Contracts Flashcards
Offer
Outward manifestation of intent to enter into a K
- Intent AND specific terms
- Advertisement is an invitation to an offer, not an offer
Termination of an offer
- Death
- Lapse
- Rejection (i.e, counteroffer)
- Revocation
When is an offer revocable? Types and instances
1) Direct: retraction of an offer by the offeror
2) Indirect: offeree learns from a reliable source of revocation of offer (another deal is made)
- Only 3 instances where irrevocable
1. Option K: promise to keep the offer open + additional consideration
- Firm offer (UCC): 1. writing 2. signed by merchants to keep the offer open (time stated or otherwise max 3 months)
- Unilateral K: promise for a performance. Performance beings – offer becomes irrevocable.
Mirror Image Rule
Common Law -
acceptance must mirror offer
Acceptance
by silence (valid only if o’or would be okay with it) or performance
Mailbox rule
acceptance effective when sent
Exception: if rejection sent first and then acceptance, then whichever is arrived first wins
UCC Acceptance
acceptance construed liberally - different terms/methods of acceptance okay unless
- Materially changes terms of K
- Objection to the change of a term in a reasonable amount of time
- Offer limits the acceptance
Consideration - valid vs. invalid
bargained for exchange
- Illusory promise is not valid: offeror retains control BUT generally valid.
- Gift is NOT valid
- Past or moral consideration is NOT valid
- Promise to pay debt that was barred by SOL is valid
- Promise to pay debt discharged by bankruptcy is valid
- UNDISPUTED debt - debt not paid in full is not enforceable
- DISPUTED/doubtful debt - debt not paid in full is enforceable
- Forbearance is valid (not suing when you can)
Promissory estoppel
detrimental reliance on the promise
- P’or reasonably induces action or forbearance, and such action or forbearance is induced
- consideration not necessary but enforceable
Defenses to Enforceability
- minority - voidable at the option of minor. K when the minor turns majority is enforceable
- mental illness
- duress - wrongful threat
- undue influence - uneven bargaining position
- unconscionability - result itself will be unfair
- mistake
- misrepresentation
- non-compete clause - enforceable if reasonable under the circumstances
- SOF
Defense - Mistake
Unilateral: one party is mistaken. generally not a defense unless the other party knew of the mistake OR clerical error
Bilateral: both parties are mistaken about material term. Remedy is rescission.
Defense - misrepresentation
Intentional: knew or should have known of falsity with intent to induce reliance
Negligent: causes the innocent party to detrimentally rely
Statute of Frauds
○ Marriage
○ Year - K that cannot be performed within a year
○ Land - interest in land including leases
§ part performance exception: (2/3) some payment, improvement, possession
○ Executor of estate of decedent
○ Goods $500 or more
§ Exception
- Partial performance (delivery/payment)
- Merchant confirmation: if a merchant sends a signed confirmation of order with quantity and other merchant doesn’t object within 10 days
○ Surety: promise to pay debt of another. If self-serving motive, no need to be in writing.
○ Legal writing:
§ Parties, subject matter (MYLEGS), material terms, signed by party to be charged
Parole Evidence
- Adding more terms to a K
Must be information discussed prior to or at the time the parties entered the K
- Is the K partial or complete integration?
a. Complete/final integration: parole evidence is not admissible
§ Merger clause - final agreement between the parties
§ BUT allowed if to clear up ambiguity
b. Partial integration: PE is admissible
- Evidence that explains or supplements the original K is admissible
- Evidence that contradicts or materially alters the K is NOT admissible
Parole Evidence Rule Exceptions
evidence admissible if:
a. Fraud, mistake, duress
b. Condition precedent
c. Course of dealing, trade custom
Risk of Loss - Carrier
a. Shipment K (default): RoL on S until delivers to carrier and notifies/provides info to B
b. Destination K: RoL on S until goods delivered to destination
c. FOB (free on board)
FOB seller = shipment K
FOB any other location = destination K
Risk of Loss - Non Carrier
If S is a merchant: RoL on S until B takes possession
If S is not a merchant: RoL on S until goods are tendered to B
Requirements K v. Output K
Requirements K: promise to buy all widgets that the B requires
Must be in “good faith”
Output K: Seller promises to sell all widgets that it produces
Modification - CL vs UCC
changing material term to K (oral or written)
- CL needs new consideration
○ Oral mod allowed even with prohibiting clause - UCC: no consideration, needs good faith
○ Clause prohibiting oral mod is valid
Mutual modification: both parties agree to modify. Ok if “fair and reasonable under circumstances”
Conditions on K
Precedent: event happens prior to the performance of K
Concurrent: event occurs at the time of performance of K- Subsequent: event happens after K
Excused if: waiver of condition; bad faith; to avoid forfeiture/great loss
Generally, time of is NOT of the essence unless stated in K. if stated, becomes a condition to the K.
Installment K and nonconforming goods
delivered in several shipments
- Non-conforming: defective shipment cannot be rejected if the defect can be cured
- If impairs the value of entire K, then breach of whole K
- If “accommodation”, B may accept or reject. counteroffer. if not mentioned, then breach.
Defenses to Breach
- Impracticability: unforeseen events that make performance too expensive/difficult
- Impossibility: objectively no one can perform (nature, illegal)
○ Temporary: then not a defense
○ Does not apply if parties prepared for that event (foreseeable) - Frustration: the core reason for K is no longer present
- Anticipatory repudiation
Defense - Anticipatory Repudiation
○ (1) Before K performance, (2) party UNEQUIVOCALLY refuses to perform
○ The other party can sue, accept, wait, or force performance
○ Assurance: can be demanded if not unequivocally refused and worried/doubtful about non-performance
§ Party must respond to demand in a reasonable amount of time (30 days)
§ UCC: demand must be in writing
- Retracting repudiation allowed unless other party: sued, accepted, or relied.
Expectation damages
putting the injured party in the position if K had been performed
Allowed if foreseeable with reasonable certainty
Contract price - money received/saved + costs
