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Flashcards in Exam III Deck (35):

Distinguish between contracts that are covered by the Uniform Commercial Code and those covered by the common law.

* UCC: Covers anything to do with the sale of goods

* CLCL: Covers everything else (services, and real estate)


List the four essential elements of a contract.

1) Mutual assent: The parties to a contract must manifest by words or conduct that they have agreed to enter into a contract. The usual method of showing mutual assent is by offer and acceptance.

2) Consideration: Each party to a contract must intentionally exchange a legal benefit or incur a legal detriment as an inducement to the other party to make a return exchange.

3) Legality of object: The purpose of a contract must not be criminal, tortious, or otherwise against public policy.

4) Capacity: The parties to a contract must have contractual capacity. Certain persons, such as adjudicated incompetents, have no legal capacity to contract, whereas others, such as minors, incompetent persons, and intoxicated persons, have limited capacity to contract. All others have full contractual capacity.


Distinguish among the following:

*Express and implied contracts

*Unilateral and bilateral contracts

*Valid, void, voidable, and unenforceable agreements

*Executed and executory contracts

*Express and implied contracts
--Express: in words
--Implied in fact: formed by conduct, taken from facts and circumstances (manifest assent)

*Unilateral and bilateral contracts
--Unilateral: when a contract is formed by the exchange of promises, and each party is under a duty to the other
--Bilateral: each party is both a promisor (a person making a promise) and a promisee (the person to whom a promise is made)

*Valid, void, voidable, and unenforceable agreements
--Valid: one that meets all of the requirements of a binding contract
--Void: an agreement that does not meet all of the requirements of a binding contract
--Voidable: though defective, is not wholly lacking in legal effect
--Unenforceable: one for the breach of which the law provides no remedy

*Executed and executory contracts
--Executed: a contract that has been fully carried out by all of the parties
--Executory: contracts that are still partially or entirely unperformed by one or more of the parties


Identify the three elements of enforceable quasi contract and explain how it differs from a contract.

1) A benefit conferred upon the defendant by the plaintiff

2) The defendant's appreciation or knowledge of the benefit

3) Acceptance or retention of the benefit by the defendant under circumstances making it inequitable for him to retain the benefit without compensating the plaintiff for its value

* How does it differ from a contract?
--Based neither on an express nor on an implied promise
--Independent basis of liability, in addition to contract or tort liability


Identify and explain the four fundamental principles of Article 2 and Article 2A of the Uniform Commercial Code (UCC).

* Good faith

* Unconscionability

* Expansion of cultural practices

* Sales by and between merchants


What is the definition of a merchant?

* A person who:
--Is a dealer in a particular type of goods
--By his occupation holds himself out as having knowledge or skill peculiar to certain goods or practices
--Employs an agent or broker whom he holds out as having such knowledge or skill


Compare and contrast the manifestation of mutual assent under the common law and under Article 2.

* The UCC assesses intent, whereas CLCL assesses the validity of a contract


Describe the UCC's approach to requiring that certain contracts be in writing and identify the alternative methods of compliance under the Code.

* The Code requires merely some writing or record
--Sufficient to indicate that a contract has been made between the parties
--Signed by the party against whom enforcement is sought or by her authorized agent or broker
--Including a term specifying the quantity of goods to be exchanged


Explain the requirements of tender of delivery with respect to time, manner, and place of delivery.

* Time
--If the contract terms set no definite time for delivery, the seller is allowed a reasonable time after entering into the contract within which to tender the goods to the buyer

* Place
--If the contract does not specify the place for delivery of the goods, the place for delivery is the seller's place of business or, if he has no place of business, his residence


Explain the perfect tender rule and the three limitations on it.

* Rule
--Imposes on the seller the obligation to conform her tender of goods exactly to the terms of the contract

* Limitations
--If there is any violation of this rule, then the buyer may
1) Reject the whole lot
2) Accept the whole lot
3) Accept any commercial unit or units and reject the rest


Explain when the buyer has the right to reject the goods and what obligations the buyer has upon rejection.

* The buyer's rejection of nonconforming goods or tender is rightful

* Obligations:
--After the buyer has rejected the goods, the Code allows her to exercise no ownership of them.
--If the buyer possesses the rejected goods but has no security interest in them, she is obliged to hold them with reasonable care for a time sufficient to permit the seller to remove them.
--The buyer who is not a merchant is under no further obligation with regard to goods rightfully rejected.


Explain what constitutes acceptance by the buyer and the buyer's right to revoke acceptance.

* Acceptance occurs when the buyer, after a reasonable opportunity to inspect the goods, signifies to the seller that the goods conform to the contract, or that (s)he will take the goods or retain them in spite of their nonconformity to the contract, or when the buyer
fails to make an effective rejection of the goods

* Right to revoke:
--The buyer may revoke acceptance of goods that do not conform to the contract if the nonconformity substantially impairs the value of the goods to him.


Identify and explain the seven remedies of the seller.

1) Withhold delivery of the goods

2) Stop delivery of the goods

3) Resell the goods and recover damages (in good faith, and in a reasonable manner)
--The seller may recover damages from the buyer measured by the difference between the unpaid contract price and the market price at the time and place of tender of the goods, plus incidental damages, minus expenses saved

4) Recover damage for nonacceptance or repudiation

5) Recover the price

6) Recover incidental damages
--Incidental damages: include any commercially reasonable charges, expenses, or commissions incurred in stopping delivery; in the transportation, care, and custody of goods after the buyer's breach; in connection with return or resale of the goods; or otherwise resulting from the breach

7) Cancel the contract


Identify and explain the eight remedies of the buyer.

