Contracts Flashcards
What is the Applicable Law for sale of Tangible Goods?
UCC or Uniform Commercial Code
What is the applicable law for all other contracts EXCEPT the sale of goods?
Common Law
What is a Merchant and why is it important initially in analysis?
Merchant is one who deals in goods of the kind or one having special knowledge or skills re practices of goods. Its important in initial analysis because special rules apply to K that involves merchants.
Predominant Purpose Rule states
When a K include both goods and services determining the predominant purpose for the K will determine the governing law.
What are the elements for a valid contract?
"All Contracts Don't Stink" A - ssent C - onsideration D - no defenses applies S - tatute of Frauds
Mutual Assent means that there must be valid what?
A valid Offer and valid acceptance
What is an Offer (common law)?
An offer is a manifestation of willingness to enter into a bargain. Requires demonstration of intent to enter into a K, definite and certain terms and communication to the offerree.
What is an offer (UCC)?
Inviting acceptance in any manner and by any medium reasonable in the circumstances. Under UCC missing terms are allowed BUT quantity and subject matter of the K is essential in establishing K.
What are NOT CONSIDERED OFFERS?
Advertisements are generally not offers (more an invitation to deal, unless its highly specific as to what is being offered and indicates who may accept; Offers made in a joke; preliminary negotiations (look at whether there is intent eg. “I’m thinking of selling my car”); catalogs are invitation to deal
What is an exception to Advertisements as NOT being considered an offer?
If the AD contains words of commitment and where the offeree can be identified with specificity that is sufficient to an offer
What does QTIPS stand for?
Quantity, Time of Performance, Identity of parties, Price and subject matter. These refer to the definite and essential terms required in an offer.
What are ways to terminate an offer?
1) rejection of offer, 2) counteroffer which terminates the first offer and offeree has new offer, 3) revocation, 4)death of the offeror, 5)lapse of time.
What is revocation of an offer?
An offeror can revoke an ordinary offer at any time before acceptance, which terminates the power of acceptance.
What is constructive revocation?
Unambiguous words or conduct that is inconsistent with the intention to contract
What are irrevocable offers?
1) UCC Firm offers, 2) option K, 3) detrimental reliance and partial performance
What is a UCC Firm Offer?
UCC firm offers are irrevocable even without consideration and require the following: 1) between 2 merchants 2) promise to keep the offer open 3) must be in writing 4) signed
What is an option K?
option contract is one where consideration has been paid to keep an offer open for a specified period of time.. For example, D and P has K and D tried to revoke, P
paid $1,000 to D to keep the offer open until January 31. This constitutes an option contract
and D’s offer was irrevocable for the stated period.
If there is detrimental reliance and partial performance on one party then what happens?
If there is detrimental reliance and partial performance on a K or preparations in part in reasonable reliance to a K then the offer is irrevocable
If the death of the offeror terminates an offer, what would be an exception when it doesn’t terminate an offer?
When the K formed before the death of the offeror or when there is an option K
What is acceptance?
Acceptance is when there is a clear expression of assent to the terms of the offer. These can be words (oral or written) creating an express K or by conduct created an implied in fact K. Offeror is the master of the offer and can dictate the manner of acceptance to the offeree.
What are two methods of acceptance in an offer?
unilateral K and bilateral K
What is a unilateral K and how does acceptance work in a unilateral K?
Unilateral K is formed when there is an exchange in the offeror’s promise for the offeree’s actual performance
What is a bilateral K and how does acceptance work in a bilateral K?
a bilateral K is formed where both parties make promises to perform
The power of acceptance is subject to what limitations?
1) timing where the acceptance must be within reasonable time; 2) only the offeree where the person whom the offer is directed may accept, 3)only in response to an offer where the offeree must know of the offer before accepting, 3) manner of acceptance, it must be accepted in the manner required by the offer and if there’s nothing specified then must be “any reasonable” means; 4) must be an objective standard
What is the mailbox rule?
When the mailbox rule is at play, it deals with the question of when an acceptance is effective. The mailbox rule says that acceptance is effective upon proper dispatch. Proper dispatch means that the offeree no longer as control or possession of acceptance.
What are the exceptions to the mailbox rule?
1) options Ks are effective upon receipt, 2) when the offer provides the terms of acceptance then those terms control, 3) when both a rejection and acceptance are sent then the rule depends whether the rejection or acceptance was dispatched first. If rejection dispatched first, then acceptance is effective if acceptance is received first. HOWEVER, if acceptance is dispatched first, acceptance is effective when dispatched in accordance with the original rule.
