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Flashcards in Contracts Deck (86):
1

Offer

Objective manifestation of willingness by offeror to enter into agreement that creates power of acceptance in offeree

Present intent to be legally bound to a contract; offeree must have knowledge of offer; terms must be certain and definite

2

Invitation to deal

advertisements are only invitation to receive offers, but may qualify as offer if sufficiently specific and limit who can accept/if associated with stated reward

3

Termination of offers (lapse of time)

if offer does not set time limit, power of acceptance will terminate at end of a reasonable period of time (UCC: 90 days)

4

UCC firm offer rule

offer irrevocable (reasonable time but no more than 90 days) if made by merchant and assurances given in authenticated writing that the offer will remain open

5

Acceptance

objective manifestation by offeree to bound by terms of the offer; unless offeror specifically requires offeree to accept in a particular manner/by particular means, offeree can accept in any reasonable manner and by any reasonable means

6

Silence as acceptance

Silence is not acceptance unless offeree has reason to believe offer could be accepted by silence OR previous dealings make it reasonable to believe that offeree must notify offeror if he does not intend to accept

7

Mailbox rule

Acceptance effective when sent, unless offer provides otherwise. mailing must be properly addressed and include correct postage;

rejection following acceptance (acceptance will control unless reliance on rejection)

acceptance following rejection (mailbox rule doesn't apply; first one received prevails);

rejection/revocation effective on receipt

irrevocable offer (mailbox rule doesn't apply): acceptance must be received before offer expires

8

Mirror image rule

acceptance must mirror the terms of the offer; any change or addition to terms acts as rejection and new counteroffer

9

UCC additional/different terms

acceptance containing additional or different terms generally treated as acceptance; unless, acceptance is expressly conditioned on asset to addition/different terms --> counteroffer

when one party is not a merchant: new terms are proposed additions

10

Battle of the forms

Both parties are merchants: additional terms are automatically included unless: term materially alters K; offer expressly limits acceptance to terms of the offer; offeror objects to term within reasonable time

11

Consideration

To constitute sufficient consideration, there must be bargained for exchange for the promise, promise must induce the detriment and detriment must induce the promise

12

Modification - CL

CL: requires consideration. May still be enforced if:

(1) rescission of existing K (tearing it up) and entering into new K, one party must perform more than she was to perform under the original K;

(2) unforeseen difficulties arise and one party agrees to compensate other party when difficulties are discovered if those difficulties would make performance impracticable;

(3) new obligations on both sides

13

Modification - UCC

Requires good faith; no consideration needed

14

Accord and satisfaction

Accord: One party agrees to accept different performance from other party than what was promised in existing K. consideration is generally required (but satisfied when each party compromises and surrenders its respective claim as to how much is owed)

Satisfaction: performance of accord agreement; discharges both original and accord K; no satisfaction until performance. if accord is breached, can sue under accord and existing K

15

Material benefit rule

when party performs unrequested service for another party; promise of payment made by other party after service is rendered can be enforced to extent necessary to prevent injustice (unless donative intent)

Under CL, promise would be unenforceable for lack of consideration

16

Promissory estoppel

promisor should reasonably expect it induce action on part of promisee; promise does induce such action; injustice only avoided by enforcement of promise

Reliance damages rather than expectation damages are awarded

17

Unilateral Mistake

one party is mistaken as to essential element of K; either party can enforce; mistaken party can void K:

(1) there is a mistake of fact, existing at time the deal was made;
(2) mistake relates to basic assumption of K and has material impact on the deal; and
(3) mistaken party did not assume the risk of the mistake
(4) the mistake would make K unconscionable OR other side knew of, or had reason to know of, or caused the mistake

AND

(3) absence of serious prejudice to other party to rescind K

18

Mutual mistake

Both parties mistake as to essential element. K is voidable by party adversely affected if:

(1) mistake existed when K was formed;

(2) relates to basic assumption of K;

(3) mistake has material impact on transaction;

(4)adversely affected party did not assume the risk of mistake;

neither party can avoid K if reformation available to cure

19

Misunderstanding

both parties believe they are agreeing to same material terms, but they in fact agree to different terms

