Contracts Flashcards
What is a contract?
A promise or a set of promises, the breach of which the law gives a remedy or the performance of which the law in some way recognizes as a duty
Sales of goods are governed by _________
the Uniform Commercial Code, Article 2
What is a sale for purposes of the UCC?
A contract in which title to goods passes from the seller to the buyer for a price
What are goods for purposes of the UCC?
all things movable at the time they are identified as the items to be sold under the contract
In a contract that is for both the provision of services and the sale of goods, what law controls?
The law of the predominant part of the contract controls the entire contract.
What law controls in a mixed contract where the contract divides payment between goods and services?
UCC Article 2 will apply to the goods and Common Law will apply to the services.
Who is a merchant?
One who regularly deals in goods of the kinds sold or who otherwise by his occupation holds himself out as having knowledge or skill peculiar to the practices or goods involved.
In order to be considered a merchant, a person must be acting in their ___________ capacity.
Mercantile.
For Example: If a computer sales person sells her car to her neighbor she is not acting in her mercantile capacity at the time of the sale.
Does every contract within the UCC impose an obligation of good faith in its performance and enforcement?
Yes
How does the UCC define good faith?
is honest in fact and observance of reasonable commercial standards
Does every contract within the Common Law impose an obligation of good faith and fair dealing on each party ti a contract with respect to its performance and enforcement?
Yes
Is the breach of this duty a question of law or fact?
Fact
How does a party breach their common law duty of good faith and fair dealing?
It usually involves exercising discretion in a way that deprives the other party of the fruits of the contract.
What are the three potential categories of possible contracts?
(1) express
(2) implied
(3) quasi * (not technically a contract)
How is an express contract formed?
by language, oral or written
How is an implied contract formed?
by manifestations of assent other than oral or written language, i.e. conduct.
Example: a person sits a barbers chair and the barber cuts his hair, a contract has been formed by the parties conduct
What is the goal of quasi-contract?
to avoid unjust enrichment to a party.
What can be recovered under quasi contract theory?
the value of the benefit conferred.
What is a bilateral contract?
traditionally, bilateral contract is one consisting of the exchange o mutual promises where each person is both a promisor and a promisee.
What is a unilateral contract?
traditionally, unilateral contracts are those in which the offeror request performance rather than a promise as a means of accepting the contract.
When does the offeror intend to complete their performance in a unilateral contract?
upon completion of the requested act by the promisee
When is the unilateral contract accepted (i.e. when does contract formation occur)?
Once the promisee completes the act
Most contracts are (1) bilateral or (2) unilateral?
bilateral
All offers are indifferent, meaning that they may be accepted by promising or beginning performance, UNLESS…
the terms of the offer clearly indicate others by language or circumstances.
In what two situations do unilateral contracts arise?
(1) where the offeror clearly, read unambiguously, indicates that the competition of performance is the only manner of acceptance; and
(2) where there is an offer to the public, such as a reward offer, which so clearly contemplates acceptance by performance rather than a promise that only the performance requested in the offer will manifest acceptance
What is a void contract?
a contract that is totally without any legal effect from the beginning.
Can a void contract be enforced by any party?
No.
What is a voidable contract?
a contract that one or both parties may elect to avoid
What is an unenforceable contract?
a contract that is otherwise valid, but which may not be enforceable due to various defenses extraneous to the contract formation (statute of limitations, statute of frauds)
What three basic questions will the court ask to determine whether a contract has been formed?
(1) was there mutual assent?
(2) was there consideration or some substitute for consideration?
(3) Are there any defense to the creation of a contract?
What is mutual assent?
“a meeting of the minds”
Must a contract have an actual subjective meeting of the minds in order to satisfy the requirement of mutual assent?
No. Mutual assent is determined by an objective standard.
What is the test for mutual assent?
it is an objective test, stating that each party is bound to apparent intention that he manifested to the other party
What is an offer?
a communication that creates a reasonable expectation in the offeree that the offeror is willing to enter into a contract on the basis of the offered terms.
What power is created in an offeree at the time a valid offer is made? in the offeror?
