Contracts Flashcards

Question

BFE

Answer 1

Past or moral consideration is not bargained for, and thus, not valid consideration. *Exception: A past obligation is valid consideration when (1) a new promise is made in writing, or (2) is partially performed. A past act that either: (1) benefitted the promisor and was performed at promisor's express request, (2) is in response to an emergency, or (3) is a subsequent promise to pay for a past act is valid consideration if the promisee expected payment.

Answer 2

A written promise to satisfy an old debt is barred by a valid defense is valid without consideration. The original debt is not revived but subsequent debt is enforceable.

Answer 3

Under common law, a pre-existing legal duty is not valid consideration, unless: (1) it is owed to a third person, (2) new or different consideration is promised, or (3) there are unforeseen difficulties so severe the pre-existing legal duty is valid as consideration. *A forbearance to sue is valid consideration if promisor honestly believed the claim to be valid. * Part payment for release is valid consideration if debt is due and undisputed *A promise is valid consideration if its mutual and not illusory *A promise to use best efforts is valid consideration if promisor is exclusive distributor.

Answer 4

(1) if promisor makes a promise, (2) that induces reliance, (3) that is reasonably foreseeable, and (4) promisee actually relies to his detriment, the promise will be enforced to avoid injustice, even without consideration

Answer 5

Under the common law, a writing requires identification of the subject matter of the K, price term, quantity term, and time for performance. Under UCC, writing requires quantity term only. A merchant's confirmatory memorandum will suffice so long as the receiving party does not object in 10 days.

Answer 6

Under statute of frauds, certain agreements must be (1) in writing, (2) contain all essential terms, and (3) must be signed by party to be charged. This includes marriage, executor's contracts, contracts for the sale of goods over $500, and suretyships (ie promises to pay the debts of another)

Answer 7

goods are specially made and seller has made a substantial beginning, (2)there is a written merchant confirmation memo, (3) a party admits the existence of the K in testimony or pleadings, or performance, or (4) performance. *Under the common law, full performance is required to remove a K from SOF. *Under UCC, partial performance satisfies SOF but only to extent of partial performance.

Answer 8

Land sale K where 2 of three of following have been met do not require a writing: (1) payment, (2) improvements, or (3) possession (PIP). Contracts for sale of goods over $500, do not require a writing if there has been part payment or acceptance.

Answer 9

A K is not performed if it is based on fraud or material misrepresentation of fact. Puffing is okay.

Answer 10

A K is not formed if a party entered into it under duress.

Answer 11

A K is not formed if it is unconscionable such that it shocks the conscience at the time of the K. Ks of adhesion are unconscionable. Procedural unconscionability: process is so unconscionable as to shock the conscience. Substantive unconscionability: the terms of the K are so unconscionable as to shock the K

Answer 12

under the UCC, SOL is a breach of K is 4 years.

Answer 13

a K is not formed if subject matter of the K is illegal..

Answer 14

Latent Ambiguity: A K is not formed if there are latent ambiguities (ie not obvious on the face of the K), unless the parties intended the same meaning. If one party is aware of the ambiguity, the K is based on the ignorant party's meaning. Patent Ambiguities: A K is not formed if there are patent ambiguities (ie obvious on the face of the K). However, parol evidence may be used to explain the ambiguity.

Answer 15

Mutual Mistake - A K is not formed if it is based on a MM and concerns a basic assumption on which the K was made. Unilateral Mistake - A K is not formed is based on a unilateral mistake. However, if a party had reason to know of the mistake, a K will be formed based on the mistaken party's beliefs.

Answer 16

A minor who enters a K for non-necessity can disaffirm the K during his minority, or a reasonable time after reaching the age of minority. However, if he ratifies the K at the age of majority, he is liable to the extent of ratification. A minor's parents are liable for necessities.

Answer 17

A K is not formed if it lacks consideration

Answer 18

If K expressly says it is held out to be a final writing then all other agreements made prior to or contemporaneous with the writing are inadmissible to vary that writing. *Subsequent agreements are not subject to PER and are admissible.

Answer 19

A K is not formed if it is based on an illusory promise which can take the form of either: (1) a condition entirely within promisor's control, (2) one of party's has a right to cancel with no notice, (3) gratuitous suretyships before debtor gets the money, or (4) promisor can choose one of several options and neither one is of any detriment.

