Flashcards in Contracts Deck (93):
A legally enforceable agreement.
K from words
K results from conduct.
Conduct that gives rise to K
Conduct where a reasonable person in a similar situation would infer a promise.
Not really a K, but a remedy that may exist when three elements exist.
Three elements for a quasi-K
1. P has conferred benefit on D; and
2. P reasonably expected to get paid; and
3. D would realize unjust enrichment if P was not compensated.
Results from an OFFER that expressly requires the performance AS THE ONLY possible method of acceptance.
Promise for a promise. Usually silent as to the method of acceptance.
Mixed Contracts (goods and services)
Rule: All or nothing - more important part governs.
UCC - Sale of Goods
ex. $400 for car and 2 driving lessons - what's more important? CAR
Is the initial communication an offer? General test.
Manifestation of commitment.
Whether a reasonable person in the position of the offeree would believe that his assent creates a contract.
Bargained for exchange of something with legal value
Defense to Contract Formation MILS
2. Lack of Capacity
4. Statute of Frauds
MANIFESTATION of intent to contract.
1. Expression of promise, undertaking, or commitment.
2. Certainty and definiteness in ESSENTIAL TERMS.
3. Communication of the above to the offeree.
Required details for Real Estate Contracts
Must include identification of land and price.
Required details for Sale of Goods Contracts (UCC Art. 2)
Quantity must be certain.
Except: Outputs and Requirements Contracts
Do missing terms prevent the formation of a contract?
Does not prevent the formation of a contract if it appears that that parties INTENDED to make a contract and there is REASONABLY certain basis for remedy.
Court can supply reasonable terms for those that are missing.
Do vague terms prevent the formation of a contract?
Court cannot enforce a contract where parties have included terms that are too vague to be enforced.
Revocation of Offer by Offeror. When is it effective?
Revocation of Offer by Offeror. Methods of revocation?
Express or implied. (e.g. offeree discovers that offeror sold subject matter to someone else.)
Revocation of Offer by Offeror. Limitations on power to terminate? BOMD
1. Beginning performance on unilateral contract.
2. Option Contract
3. Merchant's Firm Offer
4. Detrimental reliance
Rejection of Offer by Offeree. When Effective?
Effective when received.
Rejection of Offer by Offeree. Methods. (3)
1. Express rejection,
2. Counteroffer, or
3. Lapse of reasonable time.
Art. 2 - Battle of the Forms Provision
Used instead of the mirror image rule under Art. 2.
Proposal of additional or different terms by the offeree in a definite and timely acceptance is EFFECTIVE AS ACCEPTANCE,
UNLESS the acceptance is made EXPRESSLY conditional on assent to the different terms.
Whether the additional terms become part of the contract depends on whether both parties are merchants.
Promissory Estoppel (Detrimental Reliance)
Promise is enforceable if necessary to prevent injustice if:
1. The promisor should reasonably expect to induce action or forbearance;
2. Of a definite and substantial character;
3. and such an action or forbearance is in fact, induced.
Past consideration/Moral obligation:
is not consideration at common law.
Nor is it a substitute for consideration.
Option Contract: Common Law
A promise to keep an offer open for a certain amount of time. Must be supported by consideration.
Merchant's Firm Offer
1. Offer by merchant
2. in a signed writing which by its terms gives assurance that it will be held open
3. is irrevocable during the time stated; AND
4. if no time is stated then period of irrevocability may not exceed 90 days.
Seller must deliver exact conforming goods to the buyer.
Three options after violation of perfect tender:
1. Accept the goods and pay K price
2. Buyer can timely reject the goods and sue for damages
3. Buyer may accept in part and reject in part.
Promise to pay for the debts of another.
ALWAYS must be in writing.(except)
Main purpose rule
Exception to requirement that surety contracts must be in writing.
If it can be established that the main purpose of the guarantor was to benefit himself, it doesn't need to be in writing.
Exception to the parol evidence rule (8)
Evidence showing lack of consideration.
Merchant's 10 day rule
Exception to statute of frauds.
1. Both parties must be merchants
2. One merchant sends written confirmation of oral agreement binds sender immediately
3. If the recipient doesn’t object w/I 10 days after receipt, it binds them as well.
Third Party Beneficiary: Vesting of Rights
1. When 3rd party beneficiary learns of K AND assents to it
2. When there is detrimental reliance
3. When there is a lawsuit to enforce.
An accord suspends performance of the original agreement until such time as the accord is performed or not performed. Not a modification of the existing agreement. NEW agreement.
there must be a clear indication (statement) of an intent not to perform.