1) Cancel the contract

2) Recover payments made

3) Cover: the buyer may in good faith and without unreasonable delay proceed to purchase needed goods or make a contract to purchase such goods in substitution for those due under the contract from the seller (specific to the buyer)

4) Recover damages for nondelivery or repudiation (damages=$)
--The damages are equal to the difference between the market price at the time the buyer learned of the breach and the contract price, together with incidental and consequential damages, minus expenses saved because of the seller's breach

5) Sue for specific performance (addressed in Ch. 18, too)

6) Recover damages for breach in regard to accepted goods

7) Recover incidental damages

8) Recover consequential damages
--Why does the buyer receive these, and not the seller?
--Lost profit is built into the price of the good, so this is to combat that (the seller could sue for the price marked up for profit)


Identify the types of duress and describe the legal effect of each.

* Emotional duress

* Physical duress


Define undue influence and identify some of the situations giving rise to a confidential relationship.

* Unfair persuasion of a person by a party in a dominant position based on a confidential relationship

* Parent-child, teacher-student, lawyer-client, etc.


Identify the types of fraud and the elements that must be shown to establish the existence of each.

* Fraud in the execution: The defrauded party is confused as to the nature of the contract

* Fraud in the inducement: Intentional misrepresentation of the nature of the contract


Define the two types of nonfraudulent misrepresentation.

* Negligent: false representation that is made without knowledge of its falsity and without due care in ascertaining its truthfulness; voidable

* Innocent: false representation made without knowledge of its falsity but with due care; voidable


Identify and explain the two situations involving voidable mistakes.

* Mutual mistake

* Unilateral mistake


Define consideration and explain what is meant by legal sufficiency.

* Consideration: Each party to a contract must intentionally exchange a legal benefit or incur a legal detriment as an inducement to the other party to make a return exchange.

* Legal sufficiency: something of value in the eye of the law; must be either a legal detriment to the promisee or a legal benefit to the promisor


List the problem areas in contracts.

* Making contracts with minors
--Contracts between an adult and a minor are valid in regards to the adult, and voidable in regards to the minor, EXCEPT for necessities: food, shelter, clothing
-- If the minor fails to disaffirm a contract within a reasonable amount of time, the contract goes into effect

* Making contracts with intoxicated persons

* Making contracts with incompetent persons


Identify and explain the four types of contracts covered by the general contract statute of frauds and the contracts covered by the Uniform Commercial Code (UCC) statute of frauds provision.

1) Contract to pay the debts/obligations of another

2) Any contract that cannot be performed in a year or less

3) Contract about consideration of marriage

4) Contract regarding the sale of real estate


Identify and distinguish among the various types of conditions.

* How they are imposed:
--Express conditions

* When they affect a duty of performance:
--Conditions concurrent: when the mutual duties of performance are to take place simultaneously
--Conditions precedent: an event that must occur before performance is due under a contract
--Conditions subsequent: an event that terminates an existing duty

* Discharge is dependent upon this


Explain the difference between material breach and substantial performance.

* Material breach: An unjustified failure to perform substantially the obligations promised in a contract

* Substantial performance: performance that, though incomplete, does not defeat the purpose of the contract

* (These are basically different degrees of insufficient performance)


Define anticipatory repudiation.

* Anticipatory repudiation: When a seller lets the buyer know (or vice versa) that they will not perform as expected, but before the date of performance

* This gives rise to remedy under CLCL


List the three requirements of an offer.

1) Must be serious or intentional

2) Must be definite

3) Must be communicated


List the two requirements of acceptance.

1) Must be unequivocal

2) Must be communicated

* (Silence does not constitute acceptance under CLCL, but can under UCC)


What is the "effective moment," or "mailbox rule?"

* Rejections are legally effective when received.

* Acceptances are legally effective when sent.


Distinguish between offerors and offerees.

* Offerors: makes offers, revokes offers

* Offerees: rejects offers


List the eight ways to terminate an offer.

1) Acceptance

2) Lapse of time

3) Revocation

4) Rejection

5) Incompetency

6) Death

7) Destruction of subject matter

8) Subsequent illegality


When are the seller’s two opportunities to cure?

1) Prior to date of performance,

2) After the date of performance, did not hear anything from buyer so assumed the new arrangement was okay


What are the two problems with legal sufficiency?

1) Pre-existing duty (somebody promises to do something they are already contractually obligated to do)

2) Past consideration (you perform prior to knowing the existence of the offer)


Define "covenants not to compete."

* Esp. when related to employment agreements

* They will uphold these provisions if they are reasonable in relation to time and geography

* Often contained in the buying and selling of businesses, which are often upheld by the courts

* Illegal agreement, and therefore VOID


Define "exculpatory convictions."

* Ski resorts, water parts, etc. try to exculpate themselves by saying that they are not responsible for injury, death, etc.

* Courts don’t like this provision, either

* Not effective


List the key differences between the UCC and the CLCL.

* “Good,” “product,” “merchant,” “Code”

* Intent = Contract vs. Offer + Acceptance = Contract

* Open price/quantity in UCC

* Unconscionability in UCC

* UCC intends for a contract to be carried to completion

* UCC is flexible, CLCL is firm

* Firm offer in UCC

* Silence constitutes acceptance in UCC

* No mirror image rule in UCC

* New, additional, or different terms can become part of a contract in UCC

* Only one type of contract must be in writing to be enforceable under UCC (contracts above $500)

* Contracts under UCC can be modified without additional consideration if it’s put in writing