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Contracts Tricky > Contracts Tricky > Flashcards

Contracts Tricky Flashcards

1
Q

What three steps are required in order for a contract to be valid?

A
  1. Mutual assent
  2. Consideration
  3. Defenses
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2
Q

When is mutual assent present?

A

Offer + acceptance

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3
Q

What is consideration?

A
  1. Bargained for exchange of something of legal value or a detriment;

OR

  1. Substitute for consideration, such as promissory estoppel, detrimental reliance, or good faith modification under the UCC.
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4
Q

What are the defenses against a contract?

A
  1. Mistake
  2. Lack of capacity
  3. Illegality
  4. Statute of frauds
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5
Q

To what does Article 2 of the UCC apply?

A

Movable goods.

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6
Q

What factors determine whether Article 2 of the UCC applies?

A
  1. The type of transaction, and

2. The subject matter of the transaction (movable goods or real estate).

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7
Q

What are the three steps in forming an agreement?

A
  1. Initial communication that amounts to an offer
  2. What happens after the offer (repudiation, retraction)
  3. Response by offeree
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8
Q

Under common law, contracts for real-estate must include ______ to be valid.

A

a price term.

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9
Q

Under a contract, you can have an offer and contract for a sale of goods _______ if _____.

A
  1. Without a price term

2. If the parties so intend.

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10
Q

Vague and ambiguous material terms _______.

A

Render an offer void under both common law and the UCC.

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11
Q

When is a material term vague or ambiguous?

A

The bar uses one of these three words: “appropriate,” “fair,” and “reasonable.”

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12
Q

Requirements contracts and output contracts are not ______.

A

Vague or ambiguous.

Ex: A contracts to by all B’s widgets from B for 5 years. This is a requirements contract.

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13
Q

Under a requirements contract, when can a buyer increase the amount of goods contracted for?

A

When the increase is not out of proportion with prior demands.

1k to 1020, but not 5 to 25.

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14
Q

An advertisement or price quotation is _______.

A

Not an offer.

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15
Q

Four methods for terminating a contract:

A
  1. Lapse of time (the offer was not accepted within a reasonable time)
  2. Death of either party
  3. Revocation of an offer
  4. Rejection
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16
Q

Revocation can only be performed by _____.

A

The offeror.

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17
Q

Rejection can only be performed by ______.

A

The offeree.

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18
Q

What are the two ways an offer can be revoked?

A
  1. Later unambiguous (i) statements or (ii) conduct.

2. The offeree must be aware of the revocation.

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19
Q

When O makes multiple offers and one offeree rings out, is the offer revoked?

A

No. He can still give.

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20
Q

Options exist under ______.

A

Both common law and UCC Art. 2.

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21
Q

UCC Firm Offer Rule

A

An offer cannot be revoked for up to three months if (i) offer to buy or sell goods, (ii) signed, written promise to keep the offer open, and (iii) party is a merchant.

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22
Q

Does an option under the Firm offer rule need to state a time period?

A

No. Courts will imply a reasonable time.

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23
Q

At common law, an option requires:

A
  1. a promise not to revoke and

2. Payment of consideration for the option

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24
Q

What offers are irrevocable?

A
  1. Options
  2. UCC Firm Offers
  3. Relied upon contracts
  4. Unilateral contracts
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25
Q

When is there reliance?

A
  1. Reliance
  2. Reasonably foreseeable and
  3. Detrimental to the party that relied. E.g. paint can’t be returned.
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26
Q

“Offer” + “only by” =

A

Unilateral contract

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27
Q

Counter offers:

A
  1. terminate the previous offer

2. Form a new offer

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28
Q

Do counter offers terminate options?

A

No.

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29
Q

Conditional Acceptance:

A

Under common law, a conditional acceptance is both a rejection and a counter offer.

Remember, conditional acceptance includes the word “accept” and then a condition.

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30
Q

Methods of indirect rejection:

A
  1. Counter offer
  2. Conditional acceptance
  3. Mirror image rule
  4. Seasonable expression of acceptance (UCC)
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31
Q

Can a conditional acceptance be accepted through conduct?

A

Common law - Yes, and it includes all the terms of the conditional acceptance offer.

UCC - No. A contract will be established based on the parties’ conduct alone. Any terms beyond the scope of that conduct drop out.

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32
Q

The Mirror Image Rule requires __________.

A

That the response to an offer look exactly like the offer.

This is common law. This has never existed under the UCC.

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33
Q

Under the mirror image rule, what if there is a minor, immaterial change?

A

It could be acceptance.

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34
Q

Seasonable expression of acceptance occurs when:

A

there is (i) an offer to buy or sell goods and (ii) a response with additional or different terms.

