Contracts Flashcards
(153 cards)
1
Q
What questions do you need to ask when evaluating a contract?
A
Evaluating a contract requires answering three questions, (1) is there an enforceable contract; (2) has the contract been performed; and if not (3) what are the remedies for the breach.
2
Q
What is a contract?
A
A contract is a legally enforceable agreement.
3
Q
What governs contracts for services and real estate?
A
Common law governs contracts for services and real estate.
4
Q
What governs contracts for goods?
A
The UCC governs contracts for goods.
5
Q
What is the all-or-nothing rule?
A
The all or nothing rule requires mixed contracts to be governed by either common law or the UCC.
6
Q
Are there exceptions to the all-or-nothing rule?
A
Divisible contracts are the exception to the all-or-nothing rule.
7
Q
What is the predominant purpose test?
A
The predominant purpose test determines if services or goods play a bigger role in the contract.
8
Q
What does a contract require?
A
A contract requires (1) offer; (2) acceptance; (3) consideration; (4) absence of defenses to formation; and (4) compliance with the statute of frauds.
9
Q
What is an offer?
A
An offer is the manifestation of the willingness to enter into an agreement that creates a power of acceptance in the offeree.
10
Q
What is the objective test?
A
Offer and acceptance are governed by the objective test which evaluates the outward appearances of words and actions.
11
Q
Must an offer be direct?
A
An offer must be direct to the offeree.
12
Q
Under the common law what must be stated in the agreement?
A
Under Common law all essential terms must be stated in the agreement.
13
Q
Under the UCC what must be stated in the agreement?
A
Under the UCC only the quantity must be stated int he agreement.
14
Q
What is a requirement contract?
A
A requirement contract is an agreement for the buyer to only purchase from the seller.
15
Q
What is an output contract?
A
An output contract is an accruement for the seller to only sell to the buyer.
16
Q
What is an Invitation to Deal?
A
An invitation to deal is not an offer, but instead leave final approval with the speaker.
17
Q
What is an advertisement?
A
An advertisement is an invitation to deal.
18
Q
How many ways may an offer be terminated?
A
A offer may be terminated in five different ways. (1) revocation by the offeror; (2) revocation through inconsistent actions by the offeror when learned by the offeree; (3) termination by the offeree; (4) termination by death of the offeror; and (5) termination by the passage of a reasonable amount of time.
19
Q
What is an Option Contract?
A
An option contract is irrevocable as they are supported by consideration.
20
Q
What is a firm offer?
A
A firm offer is irrevocable and requires (1) a writing; (2) signed by the offeror; and (3) contain an explicit provision not to revoke.
21
Q
How long does a firm offer last?
A
A firm offer lasts for either (1) a duration stated in the offer; or (2) a reasonable amount of time not to exceed 90 days.
22
Q
What is a unilateral contract?
A
A unilateral contract arises from a promise that requests acceptance by an action of that promise.
23
Q
Does a unilateral contract give the promisee the right to finish?
A
A unilateral contract gives the promisee the right to finish.
24
Q
What is detrimental reliance?
A
Detrimental reliance occurs when the offeree reasonably and detrimentally relies on the offer in a foreseeable manner.
25
What is acceptance?
Acceptance is the manifesto of a willingness to enter into the agreement by the offeree.
26
How must acceptance be made?
Acceptance must be made in accordance with the rules of the offer.
27
How is offer ambiguity resolved under the modern approach?
Under the modern approach, if it is ambitious if it is a unilateral or bilateral offer, acceptance can be made by either performance or a return promise.
28
How does the UCC treat shipment of nonconofrmin goods?
The UCC treats the shipment of nonconforming goods as both acceptance and breach.
29
How must an offer be directed?
An offer must be specifically directed to the person trying to accept it.
30
Must an individual know about an offer to accept it?
An individual must know about an offer in order to accept it.
31
Must an individual communicate the acceptance of an offer?
Acceptance of an offer must be communicated to the offeror.
32
When is acceptance effective under the mailbox rule?
Under the mailbox rule an acceptance is effective when it is sent.
