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Contr. outline > Ch1-7 > Flashcards

Ch1-7 Flashcards

1
Q

Common law applies

A

Contracts for goods or services
Always apply common law unless UCC rule differs

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2
Q

Article 2 applies

A

Contracts for sale of tangible goods

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3
Q

Predominate purpose test

A

When contract deals with sale of property or service and goods
Apply whichever is the predominate purpose of the contract

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4
Q

Formation of a contract

A

Contract is a legally enforceable agreement created through the process of mutual assent and consideration provided that no valid defenses to the contract exist

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5
Q

Mutual assent

A

Essential in formation of a contract
Occurs when acceptance of a valid offer

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6
Q

How to decide whether the offer is valid

A

Objective theory
Judged by outward objective facts interpreted by a reasonable person

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7
Q

UCC 2-204

A

A contract may be formed in any manner sufficient to show agreement, including conduct by both parties which recognizes the existence of such a contract

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8
Q

Express contract

A

Words expressing intent of parties

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9
Q

Implied in fact contract

A

When conduct indicates assent or agreement

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10
Q

Offer

A

Objective manifestation of a willingness by the offeror to enter into an agreement that creates the power of acceptance in the offeree
Communication that gives power to the recipient to conclude a contract by acceptance
Must have intent

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11
Q

Intent

A

A statement is an offer only if the person to whom it is communicated could reasonably interpret it as an offer
Must express present intent of a person to be legally bound to a contract

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12
Q

Knowledge of offer

A

To have the power to accept an offer the offeree must have knowledge of it
Ex. lost poster of dog; man finds dog and returns without seeing poster reward, comes back next day requesting reward = no knowledge no acceptance, no contract, no money

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13
Q

Terms in offer

A

For a contract to exist, the terms of the contract must be certain and definite

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14
Q

Common law terms

A

All essential terms must be in the agreement

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15
Q

UCC terms

A

Only quantity is needed
Contract formed if intent of parties is to do so
Gap fillers will be used for undetermined terms

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16
Q

Duration terms

A

In ongoing contracts, wil be determined to last for a reasonable period of time
Employment contracts
If time not specified, then rebuttable presumption that working at will
Any party can terminate at any time without considering it a breach
Permanent employment considered at will

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17
Q

UCC 2-305

A

Missing terms provision to fill with gap fillers
such as the time (reasonable) or place for delivery (the seller’s place of business), the time of payment (when the buyer is to receive the goods), the assortment of goods (reasonable choice of the buyer), and even the price for the goods.
If the contract omits a price or if the parties agree to set the price in the future and then fail to agree, the UCC supplies a reasonable price at the time of delivery.

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18
Q

Vague terms

A

No presumption of contract because parties lack intent

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19
Q

Invitation to deal

A

NOT an offer
Question typically in the form of an inquiry and the statement in response is the offer

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20
Q

ways to terminate offer

A
  1. lapse of time
  2. death of mental incapacity
  3. destruction or illegality
  4. revocation
  5. rejection
  6. counteroffer
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21
Q

lapse of time

A

offer can be terminated if not accepted by a party within a specifically state time period once offer is received NOT SENT

if no time specified then offer ends when reasonable period of time is dependent on the facts, nature of the contract, and trade.

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22
Q

Restatement second 41

A

unless agreed otherwise and parties are talking on the phone, acceptance does no extend beyond the end of the conversation

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23
Q

death or mental incapacity

A

terminates offer if offeror or offeree dies or becomes mentally incapacitated

if OFFER HAS BEEN ACCEPTED BEFORE then the contract is still valid, does not automatically terminate

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24
Q

Restatement s. 36(c)

A

destruction or illegality terminates offer

offer involving subject matter that is destroyed is terminated
offer that becomes illegal is terminated

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25
Q

revocation

A

offer can be revoked at any time before acceptance occurs

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26
Q

constructive revocation

A

If offeree receives reliable information that the offeror has taken definite action inconsistent with offer it is automatically revoked through constructive revocation

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27
Q

how to revoke offer

A

May be made in reasonable manner and by reasonable means but not effective till communicated

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28
Q

revocation sent by mail under common law and UCC

A

not effective until received
CL: a written revocation is received when comes into possession of the person addressed or person authorized to receive on behalf
UCC 1-202: a person receives notice when: (i) it comes to that person’s attention or (ii) it is duly delivered in a reasonable form at the place of business or where held out as the place for receipt of such communications.

