Contracts and Sales Flashcards
(296 cards)
1
Q
What is a contract?
A
A promise or set of promises for the breach of which the law gives remedy or the performance of which the law, in some way, recognizes as a duty. A legally enforceable agreement.
2
Q
What is an express contract?
A
Formed by language, oral or written
3
Q
What is an implied contract?
A
Formed by conduct
4
Q
What is a quasi-contract?
A
Not a contract at all. This is a remedy of last resort when an unenforceable contract results in unjust enrichment.
5
Q
Bilateral Contract
A
A contract consisting of the exchange of mutual promises; a promise for a promise. May be accepted in any reasonable way.
6
Q
Unilateral Contract
A
The offeror requests performance rather than a promise. Acceptance is by performance.
7
Q
When does a unilateral contract occur?
A
- when the offeror clearly and unambiguously indicates that completion of performance is the only manner of acceptance.
- Where there is an offer to the public
“Offer . . . only by”
8
Q
What is a void contract?
A
A contract without any legal effect from the beginning. It may not be enforced by either party.
9
Q
What is a voidable contract?
A
A contract where one or both parties may elect to avoid, such as by raising a defense such as infancy or mental illness.
10
Q
What is an unenforceable contract?
A
An otherwise valid contract that isn’t enforceable due to a defense such as statute of limitations or statute of frauds.
11
Q
What law do we follow for contracts?
A
UCC Article II for goods, common law for everything else.
12
Q
What are goods?
A
All things movable at the time they are identified as the items to be sold under the contract.
13
Q
What is a merchant?
A
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.
14
Q
What happens if a sale involves both goods and services?
A
Determine which aspect is dominant and apply the law governing that aspect to the goods adn services.
Exception: If the contract divides payments between goods and services, each follows their normal law.
15
Q
What is good faith and fair dealing?
A
Imposed by the UCC.
“Good faith” –> honesty in fact and the observance of reasonable commercial standards
16
Q
What is mutual assent?
A
One party must accept the other’s offer.
17
Q
Is there a contract?
A
Is there mutual assent?
Was there consideration or some substitute for consideration?
Are there any defenses to the creation of the contract?
18
Q
What is an offer?
A
It must create a reasonable exectation in the offeree that the offeror is willing to enter into a contract on the basis of the offered terms.
19
Q
Did the communication of an offer create a reasonable expectation?
A
Was there expression of a promise, undertaking, or commitent to enter into a contract? (intent)
Was there certainty and definiteness in the essential terms?
Was there communication of the above to the offeree?
20
Q
Can an offeror use broad communications media?
A
Yes, but the court will likely only see it as a solicitation of an offer. So, not an actual offer
21
Q
Are advertisements offers?
A
No, they are merely invitations for offers.
22
Q
What are are the requirements for real estate transactions?
A
An offer must identify the land and the price terms.
23
Q
What are special requirements for sale of goods?
A
The quantity being offered must be certain or capable of being made certain.
24
Q
What is a Requirements contract?
A
A buyer promises to buy from a certain seller all of the goods the buyer requires, and the seller agrees to sell that amount to the buyer.
25
What is an Output contract?
A seller promises to sell a certain buyer all of the goods that the seller produces, and the buyer agrees to buy that amount.
26
What are the limitations on requirements and output contracts?
No unreasonably disproportionate demands for a quantity in any stated estimate or normal or otherwise comparable prior outputs or requirements.
27
What do you need to show an employment or services contract?
If the duration is not specified, the contract is terminable at the will of either party.
Sometimes need the nature of the work.
28
What if there are missing terms of a contract?
It does not prevent the formation if the parties intended to make a contract and there is a reasonably certain basis for giving a remedy.
29
What happens if there is no price listed?
Except in real estate, that is okay.
30
How long does a contract last?
If the agreement doesn't specify the time in which an act is to be performed, the law implies that it is to be performed within a reasonable time.
31
What if you have vague terms?
No presumption of intent if too vague to be enforceable.
Uncertainty can be cured by part performance that clarifies the vague term or by acceptance of full performance.
32
What happens if a material term is vague or ambiguous?
It is not an offer under common law or the UCC?
33
What if you have a future date that is not specified?
If the date is a material term, it is too uncertain to be enforced.
34
How does an offeree know about an offer?
An offeree must have knowledge of the offer, so the proposal must be communicated to them.
35
What happens if the offeror terminates the offer?
An offer cannot be accepted after it has been terminated by an act of the party or by operation of law.
36
What are the terminations by the offeree?
Lapse of Time
Rejection
37
What is termination by lapse of time?
An offer may be terminated by the offeree's failure to accept within the time specified by the author, or within a reasonble time if no date is set.
38
What is termination by express rejection?
A statement by the offeree that tey do not intend to accept the offer.
39
What is termination by counteroffer as rejection?
A counteroffer is an offer made by the offeree to the offeror that contains the same subject matter as the original offer, but differs in its terms.
A rejection and new offer.
40
What is conditional acceptance as rejection?
When an acceptance is made expressly conditional on the acceptance of new terms, it is a rejection of the offer.
41
What about offers that result from a conditional acceptance being accepted by performance?
A contract is formed by conduct and new terms are not included.
42
When is a rejection effective?
When it is received by the offeror.
43
What counts as rejection for an option contract?
A rejection of or a counteroffer to an option contract does not constitute a termination of the offer UNLESS the offeror detrimentally relied on the offeree's rejection.
44
What is a recovation of an offer?
