Contracts (DONE?) Flashcards

Question

Formation Defense - LOC/Time Barred Debt

Answer 1

A written promise to pay a debt, collection of which is barred by statute of limitations, is enforceable EVEN WITHOUT consideration.

Answer 2

Foreseeable reliance on a promise may make a promise enforceable EVEN without consideration. (Only the right answer if there is NO consideration.)

Answer 3

If a K is within the SOF, then a writing is required. (Watch out for "ORAL AGREEMENT", checking if it's enforceable in the absence of a writing) SOF Equal Dignities Rule: If the underlying transaction requires a writing, then the agent's authority regarding the transaction must be in writing as well. When a writing is required: - Transfer of an Interest in Real Property (purchase, leases, easements, mortgages) - Performance cannot be completed within a year (as long as full performance within a year of the K's formation is theoretically possible, no writing is required by the SOF) - Sale of goods under Article 2 for $500 or more - Lease of goods under Article 2A for $1000 or more (TEXAS ONLY) - Suretyship - Contract modification Steps: 1) Do you need a writing at all? 2) Do you have a writing that satisfies SOF against the Defendant? 3) If not, do you fall within the exceptions?

Answer 4

If the underlying transaction requires a writing, then the agent's authority regarding the transaction must be in writing as well.

Answer 5

Writing required: - For sale of goods of $500 or more (Article 2) - For lease of goods of $1000 or more (Article 2A)

Answer 6

A promise to answer for the debt of another is required to be in writing under the SOF.

Answer 7

A contract modification must be in writing ONLY IF the contract as modified (not the original K) is within the SOF. Private SOF - parties are allowed to include a clause that prohibits oral modification. Under common law, clauses that prohibit oral modification are NOT ENFORCEABLE so you can always modify a K under common law, even if you have agreed not to.

Answer 8

Article 2 Satisfactory Writings 1) Must contain a quantity term 2) Be signed by the party to be charged with breach (i.e., defendant, to make sure plaintiff isn't making it up) Other Contracts 1) Must have all material terms 2) Signed by defendant (not as broad as A2)

Answer 9

(Generally carved out where there is less chance of fraud) Real property - legislative - Leases of one year or less do not require a writing. This is a legislative exception because the legislature knows many of these leases occur without a writing. "Part Performance" - judicial - Requires 2/3 of these: some payment, possession, permanent improvements One-Year Prong: Full Performance Sale of Goods for $500 or More (Article 2)------------- - Goods accepted or paid for by Buyer - Applies only to those goods that Buyer has accepted or paid for. - Does not apply to the entire K! Custom goods - A substantial beginning on custom goods that are not suitable for sale to others. Judicial Admission - Admitting in legal proceeding that there was a K Merchant's Confirmatory Memo *** - A party's own signed writing can satisfy the SOF against the other party if: 1) both parties are merchants 2) writing claims agreement/has quantity, and 3) there's no written objection within 10 days Main Purpose Exception - When the surety's main purpose of making the promise was to benefit herself.

Answer 10

Keeps out evidence of a prior or contemporaneous agreement (either oral or written) that contradicts a later writing. PER assumes that a later writing is more important than anything that came before. Distinct from SOF = PER requires a writing ALREADY in existence. SOF involves oral agreements. LATER EVENTS - PER is irrelevant when applied to later events after the writing. It has nothing to do with what happens AFTER the writing.

Answer 11

Can always get in parol evidence to - correct a clerical error - establish a defense against formation/fatal flaw in agreement process (duress, lack of capacity, no consideration, misrepresentation) - interpret a vague or ambiguous term; if a term is not vague or ambiguous, the court will give the term its plain and obvious meaning. - add a partially integrated writing; when a writing is not a complete statement of all terms agreed to (except when there's a "merger clause", which indicates the K is complete on its face and cannot be supplemented)

Answer 12

Course of Performance [MOST IMPORTANT]: - refers to how the parties have performed under THIS CONTRACT - viewed as the best evidence of what the parties intended, because it's how they performed under that very K. Course of Dealing: - what the parties did under prior Ks with one another - less important than course of performance Usage of Trade [LEAST IMPORTANT]: - what others in the trade do in similar Ks