Offeree: The power to accept.
Offeror: A corresponding liability
What factors will courts look to when determining whether an offer created a reasonable expectation of the offeror willingness to enter into a contract?
(1) expression of a promise, undertaking, or commitment
(2) certainty and definiteness
(3) communication to the offeree
Must an offer state the words “I offer, or I promise”?
No.
When can a price quote be considered an offer?
when it is made in response to an inquiry that contains a quantity term.
Will the courts consider circumstancing surround the language when determining whether an offer exists?
Yes, but subjective intent is irrelevant. The standard is objective manifestation
Will the courts consider the prior practice and relationship of the parties when determine whether an offer exists?
Yes.
The use of a broad communication method makes it more/less likely that the communication will be considered an offer?
Less. It will likely be viewed as a solicitation of an offer.
Are advertisements generally construed as offers?
Generally, no but they can be.
When will an ad be treated as an offer?
when the language of the ad can be construed as contains a promise, the terms are certain and definite and the offeree is clearly identified.
Example: Store advertises a court would $140 for $1 on a first come, first served basis.
Will the courts look to industry custom in the industry when determining if an offer has been made?
Yes.
When is an offer sufficiently definite and certain?
When enough of the essential terms have been provided so that a contract including them would be capable of being enforced.
What terms are typically considered important?
(1) identity of the offeree
(2) the subject matter
(3) the price to be paid
Is it permissible to include an objective standard used to supply a missing term instead of a concrete term itself?
Usually, yes.
What two things MUST an offer involving realty include?
(1) identification of the land
(2) price terms
Will most courts supply a missing price term in a realty contract?
No.
What must a contract for the sale of goods include?
either a quantity term, or a method to ascertain the quantity term.
What is a requirement contract?
a contract in which a buyer promises to buy from a certain seller all of the goods that the buyer requires, and the seller agrees to sell that amount to the buyer.
What is an output contract?
a contract in which a seller promises to sell to a certain buyer all of the goods the seller produces and the buyer agrees to buy that amount form the seller.
Do requirement and output contracts contain a sufficiently definite quantity term?
Yes because they are capable of being made certain by reference to extrinsic facts.
With respect to an output or requirement contract, there may not be a tender or demand for a quantity that is _______ __________ to any stated estimate or normal comparable prior output or requirement
unreasonably disproportionate
Is an offer allowing a person to select between a reasonable range of choices sufficiently definite?
Yes.
Example: I will sell you any of these bikes for $100. Pick one.
Does the fact that one or more terms is missing from a contract prevent contract formation under the UCC?
No, as long as it appears the parties intended to make a contract and there is a reasonably certain basis for giving a remedy.
The more terms left open in an offer, the ____ likely the court will find intent for the offeror to be bound?
less
Will the lack of a price term defeat contract formation?
Only in a contract for real property
If an agreement does not state a specific the time in which an act is to be performed, what standard will the law imply in its place?
the law implies that it is to be performed within a reasonable time
Is an offer valid if it contains a vague term at common law? Under the UCC?
No and No.
Example: an agreement to purchase land for $8000 or less. This is impermissibly vague.
When can an impermissibly vague offer be cured?
(1) part performance; or
(2) acceptance
If an offer states that a material term will be decided on in the future, it will be found _______ _______ to be enforceable
too uncertain
Must an offeree have knowledge of the offer in order to accept?
Yes.
What is a revocation?
the retraction of an offer by the offeror.
What is the effect of a valid revocation?
it terminates the offeree’s power of acceptance if it is communicated to her before she accepts.
May an offer be terminated by publication?
Only if the offer was made through publication.
Is is possible to revoke an offer through in direct communication?
Yes.
What must the offeree indirectly receive in order for a valid revocation?
(1) correct information
(2) from a reliable source
(3) of acts of the offeror that would indicate to a reasonable person that the offeror no longer wishes to make the offer.
When is a revocation effective?
generally when received by the offeree.
NOTE: if the revocation was published, it is effective when published.
