Flashcards in Contracts Deck (77):
Elements for Frustration
Purpose of K has become basically valueless by virtue of some Unforseen Supervening Event not the fault of the party seeking discharge.
1. There is some supervening act or event leading to the frustration;
2. At the time of entering into the contract, the parties did NOT reasonably foresee the act or event occurring;
3. The purpose of the contract has been completely or almost completely destroyed by this act or event; and
4. The purpose of the contract was realized by both parties at the time of making the contract.
Test for Impracticability
(i) Extreme and unreasonable difficulty and/or expense; and
(ii) Its nonoccurrence was a basic assumption of the parties.
Mere change in the degree of difficulty or expense due to such causes as increased costs, unless well beyond the normal range, is NOT impracticability, bc these are the types of risks that a K is intended to cover.
New Agmt in which one party to an existing K agrees to accept, in lieu of performance, some other, DIFFERENT performance/obligation. (usually arises under a dispute);
-SUSPENDS performance of orig agmt until -Accord is/isn't performed. Breach of accord? can recover on either orig K or accord.
Performance of the accord agreement. Its effect is to discharge not only the original contract but also the accord contract as well.
occurs when a new contract substitutes a NEW PARTY to receive benefits and assume K duties, agreed to by both parties. The original contract will be discharged by the novation.
may occur in several ways other than by actual performance, including by novation, accord and satisfaction.
Prospective failure to perform (NOT repudiation)
involves conduct or words that merely raise doubts that the party will perform. judged on a Reasonable person standard.
may be retracted, provided the other party has not yet changed position in reliance on the repudiation or prospective failure. The effect of a prospective failure is to allow the innocent party to suspend performance until she receives adequate assurances. She may treat this situation as a breach only if the assurances are not given. If a defaulting party regains his ability or willingness to perform, he must communicate that to the other party.
Anticipatory Repudiation and Effect
occurs when promisor, prior to time set for performance, unquestionably indicates that she will not perform. Repudiation MUST be unequivocal! need NOT be in writing
nonrepudiating party has four alternatives:
(i) Treat the anticipatory repudiation as a total repudiation and sue immediately;
(ii) Suspend his own performance and wait to sue until the performance date;
(iii) Treat the repudiation as an offer to rescind and treat the contract as discharged; or
(iv) Ignore the repudiation and urge the promisor to perform (but note that by urging the promisor to perform, the nonrepudiating party is not waiving the repudiation—she can still sue for breach and is excused from performing unless the promisor retracts the repudiation).
Note: U.C.C. section 2-610 provides substantially identical alternatives to a nonrepudiating party when there is an anticipatory repudiation in the case of the sale of goods.
*applies only to bilateral contracts with executory (unperformed) duties on both sides.
a condition read into the K by the Court
1) Manifestation of present intent to be bound demonstrated by expression of commitment, promise or undertaking, 2) communicated to identifiable offeree in 3) definite & certain terms.
1. intent (promise/undertaking of commitment)
2. communicated to identifiable offeree
3. certainty/definite in terms (UCC quantity, Land price, time, matter, parties)
(if material term to be added in the future, the terms are too vague) price of goods missing? reas price at delivery
creates a reasonable expectation in offerree that offeror is willing to enter into K on basis of offered terms.
regularly deals in this type of good; or holds itself out as having special knowledge in this type of good
intended and named in K (vs incidental)
TPB rights vest when:
1. manifests assent to K
2. sues to enforce K
or 3. aware of K and materially changes position in justifiable reliance
*Parties can modify K only PRIOR to TP vesting
D can raise any defense against TPB that could've been raised against orig K party.
TP was creditor of Promisee
! UCC 2-207 battle forms
Additional Term in acceptance?
NOT 2 Merchants:
Valid K, (UNLESS acceptance was Expressly made Conditional on assent to the additional terms) BUT, K does NOT include Additional terms (mere proposals) unless Offeror expressly agrees to them
Acceptance creates Valid K and ADDITIONAL term becomes PART of K UNLESS
1. offer expressly limited to acceptance to its terms
2. rejection of term w/in reas time
3. additional term Materially changes offer (substantially affects economic risks or benefits or changes usual remedy for breach; Maj. arbitration clause is material) - -
DIFFERENT TERM - KNOCKED OUT
Even if party added the material term in his OWN form, he is bound by UCC rule;
all tangible movable items
Merchant Confirmatory Memo
In K betw 2 Merchants, if one party sends the other a written confirmation of the understanding within a reasonable amount of time, it binds sender immediately and will bind recipient if he has reason to know of contents and doesn't REJECT w/in 10 days
(exception to SoF)
Lapse of Offer
Lapse by Timing - Offer may be terminated by offeree’s failure to accept within time specified in offer. If no deadline, then within reasonable time.