Answer 13

Express Warranty: - created where the seller gives a description/statement of fact of the goods to the buyer - where the seller makes a promise of goods - where a seller uses a sample or model [each of these things is to be distinguished from the seller's mere expression of the seller's opinion] Implied Warranty: - of Merchantability: the goods are fit for their ordinary purpose. The seller must be a merchant who deals in goods of the kind (has special knowledge about the particular goods being sold)

Answer 14

Express Warranty: - created where the seller gives a description/statement of fact of the goods to the buyer - where the seller makes a promise of goods - where a seller uses a sample or model [each of these things is to be distinguished from the seller's mere expression of the seller's opinion] Implied Warranty: - of Merchantability: the goods are fit for their ordinary purpose. The seller must be a merchant who deals in goods of the kind (has special knowledge about the particular goods being sold) - of Fitness for a Particular: implies the goods are fit for the special purpose that the buyer has in mind. The seller must know the buyer has a special purpose and is relying on seller to select suitable goods. (Seller DOES NOT have to be a MERCHANT!)

Answer 15

You can disclaim implied warranties, but not express warranties. Absent a magical phrase, disclaiming implied warranties of merchantability and fitness require conspicuousness and particularity. Seller can limit buyer's remedy for breach of any warranty as long as the limitation is not unconscionable. (Limiting remedy for PI is presumed unconscionable.)

Answer 16

When goods are damaged before buyer gets them and neither buyer nor seller is to blame, who bears the risk of loss? Seller: - must provide new goods to buyer for no additional cost, or be liable for breach of contract Buyer: - must still pay the contract price Hierarchy: 1. Agreement 2. Breach: breaching party bears ROL 3. Delivery by Common Carrier: ROL shifts to buyer when seller completes delivery obligations. 4. Non-Carrier Cases: when ROL passes depends on whether the seller is a merchant

Answer 17

Seller must get the goods to a common carrier, make delivery arrangements, and notify buyer. Once this is complete, BUYER BEARS ROL. In contrast, destination contracts only shifts ROL to buyer upon the goods arrival at the destination.

Answer 18

The risk of loss passes to the buyer at the location named after "FOB" If the city or place after "FOB" is where the seller is located, it's a SHIPMENT K. If it's anywhere else, it's a DESTINATION K.

Answer 19

Merchant Seller: Seller bears ROL until buyer takes physical possession of the goods. Non-merchant Seller: ROL passes sooner; buyer bears ROL once seller "tenders" the goods (makes them available to buyer).

Answer 20

Special Rules: 1) Perfect Tender Rule 2) Option to cure

Answer 21

Seller must deliver perfect goods in the right place at the right time. If the tender is not perfect, buyer has the right to reject the goods.

Answer 22

A seller who fails to make perfect tender may have an option to cure. Whether seller has that option usually depends on whether the time for performance has expired. If time has NOT expired, seller has an option to cure. If time HAS expired, seller does not have an option to cure unless... - the seller had reason to believe that the buyer would take the alternative goods based on the buyer's prior conduct. (Look for past buyer flexibility)

Answer 23

Requires or authorizes seller to deliver in separate installments (otherwise, seller must deliver the goods in a single delivery) The Perfect Tender Rule does NOT APPLY to Installment Contracts. A buyer may reject goods only where there is SUBSTANTIAL IMPAIRMENT.

Answer 24

IMPLIED ACCEPTANCE: Buyer keeps goods after having an opportunity to inspect them. - If the goods are only purchased, they are not considered accepted until buyer has a chance to inspect them. - If there is a lengthy delay between receipt of the goods and complaint, look for an answer regarding implied acceptance. Once buyer accepts, it's too late for buyer to reject, but buyer can still get damages for seller's breach. - A buyer CANNOT REVOKE acceptance of goods, EXCEPT when the non-conformity substantially impairs the value of the goods AND was difficult to discover (latent defect)

Answer 25

RETURN - REFUND - DAMAGES Return the goods at the seller's expense Buyer can get any money back that they have paid Buyer can get damages for breach of contract

Answer 26

Buy can pay with a check, but the seller can refuse it. If the seller refuses the check, the buyer still has a reasonable time to get the cash after the K deadilne.

