Contracts General Flashcards
(189 cards)
1
Q
Pre-existing Duty Rule –Summary R2d Contracts Section 89
A
The agreed price increase is enforceable without any new consideration if based on a good faith reason that was not anticipated when the parties originally entered the contract. No signed writing is required to enforce the modification
2
Q
Pre-Existing Duty Rule Summary under NY General Obligations Law Section 5-1103
A
In contracts that do not involve the sale of goods, the General Obligations Law abolishes the Pre-Existing Duty Rule, provided the price modification is contained in a writing signed by the party to be charged with breach of the modified contract
3
Q
to be a “valid” acceptance of an offer
A
(1) Acceptance must be made by the one to whom the offer was made, “the offeree.” An offer is non-assignable, but once the offer is accepted and a contract has been formed, rights and duties generally can be assigned.
(2) Acceptance must be unconditional and according to the terns and conditions of the offer
4
Q
Basic Elements of a contract
A
1- Necessary and Definite Terms
2- Acceptance of a valid offer
3- Consideration supporting the promise; and
4- A binding offer
5
Q
Liability for breach of a contract requires
A
Proof of a contractual relationship between the plaintiff and the defendant, in other words, “there must be ‘privity’ of contract” between the parties
6
Q
Definition of a Contract
A
A contract is a voluntary agreement (no duress), mutually assented to by competent parties (not infants or incompetents) supported by valid consideration, to do or not to do a specific thing. it is a promise or set of promises, which if breached, law or equity will provide a remedy
7
Q
Seven General Types of Contracts
A
1- Unilateral 2- Bilateral 3- Expressed 4- Implied in fact or law 5- Integrated 6- Quasi 7-Executory
8
Q
Executory Contract
A
An executory contract is a valid contract that has been entered into, but has not been performed. Once the contract has been performed, it is called a performed or completed contract
9
Q
Acceptance of the offer is defined as
A
the asset by the offeree to all of the terms and conditions of the offer
10
Q
Unilateral Contract
A
A unilateral contract is a promise for an act. The offeror of a unilateral contract seeks a completed performance, not merely a promise of future performance. In a unilateral contract, the promise to pay is the offer and the Act; once performance is completed, the offer is deemed accepted
11
Q
Distinguish between a common law unilateral contract and the R2d of Contracts and UCC 2-206
A
At common law, in a unilateral contract, at no time is the offeree bound to perform, even if the offeree starts performance there is no legal or contractual duty to complete performance. Both the R2d and UCC 2-206 alter the common law and hold that when the offeree starts to perform under a unilateral contract, the offeree must complete performance, otherwise the offeree is in breach
12
Q
To be a valid acceptance of an offer
A
An acceptance must be an affirmative response. Silence cannot be construed as acceptance. Thus language such as “unless this offer is rejected within 7 days, the offer will be deemed accepted” cannot bind the offeree.
Under traditional contract law, identical cross-offers generally do not form a contract, they are treated as two separate offers.
Acceptance must be either by a promise or an act
Acceptance of a unilateral contract need not be conveyed to the offeror prior to performance, but once complete the offeree must give notice if the offeror would not otherwise know of the performance
Offeree must be aware of the offer before the offeree begins performance
13
Q
Bilateral Contract
A
A bilateral contract is a promise for a promise; it arises where both parties make promises (express or implied), one generally being the consideration for the other. A binding contract is immediately formed without further action by either party
14
Q
Bilateral Contract offers Revocation (Summary)
A
The revocation must be communicated to the offeree before acceptance has been dispatched
15
Q
Express Contract
A
An Express Contract is an agreement where the parties express the terms orally or in writing. The contract is an agreement “manifested by words.”
16
Q
Contracts implied-in-fact
A
Implied-in-fact contracts are enforceable agreements, the terms of which are implied circumstantially from what the parties say and do. Implied-in-fact contracts arise from one party’s behavior and conduct, which evidences that the party implied entered into a contract to pay or otherwise return performance. The conduct is based on an objective reasonable standard.
17
Q
Quasi-Contract (Implied-in-law)
A
A Quasi-contract is not a contract; it is an obligation imposed by law, to do justice even though it is clear that no promise was ever made or intended. It is a fiction imposed by law to avoid an unjust enrichment, or to compensate a performing party who has detrimentally relied on the unenforceable contract
18
Q
Quasi-contracts arise when either:
A
1-There is no express agreement between the parties and no implied conduct by the obligor to pay, but the law implies a contract to avoid an unjust enrichment. 2- There is an express agreement (contract), but it is unenforceable due to a contract defense such as illegality, statute of frauds, mutual mistake, duress, incapacity, impossibility of performance
19
Q
Quasi-contract claims can be asserted based on claims for
A
Saving lives and saving property. Recovery on a claim premised upon quasi-contract or unjust enrichment is limited to the reasonable value of the services rendered by the plaintiff
20
Q
A quasi-contract exists between a parent and a third person when
A
A third person supplies a child with “necessaries” that the parent should have been supplying, provided that the parent was not otherwise adequately providing for that child
21
Q
An express rejection of the offer by the offeree is
A
A written, oral, or inconsistent action by the offeree expressly rejecting an offer and thereby extinguishing the offer
22
Q
An Executory contract only terminates only
A
Under the Doctrine of Impossibility of performance, where the deceased or incapacitated has a non-delegable duty to perform. Death does not terminate an executory contract once it has been formed, except for the exception above
23
Q
What is quantum meruit
A
Literally means “as much as deserved.” It is an equitable doctrine based on an implied promise on the part of the defendant to pay the plaintiff as much as he reasonably deserves to be paid for his or her labor. In fixing reasonable value, the court looks at the price usually and customarily paid for such services
24
Q
In order to assert a claim in quantum meruit, a claimant must establish the following four elements:
A
1- The performance of services was in good faith; 2- The acceptance of services by the person to whom they are rendered
3- An expectation of compensation; and
4- The reasonable value of the services
Quantum meruit requires the absence of a valid enforceable contract
25
A plaintiff cannot seek recovery under a theory of quantum meruit when
the suing party has fully performed on a valid written contract/agreement, the existence of which is undisputed and the scope of which clearly covers the dispute between the parties. Therefore, when a dispute exists or enforceability of a contract which covers the dispute in issue the plaintiff can recover in quantum meruit if he fails to establish a contract
26
Pre-Existing Duty Rule [Contract Modification]
This doctrine assumes an existing contract in which both parties have obligated themselves. The pre-existing duty rule arises where one party demands more money and the only consideration in support of this demand is his or her pre-existing duty to perform or sell the goods
27
what is an integrated contract
An integrated (sometimes referred to as a "fully integrated") contract, is a contract that contains the entire agreement between the parties. Where a contract is integrated, evidence of side-deals or unexpressed terms will not be admissible in a later dispute.
