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STUDY DECKS > Contract Definitions > Flashcards

Contract Definitions Flashcards

1
Q

Predominance Test

A

to find the primary purpose/heart of the contract

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2
Q

Policy Rationales

A
  1. Predictability
  2. Freedom of Contracts
  3. Fairness
  4. Efficiency/Economy
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3
Q

Predictability

A

encourages people to enter a contract secure in the knowledge that they will be enforced

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4
Q

Freedom of Contracts

A

freedom to make whatever contracts, even if they’re dumb, we choose to make

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5
Q

Fairness

A

justice and fairness encourages contract making

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6
Q

Efficiency / Economy

A

something one values more greatly than what they currently possess - economy functions by moving business in economic way, by not congesting the courts

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7
Q

Contract Formation

A

Contract formation requires mutual assent and consideration in order to make a legally binding contract

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8
Q

Mutual Assent

A

parties manifestation of present intent to be legally bound (upon terms sufficiently certain). this usually takes the form of an offer and acceptance.

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9
Q

Common Law Mutual Assent

A

often in the form of offer and acceptance, but does not have to be, and upon terms sufficiently certain.

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10
Q

Certainty of Terms

A
  • R.2d § 33: “the indication that there is intention for an offer to be made is not qualify as an offer. Until more details are discussed.”
  • Most important terms (QTPPPS): Quantity, Time for performance, Parties (this can be satisfied by saying “first come first served”, Price, Place for performance, Subject matter.
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11
Q

UCC Mutual Assent

A

can be any manifestation to show agreement - if parties think they’re in agreement, there is a contract.
courts look at objective intent - how a reasonable person would understand the intention
- QPPS - quantity, parties, price, subject

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12
Q

Harvey v. Facey

A

(telegram case) an inquiry is not an offer, but an answer to an inquiry is an offer.

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13
Q

Offer

A

presenting a desire to form a legally binding contract, inviting someone to consent.

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14
Q

Common Law Offer

A

R.2d § 24 - An offer is the manifestation of willingness to enter into a bargain so made as to justify another person in understanding that his assent to a bargain is invited and will conclude it.

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15
Q

UCC Offer

A

Firm Offers UCC 2-205
A firm offer just means you are making an offer that is irrevocable for (1) time states, (2) a reasonable amount of time (3) max 3 months. Firm offer requires…
- offer by a merchant 2-104 (who could be dealing in such goods or by his occupation presents knowledge/skills particular to the field, or by his employment of others who have knowledge/skill particular to the field)
- in writing
- no consideration needed
Ex: a merchant agreeing to sell 100 units of a certain good at a fixed price of $50 for a period of 60 days

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16
Q

Advertisements

A

general rule: advertisements are not offers, but rather invitations for offer. they lack requisite certainty of terms.

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17
Q

Quotes/Requests for Bids

A

general rule: bids are not offers, rather invitations for offer (unless implying to immediately accept, because that implies present commitment).
exception: subcontractors bids - considered offers and are irrevocable

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18
Q

Letters of Intent

A

desire to enter into a legally binding contract at some future date, can be binding depending on language (just because labeled LOI does not mean thats all it is)

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19
Q

Acceptance

A

a manifestation of assent to the terms thereof

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20
Q

Common Law Acceptance

A

An offeror has the right to declare how exactly they want the offer to be accepted, if an offeror only suggests a preferred method of acceptance, acceptance by any reasonable means will suffice. R.2d § 60 Mirror Image Rule

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21
Q

UCC Acceptance

A

§ 2-206 acceptance can be in any reasonable manner. NO mirror image rule

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22
Q

Termination of Acceptance (Really Love Carly Rosen Dayna Immensely So much)

A

terminating the power of acceptance.
1. Revocation
2. Lapse
3. Counter Offer
4. Rejection
5. Death
6. Incapacitation
7. Silence

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23
Q

Revocation

A

(taking an offer back)
Usually circumstances an offeror has power to revoke an offer at any time before its acceptance or performance begins. It must be (1) communicated and (2) clearly

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24
Q

Lapse

A

(ran out of time)
R.2d § 41
Time is either specified, or within reasonable time (verbal contract likely lapses at the end of the conversation)

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25
Q

Counter Offer

A

(making a change to the contract)
R.2d § 39
The making of a counter offer is the rejection of the original offer - there for you now cannot accept unless it is brought up and offered again

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26
Q

Rejection

A

(offerree declines offer)
Manifestation of intention not to enter into contract (or implying you don’t want to)

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27
Q

Incapacitation

A

physically cannot perform anymore

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28
Q

Silcence

A

§69 silence means no, unless they have a reason or they were told that will be considered acceptance (“if I haven’t heard from you by…”)

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29
Q

Common Law Modifications

A

Modifications require new mutual assent and conisderation

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30
Q

UCC Modifications

A

§ 2-207
Contract is still formed, but additional terms are deemed as proposals to contract - second form would act as acceptance - does not require additional consideration
Battle of the forms - contractual disputes where different written instruments are exchanged in forming contract. boilerplate language.