The retraction of an offer by an offeror.
45
What is an indirect revocation of an offer?
If the offer receives:
1. correct information
2. from a reliable source
3. acts of the offeror that would indicate to a reasonable person that the offeror no longer wishes to make that offer.
46
When is a revocation effective?
When it is received (or published, if by publication)
47
When can an offer be revoked?
At will by the offeror
48
When can an offer not be revoked by the offeror?
1. option contract
2. Article II Merchant's Firm Offer
3. Foreseeable Reliance
4. Beginning performance
49
What is an option contract?
A distinct contract in which the offeree gives consideration fora promise by the offeror not to revoke an outstanding offer.
50
What is a merchant's firm offer?
Under UCC Article II,
1. If a merchant
2. Offers to buy or sell goods in a signed writing
3. the writing gives assurances that it will be held open,
The offer is not revocable for lack of consideration during the time stated, or fora period not to exceed three months
51
Does a letterhead count as a signature?
Sometimes
52
What is detrimental reliance in terms of an offer?
When the offeror could reasonably expect that the offeree would rely to their detriment on the offer, and the offeree does so, the offer will be held irrevocable as an option contract for a reasonable length of time
53
What is beginning performance in response to a true unilateral contract offer?
It becomes irrevocable once the performance has begun. The offeror must give the offeree a reaosnable time to complete the performance.
54
Does preparation to perform make an offer irrevocable?
No, ubt it may constitute detrimental reliance
55
Beginning Performance
Once the offeree begins performance, the contract is complete and revocation becomes impossible.
56
What happens to an offer if either party dies or becomes "insane" ?
The offer is terminated.
57
What happens to an offer if the proposed contract's subject matter is destroyed?
The offer is terminated.
58
What happens if something illegal happens during an offer?
The offer is terminated.
59
Who may accept an offer?
Only the person to whom an offer is addressed?
Generally cannot be assigned, unless an option contract, in which case it is transferable.
60
What is acceptance of an offer in a bilateral contract?
It may be accepted either by a promise to perform or by the beginning of performance.
61
Does silence count as an acceptance?
Only if by prior dealings it would be commercially reasonable.
62
What is an acceptance of an offer to buy goods for current or prompt shipment?
Acceptance either by a promise to ship or by current or prompt shipment of conforming or nonconforming goods.
63
When is a unilateral contract accepted?
The contract is not accepted until performance is complete.
64
What is a notice requirement for acceptance?
The offeree is not required to give the offeror notice that she began the requested performance. However, she does need to tell him when she is done.
65
What is the exception to the notice requirement for acceptance?
If 1. the offeror waived notice or 2. the offeree's performance would normally come to the offeror's attention within a reasonable time.
66
What happens after a shipment of nonconforming goods?
It is an acceptance creating a bilateral contract as well as a breach of the contract unless the seller seasonably notifies the buyer that a shipment of nonconforming goods is offered only as an acommodation.
The buyer is not required to accept the acommodation goods adn may reject them.
67
What is the mirror image rule?
Not in use by Article II.
Inclusion of additional or different terms is a rejection and counteroffer.
68
What does Article II use instead of the mirror image rule?
Battle of the Forms
The inclusion of additional or different terms is an acceptance, unless the acceptance is expressly made conditional on assent to the additional or different terms.
Whether they become part of the terms depends on whether the parties are merchants.
69
Contracts involving nonmerchant--Terms of Offer Govern
If any party to the contract is not a merchant, the additional or different terms are considered to be mere proposals to modify the contract that do not become part of the contract unless the offeror expressly agrees.
70
Contracts between merchants--Additional terms usually included
If both parties are merchants, additional terms in the acceptance will be included unless they
1. materially alter the original terms of the offer
2. expressly limit acceptance to the terms of the offer OR
3. the offeror has already objected to the particular terms, or objects within a reasonable time after notice of them is received.
71
What abut different terms?
Depends on the court. Either treated as additional terms or the "knockout rule" applies, which knocks that term out of the contract.
72
What is a merchant's confirmatory memo?
A merchant's memo confirming an oral agreement that contains different or additional terms is also subject to the battle of the forms provision.
73
What does it mean to have the moment of mutual assent uncertain?
Where it cannot be determined with certainty which specific communication was the offer and which was the acceptance but the parties both act as though there is a contract, the UCC considers it a binding contract.
74
What is the mailbox rule?
Acceptance by mail or similar means is effective at the moment of dispatch, UNLESS
1. the offer stipulates that acceptance is not effective until received
2. an option contract is involved
3. the offeree sends a rejection and then sends an acceptance, in which case whichever arrives first is effective.
4. The offeree sends an acceptance and then a rejection, in which case the acceptance is effective unless the rejection arrives first and the offeror detrimentally relies on it.
75
What is acceptance by unauthorized means?
It may still be effective if it is actually received by the offeror while the offer is still in existence.
76
What happens if a contract is not formed by parties' communications?
If they begin to perform as if they formed a contract, a contract is formed.
77
Auction Contracts
Complete when the auctioneer so announces by the fall of the hammer.
Auction sales are "with reserve" and the auctioneer may withdraw the goods at any time until he announces completion of the sale.
78
What are the elements of consideration?
1. a bargained-for exchange between two parties with
2. legal value
79
When do you have a bargained-for exchange?
When a promise induces the detriment and the detriment induces the promise.
There is no bargain when one party gives a gift to another.
80
Is an act or forebearance by the promisee a valid form of consideration?