33
Do unilateral reward offers require acceptance of the offer to be communicated?
Unilateral reward offers do not require acceptance of the offer to be communicated.
34
May silence serve as an acceptance?
A past history of silence may serve as acceptance.
35
How do implied-in-fact contracts allow acceptance?
Implied-in-fact contracts allow acceptance without writing or speaking.
36
What is the common law mirror image rule
Under the common law mirror image rule, the terms in an offer and an acceptance must match exactly.
37
What is a conditional acceptance?
A conditional acceptance is another form of a counter offer.
38
What is UCC 2-207(1)?
UCC 2-207(a) allows an acceptance to be effective unless the acceptance was made conditional upon those additional or different terms.
39
What is UCC-2-207(2)?
UCC 2-207(2) allows a new term in the acceptance to control if (1) both parties are merchants; (2) the new term does not materially alter the deal; (3) the offer didn't limit acceptance to its terms; and (4) the offeror doesn't object in a reasonable time to the new term.
40
What is the Knock-out rule?
The majority rule uses the knock-out rule which eliminates both of the different terms and employs UCC gap fillers.
41
What is UCC 2-207(3)?
UCC 2-207(3) only agreed upon terms in both writings will control, and UCC gap fillers will substitute.
42
Can a verbal agreement be followed by a written confirmation?
UCC2-207(1) allows a verbal agreement to be followed by a written confirmation, if the new terms are in the written confirmation then 2-207(2) controls.
43
What is consideration?
Consideration is a deal where the parties exchange promises involving legal detriment or benefit.
44
Are gift promises and conditional grifts bargained for consideration?
Gift promises and conditional gifts do not count as bargained for consideration.
45
Must consideration be adequate?
Consideration must be adequate.
46
what is an illusory promise?
An illusory promise is one in which the promisor does not clearly agree to the deal and therefore there is no consideration.
47
Is settling a claim sufficient consideration?
Settling a claim is sufficient consideration if there is a good faith belief in the validity of the claim.
48
Does contract modification require new consideration?
Contract modification requires new consideration to be valid.
49
What is the pre-existing duty rule?
The pre existing duty rule state a promise to do something that you are already legally obligated to do is not consideration.
50
What are exceptions to the pre existing duty rule?
The exceptions to the pre existing duty rule are (1) a change in performance; (2) a third party promising to pay; or (3) unforeseen difficulties that would excuse promise.
51
Is partial payment of a debt sufficient to release a debt?
Partial payment of a debt obligation is only valid if the debt is (1) currently owed; and (2) undisputed.
52
Does the UCC allow for modification without consideration?
The UCC allows for modification without consideration if it is in good faith.
53
What is promissory estoppel?
Promisory estoppel arises when one party makes a promise and the other party relies on that promise.
54
What does a reliance claim require?
A reliance claim requires that (1) the promise would reasonably be expected to induce reliance; (2) the promise took detrimental action in reliance; and (3) injustice can only be prevented by enforcement of the promise.
55
DO charities need to prove detrimental reliance?
Charities do not need to prove detrimental reliance.
56
What is a contract implied-in-law?
A contract implied-in-law is when you would have made a contract if you could have, but you could not.
57
What are the elements of a contract implied-in-law?
the elements of a contract implied in law are (1) the plaintiff confers a measurable benefit on the defendant; (2) the plaintiff reasonably expected to get paid; and (3) it would be unfair to let the defendant keep the material benefit without paying.
58
What are the seven defenses to contract formation?
The seven defenses to contract formation are (1) misunderstanding; (2) incapacity; (3) mistake); (4) fraud/misrepresentation/nondisclosure; (5) duress; (6) illegality; and (7) unconscionability.
59
What is misunderstanding?
Misunderstanding is when each party attaches a different meaning to the same word.
60
How is misunderstanding proven?
To prove misunderstanding, (1) the parties must use a material term that is open to multiple reasonable interpretations; (2) each side attaches a different meaning to the term; and (3) neither party knows of the confusion.
61
What groups of people lack the capacity to contract?