Neither party knows: no K
One party knows: K formed on meaning of material term as understood by unknowing party

20

Fraudulent Misrepresentation

(1) Knowing or reckless false assertion of fact with intent to mislead;
(2)misrepresentation induced asset to K; (3) justifiable reliance on misrepresentation by adversely affected party

21

Nonfraudulent misrepresentation

K voidable by adversely affected party who (1) justifiable relied on a (2) material misrepresentation (info that would cause reasonable person to agree/person making misrepresentation knows it would cause particular person to agree); (3) misrepresentation induced assent to K

Can be innocent or negligent

22

Undue influence

Unfair persuasion of party to assent to K.

Unfair persuasion: relationship between dominant party and dependent party due to lack of expertise/experience or diminished mental capacity; OR

whether the persuasion of one party seriously impairs the free and competent judgment of other party

23

Duress

Improper threat (criminal action or civil action bad in bad faith; threat to breach K) that deprives party of meaningful choice

24

Incapacity

Infancy: voidable by infant; but after reaching age of consent, infant does not void then treated as being ratified

must pay for reasonable value of necessities

25

Unconscionability

K is unconscionable when it is so unfair to one party that no reasonable person in the position of the parties would agree to it

26

Implied in fact

conduct, not words, indicates assent or agreement

27

Quasi-contract

Plaintiff conferred measurable benefit on D; P acted without gratuitous intent; unfair to let D retain benefit without compensation

28

Express warranty

Any promise, affirmation, description or sample that is party of the basis of the bargain, unless it is merely the seller's opinion.

Disclaimer: inoperative if unreasonably negate or limit express warranties

29

Implied warranty of merchantability

Seller is a merchant; goods must be fit for their ordinary purpose.

Disclaimer: can be disclaimed by use of "as is" language; oral disclaimer ok, but must use "merchantability" and be conspicuous if in writing

30

Implied warranty of fitness for a particular purpose

seller has reason to know (from any source) buyer has particular use for goods; buyer is relying on seller's skill to select the goods

Warranty can be disclaimed by conspicuous writing

31

Impracticability

Unforeseeable event has occurred (illegality; subject matter of K destroyed; performing party dies/incapacitated); nonoccurrence of event was basic assumption on which K was made; party seeking discharge is not at fault; did not assume risk of event happening

32

Frustration of purpose

1. unexpected events arise that destroy one party's purpose in entering K;

2. event must not be fault of frustrated party

3. non-occurrence was basic assumption of K

unexpected event does not need to be completely unforeseeable, but must be so severe it's not within assumed risks inherent under K

33

Third Party beneficiary

Intended beneficiary: one to whom the promisee wishes to make a gift of the promised perform/satisfy an obligation to pay money owed by promisee to beneficiary; has right to bring an action on K

gift K: can only sue promisor (the person who's giving the performance)
Creditor k: can sue both

Incidental beneficiary: one who benefits from K even though there is no K intent to benefit person

34

Vesting of beneficiary's rights

Beneficiary detrimentally relies on rights created; manifests assent to K at one of the party's request; or files lawsuit to enforce K

35

Statute of Frauds

in writing (receipts or correspondences okay; more than one writing okay if one writing references other); signed by party to be charged; contain essential elements of the deal

Marriage; Suretyship; One year; UCC; Real Property

36

Express condition

Those that are expressed in K; requires complete compliance

37

Implied condition

those deemed part of K because agreement suggest parties truly intended the condition, but failed to expressly include it; substantial performance required

38

Perfect tender rule

seller must transfer ownership and tender goods conforming to warranty obligations; substantial performance insufficient

39

Shipment contract

seller must deliver goods to a carrier; make K for shipment; when K is silent, shipment K is presumed when K requires shipment by third party

40

Destination contract

seller must deliver goods to place specified in K; tender them there by holding them at buyer's disposition

41

Material breach

nonbreaching party does not receive substantial benefit of bargain; allows nonbreaching party to withhold any promised performance and pursue remedies for breach, including remedies

42

Minor breach

breaching party has substantially performed; nonbreaching party entitled to remedies but must perform under K

