Business Law I: Contracts II Flashcards
Consideration
Benefit promised by offeror (promisor) and legal detriment promised or performed by offeree (promisee)
Legal Detriment
Doing what you are free not to do and not doing what you are free to do
Preexisting duty and consideration
You cannot obtain more detriment from the other party in order to perform something you are already legally obligated to do
Exceptions to preexisting rule
- Rescission/new contract
- UCC modification for contracts for the sales of goods
- Unforeseen hardship
UCC Requirements Contract
Buyer agrees to purchase all he/she needs for his/her home or business from the seller (i.e. propane)
UCC Output Contract
Seller agrees to sell all that it produces to a particular buyer
Accord and Satisfaction
Accord = agreement to waive legal rights, releasing another party from legal obligation
Satisfaction = actual payment of the amounts agreed to in the accord
Liquidated Debt
amount due and owed is clear to both parties
Unliquidated Debt
parties acknowledge that money is due and owed, but the disagree on the amount
Estoppal
Legal principle that bars a party from denying or alleging a certain fact owning to that party’s previous conduct, allegation or denial.
Conceptually, estoppel is meant to prevent people from being unjustly wronged by the inconsistencies of another person’s words or actions.
Statute of Frauds
Requires certain types of contracts to be in writing to be enforceable. (those contracts that people are most likely to lie about to secure benefit)
Types of contracts that must be in writing under Statute of Frauds (5)
- Guaranty of debt contracts
- Contracts involving interest in real property
- Contracts impossible to perform within one year of formation
- Contracts for the sale of goods > $500
- Promises of executors for personal liability for debts of estate
Guarantor
Person who guarantees to pay for someone else’s debt if he/she should default on a loan obligation.
Partial performance exception to real property rule (3)
- Payment of some or all of purchase price has been made
- Buyer is in possession of land by living there or proceeding to develop it
- Buyer has made valuable improvements
Exception to UCC Statue of Frauds: Merchant confirmation memo between merchants
If one merchant sends another merchant a written confirmation, and other merchant does not object in writing within 10 days, the oral contract is enforceable by either party even though only signed by one
Exception to UCC Statue of Frauds: Special ordered goods
An oral contract for special ordered goods (goods that seller cannot resell in ordinary course of business) is enforceable if seller has substantially begun performance
Exception to UCC Statue of Frauds: Admission under oath
Any admission under oath that an oral contract was made removes Statue of Frauds as defense
Exception to UCC Statue of Frauds: Performance by buyer
If the buyer takes possession or makes a payment acceted by the seller, the Statute of Frauds is removed (oral contract enforced), at least to the quantity accepted or purchases.
Parole Evidence Rule
“If what you wanted is not in the contract but promised as an aside in negotiations, you cannot bring that up later and expect to get it”
Defenses to Formation (5)
- Mistake
- Fraud/Misrepresentation
- Duress
- Undue Influence
- Illegality
Unilateral Mistake
Binding on mistaken party unless:
- Other party knows/should have known about mistake
- Mistake is material and obvious
- Error was due to mathematical calculation
Bilateral (mutual) Mistake
If both parties are mistaken and the mistake is one that involves the identity, existence or quantity of the subject matter, the contract cannot be enforced by either party
Elements of Misrepresentation/Fraud
- Misrepresentation of statement of fact
- Intent to deceive
- Material
- Reliance on the misrepresentation
Exculpatory Clauses
Clause in contract that disclaims any liability regardless of fault