Individuals that lack capacity to contract are (1) minors; (2) mentally ill persons; and (3) very intoxicated persons.
62
Are contracts with incapacitated persons voidable?
Contracts with incapacitated persons are voidable.
63
Are incapacitated people able to contract at all?
Incapacitated persons can contract for necessities at a fair value.
64
What is a mistake?
A mistake is a belief that is not in accordance with a present fact.
65
What is a mutual mistake?
A mutual mistake allows the adversely affected party to rescind if (1) there is a mistake of fact existing at the time of contract; (2) the mistake relates to a basic assumption of the contract and has a material impact on the deal; and (3) the impacted party did not bear the risk of the mistake.
66
What is a unilateral mistake?
A unilateral mistake is a mistake by one party.
67
How may a unilateral mistake be rescinded?
A unilateral mistake may be rescinded y the adversely affected party if (1) all the elements of mutual mistake can be proven; and either (2) the mistake makes the contract unconscionable; or (4) the other side had reason to know of the mistake.
68
What is misrepresentation?
Misrepresentation is a statement at the time of contracting that is not true.
69
What must be proven for misrepresentation?
Misrepresentation requires the asserting party to show (1) a misrepresentation of a present fact; (2) that is material or fraudulent; and (3) made under circumstances in which it is justifiable to rely on the misrepresentation.
70
What is duress?
Duress is an improper threat that deprives a party rom a meaningful choice.
71
What is procedural unconscionability?
Procedural unconscionability is a defect in the bargaining process itself.
72
What is substantive unconscionability?
Substantive unconscionability is a rip-off in a term of the contract.
73
What is the statute of frauds?
The statute of frauds is a barrier that the following contracts must meet to become binding; (1) marriage; (2) suretyship; (3) one year; (4) UCC over $500; and (5) Real property interest transfers.
74
What is the main purpose exception?
The main purpose exception applies to suretyship when the main purpose is the surety's economic advantage.
75
What does a writing under the statute of frauds require?
A writing under the statute of frauds requires (1) signing by the party against which it is being enforced; (2) identity of the parties; and (3) contain the essential elements of the deal.
76
May part performance satisfy the statute of frauds?
Part performance on a real estate deal may satisfy the statute of frauds if two of the following are meant; (1) possession; (2) payment; or (3) improvement to the land.
77
What is required in a statute of frauds writing under the UCC?
Under the UCC a writing under the statute of frauds must only contain the quantity.
78
May part performance satisfy the statute of frauds under the UCC?
Partial performance may satisfy the statute of frauds under the UCC only for the quantity delivered and accepted.
79
How does the UCC treat custom goods under the statute of frauds?
Custom goods under the UCC satisfy the statute of frauds as soon as the maker makes a substantial beginning towards the manufacturing.
80
How are modifications made under the UCC and the statute of frauds?
Under the UCC, modification is only required to be in writing if the modification would be governed by the statute of frauds.
81
What is the parol evidence rule?
Under the parol evidence rule only the terms in the contract control.
82
What is a complete integration?
A complete integration is a contract expressing all terms of the agreement.
83
What is a partial integration?
A partial integration is a writing that doesn't include all of the terms of the agreement.
84
What does a complete integration include?
A complete integration includes a merger clause.
85
What is not controlled by the parol evidence rule?
If a term is naturally omitted from an agreement, it is not controlled by the parol evidence rule.
86
Under the UCC are writings presumed to be complete or partial?
Under the UCC, writings are presumed to be partial integrations, unless a disputed term would have certainly been included in the writing.
87
When doesn't the parol evidence rule apply?
The parol evidence rule doesn't apply when introducing evidence to interpret an ambitious term in the contract.
88
What is a warranty?
A warranty is a promise that explicitly shifts risk to the party making the promise.
89
Must a warranty be disclaimed?
Warranties must be disclaimed.
90
Do warranties apply under the UCC?
Warranties apply under the UCC.
91
What is an expressed warranty?
An expressed warranty is a promise which affirms or described goods and acts as a basis of the bargain.
