyer when the goods are delivered to the carrier. Default rule when the contract is silent. Buyer bears the risk of loss if the goods are damaged in transit.
Destination Contract — Risk of loss passes to the buyer when the goods are tendered at the destination. Seller bears the risk if the goods are damages in transit.
56
Pre-Existing Duty Rule (Common Law)
A promise to increase compensation for duties already owed is unenforceable if there is no additional consideration for the modification.
Exceptions —
- Mutual modifications (satisfies additional consideration), or
- Unforeseeable circumstances.
57
Modifying a UCC Contract
An agreement modifying an existing contract does NOT need additional consideration in order to be enforceable, as long as it was **made in good faith**.
58
Unilateral Mistake
One party's mistake generally is not an excuse unless the other party knew or had reason to know of the party's mistake.
59
Mutual Mistake
Mutual mistake will make a contract **voidable** when
(1) both parties are mistaken,
(2) the mistake relates to a material fact, and
(3) the party disadvantaged did not bear the risk of mistake under the contract.
Mutual mistake means that there was no meeting of the minds.
60
Impossibility
Both parties are excused from performance if it is rendered impossible after the contract is formed.
The impossibility must be _objective_.
The contingency that creates the impossibility must not have been known to the parties at the time of making the contract. (_Unforeseeable_)
61
Frustration of Purpose
3 requirements for the modern test:
1. The **principal purpose** in entering the contract is frustrated.
2. The frustration was **substantial**. (*NOTE: Not necessarily completely*)
3. It was a **basic assumption** that the event that caused the frustration would not occur. (Completely unforeseeable)
62
Accord
When the obligee promises to accept **substitute performance** in satisfaction of the obligor's existing duty.
Permissible when one party has already performed and is waiting on the other to finish performing.
Does not discharge the duty to perform, only suspend it. Once the substitute performance is complete, there is "satisfaction".
63
Accord and Satisfaction
Refers to the agreement (accord) between two contracting parties to **accept alternate performance** to **discharge a pre-existing duty** between them and the subsequent performance (satisfaction) of that agreement.
The new performance is called the accord. The excusal of the initial performance obligation is called the satisfaction.
Differs from a modification in that a modification immediately discharges a pre-existing duty, whereas an *accord and satisfaction does not discharge a pre-existing duty until the agreed upon, alternate performance occurs*.
64
Quantum Meruit
A doctrine that states there is an inferred promise to pay a fair amount for work and the materials provided, even without a lawful, enforceable agreement between the parties. A breaching party may be able to recover "the reasonable value of the benefits conferred".
Recovery is reduced by the damages caused by their breach.
65
Perfect Tender Rule
Under the UCC, the seller is in breach if their goods fail in ANY respect to conform with the contract. AKA, the goods must be perfect.
If the goods are NOT perfect, the buyer may:
1. **Reject** the goods;
2. **Accept** the goods; or
3. **Accept in part** and **reject in part**.
Does not apply to installment contracts.
66
Minors
Anyone under the age of 18 may enter into a contract, but the contract is voidable at the minor's option.
If the minor voids the contract, they are obligated to return any goods, but they are not liable for the damages under the Power of Avoidance.
Once they turn 18, they may ratify the contract.
67
Fraudulent Misrepresentation
Requires 4 elements:
1. A **misrepresentation** (an assertion inconsistence with existing facts);
2. The requisite state of mind (either **knew that their representation was false**, knew that they didn't know, and/or had an **intent to mislead**);
3. Misrepresentation must have been **material** (either subjectively or objectively);
4. There was **reasonable reliance** on the misrepresentation.
68
Negligent Misrepresentation
Requires 4 elements:
1. A **misrepresentation**,
2. The misrepresentation was **material**,
3. There was **reasonable reliance** on the misrepresentation, and
4. The defendant would have known that the assertion was false **if they had asserted reasonable care**.
69
Fraudulent Nondisclosure
1. **Material nondisclosure**,
2. **Reasonable reliance** on the nondisclosure, and
3. There was a **duty to disclose** and a **failure to fulfill it**.
70
When is There a Duty to Disclose
- When there is a relationship of trust/confidence,
- When an assertion was true at the time but later became untrue, and/or
- When the obligation of good faith would require it.
71
Procedural vs. Substantive Unconscionability
Must have both!
Procedural: The bargaining process created an absence of meaningful choice for an aggrieved party.
Substantive: The contract terms are unreasonably favorable to one party over the other.
If there is both substantive or procedural unconscionability, the court may:
1. Refuse to enforce the contract,
2. Take out the offending clause, or
3. Limit the application to avoid unconscionable results.
72
Assignment of Rights
A transfer of a right to **receive** a contract **performance.**
For an assignment to be effective, the owner of the right must manifest an intention to make a present transfer of an existing right.