Answer 20

(1) agreement only partially integrated (2) resolve ambiguities (3) terms that would naturally be omitted and do not conflict with the K (4) formation defects because of misrepresentation, fraud, duress. (5) true consideration (6) clerical mistake in integration (7) evidence of condition precedent necessary for K to be effective Supplemental terms: course of dealing, course of performance, and custom and trade usage

Answer 21

Under the common law, if additional or different terms are proposed, the mirror image rule dictates the K is not formed if and a counteroffer is created. Under the UCC, if additional are proposed, whether they are included in the K depends on whether one or both parties are merchants and contracting to the agreement. If the K is between one merchant and one non-merchant, the additional term is a proposal and terms of the original offer govern. If K is between 2 merchants, additional term becomes part of the K, unless: (1) the offer expressly said acceptance could not contain different terms, (2) different terms materially alter the K, or (3) the offeror rejects the different terms in a reasonable time.

Answer 22

If K is between one merchant and one non-merchant, the different term is not included and terms of the offer govern. If K is between 2 merchants, there is a split of authority regarding whether the different term is included. Some jdxs treat the different term like an additional term and permit it to be part of the K, unless: (1) offer expressly said acceptance could not contain additional terms, (2) additional terms materially alter the K, or (3) offeror rejects the additional term in a reasonable time. Other jdxs use the knockout rule and different term is knocked out.

Answer 23

Under the UCC, if there is no K but performance begins, the terms are based on the writings in agreement and the court may use UCC gap fillers to set reasonable terms based on the following: (1) Price - set at reasonable at time of delivery (2) Place of delivery - seller's place of business, if none, then seller's home (3) Time for shipment/delivery - due in reasonable time (4) Time for payment - due at time and place where buyer is to receive goods

Answer 24

Default delivery location is the seller's place of business Non-carrier cases * if the seller is a non-merchant, the risk of loss passes to the buyer upon tender of delivery. *if seller is a merchant, the risk of loss passes to buyer only when the buyer takes physical possession of the goods Carrier Goods A shipment K exists only when delivery terms specify (free on board) + seller's city or goods' location city. The risk of loss passes to the buyer when: (1) seller gets goods to the common carrier, (2) seller makes arrangements for delivery, (3) seller notifies the buyer, and (4) buyer must pay the freight charges. A destination K exists when the delivery terms specify FOB + any other city. The risk of loss passes to the buyer when the goods arrive at the buyer's destination.

Answer 25

arise from any statement of fact or promise, sample, brochure, or model.

Answer 26

arises in every sale of goods by a merchant and ensures goods are fit for ordinary purpose.

Answer 27

arises when: (1) seller knows buyer is relying on the seller to pick suitable goods for the buyer, and (2) buyer relies on seller's expertise to furnish suitable goods of the kind

Answer 28

(1) SOL: SOL is 4 years from the tender of delivery. (2) Privity: there is no warranty liability if buyer did not buy from the seller (3) buyer's examination of goods: if buyer inspects goods, there are no implied warranties if defects would be obvious upon inspection. (4) Disclaimers: express warranties can be disclaimed so long as done in a clear and reasonable way Implied warranties can be disclaimed if: (1) disclaimer is conspicuous, or (2) disclaimer says as is

Answer 29

- UCC Perfect Tender Rule: Seller is obligated to perfectly tender goods to the buyer. - Under common law, if there is a unilateral offer, there must be full performance. - Under common law, substantial performance is acceptable so long as there is no material breach. The other party is entitled to a setoff based on the value of performance given.

Answer 30

if one party gives reasonable grounds for insecurity, then the other party can, in writing, (1) demand adequate assurances, and (2) if commercially reasonable, suspend performance until receipt of the assurance. If seller learns the buyer is insolvent, the seller can (1) refuse to deliver the goods, unless buyer pays cash, or (2) seller can reclaim the goods upon demand within 10 days after buyer received them.

Answer 31

If a condition precedent is not met, parties do not have to perform If condition concurrent is not met, party fulfilling their condition can treat it as a breach and their performance will be excused If condition subsequent is met, it cuts off duty to perform. However, if condition subsequent is waived, performance is still due.

