Contracts Flashcards
Merchants
The UCC has special provisions that apply to merchants. A merchant is one who deals with the relevant goods or has specialized knowledge and skills regarding the practices and goods involved.
Statute of Frauds
Under the UCC, a contract for the sale of goods of $500 or more must be in writing.
Offer
An offer requires (1) the present intent to be bound;
(2) has definite and certain terms; and
(3) an identified offeree
Effect of New Terms On Acceptance
An acceptance is an assent to the terms of the offer made by one with the power to assent.
Under the UCC, if acceptance is conditioned upon the offeror’s asset to additional terms, it is not an acceptance. It is a rejection and counter offer.
Acceptance By Shipment
Where a buyer requests that goods be shipped, the request will be construed as acceptance by the seller by shipment `of the goods or a promise to do so.
Breach
A contract breach occurs when a party fails to perform once (1) conditions precedent are met or excused, (2) time to perform arrives, and (3) performance is not discharged.
Implied Warranty of Merchantability
A warranty of merchantability is implied in every contract for the sale of goods that warrants that the goods are fit for the ordinary purposes.
Warranty of Fitness For A Particular Purpose
A warranty of fitness for a particular purpose is implicated in every sale of goods when the seller knows or has reason to know the buyer wants the goods for a particular purpose and the buyer relies on the seller’s judgment to choose a suitable project.
Perfect Tender Rule
The UCC requires perfect tender such that all goods must be delivered per the contract specifications or the buyer can reject the goods.
Rejection of Goods/Right to Cure
A buyer may reject goods by giving the seller notice within a reasonable time after delivery.
A seller has a right to cure a defective delivery or tender if:
(1) the time performance under the contract has not arrived;
(2) the seller reasonably believed the buywr would accept the nonconforming goods;
(3) the seller notifies the buyer of intent to cure.
Limitations on Damages
- Forseeability
- Duty to Mitigate
- Certainty
- Causation
UCC Expectation Damanges
Seller Breach:
- If buyer has goods - difference between market value of perfect goods and value as tendered.
- if seller has goods: difference between K price and the cover price
Applicable Law
Contracts are governed by the UCC or by Common Law. Contracts for the sale of goods are governed by the UCC. The Common Law governs every other kind of contract, like service contracts and contracts for real property.
Offer
An offer is an objective willingness to enter into a contract with the offeree, that creates a power of acceptance in the offeree.
Advertisements are not generally offers, unless they are (1) specifically directed at a person; (2) detail the terms of the contract; and (3) tell the person how they can accept it.
Termination: Offers can terminate with lapse of time, death of offeror, revocation (actual or constructive), rejection (including CL counteroffers).
Acceptance
An objective manifestation of assent to enter into the contract with the offeror.
Cannot usually be accepted by silence, but can be sometimes
CL Mirror Image: Under the CL, the acceptance must exactly mirror the offer, else, it is a rejection + counteroffer.
Mailbox Rule: Acceptance valid on delivery, Rejection valid on receipt.
Irrevocable Offers
UCC Firm Offers: Both parties merchants; signed writing; assurance to keep open for given time (period of irrevocability can’t be longer than 3 months)
Option Contracts: Options contracts require that consideration is paid for a promise to keep open
Unilateral Contracts: Unilateral contracts are irrevocable once the offeree party begins performance.
Consideration
Bargained for exchange of legal value
Consideration not valid for past consideration; pre-existing duty; or illusory
Promissory Estoppel can serve as a consideration substitute as can surrendering a claim.
Battle of the Forms
One Merchant: Additional/different terms are mere proposals and not part of K unless offferor agrees to modified terms
If Both Merchants (Additional Terms)
* Acceptance is made conditional on offeror’s assent (counteroffer + rejection)
* Original expressly limits acceptance on offer terms; new terms materially alter original terms; offeror object w/in reasonable time -> **terms dropped but K is formed. **
*
Both Merchants (Different Terms)
* Knockout Rule (Majority) Conflicting terms are omitted, use gap fillers
* Alternatively, analyze as additional terms
Contract Defenses
Formation
* Unconscionability
* Undue Influence
* Mental Insantiy: Contract is void
* Age: Contract is voidable by the minor, minor can ratify once 18
* Illegality
* Duress: Must be a threat
* Capacity
* Misrepresentation: Knowingly; making a false representation; to induce reliance; it causes reliance; damages
* Mistake (Mutual + Unilateral)
* Mutual - Mistake existed at time of contract; relates to basic assumption of contract; has material fact; party didn’t assume the risk
* Unilateral - Party knows of mistake by the other party; doesn’t inform the other party; + mutual factors.
* Non Disclosure - Typically seller doesn’t need to disclose, unless knows of material latent defect.
Execution
* Impracticability: Performance would result in severe burden, cost, or risk (war, unforseen natural disasters, NOT increased costs)
* Impossibility: Literally impossible (death, destruction of good). Temporary impossibility merely suspends performance unless unreasonable burden
* Frustration of Purpose: Principal purpose of contract no longer can occur.
Statute of Frauds
The Statute of Frauds requires certain contracts be in writing and signed by party to be charged.
Includes:
Marriage,
Suretyship,
One Year - Contracts that can’t occur in one year,
UCC Contracts for Sale of Goods > $500;
Real Property
Conditions
A condition is an event that must occur before performance. Can be express or implied. Express requires strict compliance, implied requires substantial performance
Waiver of conditions can occur: failure to insist on compliance, estopppel, or anticipatory repudiation.
Parole Evidence Rule
The PER limits the extent to which evidence of discussions or writings made prior to, or contemporaneous with, the signed written contract can be admitted and considered as part of the agreement.
It depends on whether the writing is a total integration or partial integration.
- Partial or fully integrated? If full (merger clause) nothing comes in. If partial, PER can be used to supplement a term but NOT contradict.
- Exception?
* The PER does not bar evidence of K defects
* Condition(s) Precedent - The PER does not bar evidence of conditions precedent to the contract’s
effectiveness.
* Ambigious Terms: Use Course of Performance; Course of Dealing; trade Usage
Contract Modification
Common Law: Needs consideration
UCC: Needs good faith
The parties must:
- Mutually agree
- SOF must be met if the modfication falls
Third Party Beneficiary
Intended: 3rd Party who promisor intends to benefit. Prevents modification if rights have vested (they know they are beneficiary)
Incidental: A party who happens to benefit from the contract has no right to sue