28
Evidence of a fully integrated contract includes a
"Merger clause," which expressly states "this agreement constitutes the entire agreement between the parties regarding the subject matter hereof and supersedes and replaces any and all prior agreements and understandings between them regarding such subject matter."
29
For a binding contract to exist
There must be an express or implied offer, coupled with an express or implied acceptance of that offer E.g., there must be mutual assent to the agreement
30
How do you determine the existence of mutual assent
Mutual assent is not the subjective intent or understanding of the parties, but rather the objective manifestations of the parties and how a reasonable person would interpret them. What one of the contracting parties subjectively thought or meant is generally immaterial in the interpretation of the contract; it is what a reasonably prudent person would objectively construe and consider to be contract to be
31
A contract has, strictly speaking nothing to doe with the personal or individual intent of the parties; therefore,
A contract is an obligation attached by mere force of the law to certain acts of the parties, usually words. Which ordinarily accompany and represent a known intent
32
What is an offer
An offer is "manifestation of a willingness to enter into a bargain, so made as to justify another person in understanding that his assent to the bargain is invited and is all that is left is his assent that will conclude it. An offer is a communicated statement manifesting a present intent to enter a contract
33
What must a valid offer contain
The offer must be clear and definite, it must contain, the "essential material terms" of price, parties, description, and quantity in unambiguous language and for the offer to be effective, it must be communicated to the offeree. The offer must induce the performance
34
An offer must be
a definite promise or commitment to be bound to the offered terms and conditions and is something more than an invitation to negotiate
35
Not a true offer?
1- Preliminary Negotiations
2- Expressions of intent
3- Requests for quotations on price
4- A statement of future plans does not constitute an offer but is merely an expression of intent to sell
36
What indicates that the offeror was not seriously make an offer
When an offer made by the offeror was angry or excited, made in frolic and banter. However, the answer "lies in whether a reasonable prudent person would have objectively thought the offeror was serious under the circumstances."
37
A court will not enforce an offer when the material terms are
too vague; imcomplete; and ambiguous
38
New York approach to Past Consideration
allows past consideration to support a contract if the contract expressly stated in a signed writing and would have been good consideration but for the time that the consideration was given or performed
39
An exception to the past consideration rule is found in
the UCC 3-303, which allows past consideration to constitute "value" within the definition of a holder in due course
40
Unilateral Contract offer --Revocation
Under Common Law and NY permit revocation anytime before performance is fully completed. R2d--45 makes an offer irrevocable once performance has been tendered or the offeree begins performance
41
Pre-existing Duty Rule Under Common Law (Summary)
A price change had to be supported by new consideration otherwise the promise to pay the increased price was unenforceable for lack of consideration. The parties' original price would govern
42
What are the terms that are necessary for the offer to be valid
1- The parties must generally be identified; 2- The object of the contract must be definite; 3- The quantity must be specified; and 4- the Price must be certain (note that under the UCC, courts are permitted to determine a "reasonable" price in the sale of goods
43
Unilateral Contract Offer Terminated
Passage of stated time or reasonable time, buy a counter offer, an offeree's rejection of the offer, incompetency of either party, or by an intervening illegality
44
Consideration may be in the form of
A commitment to pay, to perform, or to surrender a right in exchange for another's promise or act
45
Ways to terminate an offer
1- Lapse of time
2-Reovation by the offeror; either by conduct or communication
3-Rejection of the offer by the offeree; either by express rejection of the offer or by making a counter-offer
4- Termination by operation of law
46
A promise to make a gift
is not a valid contract and unenforceable because the promise lacks consideration by the promisee
47
communication of the offer
the offer must be communicated to the offeree. the offeree is the only person who may accept the offer
48
The demand for money that is supported by the same consideration under the contract--"Pre-existing Duty Rule
The demand for more money lacks any new consideration and the promise to pay the price increase will not be enforceable
49
R2d Contracts Section 86 (past consideration)
Permits a "moral obligation" to furnish sufficient consideration for a promise to pay for past benefits bestowed b the promisee on the promisor, whether the promise is oral or in writing (minority view)
50
R2d Contracts Section 89(a)
A promise modifying a duty under a contract not fully performed on either side is binding "if the modification is fair and equitable in view of the circumstances not anticipated by the parties when the contract was made."
51
when is an option that is "not" supported by consideration enforceable?
In New York under the the UCC 2-205, a sales contract that contains a written irrevocable option "firm offer" is enforceable even though the option is not supported by consideration, so long as it is in writing and signed by a merchant. The option will, generally, be irrevocable for three months
52
What approach does Article 2 of the UCC take in regard to the mirror image rule?
