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CA Bar MBE > Contracts > Flashcards

Contracts Flashcards

1
Q

What is the maximum a firm offer may stay irrevocable?

A

3 months maximum even if contracted to remain open for longer.

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2
Q

When may an adversely-affected party avoid a contract based on mutual mistake?

A
  1. the mistake must concern a basic assumption on which the contract was made;
  2. the mistake must have a material effect on the agreed exchange of performances; and
  3. the adversely-affected party must not bear the risk of the mistake.

The party wishing to avoid the contract must show that the resulting imbalance in the agreed exchange is so severe that he cannot fairly be required to carry it out.

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3
Q

Anticipatory repudiation

A

When a party makes it unmistakably clear, even before his performance under a contract is due, that he does not intend to perform.

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4
Q

T/F: Implied in fact contracts require essential terms such as price

A

False

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5
Q

sufficiency of quitclaim deed as consideration

A

quitclaim deed is sufficient consideration even when the holder is aware that their claim to the property is doubtful.

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6
Q

is a contract modification binding on an assignee who had no knowledge of the modification?

A

YES. assignee not required to have notice of the modification

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7
Q

Effect of Assignment on Assignee

A
  • Assignee stands in shoes of the assignor AKA whatever claims and defenses that could have been brought against assignor could also be brought against assignee.
  • NO NOTICE of those claims or defenses are required.
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8
Q

Substantive unconscionability

A
  • Based on price alone.
  • substantively unconscionable for a price to be set to 2-3x market price of similar goods b/c it’s excessive.
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9
Q

Procedural Unconscionability

A
  • Some form of unequal bargaining power b/w the parties.
  • This is found when party is somehow induced into agreeing to K without any meaningful choice.
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10
Q

equitable estoppel

A

invoked to prevent a party from taking advatage of another party in an unfair way, often by way of false or fraudulent words or actions.

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11
Q

Merchant Confirmation Exception

Exception to writing requirement for UCC sale of goods for $500 or more AKA a signed writing will not be required between merchants where…

A

A signed writing will not be required between merchants where:
- a written confirmation of a contract of sale has been sent (and signed)
- and the recipient fails to give notice of objection to the confirmation
- within 10 days of its receipt.

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12
Q

If an assignor assigns a job to a third party, what is the assignor effectively doing?

A

Delegating a duty, NOT assigning a right

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13
Q

impact of liability limitation clause on a UCC contract

A

liability limitation clause proposes a material alteration and is NOT the same as liquidated damages provision.

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14
Q

undue influence

A
  • defense based on lack of capacity.
  • typically based on relationship b/w parties and one party exerting pressure on the other
  • no based as much on circumstances leaving no meaningful choice
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15
Q

Ways to terminate an offer

A
  • Death
  • Lapse of time (usually offer available for a ”reasonable” amount of time)
  • Rejection
  • Counteroffer
  • Revocation
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16
Q

Four ways irrevocable offers arise:

A
    • Option K
  2. UCC Firm Offer (for 3 months max)
  3. Unilateral Contract (irrevocable the moment you begin performance)
  4. Detrimental Reliance
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17
Q

Option K

A
  1. Offeror offers to keep offer open for period of time AND
  2. Additional consideration (for $50 I’ll keep offer open for two weeks)
  • Even if Seller revokes, Buyer can STILL ACCEPT (b/c paid for the right to have the option)*
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18
Q

UCC Firm Offer

A
  1. party is a merchant
  2. offer to buy or sell goods is in writing;
  3. writing gives assuraces the offer will be held open
  4. signed by merchant/ offeror

DOES NOT REQUIRE CONSIDERATION FOR TIME PERIOD STATED IN THE OFFER
* If no time is stated, the firm offer can only stay open for a MAXIMUM of 3 months
* After 3 months, offer defaults to being revocable

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19
Q

Merchant for Purposes of Merchant Firm Offer

A

Any business person, when the transaction is commercial in nature

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20
Q

Unilateral Contract

A
  • Promise for an act
  • irrevocable the moment you begin performance
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21
Q

Common Law re: Modification

A
  • Requires new consideration.
  • When there is a pre-existing duty, promise of performance is not sufficient consideration for modification
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22
Q

Modern View re: Modification

A

modification permitted without consideration if modification is:
1. due to circumstances that were unanticipated at the time of contract formation; AND
2. fair and equitable

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23
Q

UCC Modification

A
  • Requires modifications to be made in good faith
  • if in good faith, binding even without consideration
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24
Q

Risk of loss when there is:
- NOT a carrier
- Seller IS a merchant

A

If the seller is a merchant/retailer/wholesaler delivering them right to you, the risk of loss is on the seller
- UNTIL the buyer takes possession