When is a communication received by a party at common law?
when it comes into the possession of the person addressed (or someone authorized to receive the communication).
Does a communication have to be read in order for it to have been received at common law?
No.
When is a communication received under the UCC?
(1) it comes to his attention or
(2) it is delivered at a place of business through which the contract was made, or other designated place.
Must a revocation be in writing?
No.
True or false: in the absence of an exception, an offer can be revoked at any time even if the offeror has promised to keep the offer open.
True
Under what situations is the offeror’s power to revoke an offer limited?
(1) option contract
(2) merchant firm offer
(3) detrimental reliance by the offeree
(4) start of performance of a unilateral contract
What is an option contract?
a distinct contract in which the offeree gives consideration for a promise by the offeror not to revoke an outstanding offer.
When does the offer terminate in an option contract?
when the option expires
Does the merchant firm offer apply under common law or UCC Article 2?
UCC Article 2
What are the requirements of a merchant’s firm offer?
(1) If a merchant
(2) offers to buy or sell foods in a signed writing; and
(3) the writing gives assurances that it will be held open
What is the effect of a valid merchant’s firm offer?
the offer is not revocable during the time stated.
Is consideration required to be given in a merchant’s firm offer?
No
How long is a merchant’s firm offer if no time is stated?
a reasonable time, NOT to exceed three months
When will an offer be irrevocable for detrimental reliance?
where the offeror could reasonably expect that the offeree would rely to her detriment on the offer and the offeree does so rely. Such a contract is treated as an option contract.
How long will the offer be held open when it is irrevocable for detrimental reliance?
for a reasonable length of time
True or false: an offer for a true unilateral contract is revocable once performance has begun.
False. Once performance has begun, the offer is irrevocable.
In a unilateral contract, how long does the offer have to remain open once the offeree has begun performance?
for a reasonable time necessary to complete performance
When an offer has been made for a unilateral contract, is the offeree bound to complete performance once she has begun?
No. Because acceptance can only be given by complete performance, the offeree is under no duty to complete performance. The effect is that a contract has not been formed.
True or false: an offeror has the power to revoke an offer for a unilateral contract when the offeree is preparing to perform.
True, unless the preparations are so substantial as to constitute detrimental reliance
What happens if performance is tender by the offeree but refused by the offeror?
If the offeror’s cooperation is necessary for performance, her withholding of it upon the tender of performance is the same as beginning performance.
What is an express rejection?
a statement by the offeree that she does not intend to accept the offer.
What is the effect of an express rejection?
it terminates the offer.
What is a counteroffer?
an offer made by the offeree to the offeror that contains the same subject matter as the original offer but differs in its terms.
What is the legal effect of a counteroffer?
it serves as both a rejection of an original offer and a new offer.
What test is used to determine whether a response is a counteroffer?
Whether a reasonable person would believe that the original offer had been rejected.
When is a rejection effective?
when it is received by the offeror
Does a rejection or counteroffer to an option contract constitute a termination fo the original offer?
No. the offeree may still accepting within the option period unless the offeror has detrimentally relied on the rejection.
Within what time must an offeree accept an offer?
within a reasonable time.
What is the consequence if the offeree dies or is adjudicated insane prior to acceptance? What about the offeror?
in either scenario, the offer is terminated by operation of law.
Must the death or insanity of a party be communicated to the other party in order for an offer to terminate?
No.
If an option contract is formed, and one or both parties die is the contract terminated?
No.
If the subject matter of a contract is destroyed prior to acceptance, is the offer terminated?
Yes.
If the subject matter of a contract becomes illegal prior to acceptance, is the offer terminated?
Yes.
What is an acceptance?
a manifestation of assent to the terms of an offer.
What is the effect of a valid acceptance?
a contract is created (subject to valid consideration)
Who has the power to accept?
(1) a person to whom the offer was made; OR
(2) a member of a class to which an offer has been directed
Can an offeree’s power of acceptance be assigned to a 3rd party? Is the result different if subject to an option contract?
No, the power of acceptance cannot generally be assigned. However, the power to accept an option contract can be assigned.