Unique personal services: too sick to do the job:
(even if it’s your own fault) you are not liable for damages unless the K provides otherwise.
Act or event (other than lapse of time) that must occur first before a party is under a duty to perform.
When are liquidation damages allowed?
1. Damages are difficult to ascertain at the time of entering into the agreement, and
2. Liquidated damages provision is a reasonable forecast of compensatory damages.
Damages: Basic principle
To place the non-breaching party in the situation she would have been in had the K been completed.
Lost profits doctrine
If you have a seller that deals in volume (unlimited supply of goods at their disposal) they will be allowed to seek lost profits against the breaching buyer.
Lost profits standard remedy
For a non breaching seller:
K price – resale price = sellers standard remedy.
UCC – Gap fillers
K for sale of goods must state a quantity terms if other terms are missing the ‘gap fillers’ can fill in missing terms.
Ordinarily shipment of nonconforming goods is an acceptance creating a bilateral K and a breach.
If seller seasonably notifies the buyer that the shipment of non-conforming goods is an accommodation → then that is a counteroffer and the buyer is free to reject or accept.
NOTICE OF ACCOMMODATION
Counteroffer. Buyer can reject or accept.
Revocation of unilateral contracts:
Once performance has begun the offer cannot be revoked as to that performer.
Death and an Option Contract
An offer that was irrevocable for a period of time b/c of an option K, survives the offeror’s death and may be accepted at any time during the option period.
If a past obligation, such as a debt, would be enforceable except for SOL, courts:
will enforce a new promise if it is IN WRITING or if there has been PART PERFORMANCE.
Latent Ambiguity: In cases where one party is aware and the other is not at the time of K – K will be enforced according to:
the intent of the party who what unaware of the ambiguity.
Seller is obligated to get the goods to the destination indicated and make a reasonable arrangements for freight if FOB is not the sellers place of business.
Seller has risk of loss until it reaches the FOB destination.
Executory agreement to discharge an existing contractual duty.
Valid accord requires:
consideration – it may be of a lesser value than consideration in the other K as long as it is ‘different’
the performance of the accord agreement. Discharges both the original K and the accord agreement as well.
The basic measure of damages for breach of warranty is: (3 things)
1. The difference between the value of the goods as delivered and the value they would have had if they had been according to the contract, plus
2. Incidental damages, plus
3. Consequential damages.
Recovery in a suit for restitution: The measure of the recovery is:
the value of the benefit conferred.
Addresses unjust enrichment.
The amount necessary to buy a substitute performance
For breach of a sale of goods contract a buyer's damages are measured:
as of the time he learns of the breach.
For breach of a sale of goods contract a seller's damages are measured:
as of the time for delivery.
put the plaintiff in the position she would have been in had the contract never been formed.
Consequential damages are:
damages resulting from the breach that any reasonable person would have foreseen would occur from a breach at the time of entry into the contract.
The implied warranty of merchantability is implied in:
every contract for the sale of goods by a merchant who deals in goods of the kind sold.
Under the implied warranty of merchantability
the goods are warranted to be at least fit for the ordinary purposes for which such goods are used.
The warranty against infringement is provided by a merchant seller and warrants that:
the goods are delivered free of any patent, trademark, copyright, or similar claims.
The implied warranty of fitness for a particular purpose arises when:
1. a seller has reason to know the particular purpose for which the goods are to be used and
2. the buyer was relying on the seller’s skill and judgment to select suitable goods when the buyer bought the goods.
Parol Evidence: Williston Test: Based on the ____ __ ___ _______ _________, ct decides whether contracting parties (in general) would include:
face of the written agreement and ct decides whether contracting parties (in general) would include the term sought to be proved.
Parol Evidence: Corbin Test: Takes into account the specific circumstances of the transaction involved and asks whether:
parties like these situated as they are would naturally and normally include in their writing the extrinsic matter that is sought to be introduced.
UCC Parol Evidence Rule: A party cannot contradict a written contract but he may add consistent additional terms unless:
(i) there is a merger clause, or
(ii) the courts find from all of the circumstances that the writing was intended as a complete and exclusive statement of the terms of the agreement.
