Contracts and Sales Flashcards
(460 cards)
What is a contract? General definition:
A contract is 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.
Common Law vs. Article 2 Sale of Goods: defined
Generally, the common law governs contracts. However, special rules have been developed for contracts involving the sale of GOODS, and those rules are contained in Article 2 of the UCC. Article 2 has adopted much of the common law of contracts, but where the common law and Article 2 differ, Article 2 prevails in a contract for the sale of goods.
“Sale” defined
A sale is a contract in which title to GOODS passes from the seller to the buyer for a price.
“Goods” defined
Article 2 defines “goods” as all THINGS MOVABLE at the time they are identified as the goods to be sold under the contract. Thus, Article 2 applies to sales of most tangible things, but does not apply to the sale of real estate, services, or intangibles, or to construction contracts. Goods associated with real estate (e.g., growing crops and uncut timber, and fixture removed from the land) MAY fall under Article 2 under certain circumstances.
Contracts involving Goods and Nongoods
If a sale involves both goods and services (e.g., contract to paint a portrait), a court will determine which aspect is dominant and apply the law governing that aspect to the whole contract. However, if the contract divides payment between goods and services, then Article 2 will apply to the sale portion and the common law will apply to the services portion.
Merchants v. Nonmerchants
A number of the rules of Article 2 depend on whether the seller and/or buyer are merchants. Article 2 generally defines “merchant” as one who regularly deals in goods of the kind sold or who otherwise by his profession holds himself out as having special knowledge or skills as to the practices or goods involved. For many of the ARticle 2 provisions dealing with general business practices (e.g., Statute of Frauds, confirmatory memos, firm offers, modification), almost anyone in business can be deemed a merchant. However, a few Article 2 provisions (e.g., the implied warranty of merchantability) are narrower and require a person to be a merchant with respect to goods of the kind being sold.
Types of Contracts: As to Formation
Contracts are frequently described as express, implied, or quasi. Only the first two are actually contracts, and they differ only in the manner in which they are formed.
Express contract:
formed by LANGUAGE, oral or written.
Implied in Fact Contract:
formed by manifestation of assent other than oral or written language, i.e., BY CONDUCT (e.g., if a person sits in a barber’s chair and the barber cuts his hair, a contract has been formed by the parties’ conduct).
Quasi-Contract or Implied in Law Contract:
NOT CONTRACTS AT ALL. They are constructed by courts to AVOID UNJUST ENRICHMENT by permitting the plaintiff to bring an action in restitution to recover the amount of the benefit conferred on the defendant. Their only relationship to genuine contracts is historical.
Types of Contracts: As to Acceptance (list)
bilateral or unilateral
Bilateral Contracts:
EXCHANGE OF MUTUAL PROMISES
The traditional bilateral contract is one consisting of the exchange of mutual promises, i.e., a promise for a promise, in which each party is both a promisor and promisee.
Unilateral Contracts:
ACCEPTANCE BY PERFORMANCE
The traditional unilateral contract is one in which the offeror request performance rather than a promise. Here, the offeror-promisor promises to pay upon the COMPLETION OF THE REQUESTED ACT by the promisee. Once the act is completed, a contract is formed. In such contracts, there is one promisor and one promisee.
Modern View: Most contracts are ____.
Bilateral.
Under A2 and R2, unless clearly indicated otherwise by the language or circumstances, ALL offers are “doubtful” or “indifferent” offers, which means they may be accepted by promising or beginning performance.
Modern View: Unilateral Contracts Limited to Two Circumstances
Under A2 and R2, a traditional unilateral contract (i.e., a contract that can only be formed by full performance) occurs in only two situations:
- where the offeror clearly (unambiguously) indicates that COMPLETION OF PERFORMANCE IS THE ONLY MANNER OF ACCEPTANCE–the offeror is the master of the offer and may create the offer in this fashion; and
- where there is an OFFER TO THE PUBLIC, such as a reward offer, which so clearly contemplates acceptance by performance rather than a promise that only the performance requested in the offer will manifest acceptance.
Types of Contracts: As to Validity
- Void contract
- Voidable contract
- Unenforceable contract
Void contract:
A void contract is one that is totally WITHOUT ANY LEGAL EFFECT from the beginning (e.g., an agreement to commit a crime). It CANNOT BE ENFORCED BY EITHER PARTY.
Voidable contract:
A voidable contract is one that one or both parties may ELECT TO AVOID (e.g., by raising a defense that makes it voidable, such as infancy or mental illness.)
Unenforceable Contract:
An unenforceable contract is an agreement that is otherwise valid but which may not be enforceable due to VARIOUS DEFENSES extraneous to contract formation, such as the statute of limitations or Statute of Frauds.
Creation of a Contract: what three questions will a court ask to determine whether there was in fact a contract?
- Was there mutual assent?
- Was there consideration or some substitute for consideration?
- Are there any defenses to creation of the contract?
Mutual Assent–Offer and Acceptance: in general
Mutual assent is often said to be an agreement on the “same bargain at the same time”–“a meeting of the minds.” The process by which parties reach this meeting of the minds generally is some form of negotiation, during which, at some point, one party makes a proposal (an offer) and the other agrees to it (an acceptance). An actual subjective meeting of the minds is not necessary. Rather, courts use an OBJECTIVE MEASURE, by which each party is bound to the APPARENT INTENTION that he manifested to the other(s).
The Offer:
An offer creates a power of acceptance in the offeree and a corresponding liability on the part of the offeror. For a communication 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. In deciding whether a communication creates this reasonable expectation, you should ask the following 3 questions:
- Was there an expression of a PROMISE, UNDERTAKING, OR COMMITMENT to enter into a contract?
- Were there CERTAINTY AND DEFINITENESS in the essential terms?
- Was there COMMUNICATION of the above to the offeree.
The Offer: Promise, Undertaking, or Commitment
For a communication to be an offer, it must contain a promise, undertaking, or commitment to enter into a contract, rather than a mere invitation to begin preliminary negotiations; i.e., there must be an INTENT to enter into a contract. The criteria used to determine whether communication is an offer include the following:
- language
- surrounding circumstances
- prior practice and relationship of the parties
- method of communication
- industry custom
The Offer: Promise, Undertaking, or Commitment–LANGUAGE
The language used may show an offer was or was not intended. Technical language such as “I offer” or “I promise” is useful to show that an offer was made, but it is not necessary. Also, certain language is generally construed as merely contemplating an invitation to deal, preliminary negotiations, or “feelers,” rather than being an offer. This includes phrases such as “I quote,” “I am asking $30 for,” and “I would consider selling for.” No mechanical formula is available.