Flashcards in Contracts and Sales Deck (69):
A contract formed by language, oral or written.
Implied in Fact Contract
A contract form by conduct is an implied in fact contract.
Not a contract at all. It is a remedy that allows a plaintiff to recover a benefit unjustly conferred upon the defendant, a remedy to prevent unjust enrichment.
There is one one promise, which is given in exchange for performance.
Two promises given in exchange for performance.
Elements of a contract
1) An agreement made up of an offer and an acceptance
2) An exchange of consideration
3) A lack of defenses
Offer and Acceptance
Offer is a statement made by an offeror that creates the power of acceptance in the receiver offerree.
Advertisments not considered offers.
Termination of offer
An offer must be accepted before it is terminated. An offer can be terminated via revocation or rejection.
General rule is that offeror can revoke an offer any time before acceptance. Revocation can be direct or indirect.
Limitation on Offeror's Power to Revoke
1) Option Contact-a distinct contract in which the promisor promises to keep an offer open in exchange for consideration from the promissee
2) Unilateral Contracts- If an offeror makes an offer to enter into a unilataral contact and the offeeree begins to perform, the offeror cannot revoke and must give the offeree a reasonable time to complete performance.
3) Merchant's Firm Offers under UCC Sales- Certain written offers by merchants are irrevocable under the UCC.
Rejection by Offeree
Offeree can terminate the offer by rejecting. Once the offer is effectively rejected, it cannot be accepted. Either express rejection or counteroffer is a method of rejection.
Termination by Operation of Law
1) Termination by Death or Incompetency of Parties
2) Termination by Destruction of Subject Matter
3) Termination by Illegality
1) Only the person to whom the offer was made may accept.
2) Acceptance may be made in any manner reasonable under the circumstances
3) Acceptance follows the mirror image rule, which requires an acceptance to mirror the offer to be effective.
4) Mailbox rule- Acceptances are generally effective when they are dispatched.
Elements of Consideration
1) Must be something of legal value given by each party and there must be a bargained for exchange.
2) Legal value constitutes either a detriment to the promissee or a benefit to the promisor.
3) Need not have monetary value
4) Need not flow to party
5) Courts will not inquire into the adequacy of the contract.
6) Preexisting legal duties generallly not sufficient
Detrimental Reliance/Promissory Estoppel
A promise made by one party and detrimentally relied upon by another can be enforced without consideration. For the doctrine to apply the promise must be reasonably relied upon and detrimental.
1) A misrepresentaion of material fact by the defrauding party.
2) Scienter-defrrauding party knew that the statement was false or that the defauding party made it with a reckless disregard for the truth.
3) The defrauding party intended to induce the victim to rely on the misrepresentation
4) Actual and justifiable reliance by the victim on the misrepresentation
Fraud in the Execution and Fraud in the Inducement
Fraud in the Execution occurs when a party is deceived into signing something that he does not know is a contract.
Fraud in the Inducement- The defrauded party is aware she is making a contract, but terms are materially misrepresented.
Has all elements of fraud except scienter.
Arises when a party's free will to contract is overcome by an unlawful use of a threat of harm.
A party's free will to contract is overcome by the defendant's abuse of a position of trust or confidence.
If both parties to a contract are mistaken as to a material fact regarding the contract, the adversely affected party can avoid the contract.
Unilaterial mistakte as to a material fact is a defense if the other party knew or should have known of the mistake.
Minors may Generally Disaffirm Contracts
May disaffirm a contract at anytime while a minor or even within a reasonble time after becoming an adult. Contracts for Necessities of life are an exception to this rule.
Allowed only if the intoxication prevents the promisor from knowing the nature and significant of his or her promise and the other party knew of the impairement.
A party who mental capacity is so deficient that she is not capable of understanding the nature and significant of the contract can be disaffirmed.
Statute of Limitations
1) Usually 4 to 6 years
2) Measure from Date of Breach
Six Contracts Requiring Writing
1) Contracts where the consideration is marriage
2) Contracts which by their terms cannot be performed within a year
3) Contracts involving interests in land
4) Contracts by executors or similiar respresentives to pay estate debts out of personal funds
5) Contracts for the sales for $500 or more
6) Contracts to act as surety (to pay the debt of another)
An event occurs that will make performance of the contract impossible, impossibility is available as a defense.
Accord and satifisfaction and substituted contract
An accord is an agreement to substitute one contract for another and satisification is the execution of the accord. Accord and satisifcation discharge the original duty.
Available as a defense to a party who has been released from a contract. Occurs when a new contract substitutes a new party for an old party in an existing contract.
Prevention of Performance is a Breach
If one party prevents the other from performing contract duties, a material breach has occured. The nonbreaching party is excused from performance.
Parol Evidence Rule
Prohibits the following:
1) A party in a lawsuit involving a fully integrated written contract
2) From introducing evidence at trial of;
3) Oral or written statements made prior to the written contract or oral statements made contemporaneously with the written contract.
4) That seek to vary the terms of the written contract.
Material or Substantial Breach
Nonbreaching party can be discharged from contract. If the breach is only minor, the nonbreaching party is not discharged by entitiled to damages.
One party indicates in advance of performance to another that the duties will not be performed.
1) Treat as breach immediately sue for damages
2) Await time for performance and then sue if performance has not been performed.
3) Cancel contract
Awards the nonbreaching party enough money to obtain substitute performance.
Used with land or unique items.
Essentially a court order that the breaching party perform or face contempt charges.
