MBE Flashcards
(139 cards)
1
Q
When do the rights of a donee beneficiary vest?
A
When the beneficiary materially changes position in justifiable reliance on the promise.
2
Q
Can personal services contracts be delegated?
A
Not when the person performing has special skill.
3
Q
What if a party knows about the delegation of a personal services contract and doesn’t object?
A
Party will have waived the nondelegability.
4
Q
What is an accommodation?
A
It is a counteroffer by the seller. It is when the seller includes some conforming and some uncomforming goods along with a note explaining the noncomforming goods.
5
Q
What if a merchant seller simply shipped noncomforming goods with no note?
A
Acceptance and breach of contract.
6
Q
What if there is an agreement between merchants and no delivery term?
A
The UCC will “gap fill” with a delivery within a reasonable time.
7
Q
Unilateral offer: what happens once performance has begun?
A
The offer cannot be revoked as to that performer. (woman buying groceries example)
8
Q
What happens if a contract is written and contains an ambiguity, and one person knows of the ambiguity and the other person does not know about it?
A
The contract will be enforced according to the intent of the party who did NOT know about the ambiguity.
9
Q
What if neither party knows of the ambiguity when the contract is formed?
A
No contract unless both parties meant the same thing.
10
Q
Expectation damages:
A
putting the non breaching party in the position he would have been in had the contract been performed
11
Q
Firm Offer requirements:
A
- offer for sale of goods
- merchant signs a written offer
- offer promises to leave open an offer for a stated time period
* irrevocable for stated period (max 3 months)
12
Q
If there is a valid option contract, will a rejection by an offeree terminate the option?
A
NO. The offer only terminates at the end of the option period regardless of offeree’s conduct. (unless reliance by offeror)
13
Q
What if there is a valid option contract and the offeree rejects the offer before the end of the option and the offeror detrimentally relies on this rejection?
A
This will extinguish the option.
14
Q
When does Art. 2 of the UCC apply?
A
Applies: sale of goods
Does NOT apply: services, real estate, construction contracts
15
Q
Who is a merchant?
A
One who REGULARLY deals in goods of the kind sold
16
Q
Implied contracts
A
Formed by conduct
17
Q
Quasi contracts or implied in law contracts
A
NOT contracts at all.
Construed by courts to avoid UNJUST ENRICHMENT
18
Q
When will a contract be unilateral (2 situations)
A
- offer UNAMBIGUOUSLY indicates that completion of performance is the only manner of acceptance OR
- offer to the public (reward offer)
19
Q
Creation of a contract: what three elements must be present?
A
- mutual assent
- consideration
- any defenses?
20
Q
When is a contract void? What is the effect of a contract that is void?
A
A void contract is one that is totally WITHOUT ANY LEGAL EFFECT from the beginning.
Ex: an agreement to commit a crime
21
Q
What to look for in an offer:
A
- intent to enter into a contract
- certainty and definiteness
- communication of the offer to the offeree
22
Q
Offer must be definite: what is the key inquiry?
A
Whether the contract has enough terms to be capable of being enforced.
23
Q
Standard for requirements contracts
A
good faith - not unreasonably disproportionate
24
Q
How can an offer be terminated?
A
- lapse of time
- offeror revokes either by acting inconsistently with the offer or by expressly revoking
- offeree states that he will not accept
25
When does revocation become effective?
Upon receipt
26
When can an offer not be revoked?
- Reliance by the offeree that is reasonably foreseeable
- Valid options contract
- Unilateral contract and person has started performing
27
Common law: acceptance with additional terms
NO CONTRACT (mirror image rule)
28
UCC: acceptance with additional terms when one is a nonmerchant
Contract, but additional terms do not become part of it
29
UCC: acceptance with additional terms when both are merchants
Becomes part of the contract UNLESS
- material term
- nonmaterial and merchant objects w/in reasonable time
30
What if there are DIFFERENT terms with the acceptance?
Common law: this is a rejection (violates mirror image rule)
UCC: courts are split
- some courts: treat it like additional terms
- other courts: conflicting terms "knock out" each other out and UCC fills the gaps
31
When will death not terminate an offer?
- option contract
| - part performance of offer to enter into a unilateral contract
32
Who can accept an offer?
Generally only the person to whom the offer is made.
Exception: an option contract can be assigned
33
General rule: when is acceptance effective?
When posted (mailbox rule)
34
Exceptions to the mailbox rule: what happens if rejection is mailed first, then letter of acceptance and rejection received first?
Letter of acceptance is a counteroffer
NO mailbox rule here
35
Exceptions to the mailbox rule: what happens if acceptance is mailed first, then rejection is sent and rejection is received first?