Answer 32

the failure of a condition will relieve a party of their obligation to perform. Every condition contains an implied condition of good faith and fair dealing between the parties to carry out their obligations.

Answer 33

Under the common law, modifications require additional consideration. Under common law, oral modification is permitted even if K says otherwise Under UCC, modifications do not require additional consideration. Under UCC, a K that requires modification to be in writing and must be complied with. Under the UCC, a modified K must be in writing if it falls within SOF as modified. Under the UCC, a K is between one merchant and non-merchant, and it is modified, the non-merchant must sign for the modification separately.

Answer 34

A party is excused from performance if the other party makes an unambiguous statement, prior to the time performance is due, that she will not perform. An AR can be withdrawn so long as there is no material change in position by the other party or the other party does not treat it as final. If timely retracted, then the duty to perform is reimposed, but performance can be delayed until adequate assurances are given.

Answer 35

non-repudiating party must demand assurances and then if repudiator doesn't respond, can: (1) treat the K as repudiated and sue immediately (2) suspend own performance, wait for the date of performance then sue (3) ignore repudiation and urge promisor to perform, or (4) accept repudiation and rescind contract

Answer 36

Under common law, a breach is anything less than full performance. A breach occurs if the promisor is under a duty to perform that has not been discharged and he fails to perform.

Answer 37

in event of material breach, the non-breaching party: (1) must be willing and ready to perform, (2) may treat the K as ended and her performance is discharged, and (3) may have an immediate right to all remedies for the breach of the entire K, including damages.

Answer 38

occurs when the promisor has substantially failed to perform his K obligations (ie time of essence clause)

Answer 39

Occurs when the promissee gains the substantial benefit of her bargain despite the promisor's defective performance. Remedy: the non-breaching party will be held to the K; however, she is entitled to a set-off, or damages for the minor breach.

Answer 40

amount of benefit receiving by non-breaching party, adequacy of compensation for damages, extent of part performance by breaching party, hardship to breaching party, negligent or willful behavior, likelihood that breaching party will complete performance

Answer 41

Requires perfect tender of perfect goods. If seller fails to do so, buyer can: (1) accept the goods and sue (must be given a reasonable opportunity to inspect, unless the K says otherwise) (2) reject the goods and sue (must reject before acceptance occurs), or (3) Accept any commercial units, reject the rest and sue. Rejection by the buyer requires: (1) buyer to notify seller, (2) buyer to take care of the goods until seller gets them, (3) buyer to give the seller an opportunity to cure.

Answer 42

Seller can cure if it's on or before the date of performance and the buyer must accept the conforming delivery. Seller can cure if its after date of performance only if seller had reasonable grounds to believe the buyer would accept delayed cure. If an installment K, the buyer cannot reject a defective installment if it can be cured. **A breach of one unit still entitles party to payment for the other performed units. ** A breach of one unit is a material breach as to the whole K only if it substantially impairs the value of the entire K. Shipment of Non-conforming goods - is both acceptance and breach, unless seller included a notice that the goods are an accommodation in which case the notice is a counteroffer.

Answer 43

of buyer's acceptance requires: (1) buyer accepted them on reasonable belief the defect would be cured, or (2) the defects were latent. The buyer must revoke within a reasonable time and before any substantial change in condition of the goods.

Answer 44

Impossibility, impracticability, frustration of purpose

Answer 45

If performance is objectively impossible, both parties discharged form performance. Ie illegality Remedy: parties can be reimbursed for part performance in quasi-K

Answer 46

Performance becomes impracticable if promisor encountered subjectively extreme and unreasonably difficulty or expense that was not anticipated at time K was entered into

Answer 47

if purpose of the K has become valueless because of some supervening event, that is not the party's fault, which was not reasonably foreseeable at the time the K was entered into, performance is excused because of frustration of purpose.

Answer 48

a rescission agreement that is executory on both sides excuses any further K performance.

Answer 49

a change to an existing obligation to accept a different agreement in satisfaction of an existing K (see above)

Answer 50

if parties to an already existing obligation accept different performance in satisfaction of the existing obligation, the original called-for performance is excused. Accord - an accord is a new agreement between parties that already have an existing K. It requires new consideration. Satisfaction - is performance of an accord. If the satisfaction does not occur, the plaintiff can sue under the original K or the new accord.