The UCC will apply only the terms of the offeror and offered which "mirror" each other to become part of the contract. See "Battle of the forms."
53
Although the majority of courts continue to follow the pre-existing duty rule, the rule will be circumvented if?
1. The parties terminated and rescinded their original contract and then entered into a new one.
2. The parties' pre-existing duty was altered even slightly
3. The modification arose from unforeseen and unanticipated circumstances; or
4. There was a viable claim of estoppel or waiver
54
Options (Irrevocable offers) Revocation
Options are not revocable by the offeror once the option is accepted by the offeree and the acceptance is communicated to the offeror. Options are not revoked by the offeror's death or offeree's rejection after acceptance or counteroffer. The option can only be revoked by the offeror if revocation notice reaches the offeree before the option does.
55
Termination of the offer once an offer has been validly made, it can be revoked by "what period of time?"
A lapse of time--means that an offer should be accepted within a reasonable period of time.
The offer contains the time period after which the offer automatically expires
The offeror is the master of the offer and courts will not alter the stated time period, even if it is an unreasonable time
56
What time period does the court use to terminate an offer
If the offer does not set a time limit for acceptance, the power of acceptance terminates at the end of a reasonable time period, as determined by the court in light of the circumstances
57
If an acceptance is late
1- Then the offeror has the option of treating it as an offer
2- If the offeror receives the acceptance late, remains silent, and does not timely reject the acceptance, the offeror's silence will act as an acceptance
58
when the offeror and offeree are dealing on the phone or in person, when does the time to accept expire or lapse
Unless the offer is accepted before their conversation terminates, the law deems the time to accept to have ended at the conclusion of the in person or telephone conversation.
Unless otherwise agreed by the parties, the offer does not survive the conversation and the offer must be renewed by the offeror
59
Revocation by the offeror
The offeror can revoke his offer at any time before it is accepted, as long as the revocation is communicated to the offeree
60
When is the termination of an offer by the offeror valid
The termination by the offeror is valid when the offeree receives it
61
What mode should the offeror use to revoke an offer?
The mode or method that the offeror used to publish the offer. Basically in the same manner the offeror used to communicate the offer to the offer
62
Options are also known as
Firm offers or irrevocable offers. An option enables the offeree to compel a sale
63
What kind of conduct revokes an offer by the offeror
Conduct which is inconsistent with the offer, such as the sale of the offered item to another prior to the offeree accepting, and the offer has knowledge of the inconsistent conduct by the offeror.
The offeror's intent to revoke was implied by the sale to the subsequent offeree
64
When is an offer irrevocable by the offeror
In the case of an "option" contract (an irrevocable offer). The offeror promises to "keep open" and not revoke the contract offer for a stated or reasonable period of time
65
Valuable consideration may consist of
Some right, interest, profit, or benefit accruing to one party or some forbearance, detriment, loss, or responsibility given, suffered, or undertaken by the other
66
What constitutes an option
The offer must contain assurances that the offer will remain open and not be revoked by the offeror. The acceptance of an option occurs only upon the offeror's receipt by the offeree's acceptance of the option. The offered may assign an option.
67
When does an option terminate
The option will, however, terminate after (1) the stated time period attached to the option; (2) Destruction of the subject matter of the option; (3) intervening illegality; or (4) death of a person essential to the performance of the contract
68
R2d of Contracts view on Pre-Existing Duty Rule
Change the common law rule in cases where the refusal to perform was "equitable and fair" and the difficulties were substantial, unforeseen, and not within the contemplation of the parties when the original contract was made
69
Pre-existing duty rule summary under UCC 2-209(1) sales contracts
The agreed price increase is enforceable without any new consideration if based on the "good faith" reason for asking for more money to perform the contract. No signed writing is necessary unless the modified total price is $500 or more; above $500 requires a signed writing of the modification
70
When is an oral option enforceable
If it is supported by consideration AND the option is not otherwise barred by the statute of frauds
71
Judicial Scrutiny is not proper subject under contract law when determining
for the adequacy or excessiveness of consideration absent a claim of fraud, duress, or misrepresentation. Absent unconscionability, fraud, or shocking unfairness as to the bargain struck by the parties, the courts eschew rewriting the contract to equalize the values of the bargained for consideration
72
New York's approach to the Pre-existing Duty Rule
NY allows a signed writing to substitute for consideration to support a contract modification of a non-sales contract. NY General Obligation Law 5-1103
73
A promise to perform an act, which one party is legally bound to perform for the other
is not legal consideration (i.e., payment of a valid legal judgment) for the plain reason that there is no additional benefit or detriment to either party, and falls under the pre-existing duty rule
74
What is the multistage rule on an option for non-sales contracts
the UCC rule of non-sales contracts provided the free (no consideration is paid) option is in a signed writing; note that the written gratuitous option is not limited to three months in non-sales
75
UCC Article 2 - Pre-existing Duty Rule 2-209(1)
UCC Article 2 DOES NOT follow the pre-existing duty rule under common law, provided the price increase was demanded for in "good faith."
76
What is a right of first refusal?
It is NOT an option or an offer. A right of first refusal permits the offeree to buy only if the seller decides to sell
77
What type of statement by the offer, after receiving a valid offer, does not terminate or extinguish the offer
A mere inquiry for a lower price is not a rejection or counteroffer
78
Termination of an offer by operation of law occurs when [lawful termination of an offer]
The offer terminates when:
(1) The offeror dies or becomes mentally incompetent;
(2) Intervening events render the subject matter of the offer illegal; or
(3) the subject matter of the offer is destroyed
79
Making a counter offer has what effect on a valid offer?
