Contracts Flashcards

Question

Contract Formation - Requirements - Consideration - Past Acts

Answer 1

Promise given in exchange for past acts DOES NOT count Unless: past act benefitted & performed at promisors request OR response to emergency > promise to pay enforceable Preexisting legal duty doesn’t count unless: new consideration, duty to third person, honest dispute re duty, or modify bc new circumstances

Answer 2

Modification of a contract generally requires new consideration UNLESS; Modification bc of unanticipated circumstances + fair/equitable OR contract is under UCC and done in good faith

Answer 3

Writing w/ material terms signed by person to be held liable Must ID subject matter, indicate between parties, and state essential terms with reasonable certainty * For goods over $500 > quantity + D’s signature * For services > material terms + D’s signature

Answer 4

Marriage – When marriage is consideration Year – Performance impossible within one year from date of agreement Land – Promises creating interest in land Typically full performance removes SoF * Executor – Exec/admin promises to pay estate debts Goods – Goods over $500 * NOT REQUIRED IF: SWAP (specially made goods, written confirmation by merchant, admission in court, or performance) Suretyship – Promise to answer for debt/default of another

Answer 5

Parties can orally modify contract even if contract reqs writing UCC - Contract that reqs writing for modification is given effect If parties try to orally modify contract that reqs writing, ineffective as a modification but can be waiver if other party changes in reliance

Answer 6

Land sales – Two of three (payment, possession, improvement) Service contract – Full performance Sales of goods – Specially made goods, Merchant’s Confirmatory Memo, admission in court, or performance (or if goods paid for + accepted) Estoppel – If inequitable to allow SoF defeat a meritorious claim

Answer 7

Even if void under SoF, party can sue for reasonable value of services/performance rendered or restitution of other benefit conferred

Answer 8

Lack of Capacity Duress Absence of Mutual Consent (misunderstanding, mistake) Unconscionability Statute of Frauds

Answer 9

Under 18 – Cannot enter into contract binding on themselves * Minor may choose to disaffirm a contract before reaching 18 * Minor may choose to affirm at 18 (express or by conduct) * Contracts for necessary items > minor liable for value received Mental incapacity – cant understand nature/significance of promise > voidable Intoxicated – If cant understand nature/significance of promise > voidable

Answer 10

Duress – Improper threats > voidable Undue susceptibility to pressure + excessive pressure by other party > voidable

Answer 11

Misunderstanding – Contract w/ term with two+ possible meanings * Neither party aware > no contract unless parties intend same meaning * Both parties aware > no contract unless parties intend same meaning * One party aware > binding contract on what ignorant party believed

Answer 12

Both parties mistaken about existing facts, voidable by adversely impacted party if: * Mistake concerns basic assumption of contract * Mistake has material effect on exchange * Mistake re existence of subject matter > unenforceable * Mistake re value of subject matter > enforcable * Party seeking avoidance didn’t assume risk re mistake

Answer 13

Invalidates contract if other party knew/had reason to know of mistake Mistake must have material impact and party not born risk of mistake

Answer 14

Fraudulent misrepresentation > void if innocent relied on fraud Material misrepresentation > void if innocent relies and was material Material if induce reasonable person or this person to agree

Answer 15

Requires: unfair surprise + oppressive terms when the contract was formed Risk-shifting provisions > invalidated if inconspicuous or incomprehensible Contracts of adhesion > invalidated if unable to get w/o agreeing to provision Exculpatory clauses >invalid if releasing liability for intentionally wrongful acts Court can refuse to enforce, enforce remainder, or limit application of clause

Answer 16

When parties have written contract w/ intent that it be final expression > integration (intended as final expression of agreement + intended to be complete) Other expressions made prior or oral expressions contemporaneous w/ writing are inadmissible to vary terms of the writing

Answer 17

Writing may be supplemented w/ consistent add’tl terms UCC presumes all writings are only partial integrations

Answer 18

Validity issues: formation defects (fraud, duress, etc.) or conditions precedent to effectiveness. Naturally omitted terms doctrine – allows evidence of terms that would naturally be omitted (does not conflict with writing + concerns a subject that parties would not ordinarily be expected to include in writing) Interpretation: to aid in reaching clarity as to meaning of uncertain terms Showing true consideration paid Facts entitling person to reformation of contract (like mistake) Subsequent modifications of written contract UCC: Adding consistent additional terms; explain terms by evidence of performance, course of dealing, and usage of trade

