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Contracts Flashcards

1
Q

Trade Usage terms

A

Even if one party didn’t know, standard terms as customarily used in that industry will apply

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2
Q

Perfect Tender Rule (UCC)

A

UCC 2-601: you can choose not to accept the delivery if it doesn’t conform exactly to the contract (e.g. 100 dolls v. 99)

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3
Q

Remedies under 3 types of Breaches

A

Nonmaterial: sue for damage and seek to cure; but can’t terminate

Material: sue for damage; suspend and seek to cure (can’t terminate yet; they have to be unwilling or can’t cure)

Total: sue for damage

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4
Q

“Lost volume seller” under UCC

A

UCC 2-708(2): If a seller is a merchant who sells multiple similar items, you can claim damage based on lost volume even though you sold that to someone else after breach. It doesn’t apply if you have limited goods on your hand.

Case: Neri

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5
Q

Priority of interpretation of ambiguous terms in UCC

A

Under UCC 2-208,

express terms;

course of negotiation;

course of performance;

course of dealing;

trade usage

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6
Q

Economic Waste doctrine

A

Different damage may be awarded if the cost to perform outweighs dimution in value or it creates excessive economic waste

Case: Peevyhouse, Kent

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7
Q

Bargain Theory

A

Holmes:

i) mutuality of obligations and
ii) reciprocal conventional inducement, that comes with
iii) bargained-for-exchange (just some type of deliberation)

RST: K is something given in exchange for the promise that is bargained for

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8
Q

Treatment of Missing Terms

A

K is enforceable if the context implies the parties meant to contract in good faith; the court will supply reasonable missing terms

Implied covenant of good faith and fair dealing

Cardozo in Wood; “the whole writing may be instinct with an obligation” (legal realism)

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9
Q

Material Benefit Rule

A

Law seeks to prevent unjust enrichment.

Basis to enforce quasi-contract; also has to prove that the other party had a chance to decline the offer

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10
Q

Misrepresentation of Existing Facts

(defense)

A

RST: i) knew it was false or ii) wasn’t sure whether it was true or iii) knowingly made a rep without any basis (test in Byers)

Innocent misrepresentation: if misrepresentation would likely induce a reasonable person to manifest his assent, or the seller believed that it would be so.

“Party with superior knowledge” can be construed as misrepresentation (Vokes and dance lessons)

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11
Q

Overriding Express Conditions

A
  • Forfeiture: if complying with the condition creates disproportionate forfeiture. (e.g. mowing + fixing divots vs. excusing entire payment because of some issues with unrepaired divots would be disproportionate)
  • Waiver: the party benefitting from the condition promised to perform even if the condition did not occur (e.g. usually express waiver of condition)
  • Estoppel: the party benefitting from the condition acted so as to make the other party reasonably believe that it would perform even if the condition did not occur (e.g. continuing to pay even though some performance was faulty made me believe that it was still valid)
  • Doctrine of Prevention
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12
Q

Unconscionability

(defense)

A

i) Absence of meaningful choice (e.g. furniture for poor uneducated consumers and sophisticated fine prints)
ii) Unreasonably favorable to other party

UCC 2-302: i) [causes oppression] (overreaching) and ii) unfair surprise (e.g. fine prints); NOT about superiror bargaining power

Distinguish between procedural and substantive (at the time of K) unconscionability

Case: Williams

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13
Q

Promissory Estoppel

A

i) Promise was made
ii) Justifiable and detrimental reliance
iii) Foreseeable to the promisor that promisee would substantiall change his position in reliance
iv) Enforcement is necessary to prevent injustice

Reliance damage is usually awarded

Note that charities and divorce settlements don’t need to prove detrimental reliance under RST 90(2)

Case: Ricketts (my grandpa told me to quit my job)

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14
Q

Liquidated Damage

A

Only meant to compensate, and not punish.

Liquidated damage must be a reasonable estimate at the time of K AND at the time of breach

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15
Q

How do I get my writing to satisfy SoF?

