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Contracts > Contracts (Illinois Bar Exam) > Flashcards

Contracts (Illinois Bar Exam) Flashcards

1
Q

Unilateral Contract

A

Results from an offer that expressly requires performance as the only method of acceptance. [Reward/Prize/Contest]

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2
Q

Bilateral Contract

A

usually offer is silent as to method of acceptance; only way you can have legal consequences for breach of contract.

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3
Q

Quasi Contract

A

Equitable remedy. Not contract law. Any time contract law would provide an inequitable result, use quasi contract

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4
Q

Article 1 of UCC

A

common law contracts apply to sales of goods “unless displaced by particular provisions of Art. 2.”

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5
Q

Article 2 of UCC

A

applies to contracts that are primarily for sales of goods.

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6
Q

Mixed Deals (both sale of goods and services)

A

The more important part of the contract rules.

Exception: If K expressly divides payment, then apply UCC to sale of goods part and common law to rest.

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7
Q

Contract

A

An agreement that is legally enforceable.

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8
Q

Offer

A

One person’s manifestation of willingness to contract. Test: “whether a reasonable person in the position of the offeree would believe that his assent creates a contract.”

Offers generally create the power of acceptance in the person to whom the offer was made/the offeree, creating a K.

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9
Q

Sale of real estate - terms required for offer

A

Requires price and land description, otherwise, not an offer.

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10
Q

Sale of goods - terms required for offer

A

No price requirement. Intent of parties test applies where no price term.
Vague or ambiguous material terms - not an offer under either common law or UCC. (Requirements or output contracts - not vague or ambiguous - are valid. Buyer can increase requirements as well, as long as the increase is not unreasonably disproportionate to prior demand.)

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11
Q

Advertisement or Price quotation - Offer?

A

Generally an ad or a price quotation is not an offer. Usually, just an invitation to offer.
Exceptions: An ad can be a unilateral offer IF it is in the nature of a reward.
Ad can be an offer if it specifies quantity and expressly indicates who can accept.
Price quotation can be an offer if sent in response to an inquiry.

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12
Q

Termination of an offer

A

An offer cannot be accepted after it’s terminated.

Methods of Termination:

  1. Lapse of Time (time stated or reasonable time)
  2. Death or incapacity of a party prior to acceptance [except: irrevocable offers]
  3. Words or conduct of offeror [revocation]
  4. Words or conduct of offeree [rejection]
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13
Q

Revocation of an offer

A

Generally Offers can be freely revoked by the offeror.

  1. Later unambiguous statements by offeror to offeree of an unwillingness or inability to contract.
  2. Later unambiguous conduct by offeror indicating an unwillingness or inability to contract that offeree is aware of.
    * *Multiple offers are not revocation - ambiguous.
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14
Q

Option

A

Offer cannot be revoked if the offeror has not only made an offer but also 1) promised to not revoke (or promised to keep the offer “open”) AND 2) this promise is supported by payment or other consideration (“option”).
Options can be assigned (Offers cannot be assigned!).

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15
Q

UCC Firm Offer Rule

A

An offer cannot be revoked for up to three months if 1) offer to buy or sell goods, 2) signed, written promise to keep offer open, and 3) party is a merchant. [merchant – generally a person in business]

  • If firm offer for more than 3 months, irrevocable for 3 months, revocable after that
  • Not necessary to supply time period in writing, up to 3 months.
  • Remember: Only sale of goods [not real estate or services]
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16
Q

Reliance

A

an offer cannot be revoked if there has been 1) reliance that is 2) reasonably foreseeable and 3) detrimental.

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17
Q

Unilateral Contract Revocability

A

Start of performance pursuant to an offer to enter into a unilateral K makes that offer irrevocable for a reasonable time to complete performance. Mere preparation is not enough to make offer irrevocable.

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18
Q

Indirect Rejections of Offer - Counteroffer

A

Indirect Rejection
1. Counteroffer (applies to all ks) - generally terminates the offer and creates a new offer. Where a counteroffer has been made, there is no express contract unless that counteroffer itself has been accepted. BUT Counteroffers do not terminate options.