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29
Q

exceptions to revocation

A
  1. option contracts
  2. UCC firm offer
  3. detrimental reliance
  4. partial performance
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30
Q

option contracts

A

Promise to keep an offer open for a specified period of time; cannot revoke during the period of time
Must give separate consideration if new contract, if existing contract then no consideration is needed
CL: r. 37

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31
Q

UCC Firm Offer

A

2-205
an offer to buy or sell goods is irrevocable if:
i) The offeror is a merchant;
ii) There is an assurance that the offer is to remain open; and
iii) The assurance is contained in a signed writing from the offeror.
No consideration by the offeree is needed to keep the offer open under the UCC firm offer rule.

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32
Q

merchant

A

person who regularly deals in types of goods involved in transaction

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33
Q

time for merchant firm offer

A

cannot exceed 3 months regardless of time period stated
can be less or extended WITH CONSIDERATION

34
Q

signed writing in firm offer

A

anything written writing including electric record or email

35
Q

detrimental reliance

A

doctrine of promissory estoppel
When the offeree reasonably and detrimentally relies on the offeror’s promise prior to acceptance, the doctrine of promissory estoppel may make the offer irrevocable.
must have been reasonably foreseeable that such detrimental reliance would occur in order to imply the existence of an option contract.

36
Q

partial performance

A

Unilateral contract, cannot revoke once performance has begun

37
Q

rejection by offeree

A

Offer terminated by rejection
Usually effective upon receipt

38
Q

counteroffer

A

Acts as a rejection and creates a new offer
Exception for option contracts
NOT the same as rejection and mere inquiry or indecision ** (ex. “Is that a 2005 model? Or i’ll keep offer under advisement”)

39
Q

revival of the offer

A

the offer may be revived by offeror only and then accepted by the offeree
Example: A offers to paint B’s house for $500. B rejects the offer. A states that the offer remains open. B can change her mind and accept the revived offer

40
Q

Acceptance of offer

A

objective manifestation to be bound to terms
only party to whom an offer is extended may accept
must know about offer in order to accept

41
Q

bilateral contract

A

promise by one party is exchanged for a promise by the other

42
Q

unilateral contract

A

party promises to do something in return for an act of the other party
must be aware of offer before action is taken

43
Q

means of acceptance to an offer

A

always determined by offeror
UCC 2-206: if not specified, can be accepted in any reasonable means

44
Q

silence as acceptance

A

generally not an acceptance UNLESS
accepted by silence, and he was silent with the intent to accept the offer by silence; or
ii) Because of previous dealings or patterns of behavior, it is reasonable to believe that the offeree must notify the offeror if the offeree intends not to accept.

45
Q

shipment of goods as acceptance

A

if the buyer requests that the goods be shipped, then the buyer’s request will be construed as inviting acceptance by the seller either by a promise to ship or by prompt shipment of conforming or nonconforming goods.

46
Q

shipment of nonconforming goods

A

If the seller ships nonconforming goods, then the shipment is both an acceptance of the offer and a breach of the contract.
Unless
the seller “seasonably” notifies the buyer that the nonconforming goods are tendered as an accommodation, then no acceptance has occurred, and no contract is formed.
The accommodation is deemed a counteroffer, and the buyer may then either accept (thereby forming a contract) or reject (no contract formed).