Answer 27

Under Common Law, performance does not have to be perfect. SUBSTANTIAL PERFORMANCE is all that is required. (i.e., a party cannot commit a material breach.) If a party has substantially performed, the party has not committed a material breach. If a party has committed a material breach, the party has not substantially performed.

Answer 28

The excuse must be based on a LATER EVENT after the K has been formed that provides an excuse for a party's nonperformance. 1) Other party's breach 2) Anticipatory Repudiation 3) Failure to Give Adequate Assurance (Article 2) 4) Later Agreement 5) Impossibility 6) Frustration of Buyer's Primary Purpose

Answer 29

SALE OF GOODS: If seller's performance is not perfect in every respect ("Perfect Tender Rule"), buyer has pretty much free reign. 1) Can reject all of the goods 2) Can accept all the shirts, not just the conforming ones 3) Can accept some of the goods, and reject the rest Whichever option, buyer is entitled to DAMAGES

Answer 30

Injured party can recover damages for any breach, whether the breach is material or not. But only a MATERIAL BREACH provides an excuse for nonperformance (usually non-payment for payor/buyer). - finishing a job late is NOT a material breach unless "time is of the essence."

Answer 31

K is breached when there is a failure to perform when performance is due. AR is when a party repudiates the K before performance is due. AR is a MATERIAL BREACH, but it can be RETRACTED unless the other party has relied on it.

Answer 32

A party with reasonable grounds for being insecure about the other party's performance may, in writing, request adequate assurance that the other party will perform in accordance with the contract. If the seller does not provide adequate assurance, the buyer can treat that failure as an anticipatory repudiation of the K. (A party cannot use this provision to rewrite the K or to demand a particular kind of assurance. All you're entitled to is ADEQUATE assurance, and what is considered adequate is dependent on the facts.)

Answer 33

RESCISSION: An agreement to cancel the contract. In order for rescission to be effective, each party must have at least some performance remaining. MODIFICATION: An agreement to replace an existing contract with a new one. A modification takes effect immediately. ("RIGHT NOW") - modifications require CONSIDERATION to be enforceable. ACCORD/SATISFACTION: An accord is an agreement to accept performance in FUTURE satisfaction of an existing duty. The duty is suspended by the accord, but is not excused until the accord is satisfied. ("LATER ON") NOVATION***: An agreement to substitute a brand new party for an existing one. If one of the parties does not consent to the substitution, then it's a mere delegation of duties, and the non-consenting party retains its rights against the substituted party.

Answer 34

A later unforeseen event that makes performance impossible may provide the seller with an excuse. Under Article 2, the doctrine is called impracticability. 1) Destruction of Something Necessary for Performance

Answer 35

Common Law: Destruction provides excuse for nonperformance (i.e., concert hall burns down before contracted performance begins) Sale of Goods (Article 2): Same rule, but two trick questions... - Risk of Loss: A seller who bore ROL when goods were damaged or destroyed is excused by impracticability. - Unidentified Goods: A seller is excused only if the goods that were damaged or destroyed had been "identified to the contract." Death/Incapacity of Essential Person: Not just any person; someone essential for performance of the K. - Seller is off the hook and excused from performing. - If performance is made, but the buyer dies, the money can be paid by the estate, because the buyer is not essential to performance. Supervening Government Regulation Increase in Cost for Seller's Performance: - On the MBE, an increase in cost almost NEVER excuses the seller. This is because the seller assumes the risk of entering into a fixed price K. - On the TBE, the seller may be excused, depending on the facts. Look at the $ amount of the increase, and the % increase.

Answer 36

Buyer's excuse. There was a later unforeseen event that frustrated the primary purpose. The seller must have known the primary purpose as the time they entered the K.

Answer 37

Limits obligation created by other contract language, but does NOT create an independent obligation. Look for words like "if", "as long as", "when", "provided that", "on condition of", and "unless". Express condition must be completely satisfied, or the party is excused from performance. STRICT COMPLIANCE IS REQUIRED*** Express conditions don't create independent obligations, only limit other obligations that arise under the K. Types of Express Conditions: 1) Conditions precedent 2) Conditions subsequent

Answer 38

"Satisfaction" is measured by a reasonable person standard unless the contract deals with art or matters of personal taste.