43

Anticipatory repudiation - CL

promisor repudiates before time of performance is due; repudiation must be clear and unequivocal through acts or words

Nonbreaching party's options: treat as breach and sue for damages (if all that is left is payment by other party, then can't sue until date of perforamnce has passed); ignore repudiation and demand performance

44

Anticipatory repudiation - UCC

unequivocal refusal of buyer/seller to perform OR reasonable grounds for insecurity arise and other party fails to provide adequate assurances within reasonable time (no more than 30 days)

45

Expectation damages

intended to put injured party in the same position as if the contract had been performed; must be calculated with reasonable certainty; value of performance without breach (what was promised) and value of performance with the breach (what was received)

46

Consequential damages

Reasonably foreseeable losses to nonbreaching party that go beyond expectation damages; requires foreseeability; causation; reasonable certainty

Foreseeability: damages are recoverable if they are natural and probable consequences of breach/contemplated by parties at time K formed/otherwise foreseeable

47

Liquidated damages

damages stipulated by parties to K as reasonable estimation of actual damages to be recovered in event of breach

Enforceable (1) if: parties intended to agree in advance to damages; (2) stipulated amount was reasonable at time of K, bearing some relationship to damages that might be sustained; actual damages would be uncertain in amount and difficult to prove

48

Mitigating damages

party to K must avoid or mitigate damages to extent possible by taking steps as to not involve undue risk, expense or inconvenience

49

Mental incapacity

If there has been no adjudication of mental illness, a contract is voidable and may be disaffirmed if the individual is unable to: (i) understand the nature and consequences of the transaction; or (ii) act in a reasonable manner with regard to the transaction, and the other party has reason to know of this fact. If a contract is made during a lucid period, the contract is fully enforceable, unless the person has been adjudicated incompetent (void).

50

Adequate assurance doctrine

a party must respond to a demand for adequate assurance only if the demand is reasonable and justified. A demand is justified if the demanding party has reasonable grounds for insecurity with respect to the other party's potential performance.

51

Knock-out rule

different terms in the offer and acceptance nullify each other and are “knocked out” of the contract

52

Recission

Canceling of K to restore parties to positions before K was made; can rescind for mutual mistake, fraud, misrepresentation, unilateral mistake (if other party KSK of mistake); or mutual agreement; grounds for rescission must exist at time K was made

Non-defaulting party must return deposits or benefits conferred

rescission can occur by mutual agreement, mutual surrender of rights is consideration

53

Release

Writing that manifests intent to discharge another party from existing duty

CL: requires consideration

UCC: no consideration

54

Destruction or injury to identified goods

if goods are destroyed by no fault of either party before risk of loss passes to buyer, K is avoided; if goods are damaged but not destroyed, K is avoided unless buyer chooses to take goods at reduced price

55

Risk of loss

1. K risk of loss provision controls

2. If party breached, breaching party bears risk

3. shipment K --> loss pass to buyer when seller gives possession to carrier

4. destination K --> loss pass to buyer when seller tenders at place specified in K

5. merchant seller --> loss passes to buyer when buyer receives goods

6. non-merchant seller --> loss passes to buyer when seller tenders goods

56

Lost volume profits

If seller could have supplied both breaching purchaser and resale purchaser with goods, can recover for lost profits

57

assignment

not allowed when they materially increase duty or risk of obligor or materially reduce obligor's chance of obtaining performance; even if K prohibits assignment, can still assign, third party can recover, but assignment will breach K; if K invalidates assignment then third party can't recover

consideration -> irrevocable
no consideration --> revocable (unless promissory estoppel)

58

Delegation

not allowed when other party has substantial interest in having delegating individual perform or prohibited;

delegator not released from liability unless novation; delegate not liable for breach unless received consideration (makes promise enforceable against delegate); turns other party into third-party beneficiary of delegation

59

Good-faith purchaser

A buyer who does not obtain good title can nevertheless transfer good title to a subsequent purchaser who buys the goods in good faith and for value.