92
What is the implied warranty of merchantability?
The implied warranty of merchantability applies when the seller is a merchant dealing in the goods at issue and warrants that the goods are fit for ordinary commercial purposes.
93
What is the implied warranty of fitness for a particular purpose?
The implied warranty of fitness for a particular purpose applies when a buyer relies on the seller's expertise to select goods for a special purpose.
94
What is a condition?
A condition shifts risk by stating one party's contractual obligation will trigger only if a future event occurs.
95
What is an expressed condition?
An expressed condition is created by language in the contract.
96
What are satisfaction conditions?
Satisfaction conditions are met using an objective standard of satisfaction.
97
What is an aesthetic taste condition?
An aesthetic test condition is met using a subjective standard of satisfaction.
98
How may a condition be waived?
A condition may be waived by the party being benefited by the condition through words or conduct, or if the other party wrongfully interferes.
99
What is a Constructive Condition of Exchange (CCE)
CCE conditions one party's performance on the other side's performance.
100
Under common law will substantial performance satisfy CCE?
Under the common law substantial performance will satisfy CCE as long as there is not a material breach and the breach is not willful.
101
Can the non breaching party recover damages under the CCE?
If there is only a minor problems, under CCE, the non breaching party can recover damages.
102
What is perfect performance?
Under the UCC there must be perfect tender of perfect goods and delivery.
103
May a buyer revoke acceptance of goods?
A buyer may revoke acceptance of goods if they seem fine at delivery but a defect is discovered with a reasonable time.
104
Does the seller have the right to cure a failure to tender perfect goods?
The seller has a right to cure a failure to tender perfect goods.
105
What does a shipment contract require?
A shipment contract requires the seller to (1) get the goods to a common carrier; (2) make arrangements for delivery; and (3) notify the buyer.
106
What does a delivery contract require?
A delivery contract requires that the seller (1) get the goods to the buyer; and (2) notify the buyer.
107
What is a risk of loss problem?
A risk of loss problem is when goods are destroyed prior to the buyer receiving them.
108
How are risk of loss problems fixed?
(1) the contract will control; if not (2) if there is a breach, the breaching party bears the risk of loss; if not (3) if it was a shipment contract the buyer bears the risk of loss and if a delivery contract the seller bears the risk of loss; if not (4) if merchants then the risk of loss stays with the seller under the buyer receives it, if not merchants the risk of loss is with the buyer until the seller tenders the goods.
109
What is an excuse?
An excuse exists where there is a contract, but something happened to prevent one side from having to perform.
110
What is the impossibility or impracticability excuse?
Impossibility or impracticability excuse becomes available when (1) performance becomes illegal; (2) the subject matter is destroyed; or (3) the services contract with the "special person" dies or becomes incapacitated.
111
Can performance be excused if there is an increase in the cost of performance?
Performance cannot be excused if it becomes more expensive.
112
Does dying excuse contract liability?
Dying doesn't excuse contract liability on a contract that has been made.
113
What is frustration of purpose?
Frustration of purpose excuse is when performance can still happen, but an event undermines the entire reason for the contract.
114
Can performance be excused?
Performance can be excused if both parties agree to cancel the contract and there is still performance left on both sides.
115
What is an accord and satisfaction?
Accord and satisfaction is when parties to an earlier contract agree that performance will be satisfied (satisfaction) by the completion of a different performance (accord).
116
What is a novation?
A novation arises when both parties agree that a substitute person will take over the contractual obligations.
117
What is anticipatory repudiation?
Anticipatory repudiation is available when the other party says they aren't going to perform before performance is due.
118
How can a party deal with anticipatory repudiation?
Anticipatory repudiation allows a party to either (1) treat repudiation as a breach and immediately sue for damages; or (2) ignore the repudiation and demand performance.
119
Can repudiation be retracted?
A party may retract repudiation as long as the other side has not (1) commenced a lawsuit; or (2) acted in reliance on the repudiation.
120
How is repudiation dealt with under the UCC?
Under the UCC a party may demand an adequate assurance of performance and if the party fails to respond in a reasonable time it is treated as a repudiation.