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25
Q

Risk of loss when there is NOT a carrier and Seller is NOT a merchant

A
  • Seller is just Jon on Craigslist, Amazon, etc.
  • Risk of loss is on non-merchant seller UNTIL he tenders the goods to buyer aka makes them available to buyer
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26
Q

Risk of loss when there IS a carrier involve which kinds of contracts

A

Shipment and destination contracts

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27
Q

Shipment contract

A

default rule

  • does NOT require delivery at a particular location
  • Risk of loss is on the seller
  • UNTIL he gives them to the carrier
  • Once widgets are given to the carrier, aka dropped at UPS, FedEx, THEN risk of loss goes to the buyer

Note: If you see FOB SELLER – shipment contract

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28
Q

Destination contract

A
  • requires delivery at a particular location
  • Risk of loss is on seller until the goods get to the actual named location
  • risk of loss shifts to buyer when goods delivered to named DESTINATION

Note: if it says FOB + ANYTHING ELSE OTHER THAN SELLER, then it’s a destination k

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29
Q

How is restitution calculated

A

calculated by what the breaching party gained, like a down deposit

(rather than what the non-breaching party might have lost to prevent unjust enrichment)

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30
Q

UCC perfect tender rule
& what it doesn’t apply to

A
  • entitles a buyer to reject a tender of delivery that fails in any respect to conform to the contract;
  • does not apply to installment contracts.
31
Q

Damages to an injured buyer in a contract for the sale of real estate are usually measured by

A

the difference between:
the contract price and the market value of the property as of the time that the buyer learned of the breach, plus any incidental or consequential damages.

32
Q

Requirements Contract

A

does not require quantity for formation

  • Buyer promises to buy from seller all of the goods buyer requires.
  • Seller agrees to sell that amount to buyer.
  • Seller can still sell to other buyers, but buyer is not free to buy from other sellers
33
Q

Output Contract

A

does not require quantity for formation

  • Seller promises to sell all of their product or output to a buyer
  • Buyer agrees to buy that amount from Seller
  • Buyer is free to purchase from other sellers, but seller isn’t free to sell to other buyers
34
Q

Promissory Estoppel

A

Allows enforcement of promise even if there was no formal consideration when promisor made the promise if:

  • promisor reasonably should have expected to induce reliance on promise
  • enforcing party reasonably and detrimentally relied on promise and
  • injustice can be avoided only by enforcing promise

Think broken promises.

35
Q

Elements of Quasi Contract AKA contract implied-in-law

A

Contract implied-in-law used when someone receives a non-gratuitous and measurable benefit at another’s expense, even if there was no agreement or promise.

making sure someone pays for a benefit received, even if no promise made”

36
Q

purpose of implied in fact or quasi contract

A

Constructed by court to prevent unjust enrichment when party receives benefit from another who reasonably expects compensation

37
Q

when can a plaintiff recover under a quasi-contract theory—despite having no contractual relationship with the defendant?

A
  • if the plaintiff conferred a non-gratuitous benefit
  • on the defendant
  • that resulted in unjust enrichment.
38
Q

Why are implied-in-law or quasi contracts not true contracts?

A

Implied-in-law contracts are not true contracts since they lack mutual assent

39
Q

Mutual Mistake & ability to rescind

A

Adversely affected party can rescind if:
1. There is a mistake of fact existing at the time that the deal is made;
2. The mistake relates to a basic assumption of the contract and has a material impact on the deal; and
3. The impacted party did not bear the risk of mistake.

40
Q

measure of damages owed to a wrongfully discharged employee

A

compensatory damages

(amount of salary agreed upon for the period of employment)
reduced by
(amount the employee has earned or with reasonable effort may have earned from other similar employment)

41
Q

obligation to mitigate losses in an employment contract

A

limited to comparable work in the same locale.

42
Q

How much may a buyer recover after “covering” in a contract for the sale of goods?

A

If the buyer covers in good faith and in a commercially reasonable manner, —> they may recover the cost of cover

(the cost of the substitute goods) MINUS (the contract price)

43
Q

What may a buyer recover after rightfully rejecting or revoking acceptance of non-conforming goods?

A

The buyer may recover the market price of the goods at the time the buyer learned of the breach minus the contract price.

44
Q

Where a seller has goods and the buyer is in breach, how should the seller’s damages be calculated if the seller RESOLD the goods?

A

The seller’s damages are the difference between the contract price and the resale price.

45
Q

When does the suretyship provision of the Statute of Frauds not apply?

A

where the surety promise was made directly to the debtor (the son) rather than the obligee (the dealership).

46
Q

Cross offer

A

Functions as a rejection followed by a counteroffer.

47
Q

Absent explicit prohibition, when can a contractual duty NOT be delegated to another?

A

a contractual duty may be delegated to another unless the other party to the contract has a substantial interest in having the original obligor perform.

Typically the other party will have such an interest where the contract is a personal services contract involving fancy, taste and judgment.

