Contracts Flashcards
(35 cards)
What is a requirements contract and how is it satisfied?
A requirements contracts is a contract under which the buyer agrees to purchase as many goods as the buyer requires from the seller.
Under the perfect-tender rule, the goods and the seller’s tender of those goods must fully conform with the terms of the agreement and substantial performance will not suffice. Buyer can reject for imperfect tender where single delivery would be unreasonable.
What is an accord agreement and what are its requirements?
A way to discharge contractual obligation. Under an accord agreement, a contracting party agrees to accept performance that differs from what was promised in existing contract in satisfaction of the other party’s existing duty.
3 elements:
(1) tendered a negotiable instrument;
(2) instrument was accompanied by a conspicuous statement indicating that it was tendered as full satisfaction; and
(3) the claimant obtained payment of the instrument.
What is the common law preexisting duty rule?
Promise to perform, or performance of, preexisting duty does NOT constitute consideration.
However, modification is permitted when there are unanticipated difficulties and one party agrees to compensate the other so long as the modification is faith and equitable in light of those difficulties.
What is the defense of impracticability?
Parties to a contract have an absolute duty to perform unless the duty is discharged due to impracticability:
(1) an unforeseeable even has occurred;
(2) the contract was formed under the basic assumption that the event would not occur; and
(3) the party seeking discharge of performance is not at fault.
However, if a party assumed the risk of an event happening that made performance impracticable, then the party’s performance will not be discharged by impracticability.
When does an intended beneficiary have contractual rights?
May enforce rights once they vest. This occurs when:
(1) beneficiary detrimentally relies on the rights created;
(2) manifested assent to the contract at one party’s request; or
(3) files a lawsuit to enforce the contract.
Before rights vest, the contracting parties can modify or rescind the contract w/o the beneficiary’s consent.
When does wrongful interference excuse a condition precedent?
A condition precedent delays performance until a specified event occurs, and will be excused if a party whose performance is subject to that condition wrongfully prevents or interferes with is occurrence. When this occurs, the condition no longer needs to occur for the interfering party’s performance to become due.
What is the doctrine of anticipatory repudiation and how does it apply?
The doctrine of anticipatory repudiation generally applies when a contracting party clearly and unequivocally indicates an unwillingness to perform a promise before the time for performance is due. Upon repudiation, the nonrepudiation party may:
(1) treat the repudiation as a breach of the contract; or
(2) ignore the repudiation and demand performance.
However, this doctrine does not apply when the date of performance has not passed and the nonrepudiation party has fully performed. Nonrepudiation party must wait until the repudiating party’s performance is due before filing suit.
What are compensatory damages?
These damages primarily aim to put the non breaching party in the same position as if the contract had been performed, so that the nonbreaching party receives the “benefit of the bargain.” Known as “expectation measure.”
Included are:
(1) expectation damages - difference b/w what was promised and what was received.
(2) incidental damages - reimbursement for commercially reasonably expenses that the nonbreaching party incurred as a result of the breach.
(3) consequential damages - losses that arose from the nonbreaching party’s special circumstances that were reasonably foreseeable to the breaching party when the contract was made.
However, if such damages cannot be calculated w/ reasonable certainty, then the nonbreaching party may recover for any expenses incurred in reasonable reliance that the contract would be performed - reliance damages, liquidated damages, restitution.
How does the firm offer and the mailbox rule relate?
The mailbox rule does not apply to firm offers, options, or other irrevocable contracts. Under the UCC, a merchant’s offer to sell goods is firm if it is made in a signed writing that assures that the offer will remain open. Acceptance of a firm or otherwise irrevocable offer is effective only if it is received by the offeror before the offer expires.
What are the 3 irrevocable offers at common law?
(1) Option contract - offeror promises to keep offer open in exchange for consideration where duration is for a reasonable time for full performance.
(2) Partial performance - offeror invites acceptance only by performance & offer begins to perform in exchange for consideration where the duration is for a reasonable time for full performance.
(3) Promissory estoppel - offeror could reasonably foresee reliance on offer and offer reasonably relies to his/her detriment, where the duration is for a reasonable time.
How can an offeror revoke an offer?
An offer can be accepted at any time before the offer is revoked. The offeror can revoke the offer by manifesting an intent not to enter into the proposed contract, which can occur in 2 ways:
(1) expressly - when the offeror communicates the revocation directly to the offeree
(2) constructively - when the offeree acquires reliable information that the offeror has taken definite action inconsistent with the offer.
What are the essential terms for an agreement under the UCC?
(1) Goods to be sold - must be reasonably identified
(2) Quantity - must be certain or able to be made certain by reference to objective facts.
If price is not included, gap-filler will find price that is reasonable at time of delivery. If time of delivery is not included, gap-filler will find reasonable time.
What is the difference between an accord agreement and a substitute contract?