47
Q

mailbox rule

A

An acceptance that is mailed within the allotted response time is effective when sent (not upon receipt), unless the offer provides otherwise.
Must be properly addressed
DOES NOT APPLY TO AN OPTION CONTRACT

48
Q

rejection under mailbox rule

A

MAILBOX RULE DOES NOT APPLY
If the offeree sends an acceptance and later sends a communication rejecting the offer, then the acceptance will generally control even if the offeror receives the rejection first.
If the offeror receives the rejection first and detrimentally relies on the rejection, then the offeree will be estopped from enforcing the contract.

49
Q

acceptance following rejection

A

mailbox rule does NOT APPLY
If a communication is sent rejecting the offer, and a later communication is sent accepting the contract, then the mailbox rule will not apply, and the first one to be received by the offeror will prevail.
Received when writing comes into possession of the offeror or deposited in mailbox

50
Q

revocations and mailbox rule

A

effective upon receipt

51
Q

Notice in unilateral contract

A

No notice required unless reason to know that offeror would not learn of performance
If notice required:
the offeror’s duty is discharged, unless:
i) The offeree exercises reasonable diligence to notify the offeror;
ii) The offeror learns of performance within a reasonable time; or
iii) The offer indicates that notification of acceptance is not required.

52
Q

notice in bilateral contract

A

Must give notice of acceptance \
Mailbox rule applies; acceptance valid when dropped in mailbox
UCC 2-206(2)
Notice required within reasonable time if acceptance is made by beginning performance and failure to do so will result in lapse of offer

53
Q

terms of acceptance in common law

A

MIRROR IMAGE RULE

54
Q

mirror image rule

A

Any change to the terms of the offer, or the addition of another term not found in the offer, acts as a rejection of the original offer and as a new counteroffer.
Watch for inquiries or suggestions

55
Q

terms of acceptance in UCC

A

gap fillers, no mirror image
Additional or different terms included do not automatically constitute a rejection
Whether new terms are part dependent on if parties are merchants

56
Q

terms when one party is not a merchant

A

Acceptance occurs unless acceptance made expressly condition upon terms stated in offer
Additional terms are treated as proposals for addition to the contract that must be separately accepted

57
Q

terms if both parties are merchants

A

Battle of the forms UCC 2-207 guides

58
Q

UCC 2-207

A

a contract exists under the terms of the acceptance, unless (i) the terms materially alter the agreement, (ii) the offer expressly limits the terms, or (iii) the offeror objects to the new terms within a reasonable time after notice of the new terms is received.

59
Q

UCC 2-207(2)

A

Acceptance includes additional terms UCC 2-207(2)
An additional term in the acceptance is automatically included in the contract when both parties are merchants, unless:
i) The term materially alters the original contract;
ii) The offer expressly limits acceptance to the terms of the offer; or
iii) The offeror has already objected to the additional terms, or objects within a reasonable time after notice of them was received.
“Materially Alter”: A term that results in surprise or hardship if incorporated without the express awareness by the other party materially alters the original contract.

60
Q

knockout rule

A

under UCC if acceptance includes DIFFERENT TERMS
different terms in the offer and acceptance nullify each other and are “knocked out” of the contract.

61
Q

UCC 2-207(3)

A

Acceptance based on conduct
If the offer and purported acceptance differ to such a degree that there is no contract, but the parties have begun to perform anyway (i.e., demonstrated conduct that recognizes the existence of a contract), then Article 2 provides that there will be a contract, and its terms will consist of those terms on which the writings of the parties agree, together with any supplementary terms filled in by the provisions of the UCC.

62
Q

Consideration

A

essential to contract
bargained for exchange in the form of a legal benefit or legal detriment

63
Q

forms of consideration

A

May take form of
A return promise to do something;
ii) A return promise to refrain from doing something legally permitted;
iii) The actual performance of some act; or
iv) Refraining from doing some act.

