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MBE > Contracts > Flashcards

Contracts Flashcards

1
Q

What is the framework of analysis for contracts questions?

A
  1. Has an enforceable contract been formed?
  2. Has the contract been performed?
  3. What are the remedies for breach?
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2
Q

Common law applies to:

A

Real estate and service contracts

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3
Q

The UCC applies to:

A

Goods contracts

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4
Q

How do you deal with mixed contracts?

A
  1. All-or-Nothing Rule: contract is governed by either the UCC or the common law, not both (unless divisible)
  2. Predominant Purpose Rule: choose which body of law governs the contract by looking at the main reason for entering the contract - does the good or service play a bigger role?
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5
Q

Things to consider when answering “Has an enforceable contract been formed?”

A

[All Contracts Don’t Stink]

  1. Agreement
  2. Consideration
  3. Defenses
  4. Statute of Frauds
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6
Q

Agreement =

A

Offer + Acceptance

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7
Q

Offer =

A

Manifestation of willingness to enter into an agreement (by the offeror) + creates the power of acceptance (in offeree)

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8
Q

What is the Objective Test?

A

Whether the offeror displays an objectively serious intent to be bound

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9
Q

To whom must an offer be directed?

A

A specific offeree

Exception: rewards and contests

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10
Q

Specificity of the Offer - Common Law

A

All Essential Terms - parties, subject, PRICE, and quantity

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11
Q

Specificity of the Offer - UCC

A

Need only state the parties and the quantity

UCC has default rules for gap-filling

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12
Q

Power to accept =

A

Accept and know the deal has been concluded

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13
Q

Invitation to deal

A

Preliminary communications that still reserve a final round of approval for the speaker
They do not confer the power of acceptance

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14
Q

An offer in can be terminated by -

A
  1. Revocation by Express Communication
  2. Constructive Revocation
  3. Rejection of the Offer
  4. Counteroffer
  5. Death of the Offeror
  6. Passage of Time
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15
Q

Irrevocable Offers include -

A
  1. Options
  2. Firm Offers
  3. Partial Performance
  4. Detrimental Reliance
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16
Q

Requirements for a Firm Offer

A
  1. Offeror is a merchant
  2. Offer is in writing
  3. Contains an explicit promise not to revoke
  4. Signed by the merchant
    [+ Offer for goods b/c UCC]
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17
Q

Detrimental Reliance

A

An offer cannot revoked if the offeree reasonably and detrimentally relies on the offer in a foreseeable manner

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18
Q

Partial Performance

A

A unilateral offer cannot be revoked if the offeree has started performance

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19
Q

Acceptance =

A

A manifestation of a willingness to enter into the agreement by the offeree
Governed by the objective test

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20
Q

Where there is ambiguity as to the method of acceptance requested by the offeror…

A

Either method of acceptance (action or return promise) is permissible

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21
Q

What is the consequence of an offeree shipping the wrong goods?

A

Considered both an acceptance and a breach of the contract.

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22
Q

The Mailbox Rule

A

An acceptance sent by mail is valid when sent.

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23
Q

The Mailbox Rule does not apply to:

A
  • When the offeree sends something else first
  • Other types of communications (rejections, revocations)
  • Option Contracts
  • Potentially other methods of communication
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24
Q

Implied-in-fact contracts

A

Acceptance by action

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25
Q

Mirror-Image Rule

A

Common Law

An acceptance must match the terms of the offer exactly. If not, it is a counteroffer.

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26
Q

UCC § 2-207

A

A definite and seasonable expression of acceptance [or a written confirmation] which is sent within a reasonable time operates as an acceptance even though it states terms additional to or different from those offered or agreed upon, unless acceptance is expressly made conditional upon assent to the additional or different terms.

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27
Q

Under UCC § 2-207, new terms will govern only if -

A
  1. Both parties are merchants
  2. The new term does not materially alter the deal
  3. The initial offer did not expressly limit acceptance to its terms
  4. The offeror does not object within a reasonable time to the new term
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28
Q

If there is not a real contract, but the parties act as if there is, what terms apply?