Accord agreement - when a party agrees to accept different performance in satisfaction of the original promise. After breach, the party can sue under either the original contract or the accord agreement.
Substitute contract - when the parties form a second agreement that immediately discharges the original contract. After breach, a party can sue under the substitute contract only.
Note: the more formal the agreement, the more likely the fact-finder will determine that the parties intended to create a substitute contract.
What are the elements required to make promissory estoppel effective?
Under the doctrine of promissory estoppel (detrimental reliance), an offer is binding as an option contract and therefore irrevocable for a reasonable time period if:
(1) the offeror should have reasonably expected to induce reliance on the offer before acceptance;
(2) the offeree reasonably relied on the offer through action or forbearance;
(3) the offeree suffered substantial detriment as a result of such reliance; and
(4) injustice can be avoided only by enforcing the offer.
When such an offer is revoked before a reasonable period of time has passed, the remedy generally results in the award of reliance damages.
What happens when both parties are mistaken as to an essential element of a contract?
Known as mutual mistake, the contract is voidable by the adversely affected parted if:
(1) the mistake relates to a basic assumption of the contract;
(2) the mistake materially affects the agreed-upon exchange of performance; and
(3) the adversely affected party did not assume the risk of mistake.
Note: a party assumes the risk of mistake if, at the time the contract is formed, the party is aware that he/she has limited knowledge of the facts and accepts this knowledge as sufficient.
What is the difference between a gratuitous and for-value assignment of contractual rights?
An assignment is the transfer of contractual rights to a third party.
If an assignment is not supported by consideration, then it is a gratuitous assignment and is generally revocable unless (1) obligor already performed;
(2) document symbolizing assigned right;
(3) written & signed assignment delivered;
(4) promissory estoppel.
There are no warranties.
On the other hand, for-value assignments are irrevocable and the assignor warrants that he/she:
(1) has the right to assign;
(2) is not subject to limitations/defenses unknown to assignee;
(3) will not defeat/impair assigned rights.
When does waiver excuse a condition precedent?
A contracting party may generally avoid performance if a condition precedent has not occurred. The nonoccurence of a condition may be excused, however, if the party who would benefit from the condition waives it by words or conduct. And the waiving party cannot retract the waiver once the other party has detrimentally relied on it.
What is the parol evidence rule, and how does it relate to condition precedents?
The parol evidence rule generally prevents a party to a written contract from presenting extrinsic evidence of a prior or contemporaneous agreement that contradicts the terms of the contract as written.
However, evidence may be admitted to prove a condition precedent to the existence of the contract. A condition precedent is a condition that must occur to trigger a party’s obligation to perform.
When performance is predicated upon a condition precedent, when does performance become due?
A breach of contract occurs when a party fails to perform a contractual duty that has become due. Performance may be predicated upon a condition precedent, under which a contracting party’s obligation to perform arises only upon the occurrence of an uncertain future event. If the parties expressly agree to a condition precedent, then the condition precedent must be strictly enforced. This means that a contracting party must fully comply with the condition before the other party’s performance is due.
What is a material breach?
Under common law, which governs contracts for services, a material breach allows the non breaching party to withhold its own performance. A breach is material when the non breaching party does not receive the substantial benefit of its bargain. As a result, substantial performance does not typically constitute a material breach.
However, substantial performance will not suffice for express conditions in a contract. Such conditions must be performed in full. Indicators: “on the condition that” or “provided that”
How does waiver excuse a condition precedent?
A party’s obligation to perform may be conditioned on an uncertain future event that must occur before performance becomes due (ex. a condition precedent). However, a party whose subject to the condition can waive the condition by words or conduct.
What are the damages for substantial performance v. material breach?
The substantially performing party can recover on the contract even though that party has not rendered full performance. The substantially performing party can generally recover the contract price minus any cost that the non breaching party incurred to receive full performance.
A party who commits a material breach by failing to substantially perform cannot recover under the contract. The breaching party can only recover in restitution for any benefit conferred on the non breaching party minus damage for the breach.
Can a non repudiating party recover damages under the contract?
The non repudiating party may generally ignore the repudiation and demand performance pursuant to the contract or treat the repudiation as a breach.
However, the non repudiating party cannot recover damages under the contract if that party is in material breach. That is because the material breach discharges the other party’s duty to perform.
How does the prospective inability to perform differ from anticipatory repudiation?
Anticipatory repudiation occurs when one party to a contract clearly and unequivocally communicates (through words or conduct) to the other party that it will not perform. The other party can treat the repudiation as breach and sue immediately.
In contrast, mere insecurity about the party’s prospective ability to perform is not a repudiation, but it does give the other party the right to demand assurance of performance. Under the UCC, which governs the sale of goods, the demand for assurances must be made in writing. Failure to provide adequate assurance within a reasonable time, not to exceed 30 days, constitutes a breach.
