CONTRACTS Flashcards

Question

Exceptions to Preexisting Duty Rule

Answer 1

1. New or different consideration is promised; 2. Promise to ratify a voidable obligation (i.e. a promise to go through with a K despite other party’s fraud) 3. Written promise to pay a time-barred debt 4. Compromise of honest dispute 5. Unforeseen circumstances rising to level of impracticability 6. UCC - good faith modification

Answer 2

Certain agreements must be in **writing**, **signed by the party to be charged**. CL - The writing must: (1) **identify** **the subject matter** of the contract; (2) **indicate** that a **contract has been made** between the parties, and (3) **state with** **reasonable certainty the essential terms** of the contract. UCC - Only requires **some signed writing** indicating K and specifying the **quantity term** * K between Merchants – SOF is satisfied when one party sends **confirmatory memo** and **receiving merchant does not object to terms w/ in 10 days** Writing Required: * **Marriage** is consideration for promise ("If you marry...") * Promises that cannot be performed within a **Year** * Interest in **Land** * Promises to pay **Estate** debts from own funds * contract for sale of **Goods** over $500 * **Suretyship** - promise to answer the debt of another

Answer 3

_Mutual Mistake_ - the K is voidable if: 1) **both** **parties** are **mistaken**, 2) mistake concerns a **basic assumption** on which K was made; 3) mistake has **material effect** on K terms; 4) **party seeking avoidance** **did not assume the risk** of mistake _Unilateral Mistake_ - if only one of the parties is mistaken about facts relating to the agreement, the mistake will not prevent formation of a K. However, the K is voidable if: 1) the **nonmistaken party knew or should have known of the mistake**; 2) mistake has **material effect** on K terms; 3) **mistaken party did not assume the risk** of mistake

Answer 4

**Additional consideration** is needed to modify terms. **Written contract may be orally modified** even if contract prohibits oral modifications.

Answer 5

**No consideration required** to modify terms so long as made in **good faith.** The modification must be in writing if, as modified, contract is for more than $500. UCC gives effect to provisions that prohibit oral modifications.

Answer 6

**Prior** (oral or written) or **contemporaneous** statements are **inadmissible** to **vary**, **modify**, or **contradict** a **fully integrated agreement**. However, parol evidence may be admissible to **explain ambiguous terms** or prove existence of **conditions precedent** or **formation defects** (lack of consideration, fraud, duress). If K is only **partially integrated**, the written agreement will be **considered final as to the terms it states**, but agreement may be **supplemented by consistent additional terms**.

Answer 7

Contract **terms** may be **explained** or **supplemented** by evidence of: * _Course of performance_ – repeated occasions of performance between parties under current K * _Trade usage_ – evidence of what parties to similar Ks do * _Course of dealing_ – sequence of conduct between parties concerning precious transactions * _Gap Filler_ - 1) **price** – reasonable price at time of delivery; 2) **place of delivery** – seller’s place of business; 3) **time for shipment/delivery** – reasonable time; 4) **time for payment** – time and place at which buyer is to receive goods

Answer 8

A merger clause (states agreement is complete on its face) is evidence of full integration. ## Footnote *Here, the contract contained a merger clause which states the contract is a “complete and final statement of the agreement of the parties.” *

Answer 9

Under modern contract law, where language used in a contract is **ambiguous** as to whether it expresses a promise or a condition, courts will **construe the term as a promise**, because failure of conditions lead to forfeiture; and courts generally **try to avoid forfeitures**. On the other hand, use of express language, such as “if,” “on condition that,” “provided,” or “subject to” will lead courts to construe the language as a condition.

Answer 10

A condition precedent is one that **must occur** before an **absolute duty** of immediate performance arises in the other party. Failure of a condition precedent excuses the other party's performance.

Answer 11

A duty of immediate performance does not become due unless the **conditions** have been **performed** or have been **legaly excused.** * Material breach of the contract * Anticipatory Repudiation * Prospective Inability or Unwillingness to Perform (i.e. other party becomes bankrupt) * _Divisibility of Contract_ - if K is divisible and a party performs one of the units of the K, he is entitled to the agreed upon equivalent for that unit even if he fails to perform the other units. The other party will still be able to recover for damages for failure to perform remaining units. * UCC Installment Ks - K is not divisible unless it authorizes delivery in several lots * _Estoppel Waiver_ – When a party indicates that he **waves a condition** BEFORE the condition has occurred, the party is **estopped** from **asserting the condition** if the other party has **detrimentally relied** on the waiver. Party **can** **retract** **waiver** any time before other party detrimentally relies. * _Election Waiver_ – When a party **continues** **under the contract** AFTER a **condition has not occurred**, the party is deemed to have **waived the condition.** * _Substantial Performance_ - The non-breaching party’s performance obligation is still due and only option is to perform and sue later for incomplete performance.