Lapse by Operation of Law - Offer will terminate if not accepted before death of either party, insanity, destruction of proposed subject matter, or supervening illegality
Unequivocal assent to terms of offer made by one with power of acceptance, in manner prescribed or authorized by offer; manifestation of assent to an offer
CONSEQUENTIAL Damages only avail to....
offeror requests performance rather than a promise (once act is completed contract is formed and Payment due);
Only full performance with intent to accept is acceptance;
-unless an offer specifically provides that it may be accepted by performance only, will be construed as an offer to enter into a bilateral contract,
*ONCE performance has begun the offer cannot be revoked as to that performer. (Sort of like option)
Exchange of mutual promises;
-Can be accepted by either promise to perform, or beginning of performance
mutual assent between parties regarding a promise or set of promises for the breach of which the law gives a remedy or the performance of which the law, in some way, recognizes as a duty.
Mirror Image Rule
(CL ONLY) states that acceptance of an offer must be unequivocal acceptance to each and every term of offer. Any different or additional terms in the acceptance make the response a rejection and counteroffer. (be wary of mere inquiry that is NOT rejection)
Parol Evidence Rule (4 corners Rule)
where parties to a K intend to express their agmt in a final (integrated) writing, other expressions made PRIOR to or CONTEMPORANEOUSLY with the writing are not admissible to VARY, contradict, of modify the terms of the writing.
**Admissible for other purposes though (to supplement terms not mentioned, clear up Confusion in K) if not clear complete and exclusive integration of all terms..
Statements made AFTER K allowed
EXCEPTIONS: will NOT bar extrinsic evidence of Formation issues (Fraud, illegality, undue influence, duress, mistake, condition PREcedent, lack of consideration, trade usage/industry practice, course of dealing betw parties)
CL - parol evidence can be received to aid a fact-finder in interpreting a document only if the writing appears to be ambiguous on its face.
UCC - written contract’s terms may be explained or supplemented by course of dealing, usage of trade, or course of performance evidence, WHETHER OR NOT the writing appears to be ambiguous.
put the plaintiff in the position she would have been in had the contract never been formed. If the plaintiff’s expectation damages will be too speculative to measure, the plaintiff may elect to recover reliance damages instead.
Acceptance by mail or similar means creates contract at Moment of DISPATCH/mailing;
Rule does not apply to Options; does not apply when K lays out dates/times specifically; assumes stamp and proper address
Exceptions: Rejection and acceptance
1. Sends Rejection then Acceptance, whichever arrives 1st binds
2. Sends Acceptance then Rejection, acceptance effective unless rejection arrives 1st and offeror detrimentally relies on it
Promissory Estoppel / Detrimental Reliance
doctrine used by courts to avoid unjust outcome where there is NO legal K;
a promise that promisor
1. should reasonably expect to induce action or forbearance on part of promisee, and
2. which does induce action/forbearance/reliance,
3. becomes binding if injustice can be avoided only by enforcement of promise;
(award expectation OR reliance damages)
auction is with reserve
the auctioneer may withdraw the goods at any time until he announces completion of the sale.
auction without reserve
once the auctioneer calls for bids on an article or lot, that article or lot cannot be withdrawn unless no bid is made within a reasonable time.
Modification - Requires New Consideration?
CL- requires new consideration and agreement to modify a contract,
U.C.C. Article 2 allows modification w/o new consideration if sought in good faith
A promise to perform a voidable obligation
requires that consideration exists on both sides of the contract.
When the parties to a contract express their agreement in a writing with the intent that the writing embody the final expression of their bargain
Implied in Fact K
Formed by CONDUCT ie manifestations of assent other than oral or written language (ex. silence/action) objective
Quasi Contract; Implied in Law K
Not contracts at all; contructed by courts to avoid unjust enrichment by permitting P to bring action in RESTITUTION to recover Unjust Enrichment (amount of benefit wrongfully conferred on other)
bargained for exchange of legal value (not Gift); Bargained-for exchange requires that the promise induce the detriment and the detriment induce the promise;
Courts will enforce a promise as a contract only if it is supported by
1. Consideration or a
2. Substitute for consideration (promissory estoppel, detrimental reliance, or g/f modification UCC)
Promise in exchange for something you have already done is NOT effective as consideration
Lifetime Services Exception
exception to SoF where contract is for lifetime services, because person may die within a year.
formed by language, oral or written
if both parties are mistaken about existing facts (not future happenings), contract voidable by adversely affected party if:
1. concerns basic assumption on which K is made
2. Mistake has material effect on agreed upon exchange and
3. party seeking avoidance did not assume risk
Lack of Capacity
Contract voidable if party’s mental capacity so deficient that he is incapable of understanding nature of agreement.
! Firm Offer Rule
Offer by MERCHANT in SIGNED writing, which by its terms gives assurance it will be held OPEN, is NOT revocable for lack of consideration/$ during time stated (Merchant option)
-If NO time is stated, must be held open for REASONABLE time not to exceed 90 days max.
-IF stated time is longer than 90 days, offer is valid only for 90 day period max. UNLESS consideration or detrimental reliance makes it option contract keeping K open for longer
no perfect tender? Buyer can
1. accept goods and pay K price
2. timely reject goods and sue for damages
3. accept and reject in part
IF Seller gives notice of Accommodation with non-conforming tender, it is Counter offer that Buyer can accept/reject ALL (not part), but CAN'T sue for any damages
consideration is not present on both sides of K; conditional promises are NOT illusory unless condition is entirely w/in promisor's control (hot dog win ex.)