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31
Q

Bilateral Contracts

A

acceptance by a return promise
default is always bilateral
UCC always bilateral

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32
Q

Unilateral Contracts

A

Offer is accepted the moment performance begins, offeror cannot revoke the offer after performance begins §45
- think reward system
- only offeror is making a promise

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33
Q

CL Option Contract

A

an option contract can form after some of the performance has been done and then offeree has a reasonable time to complete performance, or the offer is revoked

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34
Q

Consideration

A

Consideration is a bargained for exchange. Both parties must acquire
something of value in which they desire from the agreement in exchange. (fairness and predictability)
- forbearance is consideration (not doing something you have a legal right to do)
- at will employment is consideration (staying employed is the consideration)

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35
Q

NOT consideration

A
  1. nominal consideration - Insignificant consideration that benefits one pty too much or is too small for value of deal
  2. Past consideration (pre-existing duty, CL)
  3. moral consideration
  4. illusory promises
  5. gratuitous gifts
36
Q

Pre-Existing Duty Rule (CL)

A
  • Usually occurs when ptys have an existing contract and make a second
  • When a pty tries to bargain for something they’re already obligated to do
37
Q

Illusory Promises

A

When language leaves the promisor entirely free to perform or not to perform at their discretion/unfettered discretion (“if I feel like it”) - promise to potentially do something
- too indefinite to be enforced in court
- no breach if they don’t perform
Elements:
1. unfettered discretion to promisor
2. doesn’t restrict promisor’s autonomy
3. doesn’t restrict promisors right to take future action

38
Q

Promissory Estoppel (4 elements)

A

(only if contract has not been made)
NO consideration - almost replacement for it
Elements:
1. a promise made to a promise
2. a promisor reasonably expects their promise to induce action or forbearance by promisee and actually does
3. detrimental reliance by promisee
4. injustice can only be avoided if enforced
- fairness

39
Q

Settlement of Invalid Claims

A

Can be binding if made in (1) good faith and (2) claim has reasonable basis

40
Q

Contract Defenses (9)

A
  1. Misrepresentation
  2. Non-Disclosure
  3. Concealment
  4. Mistake (biat or unilat)
  5. Duress (traditional or economic)
  6. Illegality
  7. Incapacity
  8. Unconscionability (procedural or substantive)
  9. Statute of Frauds
41
Q

Misrepresentation (Fuck Mike Manetta Actually Deadass)

A
  1. False statement
  2. Material to contract (what pty would regard as important in deciding to make contract, most cts use objective)
  3. Made with state of mind (intentional, negligent, innocent)
  4. Actually and justifiably relied on by pty
  5. Damage to other party
42
Q

Misrepresentation States of Mind

A
  1. Intentional - pty knew or believed representation to be false
  2. Negligent - pty unreasonably believed representation to be false
  3. Innocent - pty actually believed rep to be true
43
Q

Non-Disclosure (5 elements)

A
  1. Failure to disclose fact
  2. Duty to disclose fact
  3. Non-disclosed fact was material
  4. other party actually and justifiably relied on absence of fact
  5. damage to other pty
    (failure to disclose important facts)
44
Q

Concealment (Alex Fucked Over Dayna)

A
  1. active efforts to hide fact
  2. fact was material
  3. other pty actually and justifiably relied on absence of fact
  4. damage to other pty
45
Q

Mistake

A

a belief that doesn’t line up with the facts, on the basic assumption of the contract

46
Q

Bilateral Mistake (3 elements)

A
  1. Mistake by both ptys about a fact at the time contract was made
  2. concerning a basic assumption on which the contract was made
  3. has a material effect on ptys transaction
47
Q

Unilateral Mistake (4 elements)

A
  1. mistake by one pty about a fact at the time contract was made
  2. concerning a basic assumption on which the contract was made
  3. has a material effect on ptys transaction
  4. either:
    - non-mistaking party knew, should’ve known, or caused mistake
    - mistake makes contract grossly unfair
48
Q