64
Q

Gifts

A

not consideration

65
Q

test to determine gift from valid consideration

A

whether the offeree could have reasonably believed that the intent of the offeror was to induce the action. If yes, there is consideration, and the promise is enforceable.

66
Q

promissory estoppel

A

A party’s promise to make a gift is enforceable under the doctrine of promissory estoppel if the promisor/donor knows that the promise will induce substantial reliance by the promisee, and the failure to enforce the promise will cause substantial injustice.

67
Q

pre-existing duty rule

A

Common law only
a promise to perform a preexisting legal duty does not qualify as consideration because the promisor is already bound to perform (i.e., there is no legal detriment).
if the promisor gives something in addition to what is already owed (however small) or varies the preexisting duty in some way (however slight), most courts find that consideration exists.

68
Q

exceptions to pre-existing duty rule

A
69
Q

past consideration

A

not acceptable as consideration under common law

70
Q

modification of contracts under common law

A

Must be supported by consideration
Agreements to modify contract may still be enforced if:
i) There is a rescission of the existing contract by tearing it up or by some other outward sign, and then the entering into of a new contract, whereby one of the parties must perform more than she was to perform under the original contract;
ii) There are unanticipated difficulties, and one of the parties agrees to compensate the other when the difficulties arise if the modification is fair and equitable in light of those difficulties; or
iii) There are new obligations on both sides.

71
Q

modification under UCC

A

UCC 1-201(2)
no consideration is necessary to modify a contract; however, good faith is required.
Good faith requires honesty in fact and fair dealing in accordance with reasonable commercial standards.

72
Q

installment contracts

A

a party benefited by a condition under a contract may orally waive that condition without new consideration.

in installment contracts, the waiver may be retracted by providing the other party with reasonable notice that strict performance is required.

73
Q

accord contracts

A

Party taking over another party’s contract or creating a new contract within existing contract
A party to a contract agrees to accept a performance from the other party that differs from the performance that was promised in the existing contract, in satisfaction of the other party’s existing duty.

74
Q

accord contract w/ dispute of monetary claim

A

When a party agrees to accept a lesser amount in full satisfaction of its monetary claim, there must be consideration or a consideration substitute for the party’s promise to accept the lesser amount.

75
Q

satisfaction w/in accord contract

A

Performance of the accord agreement
Discharges the original contract and accord contract
If an accord is breached by the party who has promised a different performance the other party can sue either on the original contract or under the accord agreement

76
Q

use of negotiable instrument

A

If a claim is unliquidated or otherwise subject to dispute, it can be discharged if
(i) the person against whom the claim is asserted in good faith tenders a negotiable instrument (e.g., a check) that is accompanied by a conspicuous statement indicating that the instrument was tendered as full satisfaction of the claim (e.g., “Payment in full”), and
(ii) the claimant obtains payment of the instrument

77
Q

illusory promises

A

not valid consideration
promise that cannot be breached

78
Q

certain promises binding without consideration

A
  1. promise to pay debt
  2. promise to perform a violable duty
  3. promise to pay benefits received
  4. promissory estoppel
79
Q

promissory estoppel

A

Detrimental reliance
Requirements
A promise is binding if:
i) The promisor should reasonably expect it to induce action or forbearance on the part of the promisee or a third person;
ii) The promise does induce such action or forbearance; and
iii) Injustice can be avoided only by enforcement of the promise
in general, the promisee must actually rely on the promise, and such reliance must have been reasonably foreseeable to the promisor.
The remedy may be limited or adjusted as justice requires.

80
Q

exception to reliance requirement of promissory estoppel for charitable subscriptions

A

Courts often apply the doctrine of promissory estoppel to enforce promises to charitable institutions.

81
Q

enforceability of a contract

A

A contract may be unenforceable based upon a defense to formation or a defense to enforcement. Proof of the defense may render the contract void or voidable.
Void
Voidable
Unenforceable

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