Contracts Flashcards
(31 cards)
1
Q
Applicable Law
A
Art. 2 of the UCC governs all Ks for the sale of goods. The Common Law governs all other Ks. Goods are all things that are movable.
2
Q
Contract Formation
A
A valid K is formed when there is (i) offer, (ii) acceptance, and (iii) consideration.
3
Q
Offer
A
An offer is a manifestation of intent to enter into a K with definite and reasonably certain terms communicated to an identified offeree.
4
Q
Acceptance
A
- An acceptance is a manifestation of assent to the terms of the offer.
- For bilateral Ks, the start of performance manifests acceptance.
5
Q
Revocation of Offer
A
- Offers can be terminated before acceptance by:
(a) revocation by the offeror,
(b) rejection or counter-offer by the offeree, or
(c) lapse of time. - An offeror may revoke his offer through unambiguous words or conduct.
6
Q
Advertisements
A
- Ads are usually a mere invitation for offers, not an offer.
- However, an ad may be an offer if it includes sufficiently clear and definite terms.
7
Q
Timing of Acceptance/Revocation & the Mailbox Rule
A
- Acceptance of an offer is deemed effective once the acceptance is dispatched (mailbox rule).
- Revocation of an offer is deemed effective when received by the offerree.
8
Q
Mirror Image Rule & UCC Exception
A
- The Common Law mirror image rule holds that an acceptance must exactly mirror the offer; any variations constitute a counteroffer.
-
Under the UCC, the mirror image rule does not apply. However, additional or different terms are included only if:
1. both parties are merchants;
2. the term is not a material change;
3. the offer does not expressly limit acceptance to the exact offer; and
4. no objection was made within a reasonable time.
9
Q
Output and Requirement Contracts
A
- An output K requires a seller to sell all of the output of the particular goods to the buyer.
- A requirement K requires a buyer to purchase all of the particular goods that the buyer requires from the seller.
10
Q
Consideration
A
- Consideration is something of legal value bargained for exchange.
- Ks are not enforceable without consideration by both parties.
11
Q
Promissory Estoppel
A
Ks that lack consideration may be enforced under the doctrine of promissory estoppel, when:
1. a party made a promise that the other party detrimentally relied upon, and
2. the promisee’s reliance was reasonable and foreseeable.
12
Q
Defenses to Enforceability
Unconscionability
A
- Unconscionability occurs when the K contains terms that are obviously unfair and one-sided in favor of the party with the superior bargaining power.
- If a K/term is found unconscionable, a court may refuse to enforce the term or entire K.
13
Q
Defenses to Enforceability
Mutual & Unilateral Mistake
A
- A K is voidable if:
1. both parties are mistaken;
2. as to a basic assumption of fact;
3. the mistake is material; and
4. the person asserting the mistake did not bear the risk of the mistake. - A unilateral mistake is generally not a valid defense to formation of a K.
- However, if:
1. one party knew or had reason to believe that the other party was mistaken, or
2. the mistake makes the K unconscionable,
the K is voidable by the mistaken party.
14
Q
Defenses to Enforceability
Statute of Frauds (SOF)
A
- Land Ks,
- Ks that cannot be fully performed within 1 year,
- sale of goods for $500 or more,
- marriage Ks, and
- promise to pay debt of another,
are subject to the SOF.
To be enforceable, these Ks must
1. be in writing,
2. be signed by the party to be charged, and
3. contain all essential terms (parties, quantity, price, description of the property etc.).
15
Q
SOF Exceptions (Common Law)
A
- Under the Common Law, a K that violates the SOF may still be enforceable in the following situations:
1. full performance;
2. partial performance in land Ks - if two of the following is satisfied:
(a) payment for land,
(b) possession of land, and/or
(c) valuable improvements to land; or
3. estoppel
16
Q
SOF Exceptions (UCC)
A
- Under the UCC, the following exceptions exist:
1. merchant’s confirmatory memorandum - a writing, in a sale of goods between two merchants, signed only by the party enforcing it, and other party did not object within 10 days;
2. goods accepted or paid for - but only applies for those goods, not the whole K; or
3. custom made goods - seller made a substantial start and the goods are not suitable for sale in the ordinary course of seller’s business.