It kills the offer. Whenever a purported accepted is even slightly at variance with the terms of an offer, the qualified response operates as a rejection and termination of the offer
80
In what manner must an acceptance be made to be a valid acceptance
Acceptance must be by a reasonable mode, unless the offer expressly calls for a particular mode of acceptance, such as "exclusive" means to accept--any other mode is ineffective. When a slower mode of acceptance is utilized than was used in sending the offer, the acceptance is effective only when received
81
To be a valid acceptance of an offer
The "mailbox" rule for acceptance can be altered by the contract. By using language such as the offer shall be accepted only when "received and notice delivered in person."
82
A unilateral contract offer is effective
when communicated to the offeree
83
A unilateral contract offer's acceptance occurs
If the offer cannot be accepted by a promise, it is accepted when contract performance is fully completed. (Exception UCC sale of goods). Under R2d 45 acceptance by the offeree occurs when an offeree tenders or begins performance, but performance must be completed as a condition to any recovery
84
Bilateral Contract offer is effective
When the offer is communicated to the offeree
85
Bilateral contract offers acceptance is valid
is valid when acceptance of the offer is dispatched
| "mailbox rule" or acceptance is orally communicated to the offeror
86
Bilateral contract offer is terminated
Passage of stated time or reasonable time by a counteroffer, an offeree's rejection of the offer, incompetency of either party, or an intervening illegality
87
Options [irrevocable offers] are effective
When communicated to the offer. Options generally must be supported by consideration, but NOT in NY
88
Options Acceptance occurs
An acceptance of an option (called exercising the option) is effective only when the acceptance is received by the offer
89
Options are terminated
By the passage of the stated date or after a reasonable time; destruction of the subject matter or intervening illegality
90
Reject of the offer is effective
Only when it is received by the offeror
91
The ability to reject the offer terminates
When acceptance of the offer is communicated to the offeree before the offeror receives the rejection. In other words, the termination of the offer can no longer occur because the offer was accepted
92
Rejection of the offer is revoked
The offer can no longer be revoked when the offeree's acceptance is mailed, received or is communicated to the offeror before the rejection is received by offeror
93
Auction offers --UCC 2-328 are effective
When the bid price (offer) is announced by the bidder to the auctioneer
94
Auction offers --UCC 2-328 are accepted
when the auction hammer fails and the auctioneer announces "sold"
95
Auction offers -- UCC 2-328 are terminated
when a higher bid is made to the auctioneer
96
Auction offers are revocable under UCC 2-328
The bid accepted is orally withdrawn or communicated by the bidder before the hammer falls
97
What is a necessary element of an enforceable contract (once a valid offer and acceptance exist and the parties assent to the agreement)
CONSIDERATION. Consideration is, in essence the inducement of a contract; the cause, price, exchange, detriment, or impelling influence, which induces a party to enter into a contract
98
What constitutes consideration?
There must be a bargained for gain or advantage to the promisee, or a bargained for legal detriment or disadvantage to the promisor
99
A general principle of contract law related to consideration
Is that a "promise for a promise" is sufficient consideration to support a contract. Generally, a mere naked promise, unsupported by consideration is unenforceable
100
Elements of consideration
Consideration can be either a promise or performance (act, forbearance, or creation of a legal relationship). The Forbearance must be to refrain from that which the party has a legal right to do, where as an affirmative act must generally be something that the party is not otherwise legally required to perform
101
To be a valid consideration, the forbearance, or act
Does not have to benefit the one furnishing the consideration, the fact that a benefit did not flow to the promisor from the promisee is not relevant therefore, consideration may benefit a third party or solely benefit the other contracting party
102
Where a buyer and seller contract for the disclosure of an idea
The idea must be novel or unique and belong to the seller
103
Past consideration
Past consideration (a past act or determent) is not enough to support a promise because the detriment did not induce the new promise, i.e., the detriment had already been incurred it could not have been bargained for in exchange for the promise
104
What is the mirror image rule
Contract case law mandates that the terms of the acceptance match the terms of the offer. Most often, if the offer and the acceptance do not mirror one another, there is no contract
105
Formation of Contracts
A. Mutual Assent
1. Offer and Acceptance
2. Indefiniteness or absence of terms
3. Implied-in-fact contract
4. "Pre-contract" obligations based on reliance
B. Consideration
1. Bargain and exchange and substitutes for bargain: "moral obligation," reliance, and statutory substitutes
2. Modification of contracts: preexisting duties
3. Compromise and settlement of claims
106
Defenses to enforceability of a contract
A. Incapacity to contract (minor; incompetent)
B. Duress
C. Undue influence
D. Mistake, misunderstanding
E. Fraud, misrepresentation, and nondisclosure
F. Illegality, unconscionability, and public policy
G. Statute of Frauds
107
Parol Evidence and Interpretation
Is using evidence of terms and understandings that not included in the final contract, in order to determine the meaning and intention of the overall contract
108
Performance, breach, and discharge of a contract
A. Conditions
1. Express
2. Constructive
3. Obligations of good faith and fair dealings in performance and enforcement of contracts
4. Suspension or excuse of conditions by waiver, election, or estoppel
5. Prospective inability to perform: effect on other party
B. Impracticability and frustration of purpose
C. Discharge of contractual duties
D. Express and implied warranties in sale-of-goods contracts
E. Substantial and partial breach and anticipatory repudiation
109
Contract "Remedies" Include
A. Measure of damages for breach; protecting the expectation interest
B. Consequential damages; causation, certainty, and foreseeability
C. Liquidated damages and penalties
D. Avoidable consequences and mitigation of damages
E. Rescission and reformation
F. Specific performance; injunction against breach; declaratory judgment
G. Restitutionary and reliance recoveries
H. Remedial rights of breaching parties
110
Third-party rights involving contracts include:
A. Third-party Beneficiaries
1. Intended beneficiaries
2. Incidental beneficiaries
3. Impairment or extinguishment of third-party rights
4. Enforcement by the promise
B. Assignment of rights and delegation of duties
111
Distinctions between the common law and the UCC subject to "contract modifications" is that
At common law, contract modifications require (additional) consideration, under the UCC modifications require only "good faith"
112
Distinctions between the common law and the UCC for "Irrevocable offers"
At common law, an offer can be irrevocable only with consideration; in general, the offeree must pay for the the irrevocability, and thus create a contract option. Under the UCC, merchants (not non-merchants) can make an irrevocable or "firm" offer(s) without consideration, so long as the offers are in writing and signed. A firm offer made under this rule cannot be made irrevocable for a period longer than three months
113
Distinctions between the common law and the UCC subject to "delays". Under the common law a delay is
At common law, a reasonable delay is only a minor breach of contract unless the contract provides that time is of the essence--or unless the breaching party knew when the contract was created, of some extraordinary fact that made the deadline essential. If time is of the essence, any delay is a major breach (the difference being that, with a minor breach, the other party must perform and use for damages; with a major breach, the other party need not perform and can still sue for damages).