Answer 19

Price – Reasonable price at time for delivery Place of delivery – Seller’s place of business Time for shipment/delivery – Reasonable time Time for payment – Time and place at which buyer is to receive goods

Answer 20

Any affirmation of fact or promise, description, sample creates express warranty if part of basis of the bargain (buyer may have relied) BUT NOT: Statements of value or opinion

Answer 21

Implied in contract for sale by merchant who deals in that kind of good Good must be fit for ordinary purpose for which such goods are used Disclaimer – Only by mentioning merchantability; must be conspicuous

Answer 22

Buyer comes in with special purpose, seller knows, seller picks item to meet buyer’s purpose, buyer is relying on them to select, & seller knows Seller does not need to be a merchant Disclaimer – Only be a conspicuous writing

Answer 23

Implied warranties can be disclaimed by specific disclaimers or general UCC: “As is” language; course of dealing; usage of trade Must be agreed to during bargaining process

Answer 24

Parties may include clause limiting damages for breach of warranty Generally: Difference between goods tendered and as warranted

Answer 25

If agreement allocates risk, the agreement controls If party breaches, breaching party liable even if unrelated If buyer right to reject > risk of loss passes if defects cured or buyer accepts If buyer revokes acceptance > risk of loss on seller from beginning

Answer 26

Not moved by common carrier; Seller is merchant: risk of loss passes when buyer takes possession Seller is not merchant: risk of loss passes to buyer upon delivery

Answer 27

No requirement for delivery at particular destination; risk passes to buyer when goods delivered to carrier This is the default and the presumption

Answer 28

Requirement for delivery of goods at particular destination; risk passes to buyer if goods tendered to buyer at location

Answer 29

Free on board – Risk passes to buyer at named location Seller bears risk/expense of getting goods to named location

Answer 30

Free alongside – Boat; Risk passes to buyer once goods at dock

Answer 31

Requires substantial performance (essential purpose of contract)

Answer 32

Perfect tender rule Seller must deliver perfect goods at right place at right time or buyer may reject Parties must act in good faith (honesty in fact and fair dealing)

Answer 33

Noncarrier: Seller must hold confirming goods for buyer to take possession Carrier – Shipment Seller duties: make reasonable contract w/ carrier on behalf of buyer, deliver goods to carrier, notify buyer of shipment, and provide buyer with docs to take possession of goods Carrier – Destination: Seller must put and hold goods at buyers destination

Answer 34

Noncarrier: Due concurrent w/ delivery; Carrier: due when buyer receives good Installment contracts: Seller may demand payment for each installment Implied acceptance: Buyer keeps after reasonable period of inspection (1 mo+) Must pay by cash or check (if seller refuse check > more time for cash)

Answer 35

Limit duties created by contract language unless thing happens Condition - event/state must occur/fail to occur before party duty perform Failure of a condition is not a breach, discharges liability of party

Answer 36

Explicit contractual provisions, must be perfectly satisfied Satisfaction condition – reasonable person standard If dealing with personal taste > that person’s satisfaction

Answer 37

Implied duty of each party to perform on the other performing Obligation of one party to perform conditioned on other’s cooperation

Answer 38

Condition precedent – Occur before duty arises in other party Conditions concurrent – Occur together, parties’ duty arises same time Condition subsequent – When occurs, cuts of duty of performance

Answer 39

If contract unenforceable bc condition and a party has fully/partially performed, can recover under unjust enrichment theory

Answer 40

Party wrongfully prevents condition from occurring

Answer 41

Estoppel – Party indicates waiver & person detrimentally relies Election – When condition doesn’t occur, party may terminate their liability or continue under contract (continuing > waver) Conditions with no consideration that are ancillary or collateral; if installment contract, can insist on compliant future Waiving party does not waive right to damages

Answer 42

If promisor indicates they will not perform Only bilateral contracts w/ unperformed duties for both parties Stems from words/conduct unequivocally indicating will not do Non-repudiating party can: * Treat it as total repudiation and sue immediately * Suspend performance and sue on performance date * Treat as offer to rescind & contract as discharged * Ignore & urge promisor to perform