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35
Q

What is the rule of seasonable expression of acceptance?

A

Offering new terms but not making them a condition of acceptance amounts to acceptance and not a conditional acceptance.

The additional term is never a part of the contract unless both parties are merchants.

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36
Q

If the offeror has no way of knowing about the start of performance _______.

A

Notice is required.

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37
Q

Usually start of performance =

A

Acceptance.

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38
Q

With unilateral contracts, start of performance ______.

A

Is not acceptance of the contract.

Complete performance is acceptance.

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39
Q

The mailbox rule

A
  1. All communications other than acceptance are effective only when received.
  2. Acceptance is generally effective when mailed
  3. If a rejection is mailed before an acceptance is mailed, then neither is effective until received. Whatever arrives first controls.
  4. You cannot use the mailbox rule to meet an option deadline
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40
Q

Can offers be assigned?

A

No.

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41
Q

Can options be assigned?

A

Yes.

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42
Q

Consideration analysis

A
  1. Bargained for?

2. Legal detriment?

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43
Q

What is a legal detriment?

A

It can be refraining from exercising a right.

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44
Q

Is past consideration enough to create a contract?

A

No. Not unless the action was expressly requested by the promisor and there was an expectation of payment by the promisee.

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45
Q

Under common law, you need _______ for contract modification.

A

New consideration unless something unexpected happens that changes the thing contracted for. In that case, a modification adapting to the unexpected will not require consideration to be enforceable.

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46
Q

Under the UCC, you need _______ for contract modification.

A

Nothing.

No new consideration is required. Good faith is the test for changes to an existing sale of goods.

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47
Q

If a debt is due and undisputed ______.

A

Part payment is not consideration for release.

So, debt settlements are not enforceable without consideration separate from partial payment.

If the debt is not yet due and the release for partial payment occurs, it is enforceable.

48
Q

These promises are enforceable without consideration:

A
  1. A written promise to satisfy an obligation for which there is a legal defense.
  2. Promissory estoppel.
49
Q

What are the elements of promissory estoppel?

A
  1. A promise
  2. Reliance that was reasonable, detrimental, and foreseeable
  3. Enforcement necessary to avoid injustice
50
Q

Who lacks capacity?

A
  1. People under 18
  2. Mental incompetents
  3. Intoxicated persons
51
Q

Can people who lack capacity enforce contracts?

A

Yes. We don’t care about the capacity of plaintiffs.

52
Q

Can a person be held liable for breach or unjust enrichment if they keep something in breach after they gain capacity?

A

Yes.

53
Q

Does a person who lacks capacity have contract liability?

A

No. Not even for necessaries.

54
Q

What contracts are within the statute of frauds?

A
  1. A promise to answer for the debts of another.
  2. Service agreements not capable of being performed within a year from the time the contract is formed
  3. Transfers of interest in real-estate
  4. Sale of goods for $500 or more
55
Q

What is a promise to answer for the debts of another for purposes of the state of frauds?

A

A promise to pay for a third party only if the third party does not pay. E.g. “If P did not pay.”

56
Q

What is the main purpose exception to the state of frauds?

A

If the main purpose of P’s debt is to benefit a third party, then the third party will be held liable for the debt (the contract between P and third party is not within the statue of frauds).

57
Q

What service contracts are not capable of being performed within a year from the time the contract is formed?

A

Anything set out a year or more than a year in duration.

A task that is theoretically capable of being performed within a year are not within the statute of frauds.

Lifetime deals are never within the statute of frauds. Person could die tomorrow.

58
Q

Are leases for one year or less within the statute of frauds?

A

No. There is no legal requirement that leases for one year or less have to be in writing.

59
Q

How can the statute of frauds be satisfied?

A

Objective evidence, including:

  1. Signed writing
  2. Performance
60
Q

Five rules for the satisfaction of performance under the statute of frauds

A
  1. Transfers of real-estate: any two of three; (i) improvements to the land, (ii) payment, and (iii) possession.
  2. Service Contract: (a) Full performance of a service contract. (b) BUT, part performance of a service contract never satisfies the statute of frauds.
61
Q

Does part performance work for movable goods covered by the UCC?

A

Yes.

62
Q

Part performance for specially manufactured goods

A

If the contract is for the sale of goods that are to be specially manufactured, then the Statute of Frauds is satisfied as soon as the seller makes a “substantial beginning.”

63
Q

In order for a writing to satisfy a common law statute of frauds other than the sale of good statute of frauds, it must include ______.

A

All material terms.

64
Q

All material terms means:

A

Who and what and the defendant’s signature.