48
Q

When inconsistent, which controls? a course of dealing or usage of trade?

A

A course of dealing controls when inconsistent with usage of trade

49
Q

priority of course of performance, course of dealing, and trade usage

A
  • Course of performance > course of dealing & trade usage
  • Course of dealing > trade usage
50
Q

Expectation Damages Goal and formula

A

Goal:
- to put non-breaching party in the same economic position it would be in if the contract had been performed as promised.

Formula:
- Contract Price – Amount already Paid – Amount that Would Be Needed to Finish the Job = expectation damages

51
Q

General damages

A
  • the type of loss that almost anyone would incur from a breach
  • Includes incidental damages
52
Q

Incidental damages

A
  • commercially reasonable costs incurred as a result of the breach
  • part of general damages
  • ex. inspection, storing rejected goods, or finding a new buyer, or finding a replacement vendor
53
Q

Consequential damages

A

losses that are unique or special to this plaintiff

54
Q

Reliance damages

A

Goal: to put non-breaching party in the same economic position that it would be in if the contract had never been created in the first place

Ask what loss has the plaintiff incurred that would never have taken place but for the breached contract?

55
Q

Restitution Damages

A

Goal—to give the plaintiff an amount equal to the economic benefit that the plaintiff conferred on the defendant

56
Q

What is a “donee beneficiary” and who may they sue

A
  • a third party the promisee intends to benefit from the contract because the promisee wants to give them a gift
  • they may only sue the promisor unless an exception applies
57
Q

Exceptions where a donee beneficiary can sue

A

Exceptions where donee beneficiary can sue the promisee:
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.”

58
Q

What is a creditor beneficiary and who may they sue?

A
  • A creditor beneficiary arises when the promisee strikes a deal with the promisor in order to repay some earlier debt to the third party
  • they may sue both the promisor and promisee
59
Q

When do 3rd party beneficiary rights vest?

A

when the beneficiary:

  • detrimentally relies on the rights created
  • manifests assent to the contract at one party’s request or
  • files a lawsuit to enforce the contract.
60
Q

How is a contractual obligation discharged by accord and satisfaction?

A

A contractual obligation is discharged by accord and satisfaction if…
* a party tendered a negotiable instrument
* with a conspicuous statement that it was tendered as “payment in full” and
* the other party obtained payment of the instrument.

61
Q

4 exceptions to general rule that contractual duties are delegable

A
  1. Substantial interest in having OG promisor perform (evidence of this can be seen in an exculpatory clause)
  2. contract involves special judgment or particular skill
  3. special trust or relationship between the parties
  4. contractual restriction
62
Q

if both parties are merchants, and one proposes an additional term, what is the result?

A
  • additional term becomes a term of the parties’ contract is both parties are merchants UNLESS certain specified circumstances are present.
  • One circumstance is when an additional term materially alters the parties’ contract.
63
Q

gratuitous assignment

A
  • an assignment is not supported by consideration
  • generally revocable unless an exception applies
  • A revocable assignment is automatically revoked upon the death, incapacity, or bankruptcy of the assignor.
64
Q

Elements for good title to be conveyed to a buyer in the ordinary course of business

A
  • in good faith
  • without knowledge that the sale violates the owner’s rights to the goods and
  • from a merchant in the business of selling goods of that kind.
65
Q

Under common law, when is a breach “material”?

A

A breach is material when the nonbreaching party does not receive the substantial benefit of its bargain.

66
Q

Under common law, does substantial performance constitute a material breach?

A

No, except as to an express condition.

67
Q

accord and satifaction

A
  • good faith dispute over what is owed
  • need an agreement to discharge debt [accord]
  • payment = satisfaction
  • when amount is in dispute, and supplier cashes check that says “payment in full” this satisfies and discharges the obligation
68
Q

T/F: anticipatory repudiation applies when performance is complete

A

False.

69
Q

if performance is complete, but the person owing has said they cannot pay, can the non-breaching party sue immediately?

A
  • NO, must wait to sue.
  • can only sue when payment is due.
70
Q

When is payment for an installment contract due?

A

Payment by the buyer is due at time & place of each delivery unless the price cannot be apportioned.

71
Q

Release

A

a writing that manifests an intent to discharge another party from an existing duty.

72
Q

Release Requirements Under UCC

A
  • UCC requires the release to be signed by the releasing party, but does not require new consideration to be effective.
73
Q

Release Requirements Under Common Law

A

the release must be supported by consideration or a consideration substitute (eg, detrimental reliance) to be effective

74
Q

non-breaching party’s remedies to anticipatory repudiation

A

“1. sue immediately
2. suspend his own performance and wait and see until the due date
3. treat the repudiation as an offer to rescind and treat the contract as discharged; or
4. ignore the repudiation and urge performance.”

CA Bar MBE (2 decks)

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