Answer 12

Anticipatory repudiation occurs where a promisor **unequivocally** (unambiguous) indicates **prior to the time set for performance** that she will not perform. The non-repudiating party has four options: 1) **immediately sue** for breach; 2) **suspend own performance** and **wait to sue** until date performance is due; 3) treat breach as a **rescission** and **void K**; 4) **ignore** repudiation and **encourage performance**. Anticipatory repudiation can be retracted unless relied on

Answer 13

A formal request that a party re-commit to performance _Prospective inability/unwillingness to perform (PIP):_ occurs when one of the parties gives an **indication**, before his performance is due, that he will not substantially perform, but the indication does not rise to the level of unequivocal * PIP entitles the aggrieved party to **suspend performance** and make **written demand** for “adequate assurance of performance.” The other party’s **failure to respond** within a reasonable time, not exceeding 30 days, will **constitute repudiation**

Answer 14

Contractual duties will be **discharged** if they are **objectively impossible to perform** (i.e. death or physical incapacity, illegality, destruction of subject matter).

Answer 15

Contractual duties will be **discharged** if the party has encountered **extreme** and **unreasonable** **difficulty** and/or **expense** AND its **nonoccurrence** was a **basic assumption** of the parties. **Mere increase in costs** is **usually insufficient** to discharge a duty for impracticability.

Answer 16

Contractual duties will be **discharged** if an **unforeseeable** **supervening event** not due to the fault of the party seeking discharge **destroys the _purpose_ or _value_ of the contract** and the **purpose was understood by both parties** when the contract was made.

Answer 17

_Mutual Recission_ – K may be discharged by an **express agreement** between the parties to rescind if the **duties are executory on both sides**. _Unilateral Recision_ – A unilateral K may be rescinded where **one party still has duty to perform** if: 1) there is an **offer of new consideration** by the nonperforming party; 2) elements of **promissory estoppel**; or 3) **manifestation of an intent** by the original offeree to make a **gift** **of the obligation** owed to her

Answer 18

Occurs when a **new K substitutes a new party** to receive benefits and assume duties that had originally belonged to one of the original parties under the terms of the old K. Novation **releases original party** and **extinguishes old K. ** The 4 elements must be met: 1. A **previous valid K** 2. **Agreement among all parties**, including the new party to the new K 3. Immediate **extinguishment** **of contractual duties** between the original K parties 4. **Valid and enforceable new K**

Answer 19

_Accord_ is an **agreement** where one party agrees to accept a **different performance** that one that was originally agreed upon. Requires **consideration** or a **bona fide dispute.** _Satisfaction_ is the **performance of the accord**, which **discharges accord** and **original contract.**

Answer 20

A contract is breached when a **party fails to perform** **in accordance with the terms** of the contract when there is a **duty to perform**. _Minor Breach_ - Obligee **gains the substantial benefit** of the bargain so nonbreaching party **must perform**. The non-breaching party **may not cancel the K**, but has a **right to damages for the minor breach (setoff).** _Majori Breach_ - Obligee **does not gain substantial benefit of the bargain** so **no duty to perform**. The nonbreaching party **may treat the K as terminated** and will have an **immediate right to all remedies for breach of the entire K**. Breach is considered material based on: 1) the **extent of performance**, 2) the **willfulness** of breach, 3) **seriousness** of breach; and 4) **likelihood of cure**

Answer 21

If the goods **fail to conform** to the contract **in any way**, buyer may: * Accept the entire shipment + sue for damages * Once buyer accepts, he cannot later reject * Payment w/out opportunity to inspect is not acceptance * Implied acceptance once buyer retains goods after opportunity to inspect * Reject the entire shipment + sue for damages * Accept some units and reject rest + sue for damages

Answer 22

Seller has right to cure **before** time for performance if: 1) seller gives **reasonable notice** of intent to cure; and 2) seller makes a **new tender within time for performance;** Seller has a right to cure **beyond** time for performance if: 1) **prior deals** between the parties **gives seller reason to believe** that nonconforming goods were acceptable; or 2) seller **could not have known of defect** despite proper business conduct (i.e. packaged goods purchased from third party)

Answer 23

Authorize delivery in separate lots that are separately accepted. An _installment_ can only be rejected if the nonconformity **substantially impairs** the value of the installment **AND** **cannot be cured**. The _contract_ is breached **only if** the **nonconformity** of the installment **substantially impairs the value of the entire contract. **

Answer 24

Gives the non-breaching party the **benefit of the bargain** to put her in the **same position** she would have been had the **breach not occurred.**

Answer 25

Awards **cost of plaintiff’s performance** to put nonbreaching party in the position she would have been in had the **contract never been formed** (i.e. expenditures in preparation for performance). Recoverable if expectation damages (amount of profit plaintiff would have made) are too speculative.