What do we do when acceptance varies from the offer?
The rule depends on whether it is common or UCC. Common will follow Mirror Image Rule and UCC says that “any expression of acceptance” or “written confirmation” will act as acceptance even if the terms are additional or different from those contained in the K UNLESS acceptance is expressly made conditional on assent to additional or different terms.
What is the Mirror Image Rule?
The mirror image rule says that an acceptance of an offer must be the mirror image of the offer.
What is the “Battle of the Forms 2-207” Rule when the acceptance has additional terms and both merchants?
If both merchants and additional terms, then the additional terms automatically becomes part of the K unless 1) offer expressly limits acceptance to its terms, 2) material alteration with added term (warranty disclaimer), 3) objection by the offeror by reasonable time.
What is the Battle of the Forms 2-207 Rule when the acceptance has additional terms but it deals with non merchants?
If one or more parties is a nonmerchant, then additional terms will be treated a a proposal and will not be part of the K unless the party assents.
What is the Battle of the Forms 2-207 Rule when there are different terms in the acceptance?
The Knock Out Rule (Majority Rule) will apply where conflicting terms will cancel each other and neither will enter the K. K will consist of agreed to terms and court will supply missing terms if needed.
What is the rule with acceptance with prompt shipment of goods?
An offer to buy goods may be accepted by shipping the goods (purchase order sent to the seller, seller fills it). The offer is accepted by shipping conforming and nonconforming goods. Shipping conforming goods is acceptance. Shipping nonconforming goods the rule depends on when the seller acknowledges nonconformity. Without acknowledging noncomformity means that the offer has been accepted and breaches simultaneously. With acknowledgment noncomformity means that this is an “accommodation” to the buyer and will not serve as an acceptance and will be treated as counteroffer.
What is Consideration ?
Consideration is the second element of a valid contract. There must be a bargain of exchange of legal value between the parties. There must be a benefit to the promisor and detriment to the promisee.
What does not qualify as CONSIDERATION?
1) gifts, 2) sham consideration or nominal consideration, 3) past consideration (promise to pay benefit received in the past will not provide current consideration on new consideration EXCEPT (a) new promise to pay debt that is now barred and (b) new promise to pay benefits previously received at the promisor’s request; 4) preexisting duty rule (promise to do something one is already legally obligated to do will not provide consideration for new bargain unless duty is owed to third person; 5) illusory promises which means a promise to do something but in fact doesnt commit to do anything at all not enforceable. Remember that output Ks and requirement Ks may appear illusory but are valid contracts with consideration because of the implied good faith and fair dealing.
What is a substitute for consideration?
Promissory Estoppel where a K may be enforce by the courts as a valid K even when there is no consideration as long as there is a 1) promise (from the promisor) that foreseeably induces reliance, 2) is actually relied upon by the promisee, 3) and if enforce will prevent injustice. Reliance Damages are the sole remedy for the non-breaching party.
What are the Defenses to Contract Formation?
Remember “DUMMMIIS” which stands for 1) Duress, 2) Unconscionable, 3) Misunderstanding, 4) Mistake, 5) Misrepresentation, 6) Illegality, 7) Incapacity and 8) Statute of Frauds
What is Duress?
Duress can physical or economic duress. It is a wrongful physical or economic threat that overcomes a party’s free will.
What is Unconscionability?
A K may be voidable if it is unconscionale where there is unfair bargaining power between the two parties resulting to the K being unfair or oppressive to one party. Unconscionability is assessed at the time of K formation.
What is Misunderstanding?
A K is void/voidable where there is significant misunderstanding during K formation. Misunderstanding arises where there is ambiguity concerning the terms of the K. If no party is aware or both parties are aware of the ambiguity, then there is no K formed unless both parties intended the same meaning. If one party is aware of ambiguity, then there is a K formed but the K is enforced according to the unaware party’s intention.
What is Mistake?
If both parties are mistaken at the time of K formation, the mistake materially affects the agreed upon exchange and the adversely affected party did not assume risk of the mistake, the K may be voidable by the adversely affected party.
What is misrepresentation?
Tort of misrepresentation may be a defense to K formation where one party made a false statement of material fact and the other party justifiably and actually relied on the false statement resulting to the party suffering damages.