65
Q

Under the UCC, a writing survives the statute of frauds when:

A

The writing indicates that there is a contract for the sale of goods and contains the quantity of items to be sold.

It does not need to include who the parties are.

66
Q

When two merchants are dealing and one merchant sends the other merchant a writing specifying the quality of widgets to be bought or sold that the sender signs and the other merchant does not respond, has the statute of frauds been satisfied?

A

Yes. But only when (i) sale of goods (ii) both parties are merchants and (iii) there is a writing signed by the plaintiff.

67
Q

When can a defendant be estopped from a asserting a statute of frauds defense?

A

When the plaintiff relied on the defendant’s oral promise to put the agreement in writing.

68
Q

The equal dignity doctrine:

A

You are only required to provide written proof that you are authorized to act on behalf of someone else when the writing you are entering into falls within the statute of frauds.

69
Q

Changes to contracts only fall within the statute of frauds when ________.

A

The contract as modified would fall within the statute of frauds.

70
Q

Provisions that claim that all modifications have to be in writing under the Common Law are ______.

A

Irrelevant.

71
Q

Provisions that claim that all modifications have to be in writing under the UCC are ______.

A

Controlling.

72
Q

If the subject matter of a contract is illegal, _______.

A

The contract is unenforceable.

73
Q

If the subject matter of a contract is legal but the purpose in entering into the contract is illegal, __________.

A

The contract is enforceable.

74
Q

When is recision due to misrepresentation appropriate?

A

When:

  1. A statement of fact before the contract
  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
75
Q

Does non-disclosure cause recision?

A

No. It must be something more, like the breach of a close relationship or concealment.

76
Q

Economic Duress is:

A
  1. A party to a contract threatens to breach the contract

AND

  1. The plaintiff is vulnerable to the threat.

E.g. Kosher grits.

77
Q

When is unconscionability tested?

A

At the time the contract is entered into.

78
Q

There is no relief for mistake when ______.

A

“The person seeking relief bears the risk of mistake.”

79
Q

When can a person still get relief for breach of contract when they made a mistake?

A

When the mistake is unilateral. That is, one party make a mistake and the other party had reason to know the first party made a mistake.

E.g. S made a clerical error and seriously underbid other contractors. B realized this must have been a mistake, but accepted the bid. S can rescind.

80
Q

For the purpose of changing or contradicting a writing, parol evidence ________.

A

Cannot be considered.

81
Q

For the purposes of correcting a mistake in a contract or establishing a clerical error, parole evidence _________.

A

Can be considered.

82
Q

For the purpose of determining whether there was a misrepresentation, parol evidence _______.

A

Can be considered.

83
Q

Parol evidence that clears up ambiguous terms ________.

A

Can be considered.

84
Q

If integration is partial, ________.

A

Then evidence of an earlier agreement can be included into the agreement via parol evidence.

85
Q

When is a delivery obligation satisfied under a shipment contract?

A

When (i) the seller gets the goods to a common carrier, (ii) makes reasonable arrangements for delivery, and (iii) notifies the buyer.

86
Q

A destination contract contains either _____ or ______.

A

an FOB term or explicitly allocates the risk of loss.

87
Q

Risk of loss rules:

A
  1. Agreement about risk of loss controls
  2. Breach - the breaching party is liable for any uninsured loss even though the breach is unrelated
  3. Common carrier delivery: risk of loss shifts from the seller to buyer at the time the seller completes its delivery obligations, i.e. delivery to the common carrier.
  4. Catch-all: If the seller is a merchant, risk of loss shifts from merchant seller to buyer on the buyer’s receipt of the goods. It shifts to buyer when seller isn’t a merchant when the seller tenders the goods.
88
Q

When is a warranty of quality breached?

A
  1. Express words of quality are used (this can be established when the seller uses a model). An opinion (“top quality”) does not amount to express warranty.
  2. Implied warranty of merchantability: (i) seller deals in the goods in question and (ii) goods are fit for ordinary purposes.
  3. Implied warranty for a particular purpose: (i) buyer has a particular purpose and relies on seller to meet that purpose, (ii) and seller knows. (iii) The goods must be fit for a particular purpose.
89
Q

What are the limitations on warranties?

A
  1. Four Year Statute of limitations: begins to run from the time delivery or tender is made.
  2. Privity: (i) P and D contracted with each other, (ii) this has been largely eliminated.
  3. Buyer’s examination of the goods: there are no warranties as to defects which would be obvious on examination.
  4. Disclaimer: (a) generally, express warranties cannot be disclaimed, (b) implied warranties of merchantability and fitness can be disclaimed either when (i) conspicuous language of disclaimer (if about merchantability must say so) OR (ii) specific language saying “as is” or “with faults”
  5. Limitation of remedies: It is possible to limit warranties even for express warranties. But, cannot limit torts remedies for personal injury.
90
Q

Does “as is” and “with all faults” have to be explicit in order to be an effective disclaimer?

