MEE - Contracts Flashcards
*What constitutes anticipatory repudiation and what remedies are available to the non-repudiating party?
Anticipatory repudiation occurs when there has been an unequivocal refusal of the buyer or seller to perform or when a party creating reasonable grounds for insecurity fails to provide adequate assurances within 30 days of demand for such assurances.
The non-repudiating party may either: (1) Treat the anticipatory repudiation as a total repudiation and sue, (2) Suspend performance until performance date is due and wait to sue, (3)) Treat repudiation as an offer to rescind and threat the contract as discharged, or (4) Ignore the repudiation and urge promisor to perform.
A party may withdrawal a repudiation and must provide any assurances previously requested unless the other party has: (1) Materially changed position in reliance on the repudiation, (2) Cancelled the contract in response to the repudiation, or (3) Indicated they consider the repudiation to be final.
*What is required to assign a contract?
To assign a contract, a party to the contract must manifest an intent to transfer his rights under the contract to an assignee. Oral assignments generally are effective. Most contractual rights may be assigned unless the contract forbids assignment, assignment is forbidden by law, or assignment would substantially change the obligor’s duty or risk. Contracts for personal services cannot be assigned if the performance of the service so involves the personality or personal characteristics of the obligor such that it would be unfair to require the obligor to perform for a third party.
Consideration is not required, but an assignment without consideration is considered gratuitous (meaning revokable).
*How do you determine Third Party Beneficiary status?
Whether a TPB is an intended beneficiary under the contract is a question of fact; courts look to the following: Is the TPB expressly designated in the contract?; Does the TPB directly benefit from some performance under the contract?; Does the TPB have rights under the contract?; Does the TPB stand in such a relationship to the promisee under the contract that an intent to benefit the third party can be inferred? If the answer to any of these is yes, the party is likely an intended beneficiary
*What are third party beneficiaries and what are their rights?
A third party that benefits from a contract entered into between other parties is a third party beneficiary. Intended TPBs exist where the parties to the contract intend for the TPB to benefit from the contract and extends rights under the contract to the TPB. Incidental TPB stands to benefit from a contract although not intended by the parties to the contract and does not extend any rights under the contract.
Intended Beneficiaries have a right to sue for breach of a contract.
-?-How is a contract formed under the UCC?
Under the UCC, a contract is formed if both parties intend to contract and there is a reasonably certain basis for giving a remedy. The only essential term is quantity, and as long as the parties intend to create a contract, the UCC “fills the gap” if other terms are missing such as the time or place for delivery. At Common Law, all essential terms must be covered in the agreement, including the parties, subject, price, and quantity. Note: Both Requirements & Output Contracts are considered specific enough under the UCC even though they don’t have a specific quantity term.
*What is required for formation of a contract under common law?
To form an enforceable contract, there must be mutual assent, consideration, and the absence of any formation or enforcement defenses.
*What is consideration?
Consideration is a bargained-for exchange that has legal value. There is no bargain when one party gives a gift to another. Legal value is usually considered to be either a benefit to the promisor or a detriment to the promise. Most courts focus on the detriment element. The promise must induce the detriment and the detriment must induce the promise. Therefore, past consideration is insufficient.
*What is the exception to a bargained-for exchange for past consideration?
While the general rule is that something already given or performed cannot be consideration, some courts have created exceptions. Under a modern trend, some courts will enforce a promise If:(1) it is based on a material benefit that was previously conferred by the promisee on the promisor, and (2) the promisee did not intend to confer the benefit as a gift.
The second restatement includes a limitation that the promise is unenforceable to the extent it is disproportionate to the benefit conferred.
*How can an offer be revoked, and what is the objective test for creating a legal offer?
In general, an offer can be revoked by the offeror at any time prior to acceptance, even if the offeror has promised not to revoke for a certain, unless an exception applies which limits the offeror’s power to terminate.
*In regards to revocation, what is an option contract?
One way in which an offeror’s power to revoke may be limited is when an option contract is present. An option is a distinct contract in which the offer gives consideration for a promise by the offeror not to revoke an outstanding offer. This does not apply in this scenario because the cook did not provide any consideration to the gardener to hold the offer open.
*In regards to revocation, what is a Merchant’s Firm Offer?
Another way an offeror’s power to revoke may be limited is if the offeror has made a merchant’s firm offer under Article 2. If a MERCHANT offers to sell goods in a signed writing and the writing gives assurances that it will be held open, the offer is not revocable for lack of consideration during the time stated. Article 2 generally defines a merchant as one who regularly deals in goods of the kind sold or who otherwise by his occupation holds himself out as having knowledge or skill peculiar to the practices or goods involved.
Under Article 2, if the term of an offer assuring that the offer will be held open is on a form supplied by the offeree, that term must be separately signed by the offeror to be enforced as a firm offer.
*In regards to revocation, what is detrimental reliance?
In some cases, an offeror may be prevented from revoking an offer based on detrimental reliance. When an offeror could reasonably expect that the offer would rely to her detriment on an offer, and the offer does so rely, the offer will be held irrevocable as an option contract for a reasonable length of time.