114
Distinctions between the common law and the UCC subject to "delays". Under the UCC a delay is (perfect tender rule)
Under the UCC's "perfect tender" rule, every deadline must be met precisely, and any delay is a major breach. Note, however, that the exceptions to the UCC rule make it considerably less harsh in practice. With notice to the buyer, a seller can cure defective performance if there is time left for performance; also, even if the time for performance has passed, the seller can still cure if the buyer rejected a non-conforming tender that the seller had reasonable grounds to believe the buyer would accept. UCC 2-508(2)
115
Unilateral vs. Bilateral Contracts on the MBE
An offer for a bilateral contract seeks a promise in return, not performance. The offer is accepted when the offeree provides a return promise
An offer for a unilateral contract seeks performance in return, and not a promise
116
Typical Unilateral Contracts include
1- The offeror is seeking ONLY performance in return
2-- Offers to recover something (however, the modern view is that the offeree need only complete performance with knowledge of a reward offer (or a public offer of any kind), in order to earn the reward).
3- Completion of painting a house could be construed as either a unilateral or bilateral contract. However, when in doubt the court will construe the contract as a bilateral offer
117
What is the definition of consideration?
A bargained for exchange, plus either detriment to the promise or benefit to the promisor (and typically both).
An enforceable agreement requires consideration or a substitute for consideration (such as promissory estoppel)
118
How do you determine what consideration is?
The key here is the "bargain." Both parties must view the return promise (or performance) as the "price" of the contract. If they do not, there is no consideration
119
What is the most important function of the "bargain" element
is that it makes promises to make a gift unenforceable. The best way to distinguish a gift from a bargain is to look at whether or not the promisor is getting something in return for his/her promise or action.
If not, then its a gift, and the promise is unenforceable
120
Consideration in the form of surrendering a legal claim
If it is bargained for, and it constitutes a detriment to the party surrendering the legal claim (as promisee) and a benefit to the promisor of not having the promisee bring the legal claim, then it is a valid form of consideration
121
Surrendering an "invalid" claim can still be consideration, if two requirements are met:
1- A reasonable person could believe the claim is well-founded; and
2- The claim could be pursued in good faith
122
What are the two requirements for consideration
1- Reasonableness and 2- Good Faith
123
Consideration in a unilateral contract
In fact, the consideration is the offeree's promise
Remember that, in a unilateral contract, the offeror seeks return performance, not a return promise. Under such circumstances, it can be difficult to figure out the consideration for the agreement.
124
Promissory estoppel as a substitute for consideration is valid when
An agreement can be enforceable without consideration as long as there's a substitute for consideration---typically, promissory estoppel.
Promissory Estoppel is triggered by a gratuitous promise that is likely to, and does induce the promisee's "reliance".
Promissory Estoppel is not true consideration, because there is no bargain, but it does result in the promise's being enforced.
125
What is the prerequisite to using promissory estoppel as the consideration
The most important thing to remember is that the lack of an otherwise enforceable contract is a prerequisite for promissory estoppel; if there's an enforceable contractual promise, there "cannot" be promissory estoppel
126
Quasi-contract requires that
requires that there be on enforceable contract, if there is a valid contract a quasi-contract cannot apply
127
When do courts typically apply quasi-contract rules
When a plaintiff has conferred a benefit on the defendant under circumstances where the defendant would be unjustly enriched if he were allowed to retain the benefit without paying for it.
Thus, once you've established that there's no enforceable contract, you have to determine if there's unjust enrichment. If you find enrichment, but it is not "unjust," you cannot have a quasi contractual recovery. Keep in mind, also that there cannot be unjust enrichment if the performing party suffered no detriment
128
What is a condition in a contract
The basic definition of a condition: is an event, other than the mere passage of time, that triggers, limits, or extinguishes an absolute duty to perform of one party to a contract
129
What are the two different ways to categorize conditions
The first is to categorize them according to how the condition came about, which are three types: 1- Express; 2- Implied; and 3- Constructive Conditions
The second is to categorize the conditions by the time of performance, such as; 1- Conditions Precedent; and 2- Conditions concurrent
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What is a condition precedent
A condition precedent is an event or act that must occur first in order to trigger a party's absolute duty of performance.