A

Only the terms that the writings agree on

Other terms coming from the UCC default rules

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29
Q

Bargained for consideration =

A

a deal in which the parties exchange promises involving a legal benefit or detriment

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30
Q

Framework of analysis for bargained-for-consideration

A
  1. Who is making the promise that needs to be supported by law?
  2. Is there a benefit to the promisor or a detriment to the promisee?
  3. Was this bargained for?
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31
Q

Modification - Common Law

A

Pre-existing Duty Rule - a promise to do something that you are already legally obligated to do is not consideration.
Modification will need bargained-for-consideration.

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32
Q

The Pre-existing duty rule does not apply to -

A
  1. Change in performance
  2. Third party promising to pay
  3. Unforeseen difficulties that would excuse performance
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33
Q

Modification - UCC

A

Whether the modification was made in good faith

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34
Q

Consideration Substitutes

A
  1. Promissory Estoppel
  2. Quasi-Contract
  3. [Moral Obligation + Subsequent Promise to Pay]
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35
Q

Promissory Estoppel

A
  1. A promise is made that would reasonably be expected to induce reliance
  2. The promisee does indeed take detrimental action in reliance on the promise
  3. Injustice can be avoided by enforcement of the promise
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36
Q

Quasi-Contract

A
  1. π confers a measurable benefit on ∆
  2. π reasonably expected to get paid
  3. It would be unfair to let the ∆ keep the benefit without paying
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37
Q

Defenses to Contract Formation

A
  1. Misunderstanding
  2. Incapacity
  3. Mistake
  4. Fraud/Misrepresentation/Nondisclosure
  5. Duress
  6. Illegality
  7. Unconscionability
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38
Q

Defense of Misunderstanding

A
  1. The parties use a material term that is open to 2 or more reasonable interpretations
  2. Each side attaches a different meaning to the term
  3. Neither party knows, or should know, of the confusion
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39
Q

Defense of Incapacity

A

Minors, Mentally Ill, and Intoxicated persons
Contract is voidable, meaning the incapacitated party can disaffirm.
Exception: contracts for necessities

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40
Q

Defense of Mistake

A

A mistake is a belief that is not in accord with a present fact.
Only the adversely affected party can claim the defense of mistake.

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41
Q

Mutual Mistake

A
  1. There is a mistake of fact, existing at the time that the deal is made
  2. The mistake relates to a basic assumption of the contract and has a material impact on the deal
  3. The impacted party did not assume the risk of mistake
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42
Q

Unilateral Mistake

A

Elements of Mutual Mistake +

  1. The mistake would make the contract unconscionable, or
  2. The other side knew of, or had reason to know of, or caused the mistake.
43
Q

Defense of Misrepresentation

A
  1. A misrepresentation of a present fact
  2. That is material or fraudulent
  3. That is made under circumstances in which it is justifiable to rely on the representation
44
Q

Fraud in the Execution

A

when you tick someone into signing something that she doesn’t know is a contract

45
Q

Nondisclosure

A

Normally not required to tell the other side about all material facts
Exceptions: fiduciary relationships & active concealment

46
Q

Defense of Duress

A

An improper threat that deprives a party from making a meaningful choice to contract
Economic Duress or Undue Influence

47
Q

Defense of Illegality

A

Illegal contracts are unenforceable.
Distinguish from contracts in furtherance of an illegal act
Also includes contracts against public policy

48
Q

Defense of Unconscionability

A 
Some jurisdictions will require both -
Procedural Unconscionability (defect in process)
Substantive Unconscionability (rip off)
49
Q

The Statute of Frauds applies to:

A
  1. Marriage
  2. Suretyship (but see main purpose exception)
  3. One Year
  4. UCC ($500+)
  5. Real Property
50
Q

Satisfy the Statute of Frauds by

A
  1. Performance

2. Having a writing

51
Q

In order to satisfy the Statute of Frauds, a signed writing must cover the fundamental facts by -

A
  1. Identifying that a contract has been made
  2. Identifying the parties
  3. Containing the essential elements of the deal
52
Q

The Statute of Frauds & Service Contracts

A

Full performance of a services contract by either side will satisfy the Statute of Frauds.