Yes, if it benefits the promisor. THe benefit need not be economic.
81
Is past or moral consideration allowed?
No. A promise given in exchange for something already done does not satisfy the bargain requirement.
82
Are there any exceptions to the past or moral consideration bar?
When a past obligation is unenforceable because of a technical defense, the obligation will be enforceable if a new promise is made in writing or is partially performed.
If a past act benefitted the promisor and was performed by the promisee at the promisor's request or in response to an emergency, a subsequent promise to pay for that act will be enforceable.
83
Do courts consider the adequacy of consideration?
No, but courts bar things that are devoid of value or are sham considerations.
Even if there is a possibility of value, a mere peppercorn, it is okay.
84
What is legal detriment in terms of consideration?
If the promisee does something they are not legally obligated to do or refrains from doing soething they have a legal right to do.
85
What is a legal benefit?
Opposite of a legal detriment. Forbearance or performing of an act that the promisor was not legally entitled to demand or expect.
86
Is a preexisting legal duty consideration?
No, that is insufficient consideration.
87
What are the exceptions to the preexisting duty rule?
New or different consideration is promised
The promise is to ratify a voidable obligation
The preexisting duty is owed to a third person rather than to the promisor
There is an honest dispute as to the duty
Unforeseen circumstances are sufficient to discharge a party
Under the modern view, if the modification is fair and equitable in view of circumstances not anticipated.
88
Can you modify a contract without new consideration?
A good faith agreement modifying a contract subject to the UCC needs no consideration to be binding.
89
Modification of contracts
Under general contract law, a contract cannot be modified unless the modification is supported by new consideration.
UNLESS
1. the modification is due to circumstances that were unanticipated by the parties when the contract was made
2. it is fair and equitable
90
Can you discharge debts?
Yes, by accord and satisfaction.
91
Can you have forebearance to sue?
A promise to refrain from suing on a claim constitutes consideration if the claim is valid or the claimant in good faith believed the claim was valid.
92
What is the requirement of Mutuality?
Consideration must exist on both sides of a contract.
93
Is there a right to choose an alternative course?
A promise to choose one of several alternative means of performance is illusory unless every alternative involves legal detriment to the promisor. It will not be illusory if:
1. at least one alternative involves a legal detriment and the power to choose rests with the promisee a third party OR
2. a valuable alternative is actually selected.
94
Is there any time when consideration is not necessary? (Promissory Estoppel)
Consideration is not necessary if the facts indicate that the promisor should be estopped from not performing it. Such as:
1. The promisor should reasonably expect to induce action or forbearance AND
2. such action or forebearance is in fact induced;
This may be limited as justice requries.
95
When might an otherwise enforceable contract be unenforceable?
1. a defect in capacity
2. defense to formation of teh contract
3. a defense to enforcement of certain terms exist
96
Who has a legal incapacity to contract?
Infants
Mental Incapacity
Intoxicated Persons
97
What is disaffirmance by minors?
A minor may choose to disaffirm a contract at any time before (or shortly after) reaching the age of majority.
98
Are there exceptions to disaffirmance by minors?
Yes, for student loans, insurance contracts, and agreements not to reveal an employer's proprietary information.
99
What are "necessaries" ?
Items necessary for subsistence, health, or education
Minors may disaffirm contracts for these, but will be liable in restititution.
100
Can a minor affirm upon attaining majority?
Yes, a minor may choose to affirm either by failing to disaffirm within a reasonable time after reaching majority or be express actions.
101
Is a contract made when a party was mentally incapacitated void?
Not void, voidable.
One whose mental capacity is so deficient that they are incapable of understanding the nature and significance of a contract may disaffirm when lucid or by a later appointed legal representative.
A person who has been appointed a guardian has no ability to contract.
102
May intoxicated persons enter into a contract?
One who is so intoxicated that they don't understand the nature and significance of their promise may be held to have made only a voidable promise if the other person had reason to know of teh intoxication.
103
Is a contract made under duress valid?
No, it is voidable.
104
What happens if a contract is ambiguous?
If neither party is aware of the ambiguity: no contract unless both parties intended the same meaning.
Both parties aware: no contract unless both parties intended the same meaning
One party is aware: it is a binding contract based on what the ignorant party reasonably believed to be the meaning of the ambiguous conduct.
105
What happens if there is a mutual mistake as to existing fact?
The contract may be voidable by the adversely affected party if:
1. the mistake concerns a basic assumption on which the contract is made
2. the mistake has a material effect on the agreed-upon exchange
3. the party seeking avoidance did not assume the risk of the mistake
106
Is mutual mistake a defense if the party bore the risk?
Mutual mistake is not a defense if the party asserting mistake as a defense bore the risk that the assumption was mistaken.
107
What about mistakes in value?
Generally not a defense.
108
What happens if there is a unilateral mistake?
If only one of the parties is mistaken about facts relating to the contract, the mistake will not prevent formation of a contract.
If the non-mistaking party knew or had reason to know of the mistake, the contract is voidable by the mistaken party.
109
What is mistake by the intermediary?
When there is a mistake in the transmission of an offer or acceptance by an intermediare, the message as transmitted is operative unless the other party knew or should have known of the mistake.
110
What is fraudulent misrepresentation? (fraud in the inducement)
If a party induces another to enter into a contract by using fraudulent misrepresentation, the contract is voidable by the innocent party if they justifiably relied on the fraudulent misrepresentation.
111
What is material misrepresentation?
A representation that may be voidable by the innocent party if the innocent party justifiably relied on the misrepresentation and it was material.