If offeror relied on letter of rejection before acceptance is received, estoppel may apply.
36
When must acceptance be received for an option contract?
Acceptance is when received (NO mailbox rule with option contracts)
37
Elements of consideration
1. promisee must suffer some legal detriment
2. detriment must induce reliance
3. the promise must induce the detriment
*bargained for exchange
38
Moral obligation
Generally not a substitute for consideration.
2 possible exceptions:
- performed acts at the promisor's request
- material benefit rule: promisor received a benefit and then promised to pay for it
39
Preexisting duty rule:common law
performance of a preexisting duty is NOT consideration
There must be consideration to modify
40
What if a promisor makes a promise and you owe the preexisting duty to a third person?
No preexisting duty, the new promise is enforceable
41
UCC rule for modifications
No consideration is required - good faith is required for modification
42
What happens if a debtor makes a partial payment in exchange for a promise to forgive balance of debt: is there consideration to make this an enforceable promise?
If debt is due and undisputed: part payment is NOT consideration
If debt is not yet due OR is disputed: part payment is consideration
43
When can a promise to dismiss a lawsuit or not bring a lawsuit be consideration?
When the party giving up the claim believes in GOOD FAITH that it is a valid claim.
44
What if debtor owed a debt but it is now barred by statute of frauds, but he again promises to pay?
A WRITTEN promise to pay a debt barred by the statute of limitations is enforceable.
45
Promissory estoppel elements
1. promise
2. reliance that is both foreseeable and justifiable
3. enforcement necessary to avoid injustice
46
Who lacks capacity to contract (3 categories)
1. infants
2. mental incompetents
3. intoxicated persons
*other party must have had REASON TO KNOW person was incompetent or intoxicated
47
What types of contracts are within the Statute of Frauds?
Marriage: promise in consideration of marriage
Year: can't be performed within a year
Land contracts: leases or easements over a year, property
Executor promises to pay an obligation
Goods over $500
Surety
48
Modifications: what should you look at to determine whether the modification is within the statute of frauds
Look at the modified contract - if the contract as modified, is within the statute of frauds, it must be in writing
49
What happens if at common law there is a contract that says all modifications have to be in writing?
This won't be enforced. Modifications at common law can be oral if they are not within statute of frauds.
50
UCC: what happens if the contract provides that all modifications must be in writing?
Under the UCC, these clauses are effective.
51
What contents must be in a contract other than the sale of goods?
1. identify the parties
2. identify the contract subject matter
3. contain all essential terms
4. signed by party to be charged
52
Part performance of an oral agreement to buy real estate
Possession + full or part payment
| Improvements + possession
53
Sale of goods for $500 or more: what must the contract contain
1. quantity
2. contract for sale has been made
3. signed by the party raising defense
54
Confirmatory memo: exception to statute of frauds
Use when there is an initial oral agreement.
1. both parties are merchants
2. writing claims that there is a contract
3. writing signed and states quantity
ALSO binds recipient BUYER if:
- he has reason to KNOW of the confirmation's contents AND failure to object in writing within 10 days of receipt
*make sure it was sent within a reasonable time after the oral agreement*
55
What if there is part performance of contract for sale of goods?
Part performance of a contract for the sale of goods satisfies the statute of frauds to the extent of part performance.
(can't get the other part that fails statute of frauds)
56
Exception to statute of frauds: specially manufactured goods
If there has been a substantial beginning for specially manufactured goods
57
What if there is an ambiguity that neither party is aware of and they have different definitions of that term?
No contract.
58
Mutual mistake of material fact
No contract if:
- both parties are mistaken
- materially affects the agreed exchange
- neither party assumed the risk
59
Unilateral mistake: will it allow mistaken party to avoid the contract?
NO unless other party knows or had reason to know of the mistake.
60
Undue influence elements
unfair persuasion
61
Fraud in the inducement: what happens to the contract?
Voidable
62
Fraud in the factum: what happens to the contract
Void
63
What does fraud in the inducement mean?
It means you understood the nature of the contract but someone lied to get you to sign
64
What does fraud in the factum mean?
It means you were actually deceived as to the nature of the document you were signing.
65
What happens if there is an innocent misrepresentation?
Even though innocent, you can still void the contract if you reasonably rely on that misrepresentation (must be material)
66
Unconscionability: who decides (judge or jury?)
Judge
67
Unconscionability: what should you look for
- oppression
| - procedural (gross disparity of bargaining power) and substantive (grossly unfair terms) unconscionability
68
What happens if the contract is illegal?
It is void
69
Other sources of contract terms
- custom and usage
- prior dealings b/w parties
- UCC terms implied
70
Exceptions to the parol evidence rule
- condition precedent
- using an earlier agreement to show fraud, duress, mistake
- subsequent agreements after the contract
71
What is the presumption if the contractual language is unclear regarding the type of delivery?
presumption is a shipment contract
72
When does a risk of loss shift from seller to buyer?