17
Q
Modification of Contracts
A
- Under the Common Law, K modification must be supported by consideration.
- Past performance or performance of a pre-existing duty is not treated as adequate consideration (pre-existing duty rule).
- Under the UCC, there is no consideration requirement for K modifications made in good faith.
18
Q
Parol Evidence Rule
A
- Evidence of a prior or contemporaneous negotiation or agreement is inadmissible to contradict or supplement a later witten K.
- However, a partially integrated writing does not contain a complete statement of all terms the parties agreed to, as such, can be supplemented with additional consistent terms.
- A fully integrated writing cannot be supplemented with additional consistent terms.
19
Q
Condition Precedent
A
- A condition precedent in a K makes performance contingent upon the completion of the condition.
- If a condition fails, no obligation of performance arises, and thus no breach has occurred.
20
Q
Frustration of Purpose
A
- Frustration of purpose discharges performance under a K.
- It occurs when:
1. a party’s principal purpose is frustrated,
2. by an unforeseeable supervening event outside of the parties’ control, and
3. both parties knew the purpose.
21
Q
Impossibility
A
Performance is discharged when it becomes physically or legally impossible to perform (cannot be performed by anyone).
22
Q
Impracticability
A
Performance is discharged when it becomes extremely and unreasonably difficult or expensive because of unanticipated events (mere increase in cost is not enough).
23
Q
Waiver
A
A waiver is a voluntary and intentional relinquishment of a K right by words or conduct. Performance is excused when it is waived.
24
Q
Material Breach vs. Minor Breach
A
- A material breach will excuse the non-breaching party’s performance. A minor breach, however, will not excuse performance (though the non-breaching party may bring a separate action for damages).
- A material breach occurs when a party does not render substantial performance.
25
Time is of the Essence Clause
The failure to perform by a specified date is generally not a material breach unless the K contains an explicit "time of the essence" clause.
26
Perfect Tender Rule
* Under Art. 2 of the UCC, a seller must deliver conforming goods. The smallest non-conformity is a breach and the buyer may reject all or a portion of the goods.
* Two exceptions to this rule exist:
1. _Right to Cure_ - A seller has a right to cure if:
(a) the time for performance has not yet expired; or
(b) the seller had reasonable grounds that substitute goods would be accepted.
2. _Installment Ks_ - A buyer can cancel installment Ks or reject an installment only if non-conformity substantially impairs the value of the entire K or that installment, and time to cure has passed.
27
Acceptance of Goods
* Acceptance of goods occurs when the buyer, after a reasonable opportunity to inspect,
1. signifies to the seller that the goods are conforming or that he will retain them despite the non-conformity,
2. fails to reject the goods, or
3. does any act inconsistent with seller's ownership of the goods.
* The buyer is obligated to pay for the goods once acceptance occurs, but may still sue for breach of K.
28
Anticipatory Repudiation
* An anticipatory repudiation occurs when a party unequivocally communicates that he is unable or unwilling to perform.
* When an anticipatory repudiation occurs, the non-breaching party may treat the K as repudiated and sue for damages (before time of performance is due).
29
Adequate Assurances
* If there are reasonable grounds for being insecure about performance, then a party may make a written request for assurance that the other party will perform in accordance with the K.
* If the other party does not give assurances after asked to do so, the requesting party may treat that as an anticipatory requdiation.
30
Implied Warranty of Merchantability
* The Implied Warranty of Merchantability is implied in all sales of goods Ks, and all goods sold by a merchant (a person dealing in goods of the kind) must be fit for their ordinary purpose.
* The warranty can be disclaimed with conspicuous language - i.e. goods sold "as is."
31
Assignment
* Rights and benefits under a K may be transferred to a third-party.
* An assignment is valid unless it materially changes the duty or risk of the obligor.
* Even if the K prohibits assignments, the assignment itself will still be valid and enforceable, but the assignor will be liable for damages.
* Any defense that could be used against the assignor may be used against the assignee.