Must the offeree know of an offer prior to acceptance in a bilateral contract? In a unilateral contract?
Yes and Yes.
An offer to accept a unilateral contract can be accepted by what?
Complete performance.
What is a carrier case?
A sale in which, either due to the circumstances or the express terms of the agreement, it appears the parties intended that a carrier be used to move the goods.
What is a carrier case?
A sale in which, either due to the circumstances or the express terms of the agreement, it appears the parties intended that a carrier be used to move the goods.
If a contract requires the seller tender delivery of goods at a particular destination, what must the seller do?
- Put and hold conforming goods at the buyer’s disposition, and
- Give the buyer any notice of tender that is reasonably necessary, and
- Provide buyer with any documents of title necessary to obtain delivery.
Can an offer to enter a bilateral contract waive the right to have acceptance communicated?
Yes.
When will silence be effective acceptance of an offer to enter a bilateral contract?
When the offeree takes offered benefits, especially if that was typical of the parties past dealings
In a shipment contract, absent an agreement otherwise, must a seller actually see that the goods reach the buyer?
No, tender may be completed by:
- Shipping the goods,
- Obtain and promptly tender any documents required by contract enabling the buyer to take possession, and
- Promptly notifying the buyer of the shipment.
Through what method can an offeree accept the offer?
Through any reasonable manner and by any medium reasonable under the circumstances.
Does a buyer have the right to inspect goods before payment?
Yes, unless the contract provides otherwise.
What happens at common law if the mirror image rule is violated
The offer has been rejected and the offeree has counteroffered.
What is a grumbling acceptance? Is it a valid acceptance?
An acceptance accompanied by an expression of dissatisfaction.
Yes, as long as it stops short of actual dissent.
Example: “I think its highway robbery at that price, but I guess I’ll have to accept.”
Under UCC Article 2 how may an offeree accept an offer?
Through promise to ship or by shipment of conforming or non-conforming goods.
In a noncarrier case, unless the contract states otherwise, a sale for goods is for what medium of currency and when is it due?
Cash on delivery
What is the battle of the forms provision under the UCC?
A rejection of the mirror image rule, providing that the proposal of additional or different terms in the offeree in a definite and timely acceptance does NOT constitute a rejection and counteroffer but rather is an effective acceptance, unless the acceptance is expressly made conditional on assent to the additional or different terms
When is payment by check insufficient?
If the seller demands legal tender and gives the buyer time to get cash.
In an installment contract, may a seller demand payment for each installment?
Yes, if the price can be so apportioned. (unless contrary intent appears)
Does a buyer have the right to inspect goods before payment?
Yes, unless the contract provides otherwise.
Is the shipment of a nonconforming set of goods a valid method of acceptance under the UCC?
Yes. It is acceptance and simultaneous breach
.
When there are additional terms contained in an acceptance to an offer under the UCC and one party is a non merchant, what terms are included in the contract?
Only the terms of the original offer. The additional terms are considered mere proposals to modify the contract that do not cede me part of the contract unless the offeror expressly agrees
Who bears the expense of inspection of goods by a buyer?
The buyer, but may be recovered from the seller if the goods do not conform and are rejected.
When may the buyer recover expenses for inspection of goods from the seller?
If the goods do not conform and are rejected.
If a contract provides for COD does a buyer have a right to inspect goods prior to acceptance?
No.
If payment is due before inspection, is the fact the goods are defective excuse nonpayment?
No, unless the defect appears without inspection or there is fraud in the transaction.
If a contract provides a party does not have a duty to perform unless a condition is fulfilled, will the party’s failure to perform be justified if the condition was not fulfilled?
Yes.
What is a conditional acceptance?
When an acceptance is made expressly conditional on the acceptance of new terms.
Is a conditional acceptance valid?
No, it constitutes a rejection and counteroffer
What is the mailbox rule?
Acceptance by mail or similar means creates a contract at the moment of dispatch, provided that the mail is properly addressed and stamped
What are the exeptions to the mailbox rule?