When the seller completes its delivery obligations
73
Non carrier: seller is a merchant
risk of loss shifts when the buyer has possession
74
Non carrier: seller is a non merchant
risk of loss shifts when the goods are tendered
75
What if there is a sale on approval (buyer gets goods on trial basis): who bears risk
Seller bears risk of loss until the buyer accepts the goods.
76
Express warranties : who can give them
any seller
77
What is an express warranty?
Promise, description, affirmation of fact
| *must be part of the basis of the bargain
78
Implied warranty of merchantability: who gives it? what is it?
Seller is a MERCHANT who deals in goods of the kind.
Warranty: goods are fit for ordinary purposes
79
Implied warranty of fitness: who can give it? what is it?
Any seller can give this warranty.
Warranty: goods fit for particular purpose
80
What are the elements for an implied warranty of fitness
1. seller must know about the particular purpose and reliance
2. buyer must have relied on the seller's expertise
81
Implied warranty of title
Seller warrants that he has good title (not stolen)
| *no other encumbrances
82
General disclaimers to warranties
as is, with all faults
*these are valid
83
Specific disclaimers: how can you disclaim?
It must be conspicuous and
Merchantibility: mention merchantibility
Fitness: use specific language which give buyer reason to know
84
What is a "limitation of remedies clause"
contract provision that limits or controls the recovery for any breach of warranty
85
When are remedy limitations valid?
1. not unconscionable
| 2. limited remedy does not fail of its essential purpose
86
UCC: With consumer goods, what happens if personal injury damages are limited?
Per se unconscionable
87
What is a condition precedent?
Must occur before an absolute duty of performance arises
88
Conditions concurrent
Capable of occurring together - parties are bound to perform at the same time
89
Condition subsequent
Occurrence of this type of condition cuts off an already existing duty of performance
90
Estoppel/waiver difference
Estoppel: statement or conduct by the person prtoected by a condition BEFORE the conditioning event was to occur + change of position
Waiver: statement or conduct made AFTER the conditioning event + NO change of position needed
91
When can seller cure when he fails to provide perfect tender?
1. contractual right to cure
2. time for performance has not yet expired
3. in limited situations: seller has option to cure after time for performance has not yet expired
92
When will seller have a chance to cure when time for performance has expired?
Whether seller has reasonable grounds for believing improper tender would be acceptable (maybe with a money allowance)
- prior dealings
93
What are installment contracts?
- requires or authorizes delivery in separate lots to be separately accepted
94
When can buyer REJECT an installment?
Only where there is substantial impairment in that installment that cannot be cured.
95
When can buyer REJECT the entire installment contract?
Only where breach w/ respect to installment impairs the value of the whole contract.
96
When has buyer accepted goods?
1. Reasonable opportunity to inspect + indicates goods conform and will keep them OR
2. Fails to make an effective rejection OR
3. Does any act inconsistent with seller's ownership
97
What if a buyer pays before she has a chance to inspect, when is there acceptance?
No acceptance until she has a reasonable opportunity to inspect.
98
When can you later revoke your acceptance of goods?
1. noncomformity substantially impairs the value of the goods
2. there are excusable grounds for revocation (reasonable reliance)
3. revocation within a reasonable time after discovery and before any substantial change in the condition of the goods
Ex: sleeping bag example
99
Buyer's payment obligation
If no agreement for credit -- buyer can pay by check, but if seller refuses and demands cash, buyer must be given reasonable amount of time to get it
100
What happens if there is a defective good shipment, who bears risk?
Seller bears risk the whole time.
101
What happens if a seller has identified conforming goods to the contract and the buyer breaches: who does the risk of loss fall to? (before shipment they are destroyed?)
Buyer bears risk to the extent of any deficiency in the seller's insurance coverage
102
Common law: what is required
Substantial performance
103
At common law, what excuses the other party's performance?
Material breach
104
What if a contract contains an express condition?
Strict compliance with the express condition is required or else other party is excused from performing.
but note: if there is disproportionate forfeiture it may be excused
105
Anticipatory repudiation
indication of an unwillingness to perform obligations under the contract before performance is due
106
What happens if a person anticipatory repudiates because he thinks the other party has materially breached?
Wrongful repudiation and other side can sue for damages
107
What happens if a party repudiates and then later changes its mind and says it will perform?
So long as the other party hasn't relied on the repudiation, the repudiation may be retracted.
108
Rescission: effect
avoiding a contract
| *some performance must remain on both sides in order to rescind
109
Is an oral rescission okay if the original contract was required to be in writing?