These are not easy to spot; just ask the question: "Is there an enforceable duty before the required event happens?" If the answer is no, that's a condition precedent. In other words, if the answer is yes, then the contract is not enforceable unless some specified event or condition is satisfied
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What is a Concurrent condition
Concurrent conditions exist where each party's duty to perform is conditioned on the other party's performance. The thing to remember about concurrent conditions is that they have to be capable of simultaneous performance.
132
What is the general rule when interpreting contract terms?
The general rule is that contract terms are to be interpreted "objectively," by determining what interpretation a reasonable person, knowing the same things that the parties know, would place on the terms.
You want to avoid any extraordinary or unusually strict interpretation of contract language
133
If the statute falls within the Statute of Frauds, then it must
be in "writing" in order to be enforceable. Thus, the first thing you have to know is which kinds of contracts are covered by the SOF;
134
What are the seven basic type of contracts that generally fall within the Statute of Frauds requirement
1- Contracts of "suretyship" (i.e., a contract to answer for another's debt or default--a guarantee of performance);
2- Contracts for the "sale of interest in land" (including leases of one year or longer);
3- Contracts for the "sale of goods worth more than $500 (UCC 2-201) (except specially manufactured goods, or where there is partial performance)
4- Contracts that "cannot possibly be performed within a year";
5- Contracts for the sale of securities (UCC 8-319)
6- Regardless of cost, contracts for the sale of personal property other than goods with a value of more than $5000, e.g., royalty rights (UCC 1-206);
7- Contracts in consideration of marriage
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What is the mnemonic to help remember the list of contracts that are covered by the Statute of Frauds
MP SIGNS (Marriage; Personal property more than $5000; Suretyship; Interest in land; Goods more than $500; Not performance within a year; Securities transactions).
136
At common law, what are the five circumstances under which a contract within the Statute of Frauds will be enforceable even without a writing:
1- Full performance by both sides;
2- Seller conveys property to buyer;
3- Buyer pays all or part of the purchase price AND performs some act explainable only by the contract's existence (e.g., constructing buildings on land);
4- Promissory Estoppel; and
5- Waiver (e.g., by not affirmatively pleading the Statute of Frauds as a defense).
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Under the UCC, courts will excuse the necessity for a writing under several circumstances.
Where a transaction in goods is involved, part performance removes the writing requirement (but only to the extent of the actual performance), as does an admission in court by the party denying the contract's existence. In addition, specially manufactured goods does not require a writing once the seller has begun to manufacture or made commitments to produce the goods (2-201(3)(a)) and a letter of confirmation can also satisfy the SOF if the transaction is between merchants
138
What is the "main purpose" exception to the Statute of Frauds as regards contracts of suretyship
Where one person promises to pay for the debts of another: if the surety's "main purpose" is to further his "own interest," then the promise does NOT fall within the Statute of Frauds.
139
If a contract fails for non-compliance with the Statute of Frauds, a party may be entitled to
a claim under the theory of a quasi-contractual recovery for the reasonable value of his part performance, and to restitution of any other benefits he may have conferred
140
What is an "intended third-party beneficiary"
the promisee of a contractual promise intends that her performance should benefit someone outside the contract, that other person is called the "intended third-party beneficiary"
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What are the different types of third-party beneficiaries?
1- Intended and incidental beneficiaries
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what is the legal difference between and intended and incidental third-party beneficiary
The intended beneficiary has the ability to enforce rights under the contract, and incidental has no enforceable rights.
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Explain a third-party intended beneficiary's rights
Remember that a beneficiary's rights are not enforceable until those rights vest. The significance is that prior to the rights vesting, the parties to the contract can modify or even rescind the contract "without regard to the beneficiary."
Once the rights vest, however, any modification requires the beneficiary's consent
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When does a third party beneficiary's rights vest
1- The beneficiary manifests assent to the promise;
2- The beneficiary sues to enforce the promise; or
3- The beneficiary justifiably relies on the promise to his detriment
Remember, the third-party beneficiary's rights cannot vest until he knows about the contract. Thus, before a third-party beneficiary finds out about a contract, it can be modified or rescinded, with no regard for the beneficiary's rights
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Assignment, generally is
What "can" be assigned, and under both the common law and the UCC, the ONLY rights that CANNOT be assigned are those that would materially change the other party's duty, risk, or chance of receiving return performance. That includes things like personal service, rights under future contracts, requirements and output contracts, and assignments contrary to public policy (such as government pensions and alimony payments).
All other rights can be assigned
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Delegation, generally is
What duties "can" be delegated, is a bit more complicated. Determine if the duty is 1- Impersonal or 2- does delegation "materially alter" the nature of performance
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What is an impersonal duty
1- Is the duty "impersonal." If not--it cannot be delegated. In other words, if the duty is personal (such as a certain artist) then it cannot be delegated.
An "impersonal" duty is one in which the one receiving performance has no particular interest in limiting performance only to the one who he expected performance. Personal duties include services people like lawyers, doctors, architects, and portrait painters---where the identity of the person performing the duty matters
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If the duty is impersonal then you need to decide if the delegation
"Materially alters" the nature of the performance or the risks and burdens to the party who would receive the performance. If not, and there will not be a material alteration, then the duty is delegable
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what does an assignment of a contract imply?
it includes a delegation of duties as well
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Assignment of rights under this contract is "prohibited," or similar language means that
The assignment is valid. The other party can sue only for damages for breach of the covenant
151
Assignment of rights under this contract is "void," or similar language means that
The assignment is "voidable" at the other party's option (non-assigning party)
152
The contract prohibits assignment "of the contract" means
This bars only delegation of duties, not assignment of rights.
153
Integration and the parol evidence rule relationship is that
These two concepts are flip sides of the same coin: In order to determine if the parol evidence rule bars evidence of contract terms, you have to determine if the contract is "completely integrated."