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19
Q

Indirect Rejections of Offer - Conditional Acceptance

A
  1. Conditional acceptance (applies to all ks) - Look for a response to an offer with the word “accept” followed by a conditional phrase or word.
    - Common law [real estate or services] - rejects first offer and becomes a counteroffer that can be accepted by conduct.
    - UCC [sale of goods] - rejects first offer - wipes out the first offer but DOES NOT replace it [not a counter offer]. Without further conduct/discussion, no contract.
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20
Q

Indirect Rejections of Offer - Additional Terms

A
  1. Additional terms [common law only]
    Mirror image rule - under common law, a response to an offer that adds new terms is treated like a counteroffer rather than an acceptance
    - Additional terms [UCC] - If response adds terms but doesn’t make them a condition of acceptance, generally treated as “a seasonable expression of acceptance.” [irrelevant as to whether they’re merchants] The additional term IS NOT a part of the K unless both parties are merchants. Even if both parties merchants, not a part of K if additional term is “material” or offeror objects to additional term.
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21
Q

Acceptance of an Offer

A

Offeror can control the method of acceptance, the time that acceptance is effective, or whether the offeree must give notice that it has been accepted by performance.

Generally start of performance is acceptance. [But completion of performance required to accept unilateral offers]

22
Q

Acceptance of an Offer - Distance situations

A

Acceptance generally effective WHEN MAILED. [mailbox rule]
Communications other than acceptance effective only when RECEIVED.
**If a rejection is mailed before an acceptance is mailed, neither is effective until received.
**Can’t use the mailbox rule to meet an option deadline.

23
Q

Acceptance/Rejection of an offer - seller of goods sends noncomforming goods

A

If a seller tenders nonconforming goods, constitutes a breach of the k. Buyer may either accept or reject the goods.

  • Acceptance - Buyer may accept and recover from the seller the difference between the value of the goods as warranted and their actual value with the defects.
  • Rejection - Buyer must take positive action to give seller notice of the rejection. If seller can cure the problem, the buyer should tell seller why he is rejecting the goods or risk a reduction in damages. If reject, buyer must hold the goods for a reasonable time and permit S to remove them/await instructions S
  • Right to Cure - A seller has the right to cure nonconforming goods if S gives notice to the buyer and if conforming goods can be delivered before the last date for delivery under the sales K. Under UCC, if a seller sends nonconforming goods that he reasonably believed would be acceptable, the seller has more time to deliver conforming goods if he gives notice of such intent to the buyer.
24
Q

Acceptance

A

Generally, an offer can be accepted only by 1) a person who knows about the offer at the time she accepts; 2) who is the person to whom it was made.
When an offer has been affected, the offeror can no longer revoke and the offeree can no longer reject. There is a contrat!

25
Q

Legal Reasons to not enforce an agreement (11)

CCSIPMNDUAM

A
  1. Lack of consideration
  2. Lack of capacity of promisor
  3. Statute of Frauds
  4. Illegality of performance
  5. Public Policy
  6. Misrepresentations
  7. Nondisclosure
  8. Duress
  9. Unconscionability
  10. Ambiguity
  11. Mistakes at time of agreement as to material facts affecting the agreement.

CCSIPMNDUAM
Chocolate Coffee sipped in Paris may not direct U at Morning.

26
Q

Consideration

A

Usually not an issue. Where it is, look for the bargained-for legal detriment.
Identify the promise breaker - did that person ask for something in return for her promise?
Look at person trying to enforce the promise and ask what requested legal detriment that person sustained.

Adequacy of Consideration - not an issue.

27
Q

Illusory Promise

A

One that courts will not enforce due to lack of consideration/legal detriment/valid promise on one side. Example: S promises to sell grits to B but reserves the right to terminate the agreement at any time without any notice. But if reserved right to terminate on ten days notice - that’s a legal detriment/valid promise.

28
Q

Past Consideration

A

Where the promisor’s motivation for making the promise was a past benefit that gave rise to a moral, not legal, obligation to make compensation. Generally not consideration, except where the promisor expressly requested one and an expectation of payment by promise was made (if promise was based on a material benefit received from the promisee).