A

i) Applicable statute will be either provided in exam or UCC 2-201; only quantity needs to appear in the writing (RST 131; reasonably intended to enter in K)
ii) Signatory: agreement has to be signed by the party against whom enforcement is sought (unless under UCC, you’re a merchant doesn’t object within 10 days)

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16
Q

Implied Warranties in UCC

A
  • UCC 2-315: implied warranty of merchantability (goods generally fit for their ordinary purposes)
  • and implied warranty of fitness for particular purpose if you can prove seller knew the i) purpose ii) reliance on seller’s knowledge iii) actual reliance
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17
Q

Alternatives to Options in (RST/UCC)

A

RST: Substantial detrimental reliance on that offer (goes back to promissory estoppel)

UCC 2-205: a firm offer in writing by merchant is an option

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18
Q

Mailbox Rule

A

Acceptance is valid when it’s sent.

Everything else (offer, revocation) is valid when it’s in your possession

Meant to spread the risk of transmission; see RST 63

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19
Q

Exceptions to Parole Evidence Rule

A

i) Evidence offered to prove nonexistence of contract (e.g. fraud, duress, lack of consideration)
ii) Oral agreements prior to formation
iii) Any external evidence to address ambiguities in terms

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20
Q

Undue Influence

(defense)

A

“Improper use of power and trust in a way that deprives a person of free will and substitutes another’s objective”

i) Susceptible state for consent (e.g. exhaustion, emotional distress)
ii) Application of excessive strength (pushy sales technique, etc)

Case: Odorizzi

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21
Q

Gut check of an Offer

A

Would a reasonable offeree believe that all he needs to do is to accept to create a binding contract?

Cases:

Too indefinite: Nebraska Seeds

RRP interpretation: Embry and Lucy

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22
Q

Minimum Components of Offer (RST/UCC)

A

RST: Requires “definite and certain terms”

UCC: Must have quantity; can use gap fillers for rest

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23
Q

Principles for External Evidence

A

i) Ambiguous terms should be construed against the drafter
ii) Course of prior performance and dealing considered as parole evidence

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24
Q

Objective Theory interpretation of Mutual Assent

A

i) Reasonable person must believe that the other person intended to be bound and ii) the promisee must have actually so believed

Cases: RRP: PepsiCo

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25
Q

Gut check for Anticipatory and Material Breach

A

Did I now lose faith in the party’s ability to perform the rest of his performance?

Think about Bowen, hopeless employee

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26
Q

Parole Evidence Rule

A

i) binding integrated agreement discharges prior agreements to the extent it is consistent with them
ii) binding completely integrated agreement discharges prior agreements to the extent they are within its scope

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27
Q

Illegality

(defense)

A

One party keeps his bargain if the performance is illegal - “leave them where it finds them”

Otherwise think about policy arguments if there’s no provision about what to do with void agreements under the statute

28
Q

Definition of Offer

A

Act whereby one person confers upon another the power to create contractual relations between them

29
Q

Express Conditions

A

Strict compliance of contingent conditions in K that was expressly spelled out (“only if”, “provided that”, “unless”). Excuses performance but doesn’t breach K

mitigated by doctrine or prevention (not valid if you were prevented from performing the condition) or waiver

Substantial performance can negate nonoccurence of conditions (Kent)

30
Q

Mirror Image Rule

A

Acceptance must be in the same terms as the offer, anything less is a counteroffer.

RST takes a softer view and recognizes “suggestion or inquiry”

Cases: Ardente

31
Q

Remedy for Anticipatory Breach

A

If the repudiation was unequivocal or the party failed to cure within AA period, then:

i) Treat it as total breach and sue for damages (seek restitution if losing party)
ii) Suspend performance and wait to sue until the performance due date
iii) Treat the repudiation as offer to rescind and treat the contract as discharged (no action)

32
Q

Acceptance by Silence

A

Generally doesn’t work

RST 69: Exceptions when

i) Recipient had benefit of the bargain with knowledge or expectation to pay
ii) Had history of prior dealings with the vendor

33
Q

Conditions to request Specific Performance

A

Lack of adequate remedy: good is unique as in Sedmak or Dallas Cowboy (UCC 2-716 also recognizes), or can’t get it without significant expense, burden or delay. Personal attachment is irrelevant

Equity: what’s most fair? Enforcement could be unconstitutional (Mary Clark)

34
Q

Components of Acceptance

A

i) Must have intent to accept
ii) Only the offeree can accept (or as spelled out in the offer)
iii) Must be in the manner and form authorized by the offer