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Under the parol evidence rule
a writing that is "completed integrated" cannot be contradicted or supplemented by prior written or oral agreements, or by contemporaneous oral agreements.
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A "completely integrated" agreement means
that the parties intended the contract to be a "final and complete statement" of their agreement.
156
When evaluating parol evidence rule and integration rule, you need to determine two things:
First, what the exceptions to parol evidence are, and second, what happens if an agreement isn't completely integrated
Second, whether the ramifications of an incomplete, or partial, integration: A partially integrated agreement is one that does not reflect the complete agreement of the parties.
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The parol evidence rule does not bar
Evidence of defects in contract formation, such as lack of consideration, fraud, and duress. Also, when a contract's effectiveness is subject to an oral or earlier written "condition," the parol evidence rules does not bar proof of the condition's existence
158
If a court determines that that a contract is only partially integrated, then
The written agreement will be considered final as to the terms it states, but the agreement may be "supplemented" by consistent, additional terms.
159
If the court determines that an agreement was not fully integrated, what types of evidence can be admitted
1- Oral testimony or other notes
160
What is the defense of impracticability?
The R2d puts that "where, after a contract is made, a party's performance is made "impracticable" without his fault by the occurrence of an event the non-occurrence of which was a basic assumption on which the contract was made, his duty to render that performance is discharged, unless the language or the circumstances indicate the contrary
Since there are no "language or circumstances indicating the contrary" (i.e., indicating that the parties did not intend for impracticability to operate in circumstances like these, the party will discharged from his duty to perform, and will not be liable for breach
161
If the parties reach (perhaps orally) what would otherwise be a binding agreement, and while the parties were having the contract drawn up, and one parties "changes" their mind; what kind of action would be brought and why
An original informal agreement is enforceable. R2d 27: Manifestations of assent that are in themselves sufficient to conclude a contract will not be prevented from so operating by the fact that the parties also manifest an intention to prepare and adopt a "written memorial thereof"; but the circumstances may show that the agreements are preliminary negotiations.
Therefore, if there is nothing in the circumstances to show that the manifestations of assent were merely preliminary negotiations, then the original informal agreement is enforceable
162
What is the doctrine of accord and satisfaction? and what effect does it have on recovery of any difference in the original terms of an agreement?
An accord is an agreement under which a party to a contract agrees to accept, as complete satisfaction of the contract, some performance different from that originally due under the contract. "Satisfaction" is performance of the accord, and once satisfaction takes place, both the accord and original contractual duty are discharged.
The doctrine of accord and satisfaction will prevent the a party from further recovery if they "accept" a lesser amount then originally contracted for.
Determine if there was a "good faith" (although mistaken) dispute as to whether the value of the contract or thing in dispute
163
What is the most common measure of damages sought by a party as the result of the other party's breach in a construction contract?
The most common measure of damages sought under the breach is "expectation" damage," which seeks to put the non-breaching party in the same position as he would have been had there been no breach.
So if you have a question that states an amount of profits, but for the breach but additional costs already incurred
Expectation Damages+ Amount of loss (expenditures and other loss) + Expected profit-Amount saved as a result of the breach
164
When does a unilateral offer becomes irrevocable according to MBE
An offer is unilateral if it allows acceptance only by performing the requested act. A unilateral offer becomes irrevocable once the offeree begins performance. Since an offer will be irrevocable once an offeree begins to perform, any attempt by the offeror to revoke is ineffective
165
If two parties enter into an agreement, and the breaching parties offer is a promise that is unsupported by consideration, (non-gift), the best argument for the non-breaching party (the party harmed as a result of the breach) is
That the non-breaching party's "reasonable reliance" caused the breaching party's promise, though not supported by consideration, to be binding under the Doctrine of Promissory Estoppel.
The breaching party's promise was not supported by consideration, since the non-breaching party did not confer any legal benefit or undergo any legal detriment in exchange for the promise. However, the doctrine of promissory estoppel applies to make the breaching party's promise enforceable even without consideration.
166
What are the requirements for a third-party to be an intended beneficiary?
For a third-party to be an intended beneficiary, it must first of all be the case that giving the third-party the right to sue would be appropriate to effectuate the intentions of the parties.
If it was the intended for the third-party to legally enforce the agreement, then determine if the third-party falls into one of the following categories:
(1) either the performance of the promise will satisfy an obligation of the promisee to pay money to the beneficiary; or
(2) the circumstances indicate that the promisee intends to give the third-party beneficiary the benefit of the promised performance.
Therefore, letting the third-party sue would effectuate the intentions of the parties, and having met the requirements of an intended beneficiary, the third-party can enforce the promise between the parties
167
When is consideration adequate to support a contract?
A promise to do something in return for something else. When the promisor sought performance in return, the promisor proposed a unilateral contract, not a bilateral contract. So the consideration requires a bargained for exchange and either detriment to the promisee or benefit to the promisor.
Consideration is only inadequate if it does not represent the price of the bargain; that is there's a donative (gift) promise in the guise/place of a legal, enforceable one
168
What is the legal recovery when a minor reaches the age of 18?
A creditor can only recover to the extent that the minor ratified the original contract for a "non-necessary item" when he reached the age of 18. Additionally, if the minor ratifies the contract for a lesser amount, then the creditor can only recover the lesser amount
169
How can a minor ratify a contract (for non-necessities) entered into when he turns 18?