1. it would induce a reasonable person to agree
2. the maker knows that for some special reason, it is likely to induce the particular person to agree, even if a reasonable person would not.
112
What is justified reliance?
A party is not entitled to relief if the reliance was unreasonable under the circumstances.
113
Can innocent parties rescind agreement and recover damages?
Yes, and may do so affirmatively.
114
What happens if there is an absence of consideration?
If the promises exchanged at the formation stage lack the elements of bargain or legal detriment, no contract exists
115
Can a contract be voided because of illegality?
Yes, if the consideration or subject matter of a contract is illegal.
116
Are there exceptions to a contract being void because of illegality?
1. the plaintiff is unaware of the illegality while the defendant knows of the illegality
2. the parties are not in pari delicto (one party is not as culpable as the other)
3. the illegality is the failure to obtain a license
If it was for an illegal purchase, the contract is voidable by one unaware of the purpose or not facilitating it.
117
What is unconscionability?
Court's ability to modify or refuse to enforce an entire contract or a provision
118
Are risk shifting clauses okay?
No, they are inconspicuous or incomprehensible
119
Are adhesion contracts okay?
Courts will deem a clause unconscionable and unenforceable if the signer is unable to procure the necessary goods from any seller without agreeing to a similar provision
120
Are exculpatory clauses okay?
An exculpatory clause releasing a contracting party from liability for their own intentional wrongful acts is usually found to be unconscionable because sucha clause is against public policy.
May also be for negligent acts.
121
Can a contract limit remedies?
A contractual clause limiting liability for damages to property generally will not be found unconscionable unless it is inconspicuous
122
When does an act have to be unconscionable for it to be at issue?
Unconscionability is determined by the circumstances as they existed at the time the contract was formed.
123
What is the statute of frauds?
Certain contractual agreements must be evidence by a signed writing in order to be binding.
124
What kinds of agreements are covered by the Statute of Frauds?
MY LEGS!!
125
Are promises in consideration of marriage okay?
Yes, but it must be evidened by a writing. This applies to promises that induce marriage by offering something of value.
126
Are performances not within one year of the date of contract okay?
Yes, subject to statute of fraud.
Only if by its terms it cannot be completed within that year.
127
Do land contracts need a signed writing?
Yes, the following need a signed writing:
1. sale of real property
2. lease for more than a year
3. easements for more than a year
4. mortgages and other security liens
5. fixtures
6. minerals or structures
128
What things do not create an interest in land?
Contracts to build a building or to find a buyer for a seller
129
What about effect of performance on contracts?
Full performance by the seller will take the contract out of the Statute of Frauds. Part performance by the buyer may also remove the contract from the Statute.
130
Can an executor or administrator promise personally to pay estate debts?
Yes, but it must be evidenced by a signed writing
131
Can you have a contract for goods at $500 or more?
Obviously. Needs a signed writing though.
Unenforceable beyond the quantity of goods shown in the writing.
132
Can you promise to pay for the debt of another? (suretyship?)
Yeah, but you have to follow the Statute of Frauds.
133
What happens if you don't comply with the statute of frauds?
It renders the contract unenforceable at the option of the party to be charged.
134
When can a written contract be modified if it is subject to the statute of frauds?
When it is also in writing. Unless a contract as modified pulls it out of the statute of frauds.
135
Can you orally modify a contract at common law?
Yeah, unless it expressly provides that it must be so.
136
Can you modify a contract clause under the UCC?
Yes, but probably has to be in a signed writing.
If the contract is between a merchant and non-merchant, the provision requires the nonmerchant's separate signature.
137
Can parties orally modify a written contract?
Can be waived.
138
Land Sale Contracts
The seller can enforce the buyer's oral promise to pay if the seller has conveyed the property to the buyer.
Part performance can be evidenced by two of the following:
possession
payment in whole or in part
valuable improvements
139
How can one sue for land sale contract violations?
For specific performance.
140
What is required for a services contract?
an oral contract that cannot be completed in one year but has been fully performed by one party is enforceable.
141
What are the part performance rules for sale of goods?
1. when the goods have been specially manufactored or
2. the goods have either been paid for or accepted.
142
When is a writing not required but a contract is still enforceable?
1. If goods are to be specially manufactured for the buyer and are not suitable for sale to others in the ordinary course of business, the contract is enforceable if the seller has made a substantial beginning in their manufacture or commitments for their purchase
2. if a party against whom enforcement is sought admits in pleadings, testimony, or court that the contract for the sale was made.
3. Merchant's Confirmatory Memo Rule
143
What is a merchant's confirmatory memo?
A contract between merchants sends to the other a written confirmation of the understanding that an oral contract is sufficient under the statute of frauds, it will also bind the recipient if: 1. they have a reason to know of the confirmation's contents and 2. they do not object to it in writing within 10 days.
144
What is equitable and promissory estoppel in terms of the statute of frauds?
Estoppel may be applied if it would be inequitable to allow that Statute to defeat a meritorious claim.
145
What is the effect of a judicial admission in terms of the statute of frauds?
If a party admits in pleadings or testimony that there is an agreement, it is treated the same as though the party signed a writing.
146
Do electronic signatures constitute a writing?
Yes
147
Does the statute of frauds require a formal written contract?
No, it only requires the following:
1. reasonably identify the subject matter of the contract
2. indicate that a contract has been made between the parties
3. state with reasonable certainty the essential terms
148
What is the parol evidence rule?
