Contracts and Sales Flashcards
Key Questions of Contract Law
- What Law Applies (UCC v. Common Law)?
- Was a Contract Formed?
- What are the Terms of the Contract?
- Was There Performance or Breach?
- Are There Any Remedies?
- Are There Any Third-Party Problems?
Contracts Problem Walk-Through
- Is the K for goods or services?
- Was the K written or oral?
- Are there any third-party rights?
- Are there any defenses?
- What is the remedy?
Contracts Formula
K = MA(O+A) + C - D
K = Mutual Assent (which is Offer + Acceptance) + Consideration - (Absence of) Defenses
Types of Contracts
- Express Contracts: formed by language, oral or written
- Implied Contracts: formed by conduct
- Quasi-Contracts: Not actually contracts - unenforceable contract resulting in unjust enrichment to one party (permits a party to bring an action for restitution)
Bilateral Contract
Promise for Promise - exchange of mutual promises in which each party is both a promisor and a promisee
Can be accepted in any reasonable way, unless expressly indicated otherwise
Unilateral Contract
Acceptance by performance
Offeror requests performance rather than a promise, and the promise to pay is upon the completion of the requested act
Contract is formed when the requested act is completed
Two Situations Leading to Unilateral Contracts
- When the offeror clearly (unambiguously) indicates that completion of the performance is the only manner of acceptance
- Where there is an offer to the public (i.e. a reward offer)
Validity of a Contract
- Void Contract: A void contract is totally without any legal effect from the beginning and cannot be enforced by either party. Example: An agreement to commit a crime
- Voidable Contract: one or both parties may elect to avoid (such as by raising a defense that makes it voidable) Example: Infancy or Mental Illness
- Unenforceable Contract: Contract is otherwise valid, but isn’t enforceable due to a defense. Example: statute of limitations or statute of frauds
Common Law v. UCC
Common Law: governs contracts generally
UCC: governs contracts concerning the sale of goods. The UCC Article 2 governs the sale of goods and has adopted much of the common law, however, where there is a conflict between the common law and the UCC in a K for the sale of goods, the UCC will control.
Goods
Moveable things at the time they are identified as the items to be sold in a contract (includes most tangible things, but does not apply to the sale of real estate, services, construction contracts, or intangibles (like a patent)
Merchants v. Non-Merchants
Certain provisions of Article 2 depend on whether one or both parties are merchants
Merchants: one who regularly deals in goods of the kind sold or who otherwise by their profession holds themselves out as having special knowledge or skills as to the practices or goods involved
Combination Contracts (Sale of Goods and Services)
When a contract involves both - determine which aspect of the contract is dominant and apply the law govering that aspect to the whole contract
- Example: A buys a 2010 Toyota Prius for $8,000 from B. The price includes a free lesson on making it up hills. Article 2 will apply because the primary aspect of the contract is for the sale of the car, which is a good. The service of providing a lesson is incidental to the sale of goods
If the contract divides payment between goods and services, then Article 2 will apply to the goods portion and the Common Law will apply to the services
Good Faith and Fair Dealing
Every K within the UCC imposes an obligation of good faith - meaning honesty in fact adn the observance of reasonable commercial standards
Common Law - implies a duty of good faith and fair dealing
Breach of this duty usually involves exercising discretion in a way that deprives the other party of the fruits of the contract
Mutual Assent
Offer and Acceptance
For an agreement to be enforced as a contract, there must be mutual assent - one party must accept the other’s offer
Test: did words or conduct manifest a present intention to enter into a contract
Offer
Creates the power of acceptance in another (the offeree) and corresponding liability in the offeror
To be an offer, it must create a reasonable expectation in the offeree that the offeror is willing to enter into a contract on the basis of the offered terms
Must be objective intent (reasonable person standard) to enter into a contract - subjective intent doesn’t matter
Requirements for an Offer
Promise, Undertaking, or Commitment - a mere invitation to negotiate is insufficient, there must be intent to enter into a contract
Language
Surrounding Circumstances
Methods of Communication (see additional cards)
Use of Broad Communications Media
The broader the communicating media, the more likely it is that the courts will view the communication as a solicitation of an offer rather than an actual offer
Advertisements
Ads, catalogs, circular letters…containing price quotations are usually construed as mere invitations for offers
To indefinite and usually addressed to the general public
Exceptions: ad can be an offer if there is a promise with certain and definite terms and the offeree is identified (Think of the Mink Coat case)
Certain and Definite Terms
Are enough of the essential terms provided so that a contract including them is capable of being enforced
- Identification of the offeree (must be sufficiently identified)
- Definiteness of Subject Matter (must be certain - a court can only enforce a contract if it ca tell what the promise is)
- Real Estate Contracts: Must identify the land (with some particularity) and the price terms
- Sale of Goods: quantity terms (i.e. the quantity being offered) must be certain or capable of being made certain (note, UCC gap fillers can be used here to fill in a missing price)
Requirements Contract
A buyer promises to buy from a certain seller all of the goods the buyer requires, and the seller agress to sell that amount to the buyer
Output Contract
A seller promises to sell to a certain buyer all of the goods that the seller produces, and the buyer agrees to buy that amount from the seller
Employment and Other Services
If the duration of the employment is not specified, the offer, is construed as creating a contract terminable at the will of either party
For services, the nature of the work to be performed must be included in the offer
Missing Terms
One or more missing terms does not prevent formation if it appears that the parties intended to make a contract and there is a reasonably certain basis for giving a rememdy
Majority of states and Art. 2 hold that the court can supply reasonable terms for those that are missing
Price
Only prevents formation in a contract for real property
In Art. 2 contracts, price will be a reasonable price at the time of delivery if not specified