Duress (3 elements)

A
  1. one pty commits wrongful act
  2. precludes other pty from exercising free will or induces action
  3. must be no choice but to agree
    - traditional: pty uses violence or threats to preclude free will
    - ecocomic: pty uses economic threats to force to do something, defense to pre-existing duty rule
49
Q

Incapacity

A
  1. minor (under 18)
  2. mental illness
  3. intoxication (HIGH level of drunk)
50
Q

Unconscionability

A

if a contract is so unfair, the court may choose not to enforce the whole contract, the unconscionable clause, or limit the unconscionable clause
- Egregiously unfair
- check of unfettered power
1. Procedural: absence of meaningful ability to bargain, gross inequality of bargaining power
2. Substantive: terms that shock the conscience

51
Q

Statute of Frauds

A

certain agreements need to be in writing to be enforceable
- goods over $500 (UCC)
- land sales
- contracts that CANNOT be performed within a year
Elements:
1. Contract has following in writing (subject, sufficient to indicate contract has been made, essential terms)
2. Signature by ptys (can be in digital form)

52
Q

Damage Analysis Steps (3)

A
  1. What kind of breach did D commit? (non-performance or defective performance)
  2. To what damages may P be entitled?
    (general, special)
  3. Do any limitations justify reducing P’s recovery?
    (availability, foreseeability, certainty)
53
Q

Non-performance

A

pty doesn’t render any performance. look to the world rather than the average.
1. if SELLER breaches: FMV-K price
2. if BUYER breaches: K price-FMV

54
Q

Defective Performance

A

pty doesn’t render perfect performance. loss of value caused by breach, cost of repair, diminution of value.
FMV as promised - FMV as received

55
Q

Calculations of Damages (in general)

A

BoB + Special + Consequential - Expenses Saved

56
Q

General Damages

A

Benefit of the bargain - to put you in the position you would’ve been had the contract been performed

57
Q

Special Damages

A
  1. Reliance (what you actually spent trying to make the contract happen)
    - essential: expenses made while preparing to perform & required
    - incidental: not required but reasonably indirectly related, wasted expenses buyer made when seller didn’t perform, additional expenses caused by breach
58
Q

Consequential Damages

A

Indirect loss caused from breach
- lost use profits
- lost resale profits
- property damage
- personal injury

59
Q

UCC Unique Goods

A

§ 2-708 if its a completely unique good that cannot be resold can sometimes get complete value

60
Q

Avoidability

A

R.2d § 350 (efficiency)
1. party cannot recover for costs that could’ve been reasonably avoided
2. cannot recover if full extent of damages could have
been avoided without undue risk, burden, or humiliation
3. If pty makes reasonable effort to avoid loss, but is unsuccessful, they can still recover

61
Q

Foreseeability

A

R.2d § 351 (predictability and efficiency)
Pty can only recover damages that were reasonably foreseeable
- Damages that would arise in ordinary course of events
- Damages that would arise from P’s special circumstances that D knew about

62
Q

Certainty

A

R.2d § 352 (predictability)
P can only recover for reasonably certain damages
- P has burden of proving damage occurred and actual damage

63
Q

Restitution (2 elements)

A

NOT damages
Restores to P the value of a benefit that was unjustly conferred to D
Elements:
1. Benefit to D at P’s expense
2. D keeping benefit would be unjust
- available when there is no contract
- measured by gain to D
- D cannot gain from breach (fairness)

64
Q

Liquidated Damages (2 elements of enforceability)

A

R.2d § 356 & UCC § 2-718
“agreed damages” Term defined at formation of K that specifies damages due in event of a breach (if liquidated damages clause is deemed valid)
- incentive to keep K but penalty would be striked down by ct
ELEMENTS FOR ENFORCEABILITY:
1. Damages are difficult to calculate
- Or at least seemed so when the contract was made
2. The amount of damages is reasonable in light of either:
- Estimated damages are formation OR
Actual damages after breach
(efficiency & freedom)

65
Q

Specific Performance

A
  • Courts can make pty do something/perform their end of the contract
  • Only given when damages wouldn’t make P whole (damages are uncertain, K subject is irreplaceable, D is broke and cannot pay damages)
  • Injunctive Relief: (Courts can make pty NOT do something, prevents pty from breaching)
66
Q

Parol Evidence

A

R.2d §215
Evidence of alleged terms not written into a contract
- What’s at stake in deciding in a written contract when we will look outside of the written agreement for evidence of what the parties promised each other
APPLIES ONLY WHEN:
1. The term was oral or written, agreed upon before making the contract
OR
2. The term was (contemporaneous) oral, was agreed at the time the contract was made AND
3. There is no separate consideration

