06 Contracts Flashcards
Define “merchant’s confirmation memorandum.”
A Uniform Commercial Code (UCC) provision that allows one merchant to bind another based on an oral agreement with one signature. For example, if two merchants have an underlying oral agreement and one merchant sends the other a fax, letter, or e-mail that confirms the terms of the oral agreements, the contract is enforceable even though it was only signed/authenticated by one party. The contract is enforceable against both parties.
What types of contracts are enforced against minors?
- Contracts for necessaries or necessities (for their reasonable value and not necessarily the contract amount).
- Contracts that they ratify (expressly or by conduct) after reaching the age of majority.
Define “duress.”
Conduct that deprives a party of free will and choice such that the party enters into a contract under fear or threat of violence, or the use of economic pressure to overcome the party’s free will.
Explain the parol evidence rule.
A fully integrated contract clearly written cannot be contradicted, varied, or altered by evidence of the parties’ prior negotiations, agreements, or contemporaneous oral agreements.
How does an individual incur legal detriment?
An individual can incur legal detriment by (1) doing or promising to do something that he or she had no prior legal duty to do or (2) refraining from or promising to refrain from doing something that he or she had no prior legal duty to refrain from doing (i.e., by forbearance).
Define “preexisting duty.”
A promise to do what one is already legally obligated to do without consideration.
What are the requirements for consideration in a contract?
Each party to the contract has a benefit and detriment. The promises (detriment) are induced by the benefits and the benefits are induced by the promises (detriment). Bargained-for exchange. Consideration must actually change hands.
Define “accord and satisfaction.”
Agreement between two parties to settle an unliquidated debt (obligation is acknowledged, but the amount is unclear)(accord); satisfaction is payment of that amount; payment discharges all obligations; is not effective for discharging a liquidated debt, such as an installment loan.
Explain the difference between a liquidated and an unliquidated debt.
- Liquidated debt: One in which the amount due is agreed upon
- Unliquidated debt: One in which the parties acknowledge a debt but disagree as to the amount that is due
Describe the general rule about contracts that involve an interest in real property.
To be enforceable, Any contract involving an interest in realty must be in writing or have written evidence thereof, or an applicable exception.
Describe a situation in which the special-ordered goods exception would apply.
A condition in which the seller has substantially begun performance or has made an irrevocable commitment to do so before the buyer cancels the contract.
Describe the differences between fraud and misrepresentation.
Fraud requires proof of malicious intent to mislead or; misrepresentation may not have malicious intent to deceive if it happens negligently through a misstatement and/or omission of a material fact(s);
Fraud is a civil wrong that entitles a party to claim damages in addition to the right to rescind the contract. Parties to a contract claiming misrepresentation only have the right to rescind the contract, and there can be no suit for damages.
Describe the general rule regarding passage of title and risk of loss.
In absence of agreement, the time title and risk of loss to identified goods passes from the seller to the buyer and is dependent on the contract’s delivery terms.
When does title/risk of loss pass in free alongside shipping terms?
Title and risk of loss pass upon seller’s delivery of conforming goods alongside the vessel in the manner usual in that port or on a dock designated and provided by the buyer.
Define “tender.”
The seller’s holding out to the buyer the goods in a reasonable manner, for a reasonable time, to allow the buyer to take possession of the goods.
List the ways in which a buyer can accept title of goods.
Due notification of acceptance
Failure to reject within trial period
Does any act inconsistent with seller’s ownership
Define “fungible goods.”
Fungible goods are those that cannot be distinguished either because of homogenous qualities or because they are so mixed together. They are identified when shipped, marked, or otherwise designated.
Define “future goods.”
Goods that are to be manufactured under the terms of a contract; their identification occurs when the goods are in existence and are shipped, marked, or otherwise designated for buyer.
Define “novation.”
A contract entered into by the original parties to a contract and a third party by which the third party is substituted for one of the original parties, thereby terminating (discharging) the obligations of one of the original parties under the original contract.
Define “liquidated damages.”
A specific sum is agreed to be paid in the formation of the contract in the event that in the future the contract is breached.
Define “rescission.”
The undoing of a contract so as to return the parties to their original position
What is meant by substantial performance?
Substitute performance done in good faith.
Substituted performance is for practical purposes just as good.
Party can be compensated for the substitution.
What happens when a condition precedent fails?
The duty to perform is discharged.
List the various ways to discharge a contract.
Discharge by performance
Discharge by death or insanity
Discharge by operation of law
Discharge by accord and satisfaction
Discharge by agreement or party action
Discharge by novation
Discharge by failure of conditions
Discharge by material breach
Discharge by impossibility or impracticability of performance
Bankruptcy decree
Statute of limitations
Discharge by illegality