When the parties to a contract express their agreement in a writing with the intent that it embody the final expression of their bargain, the writing is an integration.
149
What is not part of a contract when looking at terms?
Any other expressions--written or oral--made prior to the writing, as well as any oral expressions made contemporaneous with the writing, are inadmissible to vary the terms of the writing.
150
Is the writing an "integration" ?
1. Is the writing intended as the final expression of the agreement?
2. Is the integration intended to be complete or partial?
151
What is partial integration?
If an integration is partial, the writing may not be contradicted by may be supplemented by proving consistent additional terms.
The UCC presumes allw ritings are partial integrations.
152
Can an integration be contradicted or supplemented?
Not if the integration is complete.
153
What is the merger clause?
A merger clause recites that the agreement is the complete agreement between the parties. It is one factor in determining integration.
154
Can you have any extrinsic evidence to describe the terms of a contract?
Other forms of extrinsic evidence may be admitted if it will not seek to vary, contradict, or add to an integration.
155
Can a party attack the validity of the agreement?
Yeah, if they think the agreement never came into being.
156
When can a party attach the validity of an agreement by alleging it never came into being?
Formation defects
Condictions precedent to effectiveness
157
What is a condition precedent to effectiveness?
If a party asserts that there was an oral agreement that the written contract would not become effective until a condition occurred, all evidence of the understanding may be offered and received.
158
Naturally Omitted Terms Doctrine
The Restatement of Contracts allows evidence of terms that would naturally be admitted from the written agreement. These may be if:
1. it does not conflict with the written integration
2. it concerns a subject that similarly situated parties would not ordinarily be expected to include
159
Can you use parol evidence for interpretation ?
Yes, if there is uncertainty or ambiguity in the written agreement's terms or a dispute as to the meaning of those terms.
160
What is true consideration?
The parol evidence rule will not bar extrinsic evidence showing true consideration paid, such as evidence that the consideration stated in the contract was never paid)
161
What is reformation?
If a party to a written agreement alleges facts entitling him to reformation of the agreement, the parol evidence rule is inapplicable.
162
Can parol evidence be offered to show subsequent modifications of a written contract?
Yes
163
What about additional terms under Article II?
Article II generally provides that a party cannot contradict a written contract but may add consistent additional terms unless (1) there is a merger clause or (2) the courts find from all the circumstances that the writing was intended as a complete and exclusive statement of the terms of the agreement.
164
General rules of contract construction
1. Contracts will be construed as a "whole"
2. The courts will construe words according to their ordinary meaning unless it was clear they were meant to be used in a technical sense
3. if provisions appear inconsistent, written or typed provisions will prevail over printed provisions
4. the court generally will try to reach a determination that the contract is valid and enforceable
5. ambiguities in a contract are construed against the party preparing the contract
6. the parties' course of dealing
7. a usage of trade
8. the parties' course of performance
9. when rules conflict: express over all; course of performance over course of trade; course of dealing over usage of trade
165
What are appropriate provisions where a court may fill in a gap?
Price
Place of Delivery
Time for Shipment or Delivery
Time for Payment
Assortment
166
What is an express warranty?
Any affirmation of fact or promise made by the seller to the buyer, any description of the goods, and any sample or model creates an express warranty if the statement, description, sample, or model is part of the basis of the bargain.
167
What is the implied warranty of merchantability?
Implied in every contract for sale by a merchant who deals in goods of the kind sold, there is a warranty that the goods are merchantable.
168
What does it mean for goods to be merchantable?
Fit for the ordinary purpose for which such goods are used.
169
Does a merchant have to have knowledge of the defect in order to assert the implied warranty of merchantability?
Nope, it is based on absolute liability
170
What is the implied warranty of fitness for a particular purpose?
A warranty will be implied in a contract for the sale of goods whenever (1) any seller, merchant or not, has reason to know the particular purpose for which the goods are used and the buyer is relying on the seller's skill and judgment to select suitable goods; and (2) the buyer in fact relies on the seller's skill and judgment.
171
What is a warranty of title?
The title transferred must be good, rightful, and there are no liens or encumbrances against the title of which the buyer is unaware at the time of contracting.
This arises automatically.
172
What is the warranty against infringement?
A merchant seller who deals in goods of a kind automatically warrants that the goods are delivered free of any patent, trademark, copyright, or similar claims. A buyer who furnishes specifications for goods must hold the seller harmless against such claims.
173
Can you disclaim the warranty of title?
Yes, only by specific language or circumstances that give the buyer notice that the seller does not claim title or that they are selling only such rights as they or a third party may have.
174
Can you disclaim the implied warranty of merchantability?
It may be disclaimed or modified only by mentioning merchantability. If the sales contract is in writing, the disclaimer must be conspicuous.
175
Can you disclaim a warranty of fitness for a particular purpose?
Only in a conspicuous writing.
176
What does conspicuous mean?
When a term is so written, displayed, or presented that a reasonable person against whom it is to operate ought to have noticed it.
1. larger in type than surrounding text
2. in a contrasting type, font, or color
3. set off from text by marks that call attention to it.
177
What is something is sold "as-is"?
Can disclaim warranty of merchantability under UCC
178
Can a buyer examine away his warranty of merchantability?
Yes, if he examines the goods ora sample or model as fully as they desire or has refused to examine so.
179
When can a disclaimer be applied?
To be effective, it must be agreed to during the bargaining process.
180
Is clickwrap enforceable?
Yeah
181
What are damages for breach of warranty?