Article 2 also provides that a written contract’s terms may be explained or supplemented by the following whether or not the writing appears to be ambiguous.
Parol evidence can be received to aid the fact-finder when:
there is uncertainty or ambiguity in the written agreement’s terms or a dispute as to the meaning of those terms.
Extrinsic Evidence Outside Scope of Parol Evidence Rule (5)
1. Formation defects
2. Conditions precedent
4. Showing of 'true consideration'
Condition precedent to the contract's effectiveness
An agreement that a contract will not become binding until a certain condition has occurred
material benefit rule:
(i) it is based on a material benefit that was previously conferred by the promisee on the promisor, and
(ii) the promisee did not intend to confer the benefit as a gift.
HAS THE ABSOLUTE DUTY TO PERFORM BEEN DISCHARGED? (4 Ways) Discharge by: POIT
2.Tender of performance
3. Occurrence of conditions subsequent
Discharge by Tender of Performance:
Good faith tender of performance made in accordance with contractual terms will also discharge contractual duties. Note that the tendering party must possess the present ability to perform; a mere promise of performance will not suffice.
When (under the UCC) can additional terms become a part of a K?
1. Both parties are merchants, and
2. additional term does not materially alter the K, and
3. The offeror does not object w.i a reasonable time
Confirmatory memo rule: In contracts between merchants:
1.if one party, within a reasonable time after an oral agreement has been made,
2. sends to the other party a written confirmation of the understanding that is sufficient under the Statute of Frauds to bind the sender,
3. it will also bind the recipient if
4. he has reason to know of the confirmation’s contents, and
5. does not object to it in writing within 10 days of receipt.
UCC Knock Out Doctrine:
Conflicting terms in K effectively knock out each other and UCC fills the gaps.
UCC pre-existing duty rule:
No consideration is required for modification, but there must be good faith.
Contents of a K required to satisfy Statute of Frauds:
1. ID the parties
2. ID the K subject matter
3. Contain all essential terms
4. Must be signed by party to be charged.
Six K's that fall under Statute of Frauds:
2.Promise by an executor to pay obligation of estate from his own funds.
4.K which cannot be performed w/i a year.
5. Promise creating an interest in land.
6. Sale of goods for $500 or more.
UCC requirements for K to satisfy SoF for sale of goods for $500 or more:
1. Quantity (can be output/req't)
2. Must indicate a K for SALE.
3. Must be signed by the party to be charged.
UCC Judicial Admission:
SoF defense is lost if a party admits at trial, in pleadings, or during discovery that an agreement was entered into.
Mutual mistake prevents contract when three elements are found:
1. Parties use a material term open to at LEAST TWO REASONABLE interpretations, and
2. Each party attaches a different meaning to the term, and
3. Neither party knows or has reason to know the meaning attached by the other.
Mutual mistake of MATERIAL FACT prevents K when (4 elements):
1. Both parties are mistaken
2. Basic assumption of fact
3. Materially affects the agreed exchange
4. Not a risk that either party bears.
What if there is a mistake as to value?
No relief. K stands.
Unilateral mistake: General Rule:
No relief. K usually stands.
Unilateral Mistake Exceptions:
A court may grant relief from K if:
1. Obvious mistakes
2. Avoidance before significant reliance (like typos)
Fraud in inducement:
Voidable. When you know you're signing a K but you have been lied to about the subject matter.
2 Facts that trigger Parol Evidence Rule:
1. Written K INTENDED AS FINAL AGREEMENT. (Total integration)
2. Applies to all earlier or contemporaneous agreements.
How can implied warranties of fitness and merchantability be disclaimed?
1. Must be conspicious,
2. Must mention merchantability or use "as is" language
3. By course of dealing, course of performance, or usage of trade.
4. Where seller has DEMANDED that buyer examine goods fully, there are no implied warranties for defects which an examination ought to have revealed.
When does buyer have the right to reject a non-conforming installment K?
Only where there is a substantial impairment in that installment and that cannot be cured.
A seller who fails to deliver perfect tender may cure, when? (3 situations)
1. If there is a K right to cure.
2. Time for performance has not expired.
3. If the seller had reason to believe that improper tender would be acceptable, then they may be able to cure after time for performance has expired.