1- upon turning 18, the minor can send a letter to the creditor affirming the debt
2- Conduct manifesting such an intent, if the minor kept physical possession of an item after turning 18
3- If the creditor sends the minor a document memorializing the debt, and the minor DOES NOT disaffirm within a reasonable time after reaching 18, this could be considered a ratification of the minor's original promise
170
What kind of contract has a minor (under 18) entered into when he makes an initial promise for a non-necessary item
Generally, it is considered a "voidable" contract at the minor's option due to the minor's incapacity to contract
171
Revocation of an offer becomes effective ONLY until
it is received by the offeree either in writing, verbal or some inconsistent act by the offeror, and is open to be accepted by the offeree at anytime.
172
An offer to grant an option by a non-merchant
Does not apply the UCC, and you must distinguish the difference between an "offer of an option" and the "option being open for three months." The offer of an option must be revoked in the same manner as any offer.
173
The battle of the forms (additional term) problem under the UCC occurs when
A buyer's offer (form) was silent on the issue, and the seller's acceptance (form) contained additional terms. When a proposal for additional terms do not "materially alter" the contract, then the terms become part of the contract.
174
Under the UCC 2-207(2), in a contract between merchants, the acceptance's proposed additional terms become part of the contract unless one of three things happens:
(1) the offer expressly limits acceptance to the term of the offer; (2) the proposed term materially alters the contract; or (3) the offeror promptly notifies the offeree of an objection to the proposed terms.
(be clear that both parties are merchants when apply UCC 2-207, such as non-merchants do not purchase in large quantities.
175
A merchants Requirements and output contract is governed under what UCC statute?
UCC 2-306 authorizes requirements and output contracts. A contract is enforceable when a company's promise to buy all of its requirements during a specified time furnishes consideration for the supplier's promise to give the purchaser a discount during the requirements period.
Determine if the contract allows the supplier to cancel or rescind the deal at all, if not then any modification or rescission is a breach of contract
176
When a contract is "full integrated," "Total integration" may be supplemented or explained by
Trade or industry usage.
177
When a contract for the sale of goods, governed by the UCC article 2 is "totally integrated," the UCC article 2 parole evidence
Article 2 of the UCC versions of the parol evidence rule makes it clear that even a term in a totally integration may be supplemented or explained by a trade or industry usage.
UCC 2-202(a) the meaning of the terms in the contract may still be "explained or supplemented by course of performance, course of dealing, or usage of trade."
But express terms in the total integration may not be "contradicted" by evidence or prior agreements, or of simultaneous oral agreements; also even "consistent additional terms" may not be shown if the integration is total.
178
According to most courts, when a contract for the sale of goods dealing with two merchants, under the UCC Article 2, a trade usage
Will be viewed as permissibly "explaining" or "supplementing" a term in total integration, of the writing.
179
The 5% leeway trade usage under the UCC Article 2 "totally integrated" contract means that
The 5% leeway trade usage would likely not be found to "totally negate" the quantity term of the writing, but rather, to merely "explain" the precise meaning of that term.
180
What does the "restitution" seek to correct?
Unjust enrichment. A party's "restitution interest" is defined as his interest in having restored to him any benefit that he has conferred on the other party. R2d 344(c).
181
Under the UCC if the seller fails to make delivery, the buyer is entitled to ...
UCC 2-711(1), if the seller fails to make delivery, the buyer is entitled to various items of damage, "in addition to recovering so much of the price as has been paid." So in addition to such expectation-interest damages as the cost of cover, the buyer will be entitled to restitution of the down payment.
182
The UCC Article 2 - 2-205 Firm Offers
UCC 2-205 allows merchants to make "firm offers" that are "irrevocable for a limited period of time even without consideration. Section 2-205 says that the period of irrevocability "in no event may exceed three months."
183
On the MBE when the question deals with two merchants and a firm offer, and the offeree accepts after the firm offer period of 90 days be careful that
because the offer was no longer irrevocable, and that it could be revoke, but however, it was not revoked, and not revoking the offer does not violate UCC 2-205, and a firm offer can become a standing offer after the 90 days, in which it can still be accepted unless the merchant offeror revokes it.
184
Under the UCC 2-509, default rule, when a third party carrier is used to ship goods, the risk of loss ....
Passes to the buyer upon the seller's delivery of the goods to the carrier. Unless a sales contract expressly provides otherwise, the risk of losses passes when the goods are shipped.
The parties to the contract are free to alter the allocation of risk by providing otherwise in the contract.
185
When a contract between a buyer and a seller is silent on the means of shipping and risk of shipping, or who pays the cost of shipping or place of tender
UCC Article 2-503 will apply as a default rule, and the risk of loss passes when the items are delivered to a third party carrier.
186
Under the UCC 2-601, a buyer, in a single delivery (not installment) contract, can reject the goods if:
Under the UCC 2-601, a buyer, in a single delivery (not installment) contract, has the right to reject the goods if they "fail in any respect to conform to the contract." However, the seller will have the right to cure defects, under 2-508
187
The right of a seller to cure a defect under UCC 2-508, in two circumstances:
As long as he notifies the buyer of his intent to cure:
1. The time for performance has not run out, and the seller can cure within that time; OR
2. The seller has reason to believe that the buyer would accept "non-conforming goods" in which case the seller can go reasonably "beyond" the time allowed for performance in curing the defects.
188
When is the default payment rule in a sales contract under the UCC 2-310(a)
Under the UCC, unless otherwise agreed, "payment is due at the time and place at which the buyer is to receive the goods even though the place of shipment is the place of delivery."
Under the UCC, non-carrier cases are those instances where the parties did not intend that the goods be moved by a third-party carrier.
In non-carrier cases, unless the contract provides otherwise, "payment is due at the time and place at which the buyer is to receive the goods."
189
Where is the default for delivery in sales contract under the UCC 2-308(a)
Unless the contract provided otherwise, (which it didn't) the place for delivery was "the seller's place of business"