Answer 39

Triggers performance. An event that must occur BEFORE performance is due. (e.g., I will cut your hair for $25 if it rains on July 4th)

Answer 40

Cuts off an existing duty. (e.g., I will cut your hair for $25 until the Texans with the Superbowl.)

Answer 41

Occurrence of a condition may be excused by the later action or inaction of the person protected by the condition. ***Ask who is protected, then see if he did anything to lose the protection FAILURE TO COOPERATE: If the person protected by the condition fails to act according to the condition, they forfeit protection and becomes unconditionally bound by the K. WAIVER: Voluntarily waiving the protection of an express condition removes the obligation of that condition. This waiver can be retracted to the extent that the other party has not relied on it.

Answer 42

1) Specific Performance | 2) Unpaid Seller's Right to Reclaim Goods (Article 2)

Answer 43

An equitable remedy, available only if monetary damages are inadequate to compensate the injured party. Availability of specific performance depends on the nature of the K. REAL PROPERTY: Specific performance is generally available as a remedy because real property is considered unique (even if it's not). (i.e., buying a home that is identical to those around it, and builder breaches and refuses to sell) SALE OF GOODS: Specific performance is available ONLY if the goods are unique or there are "other proper circumstances" (e.g., and inability to buy similar goods in the market because the goods are scarce) SERVICE CONTRACTS: Specific performance is NOT AVAILABLE in service contracts, but injunctive relief may be.

Answer 44

General Rule: Seller has NOT RIGHT to get the goods back under Article 2. EXCEPTIONS: 1) If the buyer was insolvent when it received the goods AND seller makes a demand within 10 days after buyer received them. (but seller has no right to reclaim against an innocent third party.) 2) Seller can reclaim goods at ANY TIME if buyer misrepresented its solvency to seller in writing within three months before delivery. (NOT TESTED)

Answer 45

1) Punitive Damages 2) Liquidated Damages 3) Expectation Damages 4) Incidental Damages 5) Consequential Damages 6) Avoidable damages

Answer 46

Generally are not awarded for breach of contract because the purpose of contract damages is to compensate, not to punish.

Answer 47

Where the parties specify in the contract what the damages will be in the event of a breach. These are upheld if the damages were difficult to estimate at the time of the K and if they were a reasonable forecast of the probable damages. Generally: - graduated flexible damages are okay - lump sums are not okay, because one size usually does not fit all - a liq. dam clause that wasn't reasonable at time of K but was reasonable at time of breach doesn't matter under COMMON LAW, but does matter under ARTICLE 2. Under Article 2, a liq. dam. clause will be enforceable if the liq. damages are reasonable EITHER at the time of the K or at the time of the breach. - if the liq. dam. clause is determined to be a PENALTY, the injured party will still be able to get actual damages. Liquidated damages CANNOT operate as a penalty. EXAM: We will generally be required to determine if the liquidated damages were valid.

Answer 48

Put an injured party in as a good a position as full performance. Expectation damages are the general rule. COMMON LAW: Paying the expectation had the K been fulfilled, leaving the injured party in the same position. ARTICLE 2: Contains formulas for expectation damages under sale of goods contracts.

Answer 49

If buyer covers in good faith (usual measure) by going out and buying market goods at a higher price to cover for the lost goods under the breached contract, buyer is entitled to the difference between K price and Cover price. COVER PRICE - CONTRACT PRICE

Answer 50

If buyer doesn't cover in good faith, or doesn't cover at all. If the buyer pays much more than market price to cover for the lost goods under the breached contract, he is entitled only to what the fair market value of the covered goods should have been. Buyer has to "eat" the rest. If buyer doesn't cover at all, buyer can still get market damages. MARKET PRICE - CONTRACT PRICE

Answer 51

Buyer is entitled to get the difference between the value in goods promised and the value in goods delivered if the buyer KEEPS non-conforming goods. VALUE AS PROMISED - VALUE DELIVERED

Answer 52

If seller resells in good faith (usual measure), usually at a loss in a falling market. CONTRACT PRICE - RESALE PRICE

Answer 53

If seller does not resell in good faith, or does not sell at all. CONTRACT PRICE - MARKET PRICE

Answer 54

If seller cannot resell the goods, the damages are analogous to SPECIFIC PERFORMANCE, and the breaching buyer is required to pay the full contract prices.