121
What are the typical damages in contract law?
Money damages are the typical remedy in contract law.
122
What is the normal way to calculate contract damages?
Expectation damages are the normal way to calculate contract damages.
123
What is the goal of expectation damages?
The goal of expectation damages is to put the breached against party back in the same position it would be in if the contract had been performed.
124
How are expectation damages calculated?
Expectation damages are measured by comparing the value of the performance without the breach to the value of the performance with the breach.
125
How are expectation damages limited?
Expectation damages are limited three ways (1) must be proven with reasonable certainty; (2) they must not include unforeseeable consequential damages; and (3) the party must have worked to mitigate the damages.
126
What are unforeseeable consequential damages?
Unforeseeable consequential damages are nonrecoverable unless the other party had some reason to know about the possibility of the special damages at the time of contracting (Hadley Rule).
127
What are consequential damages?
Consequential damages are losses specific to this plaintiff.
128
What is mitigation?
Under mitigation the breached-against party must take reasonable steps to reduce damages from the breach.
129
What happens if a party refuses to mitigate?
If a party refuses to mitigate, damages will be calculated as if they did mitigate.
130
What are Lost Volume Profits (LVP)?
Under lost volume profits a seller must mitigate the damages of a breach by selling to another party.
131
What is diminution in market value?
Diminution in market value is how much lower the market value of what you got versus what you wanted.
132
What are reliance damages?
Reliance damages aim to put a party in the same economic position that it would be in if the contract had never been formed.
133
May a party collect both expectation and reliance damages?
A party may not collect both expectation and reliance damages.
134
What are restitution damages?
Restitution damages aim to give the plaintiff an amount equal to the economic benefit that the plaintiff offered on the defendant.
135
What are liquidated damages?
Liquidated damages are state in the contract as the amount due upon breach.
136
Are punitive damages allowed in contract law?
Punitive damages are almost never allowed in contact law.
137
Is specific performance allowed in contract law?
Specific performance is allowed in contract law for real estate transactions.
138
Does the UCC require specific performance?
The UCC requires specific performance for unique goods.
139
What is the right of reclamation?
The right of realization arises when an unpaid seller tries to reclaim goods that were sold on credit when the buyer is insolvent.
140
How does a seller exercise the right of reclamation?
To assert the right of reclamation (1) the buyer must be insolvent at the time of receipt of goods; (2) the seller must demand return of the goods within 10 days; and (3) the buyer still has the goods.
141
What is a third-party beneficiary contract?
A third-party beneficiary contract is when a third party can sue to enforce a contract made by two other people.
142
What are intended beneficiaries?
Intended beneficiaries have the right to sue.
143
What are incidental beneficiaries?
Incidental beneficiaries do not have the right to sue.
144
What is a creditor beneficiary?
A creditor beneficiary arises when the promisee strikes a deal with the promisor in order to repay an earlier debt to a third party.
145
What is a donee beneficiary?
A donee beneficiary arises when there is no preexisting obligation but the promisee clearly intends to confer a gift of enforcement on a third party.
146
Can a third party lose investment rights?
A third party will not lose investment rights if (1) the beneficiary detrimentally relied on the rights; (2) the beneficiary manifests assent to the contract; or (3) the beneficiary filed a lawsuit to enforce the contract.
147
Cana promisor assert any defenses against a third-party beneficiary?
A promisor can assert any contract defenses against a third party that he would be entitled to assert against the promisee.
148
What is an assignment?
An assignment is the transfer of rights under a contract.
149
What is a delegation?
A delegation is the transfer of duties under a contract.
150
What happens if a contract says the rights are not assignable?
If a contract states that the rights are not assignable, it may either prohibit or invalidate assignments.
151
What happens when a contract invalidates assignments?
When a contract invalidates assignments the third party cannot recover.
152
Are assigned rights revocable?
If rights are assigned with consideration they are typically irrevocable.
153
Is a delegatee liable for breach?
A delegatee is not liable for breach unless the delegation was supported by consideration.