Generally, oral rescission is okay except:
- rescission involves transfer of land
- contract says it must be in writing
110
What happens if the subject matter of the contract is destroyed?
Excuses performance
111
Frustration of purpose elements
1. post-contract occurrence
2. not reasonably foreseeable at the time that the contract was entered into
3. totally or nearly totally destroys the purpose of the contract
4. purpose of the contract WAS KNOWN to both parties at the time of the contract
112
Liquidated damages: what is it?
When contract stipulates damages
113
Test for validity of liquidated damages
1. at the time the contract was made, it would be difficult to estimate damages
AND
2. at the time of contract, it was a reasonable forecast of possible damages
114
What damages are usually recovered in contract cases?
expectation damages
115
What other damages can be recovered?
1. incidental damages
2. foreseeable consequential damages
3. minus avoidable damages (duty to mitigate)
4. minus speculative damages
116
Incidental damages: what are they?
Costs incurred in a reasonable effort to avoid loss resulting from the breach
117
Consequential damages: what are they?
Injury to person or property and lost profits resulting from the breach
118
What if expectation damages are too speculative?
Reliance damages
119
equitable defenses in contract cases
1. unclean hands
2. lache
3. impossibility and hardship
120
Reformation
changing the contract to reflect the original intent of the parties
Ex: improper recording
121
What if adequate assurances are not received after party has requested them?
If such assurances are not received within a reasonable time not exceeding 30 days, it can be treated as repudiation of the contract.
122
When can a seller reclaim goods if the buyer is insolvent?
1. credit sale
2. buyer is insolvent WHEN he receives goods
3. demand for return is made w/in 10 days
123
When is breach of warranty available (what type of sale?)
Must be sale of goods
Construction contracts: at common law there are NO implied warranties
124
Who do warranties run to? (Who can assert a breach of warranty claim?)
Generally only people who are in privity of contract (or their family members or invitees)
Warranty liability may be extended if the defect in goods results in personal injury, but NOT purely economic injury.
125
Does the parol evidence rule apply when a plaintiff is trying to prove fraud?
No. Extrinsic evidence can be entered into to attack the agreement's validity.
126
Covenant not to compete
1. reasonable in length
2. reasonable in geographic scope
3. can't harm the public
4. reasonably necessary to protect buyer/employer's interest
*Courts can blue pencil overly broad provisions and keep the rest of the contract intact.
127
When can you recover the goods when the other party breaches?
If the goods have been identified as for that contract (example: planting crops that are identified as for P's contract)
128
Damages if a D anticipatory breaches?
cancel the contract and cover by buying from another person and getting the difference in the price you have to pay OR recover damages for nondelivery by suing for the market price - the contract price when buyer learned of the breach
129
Who does a merchant include?
1. people who deal in goods of the kind sold OR
2. people who otherwise by their occupations hold themselves out as having knowledge or skill peculiar to the practices or goods involved in the transaction
*as distinguished from a casual seller
130
What happens if there is a contract that falls within the statute of frauds but wasn't in writing: but there is part performance?
Only full performance would take the contract out of the Statute.
131
Who can a creditor beneficiary sue?
Creditor beneficiary can sue the promisee on the existing obligation b/w them OR she may sue the promisor for failing to render performance.
(can only get satisfaction from one)
132
Who can a donee beneficiary sue?
Donee beneficiary CANNOT sue promisee unless donee has grounds for a detrimental reliance remedy.
Donee can sue promisor to enforce the contract.
133
What happens if a contract provision prohibits assignments, but an assignment is made?
Other party can sue for damages, but this language does not bar assignments.
134
What happens if a contract provision says any assignment will be void?
Other party can stop assignment - the "void" language bars assignments.
135
What is needed to have an effective assignment?
No writing is required
Need INTENT to immediately and completely transfer her rights.
136
Assignment vs. delegation: who is liable?
Assignor will no longer be liable - gave up all rights
| Delegation: delegator will still be liable if delegate doesn't perform his duties
137
When an assignor has assigned FOR VALUE, what does he warrant?
1. he has not made a prior assignment of the same right
2. the rights exists and is not subject to any undisclosed defenses
3. assignor will do NOTHING to interfere with the assigned right
138
What happens if the first assignment is irrevocable but assignor tries to assign again?
First assignment will usually prevail (except assignee who takes for value without notice of previous assignment)
139
Commercial impracticability: elements
1. Becomes much more difficult than expected due to the occurrence of a circumstance, the nonoccurrence of which was a basic assumption of the parties
2. Both parties assumed the circumstance would not occur and the occurrence of the circumstance would have a MATERIAL EFFECT on a party’s ability to perform