60

Bilateral K

Unless a contract specifies that it can be accepted only by performance (i.e., a unilateral contract), it can be accepted either by the offeree’s promise to perform or by the offeree’s beginning performance of the contract; beginning performance operates as promise to render complete performance

61

Unilateral K

Only complete performance operates as acceptance; once performance begins, offer is irrevocable for reasonable period of time to allow for complete performance; offeree can only accept only he is aware of

62

Shipment of nonconforming goods

If seller ships nonconforming goods --> acceptance and breach

nonconforming goods as accommodation --> no K formed, counteroffer (buyer can accept/reject)

63

Cure of defects

A seller has the right to cure a defective tender if (i) the time for performance under the contract has not yet lapsed, or (ii) the seller had reasonable grounds to believe the buyer would accept the goods despite the nonconformity (must give intent to cure/make new tender of conforming goods in reasonable time).

64

Exception to UCC statute of frauds

1. Specifically manufactured goods: specially manufactured + not suitable for sale to others + seller made substantial beginning/commitment for procurement

2. part of purchase price for a single item has bee paid

3. receipt and acceptance of goods

4. judicial admission

5. both parties are merchants and one party fails to object memo in 10 days

65

Termination of offer (death/mental incapacity)

terminates on death of incapacity of offeror; unless it is an option K

66

Termination of offer (revocation)

effective when received; or when offeree acquires reliable info that offeror has taken definite action inconsistent with offer, the offer is automatically terminated

Exception: option K, firm offer, promissory estoppel, starting performance

67

Accord and satisfaction (creditor)

when creditor agrees to accept a lesser amount in full satisfaction of debt, original debt is discharged only when there is some dispute as to validity of debt, amount of debt or payment is of a different type

68

Promissory estoppel (charitable institution)

presume charity detrimentally relied on promised contribution when there is a written promise (charitable subscription)

69

Incapacity (intoxication)

voidable by intoxicated party if she was unable to understand nature/consequences of K and other party had reason to know of intoxication; must promptly disaffirm and return value of goods received; may be liable in quasi-K for fair value of goods and services

70

Surety (main purpose exception)

if the main purpose of the surety in agreeing to pay for debt of principal is the surety's own economic advantage, then SOF doesn't apply

71

Parol evidence rule

prevents party to written K from presenting prior extrinsic evidence that contradicts terms of the contract as written

72

Integrated agreement

parties intended it to be their final agreement

73

Total integration

writing completely expresses all terms of parties' agreement --> cannot introduce extrinsic evidence or prior or contemporaneous understandings

74

Partial integration

if writing sets forth some but not all terms, then partial integration --> okay as long as evidence is consistent with writing

75

PER (intent of parties)

4 corners --> completely integrated

Second Restatement: if extrinsic terms would naturally be omitted then it can be introduced

UCC: presumes written agreement is only partial integration

76

When PER is inapplicable

1. raising defense to K
2. separate and distinct deal
3. condition precedent
4. ambiguities
5. UCC: trade usage and course of dealing/performance

77

Course of dealing

sequence of conduct concerning pervious transactions between parties that can reasonably establish a common basis of understanding for interpreting conduct

78

Course of performance

if agreement involves repeated occasions for performance and other party accepts performance without objection and with knowledge of course of performance

79

Retraction of repudiation

can retract unless:

1. promisee acts in reliance on repudiation
2. signifies acceptance of repudiation
3. commences act for breach of K

80

Damages (construction)

Contractor's breach: different between KP and cost of completion by another builder

Buyer's breach:
profits builder would have earned + costs incurred by builder less any payments made by owner and materials purchased and used for anotherjob

81

Damages (construction defects)

cost of repair/completion

82

Damages (sale of goods defects)

difference between value of goods as warranted and actual value of tendered nonconforming goods

83

Restitution

Can seek to recover for benefit conferred; measure by either reasonable value of D obtaining benefit from another source (FMV) or the increase in D's wealth having received the benefit

84

Restitution (non-breaching party)

can seek restitution for nonperformance (but only if material breach) or repudiation

85

Restitution (breaching party)

can recover in restitution for benefit conferred on D less D's damages for the breach

can't recover in restitution if breach was wilful

86

One year provision

Contracts that cannot be performed within a year; usually the actual terms of K make it impossible to complete performance in a year

Full performance will take K out of SOF; part performance will not, but restitution will be allowed