(1) the offer stipulates that acceptance is not effective until received
(2) option contract is involved (acceptance only effective upon receipt)
(3) If the offeree sends a rejection and then send an acceptance (whichever is received first is valid)
(4) If the offeree sends an acceptance and then a rejection then the acceptance is effective, UNLESS the rejection arrives first and the offeror deterimentally relies on it
What are the elements of consideration?
(1) there must be a bargained for exchange; AND
(2) that which is bargained for must be considered of legal value (benefit to the promisor or a detriment to the promisee)
Will courts inquire into the adequacy of consideration?
No
What is a legal detriment?
It results if the promise does something he is not legally obligated to do or refrain from doing something he has a legal right to do
True or False: under common law promising to perform an existing legal duty is sufficient consideration for a promise.
False.
Does an agreement that modifies a contract for the sale of goods require consideration in order to be valid?
No
True or false: If a debt is due on January 30, and the debtor promises to pay half the debt on January 1, the promise will fail for lack of consideration.
False. Generally an offer to pay less than a debt owed will be barred by the preexisting duty rule. However the offer to pay less, but pay EARLIER will be sufficient consideration to uphold the promise.
Will a promise to refrain from suing on a claim constitute sufficient consideration?
Yes, if the claims is valid, or the claimant in good faith believed th claim was valid
What theory will validate a contract that would be otherwise unenforceable for lack of consideration?
Promissory Estoppel
What are the requirements for promissory estoppel?
(1) a promise;
(2) that a reasonable person would be expected to rely on to their detriment; AND
(3) that person does actually rely on the promise to their detriment
What is the remedy allowed when promissory estoppel is substituted for consideration?
Some jurisdiction will award traditional expectancy damages; some follow the Restatement 2nd of Contracts which provides for the remedy “may be limited as justice requires” (typically interpreted as reliance damages)
What is required to establish the defense of mutual mistake of existing facts?
(1) both parties are mistaken about existing (not future) facts relating to the agreement;
(2) themistake concerns a basic assumption on which the contract is made;
(3) the mistake has a material effect on the agreed upon exchange;
(4) the party seeking to avoid the contract did not assume the risk of the mistake
If mutual mistake as to existing facts is established, is the contract void; or voidable by the adversely affected party?
Voidable by the adversely affected party
When does a party bear the risk sufficient to preclude assertion of the mutual mistake defense?
When one party is in a position to better know the risks than the other party, or when the party was consciously aware of their ignorance
Will the parties’ mutual mistake as to the value of the subject matter of the contract at the time it was made be a valid grounds to void the contract on a theory of mutual mistake?
Generally no
Will a unilateral mistake be sufficient defense to enforcement of a contract?
Only if the non mistaken party knew or had reason to know of the mistake.If so, the contract is voidable at the option of the mistaken party
What is the result if a party can establish fraudulent misrepresentation (fraud in the inducement) as a defense to contract enforcement?
The contract is voidable at the option of the innocent party if she justifiably relied on the fraudulent misrepresentation.
What is required to establish material misrepresentation as a defense to contract enforcement?
The contract is voidable at the option of the innocent party if the innocent party justifiably relied on the misrepresentation and the misrepresentation was material.
When will a misrepresentation be considered material?
When:
(1) it would induce a reasonable person to agree; OR
(2) the maker knows that for some special reason it is likely to induce th particular person to agree, even if a reasonable person would not
What remedy may an innocent party (with a valid defense of material misrepresentation, fraud in the indictment,or mutual mistake) pursue?
(1) seek affirmative recision of the contract; AND
(2) all remedies available or breach of contract
What is the most common public policy defense to contract enforcement?
A contract will be void if consideration or subject matter of the contract is illegal
What are the exceptions to the illegality defense to contact enforcement?
(1) the plaintiff is unaware of the illegality while the defendant knows of the illegality;
(2) the parties are not as culpable as the other;
(3) the illegality is the failure to obtain a license when license is for revenue-raisin purposes rather than for protection fo the public.
Is a contract with an illegal purpose void?