Cannot be used to force a party to perform personal service contracts.
If specific performance is available, a party can receive either specific performance or compensatory damages, but not both.
Clause in a contract that specifies what damages will be if there is a breach. A liquidated damage clause is enforceable if the amount is reasonable in relation to the actual harm done and not considered a penalty.
Generally are no available for breach of contract. They are available for fraud.
Rescission or Cancellation
Cancels the contract and restores the parties to their former position. Rescission or cancellation is available for mutual or unilateral misstakes, fraud and most material contract breaches.
Parties are discharged from a contract and one party has already bestowed a benefit on the other, the court will imply a promise to return the value of their performance to prevent unjust enrichment.
Goods-Moverable Personal Property
UCC Sales Article applies to the sale of goods, which is defined as all things movable, which includes most tangible property.
1) Contracts for personal services and real estate;
2) Contracts for intangible personal property
3) Contracts for fixtures
Deals in goods of the kind sold
Obligation of Good Faith
UCC Imposes an obligation of good faith on both parties to a sales contract.
Offer-Merchant's Firm Offer
1) Seller must be a merchant
2) Offer must be in writing and signed by the merchant
3) Offer must give assurances it will be kept open for a certain time
1) Mirror Image Rule Does not Apply Under UCC
2) Promise to Ship or Prompt Shipment-Valid Acceptance
Under the UCC a specific quantity must be stated in a sales contract. An exception is made for output and requirement contracts.
Modifications Enforcable without Consideration
Modification of a contract for the sale of goods is enforceable, even without consideration, as long as the modification is sought in good faith.
Fraud under UCC
Under UCC a defrauded party may either sue for damges or seek recisssion. Under the Sales Article, the contract may be rescinded and sue for money damages.
Statute of Frauds
Contracts for sale of goods for $500 or more must be evidenced by a writing signed by the party except for:
1) Contracts for specifically manufactered goods.
2) Where a merchant sends another merchant a written confirmation of a contract that is sufficient to bind the sender, it will also bind the receipient if she does not object within 10 days.
3) Contracts that the parties have admitted in court
4) Contracts that have been performed.
Statute of Limitations
UCC statute of limitation of 4 years.
Impossibility and Impracticallity
Contract is objectively impossible to perform-contract is discharged. Under the sales article, a contract will be discharged for mere impracticality
Delivery and Risk of Loss
Goods that are damaged or destroyed after risk of loss has passed to the buyer, the buyer is not discharged from the contract; rather he still must pay the contract price.
Risk of loss to pass
For risk of loss to pass goods must be identified.
As parties agree
Most important rule is that if the parties designate when and where the delivery will occur or risk of loss will pass , their agreement governs.
In noncarrier cases the buyer will use pick up the goods at the seller's place of business.
In carrier cases the parties contemplate a common carrier will be used to ship the goods.
Risk passes on tender of delivery
Risk passes on actual delivery
Free Along Side
F.A.S.- term that requires the seller to deliver the goods along side of a specified vessel. Risk of loss passes to the buyer when the seller gets the goods along side the vessel.
Cost, Insurance and Freight
Term CIF means the contract price includes the cost of the goods, insurance and freight. Risk of loss is on buyer during shipment.
Free on Board
FOB-Free on Board,
FOB sellers place is a shipment contract -Seller must get the goods to the carrier for risk of loss to pass. FOB buyers place is a destination contract.
FOB buyers place is a destination contract. Seller must get the goods to the destination contract. Seller must get the goods to the destination and tender delivery for risk of loss to pass.
Effects on Breach on Risk of Loss
If seller sends nonconforming goods, risk of loss remains on the seller, regardless of the shipping terms.
Insuranble Interest when Goods are Identified
UCC provides the buyer with an insurable interest in goods as soon as the seller identifies the goods to the contract.
Title can pass at the time and place the parties agree, but before title can pass, the goods must be identified to the contract. If parties don't agree, title passes upon delivery.
Express warranty will rise from any statement of fact or promuse made by the seller. Can be made by any seller and may be oral or written. Any seller can make an express warranty; it is not limited to merchants. Express warrantiess are very difficult to disclaim
Implied Warranty of title.
Implied warrantly that the seller has good title and the right to transfer that title.
Warranty of title and the warranty against encumbrances are made automatically by every seller unless disclaimed.
Implied warranty can only be disclaimed by specific language or by circumstances that indicate the seller is not guaranteeing he has title.
Implied Warranty of Merchantability
The warranty implied in every sale that the goods are fit for ordinary purposes. No writing or oral promise is required. Made only by merchants.
Implied Warranty of Fitness for Particular Purpose
When the buyer relies on any seller to select goods suitable for the buyer's particular purpose. Seller must know of the particular purpose and that the buyer is relying on him to select the goods.
Negiligence-Failure to use reasonable care
Must prove the following.
1) Seller owed them a duty of care
2) Seller breached the duty by failing to use due care
3) Damages-the plaintiff suffered damages
Strict Products Liability
Must prove the following
1) Product was defective when it left seller's hands
2) Defect caused the plaintiff's injury
3) Defect made the product unreasonably dangerous
4) Seller was in the business of selling this type of goods
5) The product reach the user without substantial change in condition.
1) Cancel and Sue for Damages
2) Withhold Delivery and Stop Goods in Transit
3) Resell goods and sue for damages.
4) Seller's Right to Full Contract Price
5) Liquidated Damages-Must be Reasonable