35
Q

Vague of Indefinite agreement

A

RST/UCC:

i) whether parties intended to enter into a contract
ii) whether there is a reasonably certain basis for the court to appropriate remedy

36
Q

Form Contracts (or Contract of Adhesion)

A

Can be void if D can show that the clause was hidden or unclear, or was unconscionable

37
Q

Conflicting Terms in RST/UCC

A
  • *Offeror = buyer 2-207 step-saver
    1. 2-207(1) Additional terms are proposals**

a. offeree has to object / express they’re unwilling to proceed

  • *2. 2-207(2) Merchant Exception – terms become part of K, except if:**
    a. the offer expressly limits acceptance to the terms of the offer;
    b. they materially alter it; or
    c. notification of objection to them has already been given or is given within a reasonable time after notice of them is received.

ii. Offeror = seller 2-204 Easterbrook
1. Additional terms become part of K, as long as there is a right to return

a. unless the party objected by returning product

38
Q

Test for Ambiguous Terms

A

Plain Meaning Rule: ambiguities have to arise within “the four corners of the agreement”, interpret as RP would read them (Kozinski in Trident)

Contextual Approach (external evidence rule): External evidence is allowed when terms are reasonably susceptible to difference meanings (Traynor in Pacific Gas)

*not mutually exclusive, start with PMR

39
Q

Duress

(defense)

A

i) Criminal (too obvious)
ii) Economic: RST 175 - coerced into agreeing to the terms because other party applied i) wrongful pressure, ii) accepting party had no reasonable alternatives, and iii) inadequacy of ordinary remedies for breach

Case: Austin instrument

check whether there was preexisting duty

40
Q

Scope falls within SoF but there’s no writing

A

Partial Performance: UCC 2-201(3)(a) and (c); and when there’s partial payment/improvement/possession in some RE transactions

Invoke Promisorry Estoppel: RST 139 - detrimental substantial reliance

41
Q

Mutuality of Obligation

A

Exchange of promises typically create a K (otherwise it would be very hard to transact)

42
Q

Mutual Mistake

A

There is no Mutual Assent if each party had different meanings to the same term. Voidable by adversely affected party if the mistake is i) basic assumption underlying K, and ii) has a material effect on the K

Case: Raffles

43
Q

Mutual Mistake of Existing Facts

(defense)

A

Material mistake (that’s substantially less desirable for one and more for another) that goes to substance of the agreement can make K void

Case: Sherwood

44
Q

Benefit / Detriment Theory

A

Benefit or detriment to me is a consideration (one party view)

Case: Hamer (nice uncle)

45
Q

Components of Offer (5)

A
  • Directly or Indirectly*:
    i) Be communicated
    ii) Indicate a desire to enter into a contract
    iii) Be directed at some person or persons (or based on sufficiently specific criteria; Lefkowitz)
    iv) Invite acceptance
    v) Create a reasonable understanding that upon acceptance a contract will rise
46
Q

Material Breach

(excuses performance)

A

7th circuit: Of such nature and importance that contract wouldn’t have existed

Anderson: point at which it’s better to terminate despite consequential costs

CISG: substantial deprivation of expected benefits, unless it was foreseeable

47
Q

Frustration of Purpose

A

RST 265:

i) Purpose that was frustrated was principal purpose
ii) Event totally or nearly destroyed the purpose
iii) Non-occurence of the event was a basic assumption of K
iv) Frustration resulted without fault of the party seeking to be excused

Only excuses remaining duties to be rendered (i.e. you can’t get your deposit back)

48
Q

Definition of Acceptance

A

Manifestation of Asset, objectively determined, to be bound by the Offer

49
Q

Nondisclosure

(defense)

A

RST: Nondisclosure is an assertion if the disclosure would set the other party back to basic assumption AND if non-disclosure amounts to failure to act in good faith and fair dealing)

RST: market and financial conditions are not considered to be basic assumption

Case: Laidlaw

50
Q

Preexisting Duty Rule

A

Promise to do or refrain from something that the party is already bound to do is not an acceptable ground for K modification

RST: OK if modification was made in light of unforeseen circumstances and was fair and equitable

UCC: OK as long as it’s in good faith (broader)