53
Q

The Statute of Frauds & Real Estate Contracts

A
  1. Signed writing
  2. Part Performance if two of three are met -
    Possession
    Payment
    Improvements
54
Q

The Statute of Frauds & Goods

A
  1. Signed writing meeting the requirements of the UCC
  2. Part Performance for the quantity delivered and accepted
  3. Judicial Admission
  4. Failure to object to a confirming memo within 10 days (both parties are merchants)
  5. Custom-made goods are exempt
55
Q

The Statute of Frauds & Modifications

A

Whether the deal as modified would be covered by the Statute of Frauds (re: goods threshold of $500)

56
Q

Things to consider when answering “Has the contract been performed?”

A

[Pizza With Crawling Escargot]

  1. Parol-Evidence Rule
  2. Warranties
  3. Conditions
  4. Excuse of performance obligations
57
Q

The Parol-Evidence Rule applies to -

A

Earlier oral or written statements about the same deal.

58
Q

PER does not bar evidence -

A
  • Relevant to a defense against contract formation
  • Of a second, separate deal
  • Of a prior communication that is designed to interpret an ambiguous term
59
Q

PER & Integration

A
  1. Complete Integration - the contract expresses all terms of the agreement; PER bars extrinsic evidence
  2. Partial Integration - some terms not included in a final writing; PER allows extrinsic evidence to clarify an ambiguous term but not to contradict
60
Q

PER & the UCC

A

UCC presumption that a writing is at most a partial integration

61
Q

Warranty =

A

a promise about a term of the contract that explicitly shifts risk to the party making the promise

62
Q

Three Types of Warranties under the UCC

A
  1. Express Warranties
  2. Implied Warranty of Merchantability
  3. Implied Warranty of Fitness for a Particular Purpose
63
Q

Express Warranty

A

A promise that affirms or describes the goods that itself is part of the basis of the bargain
Samples or models

64
Q

Implied Warranty of merchantability

A
  • Seller is a merchant dealing in the goods at issue
  • Implied warranty that the goods are fit for ordinary commercial purposes
  • Can be disclaimed, if very clearly done
65
Q

Implied Warranty of Fitness for a Particular Purpose

A
  • Any seller
  • Triggered when the buyer relies on a seller’s expertise to select the goods for a special purpose and the seller has some reason to know of that purpose
  • Can be disclaimed only in writing
66
Q

Condition =

A

Another way to shift risk by stating that one party’s contractual obligation will kick in only if some future event takes place

67
Q

Express Conditions

A
  • Created by language in the contract

- Must be exactly/strictly satisfied

68
Q

Constructive Condition of Exchange (CCE)

A

One party’s performance is conditioned on the other side’s performance

69
Q

CCE & Common Law: Doctrine of Substantial Performance

A

A party will satisfy the CCE if there is not a material breach, and the failure is not willful.

70
Q

CCE & the UCC

A

The UCC requires perfect tender

71
Q

Perfect tender =

A

Perfect goods + perfect delivery

72
Q

Methods of Tender/Delivery

A
  1. Tender at Seller’s Place of Business
  2. Shipment Contract
  3. Destination Contract
73
Q

Shipment Contract

A

F.O.B. Seller’s Place of Business

  1. Get the goods to a common carrier
  2. Make arrangements for delivery
  3. Notify the buyer
74
Q

Destination Contract

A

F.O.B. Buyer’s Place of Business

  1. Get the goods to the buyer’s business
  2. Notify the buyer
75
Q

Risk of Loss Analysis

A
  1. If dealt with in the contract, the agreement controls.
  2. If there has been a breach, the breaching party is liable for the risk of loss.
  3. If the goods are being shipped:
    - Shipment Contract - Buyer has risk of loss
    - Destination Contract - Seller has risk of loss
  4. In all other cases:
    - If seller is a merchant, risk of loss stays with seller until the buyer receives the goods
    - If not, risk of loss moves to the buyer when the seller tenders the goods.
76
Q

Excuse of Performance Obligations

A
  1. Impossibility & Impracticability
  2. Frustration of Purpose
  3. Modification or Cancellation
  4. Accord and Satisfaction
  5. Novation
77
Q

Impossibility & Impracticability

A 
An unforeseeable event, the non-occurrence of which was a basic assumption of the contract
Party seeking discharge was not at fault
Becomes illegal
Subject matter destroyed
Special person dies before performance
78
Q

Frustration of Purpose

A

Performance can still occur, but something has happened to undermine the entire reason for the creation of the contract.