No. It is voidable by the party who was (1) unaware of the purpose; or (2) aware bout did not facilitate the purpose and the purpose does not involve serious moral turpitude
Why types of persons lack capacity to contract?
(1) minors
(2) mentally incapacitated
(3) intoxicated persons
Is a contract entered into with a person who lacks capacity void or voidable?
It is voidable by the incapacitated persons
May a minor affirm (choose to be bound) by a contract entered into while a minor when he reaches the age of majority?
Yes, either by (1) expression; or (2) implied from conduct, i.e. keeping the benefit
Are contracts entered into bony duress or unde influence void or voidable.
Voidable by the disadvantaged party
When will the withholding something that someone wants or needs count as duress?
When (1) the party threatens to commit a wrongfula ct that would seriously threaten the other contracting parties property or finances; AND
(2) there has are not adequate means available to preverent the threatened loss.
What ar the elements of undue influence?
(1) undue susceptibility to pressure by one party; AND
(2) excessive pressure but he other party
When will undue influence be most likely to be found by a court?
When the dominant party is in a confidential or caregiver relationship with the influenced party
are oral contracts generally valid?
Yes
What is the statute of frauds?
Statutory requirement that certain types of contracts be evdienced by a writing signed by the party sought to be bound
What type of writing is required under the statute of frauds?
One or more writings that:
(1) reasonably identify the subject matter of the contract;
(2) indicate that contract has been made between the parties; AND
(3) state with reasonable certainty the essential terms
What types of agreements are subject to the statute of frauds ?
MY LEGS
(1) promises made in consideration of MARRIAGE
(2) performance not capable within one YEAR of date of contract
(3) interest in LAND
(3) EXECUTOR or administrator promises personally to pay estate debts
(4) GOODS $500+
(5) SURETYSHIP promises (promises to pay the debt of another)
What is the main purpose exception to the SoF requirement for surety promises?
If the main purpose or leading object of the promisor is to serve a pecuniary interest of his own, the contract is not within the statue of frauds, even if the effect is still to pay the debts of another.
What types of contracts fit within the land requirement under the statute of frauds?
(1) leases for more than one year
(2) easements of more than one year
(3) mortgages and other security liens
(4) fixtures
(5) minerals or structures if they are to be severed by the buyer
What are the exceptions to the goods $500+ Requirement under the statute of frauds?
Writing is not required when:
(1) the goods are specially manufactured
(2) the party against whole the enforcement is sought admits in pleadings, testimony or otherwise in court that contract for sale was made;
(3) the goods are received and accepted or paid for
(4) merchant confirmatory memo rule applies
What is the merchant confirmatory memo?
In a contract between two merchants, if one party within a reasonable time after an oral agreement has been made, send to the other party a written confirmation fo the understanding that is sufficient under the state frauds to bind the sender it will also bind the recipient if:
(1) he has reason to know of the confirmation’s contents AND
(2) he does not object to it in writing within 10 days of receipt
What does the concept of unconscionability allow a court to do?
A court may refuse to enforce a provision or an entire contract to avoid unfair terms, usually do to unfairness in the bargaining process
Is unfair price a ground for unconscionability?
No, not on its own
What are common instances of procedural unconscionability?
(1) inconspicuous risk-shifting provisions;
(2) contracts of adhesion (take it or leave it)
(3) exculpatory clauses
(4) limitations on remedies (if the remedy allowed fails of its essential purpose)
At what point in time is unconscionability judged?
At the time of contract formation
When is an agreement, expressed in writing, considered an integration?
When the parties to a contract express their intent that the writing embody the final expression of their bargain
What is the parol evidence rule?
If an agreement is found to be an integration, any other expressions, written or oral, made prior to or contemporaneous with the writing are inadmissible to vary the terms of the writing
What questions must be answered when analyzing a writing as an integration?
(1) was the writing intended as the final expression of the agreement; and
(2) was the integration complete or partial?
True or false: if an integration is complete, the writing cannot be contradicted or supplemented.
True
What is the consequence of finding a writing to be a partial integration?
The writing may not be contradicted but may be supplemented by proving consisten additional terms.