Exceptions: 1. Promise to pay a debt barred by a statute of limitations. (must be in writing)
2. Promise to pay a debt discharged by bankruptcy.
(Basically: a written promise to satisfy an obligation for which there is a legal defense is enforceable without consideration)

29
Q

Part Payment as consideration for release

A

If the debt is due and disputed, then part payment is NOT consideration for release. (if you owe someone money, partial payment is not a detriment to you)
If the debt is not due yet or disputed, part payment can be consideration for release.

30
Q

Promissory Estoppel

A

A promise that is not written or lacks consideration can be enforceable if these elements exist:

  1. A promise was made
  2. The promisee reasonably and foreseeably relied on the promise to their own detriment.
  3. Enforcement is necessary to avoid injustice.
31
Q

Incapacity to contract

A
  1. Infant under 18
  2. Mental Incompetents - lacks ability to understand agreement
  3. Intoxicated person, if other party has reason to know

Consequences of Incapacity:

  1. Right to disaffirm the contract by person lacking capacity.
  2. Affirmation is implied if the benefits are retained after gaining capacity.
32
Q

Quasi Contract Liability for Necessities

A

A person who does not have capacity is legally obligated to pay for things that are necessary such as food, clothing, medical care, or shelter, but that liability is based on quasi-contract law, not contract law.
Everyone needs to be able to get necessary items, but we don’t want other people to take advantage of them. Ex: If Landlord tries to get a mentally incompetent person to pay more than the usual rent for an apartment, the landlord can only enforce the usual rent.

33
Q

Statute of Frauds [definition, categories within]

A

Statute designed to prevent fraudulent claims of the existence of a contract. If agreement is within SOF, Def can file a motion to dismiss based on SOF defense. After this is raised, pl can only get day in court by providing objective evidence of the K’s existence.

Within SOF:

  1. Promises to answer for the debts of another if that person does not herself pay [guarantee!] (suretyship) [however - if main purpose of the obligation was to benefit the guarantor, that guarantee is not within SOF]
  2. Service contract not capable of being performed within a year from the time of contract. [specific time period required, if it just says a task without a time period, SOF doesn’t apply. For Life, SOF doesn’t apply]
  3. Transfers of interest in real estate [with exceptions of a lease of a year or less]
  4. Sale of goods for $500 or more.
34
Q

Satisfying the Statute of Frauds - Performance

A

SOF satisfied by:

  1. Real estate - if any 2 of 3 fulfilled - 1. Possession; 2. Payment; 3. Improvements to the land
  2. Performance/Service contracts - Full performance by either side satisfies SOF. [part performance does not]
  3. Sale of Goods
    - Seller’s part performance - Generally, part performance of a K for the sale of goods satisfies SOF, but only to the extent of the past performance.
    - Specially Manufactured goods - if K is for specially manufactured goods, then SOF is satisfied as soon as the seller makes a substantial beginning.
35
Q

Satisfying the Statute of Frauds - Writing

A

Real estate or services writing - Material Terms test (must have who or what). Must be signed by the person who is asserting the SOF defense.
Art 2/sale of goods - Must simply indicate that there is a K for sale of goods and contain the quantity term. Generally, must be signed by def with a limited exception for 2 merchants where there is a delay in responding.

Some cases hold that the pl’s reliance on the def’s oral promise to put the agreement in writing can estop the def from asserting a SOF defense.

36
Q

Delay in responding to a contract

A

If a business person receives a contract with a quantity, a responsible one who doesn’t believe the agreement exists would respond in some way. Without a response, the agreement is deemed to have existed.

37
Q

Judicial Admission

A

If the defendant asserting a SOF defense admits in a pleading or testimony that he had entered into an agreement with the plaintiff, the purpose of the SOF is fulfilled and so the SOF is satisfied. No SOF defense.

38
Q

Written proof of authorization to enter into contract for someone else

A

Rules of law require that the authorization to enter into contract for someone else must be in writing only if the contract to be signed is within the SOF. (authorization must be of “equal dignity” with the K).