*Under the common law, what is substantial performance?
In every contract, the duty of each party to render performance is impliedly conditioned on the other party rendering his performance or making a tender of his performance. The rules for determining whether performance is substantial are the same as those for determining whether a breach is minor or material. If the breach is minor, performance is substantial; if the breach is material, performance is not substantial.
*What is the difference between a material and a minor breach of contract?
To determine whether a breach is material, the court looks at: the amount of benefit received, the adequacy of damages, extent of performance, hardship to the breaching party, and whether the breach was negligent or willful.
A reasonable delay in performance is usually considered a minor breach unless the nature of the contract is such as to make performance on the exact day of vital importance or the contract, by its terms, provides that time is of the essence. If time is of the essence, any delay will be a material breach. To determine whether time is of the essence, the trial of fact looks at the instrument itself as well as all of the surrounding circumstances.
*What is a dividable contract?
If a contract is divisible, a party who has performed one or more parts is entitled to collect the contract price for those parts even if it breaches the other parts. It is not a condition precedent to the other party’s liability that the whole contract be performed. However, the non breaching party has a cause of action for each of the unperformed units and may withhold counter performance for those units. For a contract to be divisible, (1) the performance of each party must be divided into two or more parts under the contract, (2) the number of parts due from each party must be the same, and (3) the performance of each part by one party is agreed on the equivalent of the corresponding part from the other party. Divisibility questions involve contract interpretation and generally turn on fairness.
*What is the equitable remedy of restitution?
Restitution damages arise where a party has been unjustly enriched. These damages are awarded based on value of the benefit wrongfully conferred. A party cannot recover both expectation damages and restitution damages.
*What are expectation damages?
These damages are intended to put the injured party in the same position as if the contract had been performed. One measure of damages is the cost of restoration. Often, where the cost to restore is many times greater than the difference in value of the property in its unrestored condition, damages are measured by the difference in value. Courts are split on which measure to use because the value measure encourages breach. In a case of willful breach, where only completion of the contract will enable the non breaching party to use the land for its intended purposes, the cost of completion may be considered the appropriate damage award.
*What are consequential damages?
Consequential damages consist of losses beyond those covered by the standard measure that a reasonable person would have foreseen would occur as a result of the breach. Often the availability of consequential damages turns on the breaching party’s awareness of the other party’s circumstances. Awards are reduced by the amounts saved by not using resources assigned to the project, and any amounts that could have been avoided with mitigation efforts.
As alluded to above, contract damages must be foreseeable to be recoverable. Damages are foreseeable if a reasonable person in the position of the breaching party would have known at the time the contract was made that the damages were likely to occur as a result of the breach.
To recover, damages must be certain and not speculative; i.e. they must be ascertainable with reasonable certainty. The modern trend, however, is to allow recovery if there is sufficient evidence to determine profits with reasonable certainty.
Under the UCC, only buyers have access to consequential damages.
*What is promissory estoppel?
If necessary to avoid injustice, a court will enforce a promise without consideration if: (1) the promisor should have expected the promisee to change his position in reliance on the promise; (2) the promisee did change his position; and (3) the change in position was to the promisee’s detriment.
**What are the requirements for a contract to be within the UCC Statute of Frauds?
When the price of goods is at least $500, the UCC requires a memorandum of the sale that must (i) indicate that a contract has been made, (ii) identify the parties, (iii) contain a quantity term, and (iv) be signed by the party to be charged. A signature includes any authentication that identifies the party to be charged, such as a letterhead on the memorandum. A mistake in the memorandum or the omission of other terms does not destroy the memorandum’s validity. An omitted term can be proved by parol evidence. However, enforcement is limited to the quantity term actually stated in the memorandum.
-?-What are the exceptions to the UCC Statute of Frauds?
A contract for the sale of goods is outside the Statute of Frauds to the extent that goods are received and accepted and to the extent that payment has been made and accepted. There is an exception for specially manufactured goods for the buyer that are not suitable for sale to others. Additionally, a confirmatory memo sufficient against one party is enforceable against the receiving party if they do not object in writing within 10 days.
*What is the statute of frauds under common law?
Under the Statute of Frauds, contracts that cannot by their terms be performed within a year are unenforceable unless they are evidenced by a writing or writings signed by the party to be bound and counting the contract’s essential terms, including the identity of the party to be charged and a description of the contract’s subject matter.
*When will the courts enforce the equitable remedy of specific performance in a service contract?
A court will not order specific performance of a contract for services, both because of the difficulties in enforcing such an order and because it may constitute involuntary servitude.
*What is insecurity and adequate assurances?
Under Article 2, if a party has reasonable ground for insecurity with respect to the other party’s performance, he may demand assurances that the performance will be forthcoming at the proper time. A demand for assurances must be made in writing. Until the party so demanding receives adequate assurance, he may suspend his own performance. The other party must give adequate assurances within a reasonable time not to exceed 30 days.