73
Exceptions for Assigning Rights
1. When the assignment would **materially change** the duties of the other party.
2. When the obligor has a **personal interest** in performing to the obligee, and not a third party.
3. When it would **violate the law** or public policy.
4. When the assignment is **prohibited by the contract**.
74
Delegation of Duties
When a third party agrees to **satisfy a performance** owed by the delegator.
Without a novation, a delegation does not relieve the delegator from their obligations (aka, the obligee can still sue the delegator).
Generally, all contractual duties are delegable, except for personal services, or when the contract specifically prohibits it.
75
Remedies for Breach of Contract, in General
"The general rule in American contract law is that a remedy for a breach of contract is a payment of expectation damages."
76
Limitations on the Right to Recover Expectation Damages
Expectation damages must be (1) calculated with reasonable certainty, (2) foreseeable, and (3) mitigated, if possible.
Damages that are not foreseeable are not recoverable.
You can't recover losses that you could have avoided/mitigated.
77
Expectation Damages
Default damages for breach of contract. "Benefit of the bargain" damages.
Expectation damages are the amount that would restore the aggrieved party to the position that they would be in had the contract been FULLY performed.
Formula —
- The loss of value of the breaching performance,
- Plus any incidental or consequential damages,
- Minus any payment already received,
- Minus any costs saved by not performing.
78
Reliance Damages
Restores the aggrieved party to the position that they were in prior to the contract.
Measured by:
- The expenditures made in preparation of the contract,
- The cost of performance,
- Minus any loss that the plaintiff would have suffered if the contract had been satisfied.
Available when expectation damages are too uncertain or speculative.
79
Restitution Damages
The value of the benefits already conferred upon the other party.
May also be measured by the extent to which the other party's property has increased in value.
Only available for partial performance, not full performance.
80
Liquidated Damages Analysis
1. Was the LD clause reasonable at the time of contracting, in relation/proportion to the anticipated harm?
2. Was the LD clause reasonable in relation to the harm that actually occured?
Courts will NOT uphold a LD clause that is a penalty or punishment.
81
Seller's Remedies Under the UCC
If the goods were accepted by the buyer — Seller entitled to the contract price.
If the goods were not accepted by the buyer, but the seller has resold the goods (mitigated the damages) — Seller entitled to the difference between the contract price and the resale price.
If the goods were not accepted by the buyer ,and the seller hasn't resold them — Seller is entitled to the difference between the contract price and the market price.
82
Lost Volume Seller
A seller who sells to a buyer after a previous buyer has breached a contract for sale but who would have been able to make a sale to the second buyer even if the first buyer had not breached.
May recover the PROFT that they would have made on the sale, not the full contract price.
83
Buyer's Remedies Under the UCC
If the buyer covers (buys the goods elsewhere) — the remedy if the difference in the contract price and the cover price.
If the buyer does not cover — the remedy is the difference between the contract price and the market price.
The buyer may also be able to receive the value of the goods contracted for vs. the value of the goods received.
84
Incidental Damages
The expenses incurred in dealing with or storing the goods after breach.
Either buyer or seller can recover.
85
Consequential Damages
Must be reasonably foreseeable at the time that the contract was made, and only the buyer can recover under the UCC.
86
Specific Performance
An extraordinary remedy in which the breaching party is ordered to perform. Only available when monetary damages are inadequate, such as when property is unique. Are not available for personal service or long-term contracts.
87
Specific Performance Under the UCC
Loosens the "uniqueness" requirement, only has to be "unable to recover" after a reasonable search.
88
Negative Injunction
Prohibits a breaching party from acting, most common for employment contracts.
89
Mid-term Relief
When an employee leaves before the employment contract is up, the court can't force you to work by may prevent a competing employer from hiring you.
Only available when the services are unique or extraordinary.
90
Post-Employment Relief (Covenant Not to Compete)
Valid if:
1. There is a significant business justification;
2. The scope is reasonable in duration and geographical reach;
3. There was an express provision.
91
Bilateral Executory Accord
An agreement that an existing claim will be discharged in the future by the rendition of a substituted performance. If the substitute performance is properly rendered, then there is an accord and satisfaction.
92
UCC Measure of Damages for Nondelivery or Repudiation by Seller
Difference between the market price at the time that the buyer LEARNED of the breach and the contract price, plus incidental or consequential damages.
93
Power of Attorney
A power of attorney is a written document in which one person (the principal) appoints another person to act as an agent on his or her behalf, thus conferring authority on the agent to perform certain acts or functions on behalf of the principal.
Must be in writing! Generally terminated when the principal dies. Principal can revoke the power of attorney at any time.
94
"Durable" Power of Attorney
Differs from a traditional power of attorney in that it **continues** the agency relationship **beyond the incapacity of the principal**.
The two types of durable power of attorney are immediate and "springing."
Immediate — takes effect as soon as the durable power of attorney is executed.
Springing — intended to "spring" into effect when a specific event occurs, such as when the principal becomes disabled/incapacitated.