Contracts Essay Approach
1. Applicable Law
3. Defenses to Formation
5. Third Parties
Main Purpose Exception to Surety
Exception to Sof – surety
• Use if main purpose of Guarantor in promising to answer for debt of another, was to benefit HIMSELF (not other) than does NOT need to be in writing! not really surety
will NOT prevent Contract formation, UNLESS non mistaken party knows or has reason to know of mistake by other party
F.O.B. Buyers place of Biz, risk of loss on?
Free on board, SELLER bears risk until delivery to buyer at place listed
F.O.B. Seller's place of biz, risk of loss on?
BUYER bears risk once goods handed over from Seller to Common Carrier
F.O.B. Point of Destination
Seller bears risk until gets to Point of Destination, then shifts to buyer
All Ks assignable/delegable Except
1. unique service Ks
2. Long term Requirement Ks
3. would substantially alter the obligor's risks
Consideration is Required for Assignment, T or F?
False! not required. Gratuitous ok
promisee does not receive the substantial benefit of the bargain as a result of the breach, and the non breaching party can cancel contract and sue for damages
Assignments must be in writing, T or F?
False. need not be in writing
promisee gains substantial benefit of her bargain despite obligor's defective performance; non breaching party CANNOT cancel K, but can sue for damages
Too injured/sick for unique personal services K?
excused for that time; NOT liable for damages unless K provides otherwise. (impossibility)
liquidated Damages ok if
1. damages difficult to ascertain at time of entering agmt and
2. amount is reasonable forecast of compensatory damages
act or event (other than lapse of time) that must occur before party under duty to perform
Lost Profits - standard remedy
non breaching seller under UCC
remedy = K price minus resale price
Lost Profits - VOLUME seller
non breaching seller under UCC
remedy = lost profits on that sale (remember to subtract any deposit they already paid)
occurrence of an unanticipated or extraordinary event may make contractual duties impossible to perform; must be OBJECTIVE, NOT subjective (so if party took more lucrative K it is not objectively impossible)
put non breaching party back in place she would have been if promise had been performed; measure of damages based on expectancy of getting benefit of bargain (expectation damages, or if too speculative reliance damages, and Consequential damages (only for buyer))
non breaching party may be liable for any losses resulting from breach that any reasonable person would have forseeen would occur from breach at time of entering K; (show forseeability, causation, and certainty)
in sales K only avail to Buyer
expenses reasonably incurred by buyer in inspection, receipt, transport, care, custody of rejected goods, and other expenses incidental to breach;
seller's shipping, returning and resale
Damages and Certainty
damages must not be speculative, but must be certain in their nature; Also must be unavoidable and caused by breach (plus duty to mitigate)
Excuse of condition by substantial performance
condition of complete performance may be excused if the party has rendered subtl performance and breach is minor. Usually applies to constructive conditions only (not express bc conflicts w/ intent of parties);
To find SP, use same factors as material/minor breach
Factors for Material or Minor Breach
-amt of BENEFIT received by non breaching party
-adequacy of compensation for damages
-EXTENT of part performance by breaching party
-hardship to breaching party
-negligent or willful acts by breaching party
-likelihood breaching party will perform remainder (must show willing/able to perform)
-Late performance is genly not material if done in reasonable time
Failure of a condition
discharges liability of the promisor whose obligations on the conditional promise never mature; ie nonfulfillment of condition normally excuses a duty to perform
Excuse of Condition by Hindrance/failure to cooperate
Party having a duty subject to condition, prevents condition from occurring, thus excusing performance by other party if action is wrongful
only proper when legal remedy is inadequate (ie only 1 person can do it, or Good is UNIQUE irreplaceable
Issues: feasibility of enforcement by court, against public policy
Subject to Equitable Defenses: ex. unclean hands
Retraction of the offer by the offeror.
revocation (and rejection) effective upon receipt.
Can be DIRECTly communicated to offeree
Indirect: if offeree receives
1. correct info
2. from reliable source
3. of acts of offeror indicating to reasonable person that offeror no longer wishes to make offer
Unilateral K becomes irrevocable once performance has begun
promisor binds itself to buy from the supplier all that it requires, and the supplier binds itself to sell to the promisor that same amount;
Valid quantity under UCC for all actual requirements/output; assumption parties will act in g/f and no demand for quantity unreasonably disproportionate to stated estimate or prior dealings
NEEDS consideration on BOTH sides or it is illusory.
1 contract for the exchange of goods, but goods are to be delivered in separate lots; defect in 1 delivery can be total breach only if defect substantially impairs value or entire Contract.
UCC Gap Filler
if no time is stated for delivery in the K, delivery is due w/in a reasonable time
UCC - Seller may stop delivery of goods when he learns, BUT seller MUST deliver goods to insolvent buyer if buyers tenders CASH for payment,