The difference between the value of the goods accepted and the value of the goods as warranted, measured at the time and place of acceptance.
182
What happens if the warranty of title is breached?
the goods are reclaimed by the true owner or lienholder, thus dispossessing the buyer. The buyer can rescind the contract, revoke acceptance, or sue for damages.
183
What happens if there is an appreciation or depreciation?
Measure the value of goods at the time of disposession, not acceptance.
184
To whom do warranties extend?
Any natural person who is in the family or household of the buyer or who is a guest in the buyer's home if it is reasonable to expect that the person may use, consume, or be affected by the goods and that person suffers personal injury because of the breach
185
When does the risk of loss pass to the buyer when there are defective goods?
Risk of loss doesn't pass to the buyer until the defects are cured or the buyer accepts the goods in spite of their defects.
A buyer does have a right to reject these though.
186
Where is the risk of loss if the buyer revokes acceptance?
Treated as having been rested on the seller from the beginning to the extent of any deficiency in the buyer's insurance coverage.
187
Who has risk of loss when the goods will not be moved by a common carrier?
If the seller is a merchant, risk of loss passes to the buyer only when they take physical possession of the goods. If the seller is not a merchant, risk of loss passes to the buyer upon tender of delivery.
188
Who has the risk of loss with a shipment contract?
Risk of loss passes to the buyer when the goods are delivered to the carrier.
189
What must a seller do under a shipment contract?
1. make a reasonable contract with the carrier on behalf of the buyer
2. deliver the goods to the carrier
3. promptly notify the buyer of the shipment
4. provide the buyer with any documents needed to take possession of the goods
190
Who has the risk of loss in a destination contract?
If the contract requires the seller to deliver the goods at a particular destination, the risk of loss passes to the buyer when the goods are tendered to the buyer at the destination.
191
What does FOB mean?
Free on Board [city name]
192
What does FAS mean?
Free alongisde (shipped by boat)
risk of loss passes once the goods are delivered to the dock.
193
Who bears the risk of loss in a sale or return?
a sale or return contract is treated as an ordinary sale adn teh rules above apply.
If they are returned to the seller, the risk remains on the buyer while goods are in transit.
194
What is a sale or return contract?
the buyer takes goods for resale but may return them if they are unable to resell the goods.
195
What is a sale on approval?
The buyer takes goods for use but may return them even if they conform to the contract.
196
Who bears the risk of loss for a sale on approval?
The risk of loss does not pass to the buyer until they accept.
197
What happens when goods are destroyed before risk of loss passes?
If goods that were identified when the contract was made are destroyed (1) without fault of either party and (2) before the risk of loss passes to the buyer, the contract is avoided.
If the goods were not identified until after the contract was made, the seller would have to prove impracticability.
198
Bilateral Contracts formed by performance
A contract may be formed by the parties' performance where the mirror image rule isn't satisfied and under certain circumstances under battle of the forms provision.
199
What is a party's duty at common law?
A party's basic duty at common law is to substantially perform all that is called for in the contract.
200
What is a party's duty under UCC Art. II?
Article II generally requires a perfect tender--the delivery and condition of the goods must be exactly as promised in the contract.
201
What is the obligation of good faith under Art. II?
Honesty in fact and the observance of reasonable commercial standards of fair dealing. This cannot be waived.
202
Seller's obligation of tendery of delivery
The seller must put and hold conforming goods at the buyer's disposition for a time sufficient for the buyer to take possession.
The seller must give the buyer notice reasonably necessary to enable the buyer to take possession of the goods.
It must be at a reasonable hour
203
Seller's obligation of place of delivery
In the absence of an agreement otherwise, the place of delivery generally is the seller's place of business or residence.
204
In shipment contracts, what happens if the seller has not agreed to tender at a particular destination?
The seller must:
1. put the goods into the hands of a reasonable carrier and make a reasonable contract for transportation to the buyer
2. obtain and promptly tender any documents required by the contract or usage of trade or otherwise necessary to enable the buyer to take possession, and
3. promptly notify the buyer of the shipment
205
In a destination contract, where the seller has agreed to tender at a particular destination
The seller must, at the destination, put and hold conforming goods at the buyer's disposition
206
When is payment due?
In a shipment case, the price is due when the goods are put in the hands of the carrier.
In a destination contract the price is due when the goods reach the named destination.
207
When are payments due for installment contracts?
In an installment contract, the seller may demand payment for each installment if the price can be so apportioned, unless a contrary intent appears.
208
What is the buyer's right of inspection?
The buyer has a right to inspect the goods before they pay unless the contract provides forpayment C.O.D. or otherwise indicates that the buyer has promised to pay without inspecting the goods.
209
Can you offer payment by check?
Payment by check is sufficient unless the seller demands cash and gives the buyer time to get it.
210
Is the duty to perform absolute?
A contract may provide that a party does not have a duty to perform unless some condition is fulfilled. In that case, the party's failure to perform is justified if the condition was not fulfilled.
211
What is the difference between a promise and a condition?
A promise does not have offer, acceptance, and consideration.
212
What is a promise?
A promise is a commitment to do or refrain from doing something.
213
What is a condition?
A condition means either (1) an event or state of the world must occur or fail to occur before a party has a duty to perform, or (2) an event or state of the world, the occurrence or nonoccurrence of which releases a party from their duty to perform.
214
Is the failure of a condition a breach of contract?
No, it does discharge the liability of the promisor whose obligations on the conditional promise never mature.