Answer 55

A seller will be entitled to its lost profit if it's a LOST VOLUME DEALER.*** Be on the lookout for a fact pattern involving inventories and lost volume. The seller is entitled to the lost profit even though it makes a sale of the same good to another person later, because it would have had two profits instead of one, and they're entitled to the lost profit. A dealer resells the same goods for the same price. The bar examiners are trying to trick us into saying the delaer's damages are $0, but the dealer has lost the profit it would have made on the initial sale.

Answer 56

Cost to the injured buyer or seller of transporting/caring for goods after a breach and of arranging a substitute transaction.

Answer 57

***Damages that were REASONABLY FORESEEABLE to the breaching party at the time of the contract. NOTE: Not available to a seller under Article 2. (Miller's broken shaft and UPS delivery delay hypo)

Answer 58

An injured party cannot recover damages he could have avoided ("mitigated") with reasonable effort. COMMON LAW RULE

Answer 59

1) Entrustment 2) Third Party Beneficiaries 3) Delegation of Duties 4) Assignment of Rights

Answer 60

An owner who entrusts goods to a merchant who deals in goods of the kind has no rights against a bona fide purchaser of those goods. Entrustment problems always involve the same kind of facts: Owner takes a good to a repairer who is also a merchant in that particular kind of good.

Answer 61

Fact Pattern: Two people enter into a contract with the intention of benefiting a third party. Intended Beneficiary [Usually named in the contract]: A person who is not a party to the contract, but has rights under the contract because the contract was intended to benefit her. Promisor: The party who promises to perform for the TPB. Promisee: The party who secures the promise.

Answer 62

Promisor is liable to the TPB: An intended beneficiary can sue the breaching promisor, even though there's no privity of contract between them. If Promisee breaches, then Promisor is off the hook to the TPB. Promisor's liability to the Promisee: A promisee can sue the promisor for breach, just as the TPB can.

Answer 63

General Rule: The promisor and promisee can rescind or modify the contract until the rights of the TPB have "vested". Vesting occurs when the TPB learns about the contract and relies on it. Once vested, Promisor and Promisee cannot rescind or modify without the TPB's consent. EXCEPTION: Contrary language in the contract controls. If the K includes language that grants the Promisee the right to change or rescind the contract, or terminate the TPB's rights, then TPB's consent is not needed.

Answer 64

General Rule: Contractual duties may be delegated without the consent of the person to whom performance is owed (the "obligee"). EXCEPTIONS: - Contrary language in the contract language controls.. If the K says you can't delegate, then you can't delegate. (This includes "no assignment" provisions) - Person with special skill or reputation.

Answer 65

Delegating party remains liable. (Compare novation***) Delegation does not remove rights of obligee to sue the delegating party. Delegate who gets consideration is liable to obligee as well.

Answer 66

Definition: Two people make a contract; later, one (assignor) transfers his rights to a third party (assignee). The party who owes the duty is the obligor. Two step process, where two parties enter into a K up front, and then later on one of those parties assigns rights under the K to someone else. (Contract with TPB, where the TPB is present in the K from the start) REQUIREMENTS: - ***Language of present transfer, not a promise to transfer. - Consideration is NOT required. Gift assignments are valid, but very easily revoked. RESTRICTIONS: - Contrary language in the contract controls. Must distinguish between a clause that prohibits assignment and one that completely invalidates assignment. - ***Assignment cannot substantially change duties of obligor. OBLIGOR LIABLE TO ASSIGNEE - If assignor fails to perform, assignee cannot sue to collect, since assignor wouldn't be able to collect due to material breach. MULTIPLE ASSIGNMENTS - ***

Answer 67

Gratuitous "gift" assignments are easily revoked. - the last gratuitous assignee prevails over earlier gratuitous assignees because a later gift assignment revokes an earlier one. Assignments for Consideration are more durable. - General rule: the first assignee for consideration prevails over all subsequent assignees as well as prior gratuitous assignees. EXAM TIP: Analyze each assignment in the order it was made to see if it was valid.

Contracts (DONE?) Flashcards

(93 cards)