95
3 Ways to Reject at Common Law
1. Outright/express rejection.
2. Rejection via counteroffer *(exception — can't be a "mere inquiry")*
3. Rejection via non-conforming acceptance (Mirror Image Rule)
96
"Time is of the Essence"
When parties to an agreement for the sale of goods specify a delivery date for the goods and declare that "time is of the essence," the buyer will be entitled to recover damages resulting from the seller's failure to timely deliver the goods.
Where such a breach occurs, the buyer may recover the **"consequential damages"** that reasonably flow from the breach, which **include lost profits** (but not punitive damages).
97
Employment-at-Will Rule
The default rule for the duration of an employment contract — absent an agreement to the contrary, an employer may dismiss, and an employee may quit, at any time for any reason.
However, in a majority of jurisdictions, **oral or written assurances of job security** made to an individual employee, as well as assurances contained in policy documents distributed to the workforce, may suffice to take the contract out of the default rule.
## Footnote
Using the word "permanent" or "permanent employment" = employment-at-will
98
Reformation
The parol evidence rule does not apply where a party alleges facts that would entitle him to a reformation of the contract.
Reformation permits the court to exercise equitable powers to "reform" (rewrite to correct the mistake) a contract due to a drafting error resulting in a failure to capture the true intent of the parties.
To obtain reformation, a party must show that:
(1) there was an valid agreement;
(2) that is incorrectly reflected in the writing; and
(3) proof of these elements is established by clear and convincing evidence.
99
Owner Breach of a Contruction Contract
Construction company will be able to recover the expected profit of the contract, + anything they have already expended at the time of breach.
100
Anticipatory Repudiation
Occurs when a party announces their intention not to perform prior to the time that performance is due.
Aggrieved party may choose to treat the anticipatory breach as a breach of contract, and **either cancel the contract** or bring an action for **damages or specific performance**.
A party who has repudiated a contract may RETRACT the repudiation, unless and until:
(1) The other party _acts in reliance_ on the repudiation;
(2) Positively _accepts the repudiation_; or (3) _Commences a suit_ for damages or specific performance.
101
Allocation of Risk in Construction Contracts
General rule states that a builder who promises to erect a building is still bound to do so, even though the nearly completed structure is destroyed by forces beyond the builder's control.
Partially/Newly Constructed Structure — When destroyed by fire or act of God, the risk of loss is on the **builder**.
Existing Building — When destroyed by fire or act of God, the risk of loss is on the **property owner**.
102
Past Consideration Rule Exceptions
Traditionally, a promise that has been made as a result of past consideration cannot be enforced. However, two exceptions apply —
- If you owe someone a debt and the statute of limitations is expired, your debt can be enforced if you promised them you would pay it anyway.
- If you owe someone a debt and then declare bankruptcy, your debt can be enforced if you promised you would pay it anyways.
- If a promise is made at at a time where there is a voidable obligation, like if a party is a minor, then it can be enforced when the defect is cured.
103
Shipment Contract
Requires that the seller place the goods into possession of the common carrier.
Risk of loss passes to the buyer when the goods are delivered to the carrier.
104
Destination Contract
Requires that the seller deliver the goods to the buyer at a certain location.
Risk of loss passes to the buyer when the goods arrive at the buyer's location.
105
Right of Inspection
Under the UCC, a buyer's right to inspect and reject is not affected by a provision in the contract requiring payment on delivery. A buyer still retains the right to inspect the goods and reject even after payment.
Advance payment does not "impair the buyer's right to inspect or any of his remedies." Even if there is a contract clause requiring prepayment, any buyer retains a right to inspect the goods purchased.
106
Special Rule for Construction Contracts Re: Revocation
Where a general contractor uses a particular subcontractor's bid/"offer" to formulate their own bid, an **implied option contract** is created via promissory estoppel.
107
"Merchant"
A person with special knowledge or skill with respect to the practices or goods involved in the transaction.
108
Revival
The maker is the master of the offer. An offeror has the power to revive an offer that the offeree has rejected by **communicating the revival**, which can be accomplished by _restating the offer_ or _giving the offeree more time_.
109
Substantial Performance vs. Material Breach
Substantial performance is present when a party completes its contractual obligations with “no uncured material failure.”
Whether a failure to perform is material depends on several factors, including
(1) If the aggrieved party will be **deprived of the benefit they expected** under the K;
(2) If the aggrieved party can **adequately be compensated** via damages for the defective performance;
(3) If the breaching party will **suffer forfeiture** if a material breach is found;
(4) If the breach was **willful/in bad faith**, rather than merely negligent or innocent; and
(5) The likelihood that the breaching party will **cure his failure** within a reasonable time.
The likelihood that the failure will be cured is a significant circumstance in determining whether the breach is material or nonmaterial.
110
Divisibility of a Contract
A contract is said to be divisible if the performances to be exchanged can be divided into corresponding pairs of part performances, in such a way that a court will treat the elements of each pair as if the parties had agreed they were equivalents.