A

No.

91
Q

Perfect tender applies to _____.

A

The sale of goods.

92
Q

Perfect tender is satisfied when ____.

A

Delivery matches contract terms exactly.

93
Q

What are the remedies for a failure of perfect tender:

A
  1. Keep the goods and sue for damages

2. Send the goods back, recover payments made, and maybe sue for damages.

94
Q

Rejection of goods is appropriate when:

A
  1. There is less than perfect tender and the buyer acts in good faith
  2. The buyer must tale reasonable care of the goods and cannot continue to use the goods
  3. The option of rejection because of a less than perfect tender is limited by the concepts of cure
95
Q

When can a seller cure imperfect tender?

A
  1. When the time for performance has not yet expired.
  2. When the seller has reasonable grounds to believe tender would be acceptable even if imperfect, maybe if a money allowance was made.
96
Q

Does each installment of an installment contract require perfect tender?

A

No.

97
Q

If the buyer accepts the goods, can the buyer later reject them?

A

No.

98
Q

Payment without the opportunity to _______ is not acceptance.

A

Inspect.

99
Q

Revocation of acceptance requires:

A
  1. Nonconformity that substantially impairs
  2. Excusable ignorance of grounds for revocation or reasonable reliance on seller’s assurance of satisfaction, and
  3. Revocation within a reasonable time after the discovery of the non-conformity
100
Q

Only _______ Parties have third party contract rights.

A

intended beneficiaries

101
Q

Cannot cancel a third party contract when ______.

A

The third party beneficiary (i) knows of and (ii) relies on the contract.

102
Q

In third party contracts, who can recover from whom:

A
  1. Beneficiary can recover from promisor
  2. Promisee can recover from promisor
  3. Beneficiary cannot recover from promisee
103
Q

The beneficiary can only recover from _____.

A

The promisor, and not the promisee.

104
Q

Where contract language prohibits assignment can the assignee still collect?

A

Yes, if the assignee did not know about the prohibition.

105
Q

If a contract includes language of invalidation and the assignment is made, can the assignee still collect?

A

No. The contract is voided so there is no contract to enforce.

106
Q

What assignments cannot be made whether or not there is language in the contract prohibiting assignment?

A

Assignments that substantially changes the duties of the obligor.

107
Q

Is consideration required for assignments?

A

No.

108
Q

Can gift assignments be revoked?

A

Yes.

109
Q

The assignee can recover from ______.

A

The obligor.

110
Q

The assigner can recover from _____.

A

No one. He loses his ability to enforce the contract.

111
Q

A vague term in a contract can be cured by:

A

Part performance. The part performance indicates the terms the performer believes he is operating by.

112
Q

What is a novation?

A

A novation occurs when a new contract substitutes a new party to receive benefits and assume duties that had originally belonged to one of the original parties under the terms of the old contract. A novation will serve to discharge the old contract. The elements for a valid novation are:(i) a previous valid contract;(ii) an agreement among all parties, including the new party (or parties) to the new contract; (iii) the immediate extinguishment of contractual duties as between the original contracting parties; and (iv) a valid and enforceable new contract

113
Q

What is an accord?

A

An accord is agreement in which one party to an existing contract agrees to accept, in lieu of the performance that she is supposed to receive from the other party to the existing contract, some other, different performance. An accord must be supported by consideration. Where the consideration is of a lesser value than the originally bargained-for consideration in the prior contract, it will be sufficient if the new consideration is of a different type or if the claim is to be paid to a third party.

114
Q

What is a discharge by release?

A

An agreement between two contracting parties not to sue on a contract is a discharge by release. The release or contract not to sue usually must be in writing and supported by new consideration or promissory estoppel elements. A discharge by substituted contract occurs when the same parties to a contract enter into a second contract that immediately revokes the prior contract.

115
Q

What is the effect of assignment?

A

The effect of an assignment is to establish privity of contract between the obligor and the assignee, while extinguishing privity between the obligor and assignor. The assignee then replaces the assignor as the real party in interest, and she alone is entitled to performance under the contract

116
Q

What is the effect of substantial performance?

A

It reduces the award that can be collected if performance is not complete.

117
Q

What damages can still be awarded under the doctrine of partial performance?

A

Damages suffered due to the incomplete performance

Contracts Tricky (4 decks)

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