215
When do we know if it is a promise or a condition?
Look to the intent of the parties
216
What is an express condition?
An explicit contractual provision.
1. A party does not have a duty to perform unless X occurs or
2. if X does not occur, the obligation of a party to perform one or more of his duties under the contract is suspended or terminated.
217
Can a promisor's satisfaction be a condition precedent?
yep. The promisor is under no duty to pay unless they are satisfied.
218
What is the satisfaction standard for mechanical fitness, utility, or marketability?
One that would satisfy a reasonable person.
219
What is the satisfaction standard for personal taste or judgment?
Only if the promisor is personally satisfied. Must be honest and in good faith.
220
What is the standard for satisfaction of a third party as a condition?
Most courts require actual personal satisfaction of that third party.
The condition is excused if the third party's dissatisfaction is not honest and in good faith.
221
What is the standard when the purpose of the condition is to benefit one party?
The other party's duty will not be subject to the condition.
222
What is a condition precedent?
A condition that must occur before an absolute duty of immediate performance arises in the other party.
223
What is a condition concurrent?
Conditions that are capable of occuring togethers and would make the parties bound to perform at the same time.
224
What is a condition subsequent?
When it occurs, it cuts off an already existing absolute duty of performance.
225
What is the constructive condition of performance?
The duty of each party to render performance is conditioned on the other party either rendering their performance or making a tender for their performance.
226
What are constructive conditions of cooperation and notice?
Cooperation -- the obligation of one party to render performance is impliedly conditioned on the other party's cooperation in that performance.
notice -- to give a party when performance is due
227
What should happen if both performances can happen at the same time?
They are constructively concurrent; each is a "condition precedent" to the other.
Absent excuse, each party must first tender their own performance if they wish to put the other under a duty of immediate performance.
228
What should happen if one performance takes a different time?
If one performance will take a period of time to complete while the other can be rendered in an instant, completion of the longer performance is a constructive condition precedent to the execution of the shorter performance.
229
Are equitable remedies available?
Yes, such as estoppel.
230
Have conditions been excused?
A duty of immediate performance with respect to a conditional promise doesn't become absolute until the conditions
1. have been performed or
2. legall excused
231
Can you excuse conditions?
One having the benefit of a condition under a contract may indicate by words or conduct that they will not insist on that condition's being met. Consideration is not required for a valid waiver of condition.
232
What about estoppel waiver?
If someone detrimentally relied on waiver, teh courts will hold it to be a binding waiver.
The contract to waive may be retracted at any time before the other party has changed their position to their detriment.
233
What is election waiver?
When a condition doesn't occur or a duty of performance is broken, the beneficiary of teh condition or duty must make an election. They may,
1. terminate their liability
2. continue under the contract
Election waiver cannot be withdrawn.
234
What kinds of conditions may be waived?
If no consideration is given for the waiver, the condition must be ancillary or collateral to the main subject and purpose of the contract for the waiver to be effective.
You cannot waive entitlement to the entire or substantially entire return performance.
235
What about waiver in installment contracts?
If it isn't supported by consideration, the beneficiary of the waived condition can insist on strict compliance for future installments.
236
What are the rights to damages for failure to condition?
It is important to note that a waiver severs only the right to treat the failure of the condition as a total breach excusing counterperformance.
The waiving party does not waive right to damages.
237
Can you excuse a condition by actual breach?
An actual breach of the contract when performance is due will excuse the duty of counterperformance.
Only exclused at common law if the breach is material.
238
Can you excuse a contract by anticipatory repudiation?
If these requirements are met, anticipatory repudiation will serve to excuse conditions:
1. executory bilateral contract requirement with unperformed duties on both sides
2. anticipatory repudiation must be unequivocal
3. the non-repudiating party has 4 alternatives/
239
What are the alternatives for a non-repudiating party for excuse of a condition?
1. treat the anticipatory repudiation as a total repudiation and sue immediately
2. suspend their own performance and wait to sue until the performance date
3. treat the repudiation as an offer to rescind and treat the contract as discharged, or
4. ignore the repudiation adn urge the promisor to perform.
240
Can you retract repudiation?
Yes, any time before their next performance date UNLESS
the other party has cancelled, materially changed their position, or otherwise indicate they thought it final.
241
What is prospective failure?
When a party has reasonable grounds to believe that the other party will be unable or unwilling to perform when performance is due.
242
Prospective failure is not anticipatory repudiation
Prospective inability or unwillingness to perform is not unequivocal.
243
What is the effect of a prospective failure?
To allow the innocent party to suspend further performance on their side until they receive adequate assurances that performance will be forthcoming.
244
Can you retract repudiation?
Yes, if the defaulting party regains their ability or willingness to perform.
245
Can you excuse conditions by substantial performance?
Yes
246
How do you determine substantiality of performance?
Same as determining the materiality of the breach.
247
Will courts apply substantial performance when the breach is willful?
No
248
Can damages be offset if there is substantial performance?
they can mitigate by deducting damages.
249
Does substantial performance apply to goods?
Not really
250
What is a divisible contract?
Three tests must be concurrently satisfied:
1. the performance of each party is divided into two or more parts under the contract
2. the number of parts due from each party is the same
3. The performance of each part by one party is agreed on as the equivalent of the corresponding part from the other party
251
Is a contract divisible under Article II?
Usually the same.
252
Can conditions be excused by impossibility, impracticability, or frustration?
Yes
253
When does the absolute duty to perform get discharged?
Once it is determined that a party is under an immediate duty to perform, the duty to perform must be discharged.