Answer 43

If party has reasonable grounds to believe other party will not perform, they can suspend performance until they get adequate assurances May be requested in writing No assurances received > anticipatory repudiation

Answer 44

Generally condition of complete performance may be excused by substantial performance if a constructive (implied) condition involved Will generally not apply if breach is willful or for sales of goods Party has right to damages

Answer 45

Illegality, recission (mutual), modification, release (writing + consideration), substituted contract, accord (writing + consideration), novation (valid contract, agreement of all parties, end of OG duties, new contract), impossibility, impracticability, and frustration

Answer 46

Must be objective & arise after contract Partial > discharged only to that extent Temporary > suspends contractual duties Part Performance prior > quasi-contract, reasonable value Excuse if subject matter is destroyed BUT NOT contractor’s duty to construct bc can rebuild Increase in cost not excuse unless extreme Nonoccurrence of event was basic assumption of parties and neither party expressly or impliedly assumed risk of event

Answer 47

Party to perform encountered extreme and unreasonable difficulty/expense and nonoccurrence was basic assumption Shortage of raw materials counts here Partial > must allocate deliveries among customers Nonoccurrence of event was basic assumption of parties and neither party expressly or impliedly assumed risk of event

Answer 48

Purpose is valueless by supervening event (no party fault) Requires supervening act which parties did not reasonably foresee when entering, the purpose has been completely or almost completely destroyed by act, and purpose of contract was realized by both parties at time of making contract

Answer 49

If promisor is under duty to perform and does not and has no defenses > breach Nonbreaching party > show that they are willing/able to perform but for breach

Answer 50

Occurs when no performance/substantial performance or no benefit of bargain to non-breaching party Minor breach > damages, not excuse of performance * Minor if oblige gains substantial benefit of their bargain * If w/ anticipatory repudiation > treat as material breach * Timely performance is typically not material breach (unless key) Material breach > treat as contract is ended AND right to remedies

Answer 51

Perfect tender rule – failure to conform > buyer reject, accept, or combo Right to reject is cut off by acceptance (keeping, fail to reject, act inconsistent with seller ownership), but buyer can recover difference for nonconforming goods

Answer 52

Goods have defect that impacts value & buyer accepted under belief defect would be cured OR difficulty of discovering defects

Answer 53

Within performance time MUST NOTIFY BUYER OF INTENT TO CURE If buyer rejects goods seller reasonably believed would be acceptable (maybe w/ discount), seller (w/ notification to buyer) has reasonable time to make a conforming tender

Answer 54

Expectation damages (in position as if contract performed)

Answer 55

Reject installment if impaired value & no cure Contract breached if nonconformity hurts entire contract value

Answer 56

Promissory estoppel (in position as if contract never happened)

Answer 57

Equitable remedies are only available if the legal remedy (money) is inadequate Breach of sale of good contract if goods unique or buyer unable to get cover Land because all land is unique Antique paintings/art or custom art because you cant get it elsewhere Non-compete IF services unique + covenant is reasonable + not harm public Injunctive relief to enjoin breaching party from working for competitor

Answer 58

Subject to defenses of: * Laches – P delayed action so long that delay prejudiced D * Unclean hands – Party seeking performance is guilty of wrongdoing * Sale to BFP – Subject matter sold to person (value + good faith)

Answer 59

Cancellation – If reject bc goods don’t confirm > can cancel Replevy

Answer 60

Unpaid seller right to reclaim – if buyer does not pay Can get if buyer insolvent + seller demands reclamation within 10 days

Answer 61

Put party in position as if contract was performed

Answer 62

Measured by value of benefit already conferred Essentially, just what party did before the breach

Answer 63

Return non-breaching party to status quo Available if expectation damages are uncertain

Answer 64

Any costs incident to breach ALWAYS RECOVERABLE Includes costs dealing with breach, like moving items or finding buyer

Answer 65

Recoverable if foreseen at time of formation Reflect losses over/above expectation; arise bc of nonbreaching party’s particular circumstances (like lost profits)

Answer 66

“In event of breach, damages = X” Upheld: damages difficult to estimate at time of formation + reasonable Invariable lump sums are typically always invalid