Answer 51

an agreement between both parties to an existing K to substitute a different party's performance. The agreement excuses the OG party and liability falls on the new party.

Answer 52

Incidental beneficiaries have no K rights. Intended beneficiaries have contract rights if their rights have vested. Intended beneficiaries must: (1) be identified in the K, (2) receive performance directly from promisor, (3) have some relationship with promisee evidencing intent to benefit. An intended beneficiary's rights vests when: (1) his assent is requested by and given to parties, (2) he brings a suit to enforce the promise, or (3) he detrimentally and justifiably relies. Prior to vesting, promisor and promisee can modify or rescind the 3PB rights.

Answer 53

a transfer of one's rights and benefits under the K. Clauses forbidding assignment are construed as not covering assignments of rights to get paid. An assignment does not require consideration, but gratuitous assignments are revocable and assignments for value are irrevocable.

Answer 54

are revocable and can be modified, but irrevocable if: ● Obligor has already performed ● There has been detrimental reliance by the assignee ● Token chose has been delivered (e.g. a tangible item like a stock certificate), or ● Assignment of simple chose put in writing (i.e. intangible claim, like contract right).

Answer 55

▪ Death of assignor. ▪ Bankruptcy of assignor. ▪ Notice of revocation by assignor to assignee or obligor. ▪ Assignor takes performance directly from obligor. ▪ Same right assigned to another person.

Answer 56

● It substantially changes the obligor’s duty or risk ● Personal service contracts where party is unique ● Requirement or output contract where assignee varies the quantity substantially ● Assignment of future rights to arise from a future contract, or ● Assignment is prohibited by law (e.g. wages).

Answer 57

▪ Contract provisions can prohibit the right to assign but this does not eliminate the power to assign. The assignor is liable for a breach of contract and the assignee who does not know of contract provision can still enforce the assignment. ▪ Language invalidating the right and power to assign results in a breach by the assignor and no rights to the assignee.

Answer 58

first in time to give consideration. Another may win if BFP for value without notice, and any of the following are true: ▪ Gets first judgment against obligor ▪ Obligor pays subsequent assignee directly ▪ Subsequent assignee gets delivery of token chose ▪ Subsequent assignee is a party to a novation, or ▪ Estoppel claim against other assignees.

Answer 59

transfers one’s duties and burdens under a contract to a third-party. The delegator must make a written or oral present intention to make the delegation effective. The obligee becomes a third-party beneficiary of the contract between the delegator and delegatee.

Answer 60

● Duties that involve personal judgment and skill ● Delegations that would substantially change Obligee’s required performance (especially Output/Requirements K) ● Duties involving a special trust of delegating party ● Contractually restricted (where K specifically states “cannot be delegated”)

Answer 61

● The delegatee is only liable if he received consideration from the delegating party ● The obligee can sue either the delegator or delegatee ● The delegating party will always remain liable on the contract, unless novation

Answer 62

put the plaintiff in the position she would have been had the contract been fully performed and no breach occurred. Damages must be: (FUCC) ▪ Foreseeable – Damages must have been foreseeable at the time the contract was entered into. ▪ Unavoidable – P has a duty to mitigate. ▪ Causal – The damages were caused by the breach of contract. ▪ Certain – The damages must not be speculative in nature. ▪ Under the UCC, if there has been anticipatory repudiation: ● The buyer can purchase substitute goods and recover the difference between the contract price and substitute goods (i.e. market price). ● The seller can resell the goods and recover any difference in profit, if done in good faith.

Answer 63

are awarded when expectancy damages are too speculative and plaintiff is entitled to the cost of her performance to put her back in the position she would have been in had the contract never been performed.

Answer 64

are limited to foreseeable damages arising from P’s special circumstances which D had reason to know of at the time of contract (e.g. loss of reputation).

Answer 65

are those damages that flow naturally from the breach.

Answer 66

are damages that are contracted for in the event of a future breach by both parties. Liquidated damages clauses are only valid if the damages are: (1) difficult to ascertain in advance, and (2) it is based on a reasonable forecast of damages.

Answer 67

are not available in contract actions, unless there has been tortious interference with the contract.

Answer 68

are awarded where P had no actual injury but the court wants to vindicate P’s rights.