79
Q

Accord & Satisfaction

A

The parties to an earlier contract agree that performance will be satisfied instead by the completion of a different performance. If performed, cannot sue on the initial obligation,
Accord = new performance
Satisfaction = excusing the initial performance obligation

80
Q

Novation

A

Both parties agree that a substitute person will take over the contractual obligations

81
Q

Anticipatory Repudiation

A

Repudiate the contract before performance is due

82
Q

Options in the face of Anticipatory Repudiation

A
  1. Treat the repudiation as a breach and sue immediately

2. Ignore and demand performance.

83
Q

Anticipatory Repudiation & Common Law

A

Failure to substantially perform means that the CCE is not satisfied and the other side can withhold performance

84
Q

Anticipatory Repudiation & the UCC

A

If there are reasonable grounds for insecurity, allows you to demand adequate assurance of performance.
If the questionable party fails to respond within a reasonable time, can treat as repudiation.

85
Q

Types of Money Damages

A
  1. Expectation Damages
  2. Lost Volume Profits
  3. Incomplete Performance
  4. Diminution in Market Value
  5. Reliance Damages
  6. Restitution Damages
  7. Liquidated Damages
  8. Punitive Damages
86
Q

Remedies Available

A
  1. Money Damages
  2. Specific Performance
  3. Injunction
87
Q

Expectation Damages

A

The presumptive method for calculating damages
Goal: to put a party in the same economic position as if the contract had been performed
Value of performance without Breach - Value with breach

88
Q

Limits on Expectation Damages

A
  • Must be proven with reasonable certainty
  • Unforeseeable consequential damages are not recoverable
  • Doctrine of mitigation
89
Q

Lost Volume Profits

A

Seller = retailer

Plenty of products and few buyers

90
Q

Incomplete Performance

A

Construction context

Expectation damages = Contract Price - Amt Paid - Amt needed to Complete the job

91
Q

Diminution in Market Value Damages

A

Where normal measure of damages would dramatically overcompensate the π, resulting in economic waste.
Compensated for the decreased market value vs. what you wanted

92
Q

Reliance Damages

A

Puts a party in the same economic position that it would be in if the contract had never been created.
Cannot recover both reliance and expectation damages

93
Q

Restitution Damages

A

Give the π an amount equal to the economic benefit that the π has conferred on the ∆

94
Q

Liquidated Damages

A

Set out in the contract as an explicitly negotiated amount
Courts are wary and will only enforce if -
1. The amount was reasonable at time of contract, and
2. Actual damages would be difficult to prove and uncertain in amount

95
Q

Punitive Damages

A

Almost never allowed unless the breach is also tortious

96
Q

Specific Performance

A

Awarded when monetary damages are considered to be inadequate
Available for unique goods and real estate
May award an injunction for service contracts

97
Q

Right of reclamation

A

Equitable right of an unpaid seller to reclaim goods when the buyer is insolvent

  1. Buyer is insolvent at time of receipt of goods
  2. Seller must demand the return of the goods within 10 days of receipt
  3. Buyer still has the goods
98
Q

Which third party beneficiaries have the right to sue?

A

Intended beneficiaries

99
Q

Types of Intended Beneficiaries

A
  1. Creditor Beneficiary

2. Donee Beneficiary

100
Q

Although parties may modify or revoke third party rights, they may not do so when:

A
  1. Beneficiary detrimentally relies on the rights
  2. Beneficiary manifests assent, or
  3. Beneficiary files a lawsuit to enforce the contract
101
Q

Assignment

A

A transfer of rights under a contract

102
Q

Delegation

A

A transfer of duties under a contract

103
Q

If a contract prohibits assignments . . .

A

The assigning party has breached the deal in making the assignment but the third party can still recover from the guarantor.

104
Q

If a contract invalidates assignments . . .

A

The third party cannot recover.

MBE (3 decks)

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