254
What is the easiest way to discharge a contract?
Full and complete performance.
255
What happens to a contract when the occurrence of condition subsequent arises?
The contract is discharged
256
Can a contract be discharged by illegality?
Yes
257
What is rescission?
Rescission will serve to discharge contractual duties. IT may be mutual or unilateral.
If it is mutual, there must be an express agreement.
The duties must be executory on both sides
258
What about rescission for unilateral contracts?
It needs to have the following:
1. an offer of new consideration
2. elements of promissory estoppel or
3. manifestation of an intent by the original offeree to make a gift of that obligation
259
When will a mutual agreement to rescind be enforced when a bilateral contract has been partially performed?
Yes
260
Can mutual rescissions be made orally?
Yes
261
Can mutual rescission apply to third-party beneficiaries?
If the rights of the third-party have already vested, it cannot be discharged by mutual rescission.
262
What happens if a contract is subsequently modified by the parties?
It will not discharge the entire contract. It discharges the terms of modification.
263
Does destruction or surrender of a written contract count as discharge?
No, unless both parties intend it to be.
264
Can a party release the other from the contract and promise not to sue?
Yes, but must be in writing and supported by new consideration or promissory estoppel elements.
265
Can you discharge by substituted contract?
Yes. Intent governs.
266
Can you discharge by accord and satisfaction?
Yes
267
What is an accord?
an agreement in which one party to an existing contract agrees to accept, in lieu of performance some other future performance.
268
What is satisfaction?
Performance of the accord agreement
269
Does an accord have to be supported by consideration
Yes
270
What is discharge by novation?
When a new contract substitutes a new party to receive benefits adn assume duties that had originally belonged to one of the original parties under the terms of the old contract. The old contract is discharged.
271
What are the elements for a valid novation?
1. previous valid contract
2. agreement among all parties to the new contract
3. immediate extinguishment of contractual duties between original parties
4. a valid and enforceable new contract
272
What is discharge by impossibility?
Impossibility must be "objective"
Impossibility must arise after the contract has been entered into.
Effects ==> each part is excused from duties arising under the contract that are yet to be fulfilled.
273
What is partial impossibility?
The duty may be discharged only to that partial extent
274
Does temporary impossibility matter?
It suspends contractual duties, it does not discharge them. They can spring back
275
What happens if there is part performance prior to impossibility?
If a party partially performed before the impossibility arose, that party will have a right to recover in quasi-contract.
276
What happens if somebody important dies?
In the death or physical incapacity of a person necessary to effectuate the contract discharges it.
277
What if there is supervening illegality?
May discharge
278
What about subsequent destruction of the contract's subject matter or means of performance?
Contractual duties will be discharged.
279
What happens in a contract to build?
A contractor's duty to construt a building is not discharged by destruction of the work in progress.
280
What level of specifity is required about discharge?
if the very thing itself is destroyed
if a source necessary is destroyed
if risk of loss has already passed to buyer
281
What is discharge by impracticability?
If it is
1. extreme and unreasonably difficult and/or expensive
2. its nonoccurrence was a basic assumption of the parties.
282
Contracts for sale of goods --> impossibility and impracticiability
same as common law
283
What about events sufficient to excuse performance include a shortage of raw materials?
Discharge
284
What about partial inability to perform?
Must allocate delivieries
285
What is discharge by frustration?
1. some supervening act or event leads to frustration
2. the parties did not reasonably foresee this when entering into the contract
3. purpose of the contract is almost completely destroyed
4. the purpose of the contract was realized by both parties at the time of making the contract.
286
What is discharge by account stated?
When parties agree as to the final balance due
287
What is discharge by lapse?
If neither party does the thing, neither is in breach if they were supposed to be concurrent.
288
What about the statute of limitations?
No more breach of contracts.
289
When does a breach occur?
When it is found that
1. the promisor is under an absolute duty to perform and
2. this absolute duty of performance has not been discharged.
The non-breaching party must show they are willing and able to perform but for the breaching party's actions
290
What do courts look at to determine if a breach is material?
1. amount of benefit received by non-breaching party
2. the adequacy of compensation for damages to the injured party
3. the extent of part performance by the breaching party
4. hardship to the breaching party
5. negligent or willful behavior of the breaching party AND
6. the likelihood that the breaching party will perform the remainder of the contract.
291
What is the effect of a minor breach?
A breach is minor if the obligee gains the substantial benefit of the bargain.
A minor breach does not relieve the aggrieved party of their duty of performance, but they may recover damages.
292
What is the effect of a material breach?
If the obligee does not receive the substantial benefit of their bargain, the breach is material.
The nonbreaching party may 1. treat the contract as at an end or 2. will have an immediate right to all remedies for breach of the entire contract, including total damages.
293
What is the effect of a minor breach coupled with anticipatory repudiation?
The non-breaching party may treat it as a material breach.
The UCC permits a party to complete the manufacture of goods to avoid having to sell unfinished goods at a lower salvage price.
294
What is the effect of a material breach of a divisible contract?
Recovery is available for substantial performance even though there has been a material breach.
295
Does failure to perform by the stated time in the contract constitute a material breach?
No, if the performance is rendered within a reasonable time.
Exception: if the timeliness is essential, or if the contract states that time is of the essence, it may be a material breach.
296
What is the perfect tender rule?
If goods or their delivery fail to conform to the contract in any way, the buyer generally may reject all, accept all, or accept any commercial units and reject the rest.