Answer 69

are available when D has been unjustly enriched but there is no enforceable contract. P is entitled to recover the value of the benefit conferred on D, even if in excess of the contract price. However, if P has breached also, the contract price is a ceiling on P’s recovery.

Answer 70

allows for P to recover where D has unlawful title to property belonging to P. This requires: ▪ (1) D to have title to property ▪ (2) Title can be traced to that specific property ▪ (3) There is an inadequate remedy at law, and ▪ (4) D has been unjustly enriched.

Answer 71

A court may place a lien on D’s property to secure a debt that is owed by D to P. This requires: ▪ (1) D to have title to property ▪ (2) Title can be traced to that specific property, and ▪ (3) There is an inadequate remedy at law.

Answer 72

Stops party from performing or breaching

Answer 73

● Emergency order to stop action (maintain P’s status quo) until trial/court action ● (1) P will suffer irreparable injury ● (2) P’s injury is greater than hardships D will face, if TRO granted ● (3) Likelihood of P’s success on the merits o If successful, the TRO will be issued ex parte without notice to the D and without an opportunity for D to be heard (key difference with preliminary injunction is notice!) o Duration: 10-14 days (not to exceed 14 days in federal court) * (4) Bond: IF TRO is sought, the court should impose a bond requirement on P to reimburse D if the TRO injures D, and P is ultimately not successful on the merits

Answer 74

may be granted if: ▪ (1) There is immediate harm to the P’s property interest ▪ (2) P’s harm is greater than hardships D will face ▪ (3) Probable likelihood of P’s success on the merits ▪ (4) Bond: IF preliminary injunction is sought, the court should impose a bond requirement on P to reimburse D if the injunction injures D, and P is ultimately not successful on the merits ▪ NOTICE: Preliminary injunction vs. TRO: The court may issue preliminary injunction only on notice to the adverse party.

Answer 75

may be granted if: ● (1) There is an inadequate remedy at law ● (2) Harm to property interest of P ● (3) Balance of hardship favors P ● (4) Feasibility of court enforcement, and ● (5) No defenses (see below.)

Answer 76

requires the parties to perform under the contract. Often for land or unique items but not for services. This requires: ▪ (1) A valid contract ▪ (2) With definite and certain terms ▪ (3) Mutuality of obligations (i.e. P was ready and willing to fully perform) ▪ (4) Feasibility of enforcement (i.e. proper personal jurisdiction, minimal supervision by the court) ▪ (5) There is an inadequate remedy at law, and ▪ (6) No defenses (see below)

Answer 77

permits P to recover an item of personal property that has been taken by the D. P may have to post a bond if replevin is invalid. ● Under the common law, D must have possession of the property. ● Under the UCC, the property must be “separately identifiable.” ▪ Buyer can replevy identified, undelivered goods from Seller if: ● Buyer has made at least part payment AND ● Seller becomes insolvent within 10 days OR goods are for household purposes. ▪ Seller can replevy from Buyer when: ● The goods were bought on credit; ● Buyer was insolvent when he bought them; and ● Seller makes demand within 10 days of receipt.

Answer 78

of a contract cancels the contract and places the parties in a position as if it were never formed. Valid grounds for rescission include: (1) mistake (unilateral vs. mutual), (2) misrepresentation, (3) coercion, (4) fraud, (5) incapacity, (6) illegality, or (7) impossibility. ▪ Defenses: Unclean hands, laches, election of remedies, estoppel

Answer 79

of the contract will be ordered by the court in order to meet the original intent of the parties. Valid grounds for reformation include: (1) mistake, or (2) misrepresentation. ▪ Defenses: Unclean hands, laches, sale to BFP; NOT SOF, NOT PER

Answer 80

allows P to have D removed from real property that he is in wrongful possession of.

Answer 81

▪ A party seeking equitable relief must not be guilty of unclean hands and is judged on the basis of unfair dealing with respect to the transaction sued upon.

Answer 82

▪ P will be denied relief if he has unreasonably delayed asserting his rights such that the undue delay results in prejudice or harm to D. The period of laches is shorter, but never longer, than the SOL.

Answer 83

▪ A sale to a bona fide purchase without notice is a valid defense for the BFP against any claims.