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Contracts Flashcards

1
Q

What governs contracts dealing with services or real estate?

A

Common law

Common law applies when the contract is about services (e.g., hiring someone) or real estate.

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2
Q

What governs contracts dealing with goods?

A

UCC (Uniform Commercial Code)

The UCC applies to contracts involving the sale of goods (e.g., buying paper).

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3
Q

What is the rule for mixed contracts regarding which law governs?

A

The predominant purpose of the contract determines the applicable law.

If the primary purpose involves goods, the UCC applies; if it involves services, common law applies.

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4
Q

What are the three requirements to form a valid contract?

A
  • Mutual assent (valid offer + valid acceptance)
  • Consideration
  • No defenses to formation

These must be present for a contract to be enforceable.

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5
Q

What is required for a valid offer?

A
  • Objective willingness to enter an agreement
  • Power of acceptance created in the offeree

The offer must be directed to a specific offeree, except in contests or rewards.

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6
Q

What terms must be specified in a common law offer?

A
  • Parties
  • Subject
  • Quantity
  • Price

All essential terms must be included for the offer to be valid under common law.

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7
Q

Which terms are required in a UCC offer?

A
  • Parties
  • Subject
  • Quantity

Price is not required under the UCC, which allows for more flexibility.

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8
Q

What happens if a valid offer is terminated?

A

It cannot be accepted or revived unless a new offer is made.

Termination can occur due to revocation, rejection, counteroffer, or other specified reasons.

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9
Q

What types of offers are irrevocable?

A
  • Option contracts
  • Firm offers
  • Offeree has started performance
  • Detrimental reliance

These types of offers cannot be revoked prior to acceptance.

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10
Q

What is an acceptance in contract formation?

A

A manifestation of willingness to enter into the agreement.

Acceptance must generally be communicated to the other party and follow the rules of the offer.

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11
Q

What is the Mailbox Rule?

A

An acceptance is valid at the moment of dispatch unless certain exceptions apply.

Exceptions include wrong address, stipulation of receipt, and counteroffers.

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12
Q

What is the difference between a counteroffer and an acceptance?

A

A counteroffer acts as a rejection of the original offer and forms a new offer.

Under the common law, the acceptance must mirror the offer exactly (Mirror Image Rule).

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13
Q

What does UCC § 2-207 state regarding acceptance?

A

Acceptance does not have to mirror the offer; it can include different or additional terms.

This provision allows for more flexibility in commercial transactions.

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14
Q

What is required for consideration in a contract?

A

A transfer of legal value in a bargained-for exchange.

Consideration is present if there is a legal detriment to the promisee or a benefit to the promisor.

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15
Q

What types of promises do not qualify as consideration?

A
  • Gift promises
  • Conditional gift promises
  • Preexisting legal duties
  • Past consideration
  • Illusory promises

These promises lack the necessary legal detriment or inducement.

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16
Q

What is the definition of consideration in contract law?

A

Consideration is something of value that is exchanged between parties in a contract.

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17
Q

True or False: An illusory promise is considered valid consideration.

A

False.

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18
Q

What is the preexisting duty rule in contract modifications under common law?

A

A promise to do something that a party is already obligated to do is NOT consideration.

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19
Q

Under the UCC, what is the requirement for a contract modification?

A

There is no consideration requirement; modifications are valid if made in good faith.

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20
Q

What are the three requirements for enforcing a promise under promissory estoppel?

A
  • The promisor should reasonably expect the promise to induce action or forbearance
  • The promise induces such action or forbearance to the promisee’s detriment
  • Injustice can be avoided only by enforcement of the promise.
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21
Q

Under a quasi-contract theory, what are the three conditions for enforcement?

A
  • The plaintiff confers a measurable benefit on the defendant
  • The plaintiff reasonably expected to get paid
  • It would be unfair to let the defendant keep the benefit without paying.
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22
Q

Fill in the blank: A moral obligation plus a subsequent promise can be binding in some jurisdictions, but is usually considered _______.

A

[past consideration]

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23
Q

What are the three main types of incapacity in contract law?

A
  • Infancy
  • Mental illness
  • Intoxication.
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24
Q

What options does a minor have when entering into a contract?