39
Q

Written proof of contract modification

A

If the modification of the contract would be within the statute of frauds, then the modification must be in writing.
Under common law, K provisions requiring that all modifications must be in writing are NOT effective.
Under UCC, K provisions requiring written modifications are effective unless waived.

40
Q

Illegality

A

If the subject matter is illegal, the agreement is not enforcement.

Illegal Purpose - if the subject matter is legal, the agreement is enforceable if the pl did not have reason to know of the def’s illegal purpose.

41
Q

Misrepresentation

A

1) a statement of “fact” before the K,
2) by one of the contracting parties or her agent,
3) that is false,
4) that is fraudulent or material, and
5) induces the contract.

No wrongdoing required for material misrepresentations.

42
Q

Nondisclosure

A

Generally, a person making a contract has no duty to disclose what she knows. Look for fiduciary-like relationship or concealment as exceptions to this general rule.

43
Q

Duress

A

Physical Duress

Economic Duress -

  1. Bad guy - improper threat, usually a threat to breach an existing contract.
  2. Vulnerable guy with no reasonable alternative.
44
Q

Undue Influence

A

1) special relationship between the parties and 2) improper persuasion of the weaker by the stronger.

45
Q

Unconscionability

A

Not heavily tested.

Originally applicable only to sale of goods, but 1) now a part of contracts law generally 2) empowers a court to refuse to enforce all or part of an agreement.

Two basic tests – tested as of the time the agreement was made (court determines).

  1. Unfair surprise (procedural)
  2. oppressive terms (substantive)
46
Q

Ambiguity in words of agreement

A

No K if

1) parties use a material term that is open to at least two reasonable interpretations, and
2) each party attaches different meaning to the term, and
3) neither party knows or has reason to know the term is open to at least two reasonable interpretations.

47
Q

Mistake of Fact existing at time of K

A

Relief for mutual mistake only if both parties are indeed mistaken (not just uncertain) about an existing fact (not about something that might or might not happen in the future) that is material and person seeking relief does not bear the risk of mistake.

Unilateral mistake of material fact - Relief for situations only in which the other party had reason to know of the mistake.

48
Q

Parol Evidence Rule

A

(complete integration - written and final and complete agreement).

Extrinsic evidence can be used by a court dealing with these things:
clerical error in integration?
misrepresentation/fraud/duress in creation of K?
Resolving ambiguities in written K

Evidence of earlier agreements cannot be considered for the purpose of contradicting the terms in the written K. UNLESS THE COURT FINDS:

  • The written agreement was only a partial integration.
  • the additional terms would ordinarily be in a separate agreement.
49
Q

Conduct - in determining terms of a contract

A

Forms of conduct: looked at to explain words in contracts or fill in K gaps

  1. Course of Performance – same people, same contract
  2. Course of Dealing – same people, different but similar contract
  3. Custom and Usage – different but similar people, different but similar contract
50
Q

Delivery obligations of seller of goods if delivery by common carrier

A

Shipment contract - the seller completes its delivery obligation before delivery is completed, when:
1. Seller gets the goods to a common carrier
2. Makes reasonable arrangements for delivery, and
3. Notifies the buyer.
FOB:[City where seller is or goods are]

Destination contract - seller does not complete its delivery obligation until the goods arrive at the destination.
FOB:[Any other city]

51
Q

Risk of Loss - sale of goods

A

After K has been formed, before buyer receives goods, goods are damaged/destroyed, neither the buyer nor seller is to blame.

If buyer has risk - has to pay full K price for lost/damaged goods.
If seller has risk - no obligation on the buyer to pay, possibility liability for nondelivery.

Rules: (step by step)

  1. Agreement of the party controls
  2. Common Carrier Delivery - risk shifts to buyer at the time the seller completes its delivery obligations
  3. Default/Catch-all - Is the seller a merchant?
    - Risk of loss shifts from a merchant-seller to the buyer on the buyer’s receipt of the goods.
    - Risk of loss shifts from a nonmerchant seller when he TENDERS the goods. [tender - makes available]

Contracts (1 decks)

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