Case: Alaska Packers

51
Q

Limitation on Damage

A
  • Damage have to be proved with a reasonable certainty
  • Reasonably foreseeable to the breaching party (esp. consequential damage)
  • Avoidability (duty to mitigate); goes to both costs and profits (both parties). But the substitute must not cause undue risk, burden or humiliation
  • Per Dempsey rule, you can’t claim damages prior to formation of K
  • No emotional distress or punitive damage
52
Q

Test for Material Breach

A

RST 241

  • Extent to which the injured party will be deprived of reasonably expected benefit
  • Extent to which the injured party can be adequately compensated
  • Extent to which the party failing to perform will suffer forfeiture
    • Looks at how much work the party has done and how much they would forfeit
  • Likelihood that party failing to perform will cure his failure
    • Less likely to cure, more likely it’s a material breach
  • Extent to which the behavior of the party failing to perform comports with standards of good faith and fair dealing
53
Q

Trick questions in SoF

A

i) Termination irrelevant (e.g. 2 yr contract is valid even if the party terminates in 5 days)
ii) Focus on completion of the task within the time (e.g. singer performing 18 months from now is within SoF)
iii) Performance of a task generally doesn’t fall into SoF. “capable of being completed within a year” means theoretically possible with unlimited resources
iv) Lifetime contract doesn’t fall into SoF (e.g. performance is completed for his lifetime but could be for 6 months or 6 years)

54
Q

“Cover’ under UCC

A

UCC 2-712: lets party procure substitute goods from the market instead of having to prove market price and wait final damage judgment, as long as it was in good faith, no delay, and on reasonable terms

55
Q

2 Approaches for Form Contract interpretation

A

ProCD/Easterbrook approach: start with UCC 204; shrinkwrap was an offer and Zeidenberg accepted by opening and keeping it.

Klocek: when he sent a purchase order was an offer, and Gateway assented by delivering the computer (K was formed when he bought it, not when he opened it). Then UCC 207 applies (therefore license is additional terms that he didn’t assent to)

56
Q

Past consideration and Moral Obligation

A

Not a consideration for K under RST 88 (previously conferred benefit / moral duty, not economic); unless there’s unjust enrichment or is disproportionate.

57
Q

4 ways to terminate an Offer

A

i) Rejection
ii) Revocation
iii) Lapse (reasonable time or when when they walk away in face-to-face)
iv) Death (or Incapacity)

58
Q

Illusory Promise

A

Vague promise that gives a free way out breaks K (de facto no consideration)

59
Q

Damage or Destruction of Subject Matter

A

[RST: implied conditions is negated by the event (in this case, implied condition is the service or good, or existence of venue, etc)]

UCC: “goods identified with” is destroyed or damaged

You still have to perform if you have the ability within reason (e.g. contracted to build and it burned midway; you can still build)

Case: Taylor (music hall)

60
Q

Impracticability

A

RST 261-63

i) Event must have made performance as agreed impracticable (too burdensome/expensive, or just impossible)
ii) Non-occurence of the event must have been a basic assumption of K
iii) Resulted without fault of party seeking to be excused
iv) Party seeking to be excuse must have not assumed the risk of the event

UCC 2-615: increased cost alone does not excuse performance

61
Q

Statute of Fraud

(defense)

A

Certain Ks must be in writing or evideced by writing to be enforceable

Scope: i) RE transaction, ii) Service contracts not capable of being performed within a year, and iii) sale of goods >$500

Case: Boone (only quantum meruit if there’s no written agreement)

62
Q

Theory of Promissory Estoppel

A

i) As consideration (Allegheny College)
ii) As liability for torts on deceit or misrepresentation (Goodman; Emerson radio)
iii) As contracts: exchanged promises (action anticipated by promisor and known relying party)

63
Q

Parole Evidence Presumption under RST/UCC

A

Opposite presumption

RST: If it looks integrated, assumed so unless party brings contractry evidence

UCC: Assumes it’s partially integrated, unless party brings contrary evidence

64
Q

Anticipatory Breach

(excuses performance)

A

UCC 2-609

If intent to breach was communciated unequivocally: can suspend performance and look for alternatives, sue for breach

If uncertain, or have reasonable grounds to suspect so:

  1. Demand adequate assurance in writing (Scott didn’t request one for grain purchaser)
  2. Suspend performance during this time provided it was commercially reasonable to do so
  3. Total breach if assurance is not received within a reasonable time or 30 days (UCC)
65
Q
A

Contracts (1 decks)

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