A
  • Disaffirm (rescind) the contract
  • Affirm (enforce) the contract.
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25
What must a mentally ill party prove to disaffirm a contract?
* They were unable to understand the nature and consequences of the transaction * The other party had reason to know of their condition.
26
What is the Necessaries Doctrine in contract law?
A party lacking capacity is liable for the reasonable value of necessaries provided to them.
27
What constitutes a mutual mistake in contract law?
A mutual mistake occurs when both parties are mistaken about a basic assumption of the contract.
28
What must be proven for a unilateral mistake to result in rescission of the contract?
* There is a mistake of fact * The mistake relates to a basic assumption * The mistake has a material impact * The impacted party did NOT assume the risk.
29
Define misrepresentation in the context of contract law.
A misrepresentation is a false statement made at the time of contracting that is material or fraudulent.
30
What are the two types of unconscionability considered by courts?
* Procedural unconscionability * Substantive unconscionability.
31
What contracts must satisfy the statute of frauds?
* Contracts made in consideration of marriage * Suretyship contracts * Contracts that cannot be performed within one year * UCC contracts for goods over $500 * Real estate contracts.
32
What are two main ways to satisfy the statute of frauds?
* By writing * By performance.
33
What is required for a writing to satisfy the statute of frauds?
* Signed by the party against whom enforcement is sought * Shows that a contract was formed * Includes requisite terms.
34
What is the one-year provision in the statute of frauds?
A contract that cannot be performed within one year from its making must satisfy the statute of frauds.
35
What must a buyer do to satisfy the statute of frauds in real estate contracts?
* The seller must fully perform * The buyer must take possession, make payment, or make substantial improvements.
36
What can satisfy the statute of frauds under UCC for contracts over $500?
* Performance * Admission in court * Written confirmation between merchants.
37
What satisfies the statute of frauds under UCC regarding admissions?
The party against whom enforcement is sought admits in pleading, testimony, or otherwise in court that a contract for sale was made ## Footnote The contract is not enforceable under this provision beyond the quantity of goods admitted.
38
Under UCC § 2-201(2), what are the requirements for written confirmation between merchants?
1. After an oral agreement between merchants 2. Either party sends a signed, written confirmation 3. The written confirmation is received by the other merchant 4. Unless the receiving party gives written notice of objection within 10 days ## Footnote The signed confirmation must be by the sender.
39
What constitutes a 'substantial beginning' in specially manufactured goods under UCC § 2-201(3)(a)?
When a seller makes a substantial beginning toward manufacture of custom goods for the buyer that are not suitable for sale to others ## Footnote Circumstances must reasonably indicate that the goods are for the buyer.
40
Define the Parol Evidence Rule (PER).
When parties express their agreement in a writing intended as the final expression, the writing is an integration ## Footnote The PER does not apply to non-final expressions.
41
What is a complete integration in contract law?
A writing that completely expresses all terms of the parties' agreement ## Footnote All other expressions, written or oral, made prior are inadmissible.
42
What is a merger clause?
A clause that recites the agreement is the complete agreement between the parties ## Footnote It serves as strong evidence that the writing is a complete integration.
43
What are express warranties under UCC?
1. Affirmation of fact or promise 2. Description of goods 3. Sample or model ## Footnote Each creates an express warranty that the goods shall conform.
44
What is the implied warranty of merchantability?
An implied warranty that goods sold by merchants are fit for ordinary commercial purposes ## Footnote Merchants are liable for breach if this warranty is violated.
45
How can a merchant disclaim the implied warranty of merchantability?
By using conspicuous language such as 'as is' or 'with all faults' ## Footnote The disclaimer may be made orally if 'merchantability' is included.
46
What is the implied warranty of fitness for a particular purpose?
A warranty implied when the seller knows the buyer has a specific use for the goods and that the buyer relies on the seller's skill ## Footnote The seller need not be a merchant for this warranty to apply.
47
What constitutes an express condition in a contract?
A condition that makes performance dependent on the completion of a future event ## Footnote Look for language like 'only if' or 'provided that'.
48
What is required for substantial performance under common law?
Performance is satisfied as long as there is NOT a material breach ## Footnote A material breach excuses the non-breaching party's performance.
49
Define perfect tender under UCC.