Answer 67

All about expectation damages Cover damages – Difference between cover & original price Market damages – Market price minus original price * Occurs if buyer doesn’t cover (or not in good faith) Loss in value – Difference in value as promised vs delivered * Warranty damages fit here Consequential damages – Only available if: * Seller had reason to know of requirements & loss could not be prevented via cover

Answer 68

Resale damages – OG contract price minus resale price * Assumes & requires good faith resale Market damages – Contract price minus market price * If seller does not resell or does so in bad faith Contract price – Available if seller cannot resell (like custom) Lost-volume seller – has an unlimited supply * Other damages are never adequate bc they lost a sale * Results in damages = to lost profits

Answer 69

Employer breach – Full contract price Employee breach – cost of replacing employee (offset money owed)

Answer 70

Preventing unjust enrichment Measure is the value of the benefit conferred If contract unenforceable or no contract > action in quasi-contract * P must have conferred benefits on D with reasonable expectation of being compensated for its value, D knew/had reason to know of P’s expectation, and D would be unjustly enriched w/o paying When a contract is breached * Can cancel & sue for restitution * If P performed, limited to damages under contract

Answer 71

Contract considered voidable & rescinded Grounds must have occurred before or at time contract formed Includes: mutual mistake of material fact, unilateral mistake if other party knew, unilateral mistake if extreme hardship by mistaken party, misrepresentation of fact/law, duress, illegality, etc.

Answer 72

Writing changed to conform to intent of party Mistake – If agreement between parties + agreement to put in writing + variance between original agreement and writing Misrepresentation – P can choose between reformation and voidance * Misrepresentation must relate to content or legal effect of record * Parole evidence rule doesn’t apply here UCC applies 4 year statute of limitations, parties may shorten to no less of year Breach of warranty – Limitations period begins to run upon delivery

Answer 73

Entrusting goods to merchant who deals in goods of that kind gives them power to transfer all rights of entruster to buyer in ordinary course of business Original owner has no rights against a BFP, but they can sue seller But if induced by fraud, seller can recover from fraudulent buyer unless buyer sells to someone who was a good faith purchaser for value

Answer 74

Promisor: Party who promises to perform for third party * Liability: Third party can enforce against them, as can promisee Promisee: Party who secured promise * Liability: Third party can enforce against them

Answer 75

Intended beneficiaries have contract rights * Must be identified in contract, receives performance directly from promisor, or has relationship with promisee to indicate intent to benefit

Answer 76

Incidental beneficiaries cannot enforce contract

Answer 77

Creditor beneficiary – Person to whom debt is owed by promisee Donee beneficiary - - Person who promisee intends to benefit gratuitously Recission/modification – allowed until beneficiary’s rights have vested * Vests: They manifest assent to a promise, bring suit to enforce promise, or materially change position in reliance on promise * Can’t cancel/modify after vesting unless beneficiary consents or contract says so

Answer 78

Allowed until beneficiary’s rights have vested Vests: They manifest assent to a promise, bring suit to enforce promise, or materially change position in reliance on promise * Can’t cancel/modify after vesting unless B consents or contract says so

Answer 79

Two parties contract, one transfers away their rights eventually to a third party The new person is the assignee, old party is assignor * Must manifest intent to immediately & completely transfer right * No consideration is required * Gift assignments are easily revokable Assignee can enforce rights against party who owes duty (obligor)

Answer 80

All contractual rights may be assigned UNLESS: Assignment would substantially change obligor’s duty/risk, assignment of future rights in future contracts, or assignments prohibited by law Contract language controls if it prohibits assignment

Answer 81

If assignor doesn’t act, obligor has same defenses against assignee as against assignor

Answer 82

Whichever assignee is last collects, BUT if they have consideration: * First assignee for consideration prevails over subsequent assignees and prior gift assignees * Last assignee will prevail if they do not know of prior and first to get payment from or judgement against obligor

Answer 83

A transfer of duties Contract duties may be delegated without obligee’s consent BUT contractual provisions prohibiting assignment also ban delegations Delegating person is always still liable, delegates who get consideration are too

Answer 84

Substitutes new party for original party Requires assent, completely releases original