Contracts Flashcards
(14 cards)
Condition Precedent
an uncertain future even that, if it occurs, creates a party’s duty to perform.
EX: A seller agrees to transfer ownership of a house to the buyer, but only if the buyer first secures financing from a bank.
Condition subsequent
an uncertain future event that, if it occurs, excuses a party’s existing duty to perform
Ex: An employee is hired under a contract that automatically terminates if they lose their professional license.
Mistake
belief not in accord with the basic assumption of the contract that materially affects performance
Mutual Mistake
mutual mistake (both parties are mistaken):
- no intent to take risk on mistaken element and
- substantial difference between the actual & contemplated deal
Remdies for Mutual Mistake
- Reform K to the intended agreement, or
- If unavailable, the adversely affected party can void the K.
Assignment
transfer of rights under a contract to antoher (i.e., the assignee).No formalities are needed for an assignment, but there must be a resent intent to trqansfer the rights immediately. A party’s promise to pay money received pursuant to a contract to a third party is not an assignment of the party’s contractual rights, but a promise of future payment.
Breach of a construction contract (damages)
When an owner breaches a construction contract before or during the construction, the builder’s damages are equal to the builder’s lost profits plus costs incurred, minus any costs saved or otherwise avoided.
Damages (at law)
(1) Expectancy
(2) Consequential
(3) Incidental
Expectancy
benefits of the bargain. Puts non-breaching party where they would have been been but for the breach.
EX: A buyer contracts to purchase a car for $10,000, but the seller breaches; the same car now costs $12,000 on the market. The buyer can recover the $2,000 difference to get the benefit of the original bargain.
Consequential
Reasonably foreseeable and caused by a direct result of the breach.
EX: A supplier fails to deliver parts to a manufacturer as agreed, causing the manufacturer to miss a major contract with a third party. If the lost profits from that contract were foreseeable at the time of the agreement, the manufacturer may recover them as consequential damages.
Incidental
Commercially reasonable and foreseeable based on trade (UCC Art 2).
Ex: A retailer has to pay $500 to find a new vendor after the original supplier breaches their contract. The $500 spent on locating a substitute supplier is recoverable as incidental damages under UCC Article 2.
Equity (money damages are inadequate)
(a) Rescission
(b) Reformation
(c) Specific performance
(d) Injunction (BLIP)
(e) Liquidated
(f) Duty to mitigate
Rescission
returning to the status quo by canceling the K
Example: A buyer discovers the seller lied about a car being accident-free. The court rescinds the contract, returning both parties to their pre-contract positions — the car goes back, and the buyer is refunded.
Reformation
Court rewrites the K to reflect the true intent of the parties
Example: Two parties agreed to sell “Unit A” of a building, but the written contract mistakenly says “Unit B.” The court reforms the contract to reflect the true intent: “Unit A.”