A requirement that a seller must deliver conforming goods according to contract terms ## Footnote The smallest nonconformity is a breach allowing buyer rejection.
50
What are the exceptions to perfect tender?
1. Parties can contractually change the rules 2. Installment contracts 3. Seller must be given a chance to cure nonconformity ## Footnote Conditions apply based on time and seller's belief of acceptance.
51
What is anticipatory repudiation?
Occurs when a promisor clearly repudiates a promise before performance is due ## Footnote Under UCC, it includes unequivocal refusal or insecurity about performance.
52
What are expectation damages?
Damages aimed at putting the non-breaching party in the same economic position as if the contract had been performed ## Footnote Calculated by comparing value of performance without and with breach.
53
What are reliance damages?
Damages aimed at restoring losses incurred that would not have occurred but for the breached contract ## Footnote A party cannot recover both expectation and reliance damages.
54
What is the goal of restitution?
To prevent unjust enrichment by giving the plaintiff an amount equal to the economic benefit conferred on the defendant ## Footnote It aims to return the benefit received by the defendant.
55
What are reliance damages?
Costs incurred by a party to make an advertisement for a potential sale price ## Footnote Reliance damages are designed to compensate a party for costs incurred in reliance on a contract that was not fulfilled.
56
Can a party recover both expectation and reliance damages?
No, a party must elect one or the other.
57
What is the goal of restitution?
To prevent unjust enrichment.
58
What does restitution provide to the plaintiff?
An amount equal to the economic benefit conferred on the defendant.
59
What happens in the case of Tom and the Mechanic with restitution?
Tom can recover $500 in restitution damages.
60
Can a party recover both expectation and restitution damages?
No, a party must elect one or the other.
61
What are liquidated damages?
Amount set forth in the contract to be paid upon breach.
62
What conditions must be met for courts to award liquidated damages?
* The amount was reasonable at the time of contracting * Actual damages from the breach are uncertain and difficult to prove.
63
What are punitive damages?
Damages awarded to punish the defendant.
64
When are punitive damages available in contract actions?
Rarely, some states allow them for fraud, violations of fiduciary duty, or acts of bad faith.
65
What is specific performance?
An order to perform a contract when monetary damages are inadequate.
66
When is specific performance presumptively available?
For real estate transactions.
67
When is specific performance not available?
For contracts of personal service.
68
What is rescission?
Cancelling a contract to restore parties to their pre-contract positions.
69
What reasons can parties seek rescission?
* Mutual mistake * Fraud * Misrepresentation * Unilateral mistake (if other party knew) * Mutual agreement.
70
What is the Right of Reclamation under the UCC?
A seller may reclaim goods sent to a buyer under certain conditions.
71
What are the conditions for a seller to reclaim goods from an insolvent buyer?
* Demand within 10 days of receipt * Misrepresentation of solvency within three months negates the 10-day rule.
72
What is the duty to mitigate?
The plaintiff must take reasonable steps to reduce losses.
73
What happens if a plaintiff fails to mitigate damages?
The court will reduce total damages by the amount that could have been avoided.
74
What is a third-party beneficiary?
A person who is not a party to the contract but has rights under it.
75
What rights does an intended third-party beneficiary have?
The right to sue for breach of contract.
76
What is an incidental third-party beneficiary?
A person who benefits from a contract but has no legal rights under it.
77
Can the original parties modify a third-party beneficiary’s rights?
Yes, until the rights vest.
78
What are the conditions for rights to vest for a third-party beneficiary?
* Detrimental reliance * Acceptance of benefit * Bringing suit to enforce the contract.
79
What is assignment of rights?
Transferring rights and benefits under a contract to a third party.
80
What happens if a contract prohibits assignments?
The assignor breaches the deal, but the assignment remains valid for the assignee.
81
What is required for an assignment to be irrevocable?
If consideration is provided.
82
What is the general rule regarding multiple assignments?
First assignment for consideration typically controls; last assignment without consideration controls.
83
What is delegation of duties?
Outsourcing contractual duties to a third party.
84
What conditions must be met for delegation of duties?
* Contract does not prohibit delegation * No special interest in a specific individual performing.
85
What is the difference between delegation and novation?
Delegation involves one party outsourcing duties; novation requires both parties agreeing to a substitute.

MBE Subjects (8 decks)

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