Answer 26

Reflect losses over and above expectation damages. These damages are recoverable if, **at the time the K was made**, such damages were **foreseeable** as a **probable result of the breach**. The breaching party **must have known or should have known** of the **circumstances** that would **give rise** to consequential damages.

Answer 27

Liquidated damages clauses are enforceable if: (1) **actual damages** were **difficult to calculate** at the **time** contract was formed; (2) amount specified is a **reasonable approximation** of the likely damages. ## Footnote If the clause is invalid, it is a penalty and only actual damages recoverable. If clause is valid, only liquidated damages are recoverable. Clause that provides that party can **elect to recover** either actual OR liquidated damages is **invalid**

Answer 28

Difference between the contract price and FMV

Answer 29

Employer Breach - full contract price. Employee Breach - cost to replace employee.

Answer 30

Breach by Owner: * Before construction - builder's prospective profits * During construction - contract price minus cost of completion * After completion - full contract price + interest Breach by Builder: * Before or during construction - cost of completion + compensation for delay * Late completion - value of lost use

Answer 31

The buyer's basic damages where the seller does not deliver or buyer rejects delivered goods is the **difference between** the **contract price** and EITHER the **market price at time buyer learns of breach** OR **cost of buying replacement goods** (cover), plus **incidental** and **consequential** damages, **less any expenses saved. **

Answer 32

A buyer that makes a reasonable contract to **purchase** **replacement goods** on the market at the time of breach in **good faith** and **without unreasonable delay** may recover the **difference between the contract price and cost of replacement goods**.

Answer 33

If buyer **accepts** **nonconforming goods** and gives seller **notice of defect within a reasonable time**, buyer may recover the **difference between** the **value of the goods delivered** and the **value they would have had if they had been according to the contract**, plus **incidental** and **consequential** damages.

Answer 34

The seller's basic damages where the buyer rejects delivered goods or anticipatorily repudiates the contract is the difference between the **contract price** and EITHER the **market price** at **time and place for delivery** OR **resale price**, plus **incidental** damages (no consequential), **less any expenses saved. ** A seller that **resells** the goods in **good faith** at a **commercially reasonable** private sale or public auction may recover the difference between the **contract price** and **resale price.**

Answer 35

The seller is a lost volume seller when he can **obtain** or **manufacture** **as many goods as it can sell**. If seller would have made **2 sales**, **but for the buyer's breach**, the seller may recover for **lost profit**, measured by the **contract price** with the breaching party **minus the cost** to the seller to get the goods from wholesale/dealer, **offset** by any **down payment** made by buyer.

Answer 36

If buyer has **accepted goods and not paid**, seller is **unable to resell** the goods at a reasonable price, goods were **lost or damaged** when **risk of loss was on buyer,** the seller may recover the **full contract price.**

Answer 37

Nonbreaching party has a duty to mitigate damages. A non breaching party may not recover damages that could have been avoidable by procuring substitute performance at a reasonable price.

Answer 38

Compensates the non-breaching for a **benefit conferred** on the other party to **prevent unjust enrichment.**

Answer 39

**Restitution** may be available in quasi-contract when a **contract was made**, but it is **unenforceable** and **unjust enrichment would result.** Ex. parties discharged for impossibility - builder will be able to recover for improvements made to house before it got destroyed Ex. One party dies and is discharged from performance - other party can recover payments made from deceased's estate. Restitution may be available in quasi-contract when **no contract was formed** if: (1) plaintiff **conferred a benefit** on the defendant by rendering services; (2) plaintiff conferred the benefit with a **reasonable expectation of being compensated**; (3) D **had reason to know** of P's expectation; and (4) D would be **unjustly enriched** if he did not have to compensate P. P can recover for the **reasonable value of his services.** Ex. Dr. aids a victim in a car accident.

Answer 40

Buyer’s Remedies: 1) Cancellation; 2) Buyer’s right to Replevy Identified Goods (if buyer has made part payment or is unable to secure adequate substitute goods); 3) Specific Performance – unique goods (subject to defenses: laches, unclean hands, sale to BFP). Seller’s Remedies: 1) Withhold Goods; 2) Right to recover goods from insolvent buyer; 3) Right to Demand Assurances.

Answer 41

A party may delegate its duties under the contract unless performance by the delegatee will **materially change** the obligee’s expectation under the contract.

Answer 42

Infancy Mental Incapacity Duress Undue Influence

Answer 43

Feasibility - specific performance for services contract are not feasible b/c it would be unconstitutional as involuntary servitude under 13th Amendment.

Answer 44

Laches * Fact RE statute of limitations Unclean Hands