67
Q

Parol Evidence Steps (4)

A
  1. Does PE apply?
    - yes (Prior written or oral term, contemporaneous oral term, no separate consideration)
    - no (written contemporaneous term) STOP PE INADMISSABLE
  2. Is extrinsic evidence consistent or inconsistent?
    - consistent (terms explain/supplement K)
    - inconsistent STOP PE INADMISSABLE
  3. Is parties agreement integrated?
    - if not integrated at all, evidence is admissible
    - if merger clause, default integrated
  4. Determine degree of integration
    - Fully (written agreement says everything ptys agreed to - NOT ADMISSABLE)
    - partially (written agreement has some but not all agreements - cts WILL admit extrinsic evidence ONLY consistent)
    - not integrated (K leaves out many terms & not final agreement - PE ALWAYS admissible)
68
Q

Williston Approach Jurisdiction

A

(stricter)
- If there’s a merger clause, STOP! PER DOES NOT APPLY - no extrinsic evidence permitted
- If document is complete within 4 corners of K, aka within text of the document
- Exception: terms that would naturally be omitted.

69
Q

Corbin Approach Jurisdiction

A

(more lenient)
- All evidence is permitted to help ct decide if K is integrated
- If not fully integrated, extrinsic evidence used to complete the terms
- Looks at the context in which K was formed
- UCC is more of a Corbin approach (UCC § 2-202)

70
Q

Ambiguous Agreements

A

If there is ambiguity in a term trying to be resolved, court will admit extrinsic evidence
- Parol evidence is always admissible to establish the meaning of the writing, whether or not it was integrated R2d § 214(C)
- patent or latent

71
Q

Williston on Ambiguity

A

focuses on the text of the agreement
- Contract is ambiguous only if you could see ambiguity on its face (within the 4 corners of the doc)

72
Q

Corbin on Ambiguity

A

focuses more on what they meant
- Even when K appears unambiguous on its face, extrinsic evidence may be allowed if it’s relevant to prove the meaning

73
Q

UCC on Ambiguity

A

leans more toward formulation of K
- As long as the evidence does not contradict the language it can be permitted if it serves the 3 requirements

74
Q

Patent Ambiguity

A

ambiguity that appears on the face of the document
- ambiguous words or phrases
- grammatical errors
- conflicting terms

75
Q

Latent Ambiguity

A

arises only when factual circumstances reveal a lack of clarity in the initial drafting
- only revealed after learning new info
- resolved by applying PE

76
Q

Gap

A

contract is silent in addressing issues arising while performing
- “Gap filling” is when ct’s try to fill the gap - by ascertaining what the parties must have meant aka good faith and reasonable effort
- UCC provisions permit gap fillers to interpret
1. Price, time, or place
(UNDER CL) would be a lack of certainty = no mutual assent
2. Shipment - all at once rather than in lots
3. Warranty of title
4. Warranty of merchantability
5. Warranties per trade usage and course of performance
6. (Maybe) Fitness for buyer’s purpose - if seller has reason to know

77
Q

Rules for Resolving Ambiguity (6)

A
  1. Course Performance
    - The best evidence of a contract’s meaning is how the contract was actually performed
  2. Course of Dealing
    - How parties performed prior contracts of same subject/issue
  3. Evidence of parties statements/admissions
    - Significant statements/admissions made during negotiations
    - Treated equal or more significant than course of dealing
  4. Trade Usage
    - what word usually means in standard practice/field
  5. Public Policy (absent all the above)
    - courts interpret contracts by public policy and to fix inconsistent terms
  6. Contra profentum (last resort)
    - interpret contract against party who drafted
78
Q

Conditions

A

If parties include conditions in their contract, conditions must perfectly occur for the dependant duty to arise; an event that will not auto occur but must occur before performance by other pty is req
- Made by parties or can be read into K
- Purpose: postpones an obligation
- If occurs, creates an obligation
- If it doesn’t occur, excuses obligation to perform
- If there are conditions and condition doesn’t occur = dissolution of K

79
Q

Promises

A

if we can’t tell if it’s a condition, default to promise
- Made by parties in K
- Purpose: creates an obligation
- If occurs, discharges obligation
- If it doesn’t occur, then breach
- If promise and promise is not performed, breach but parties have to perform other duties
- If condition and promise and condition doesn’t occur, breach and dissolution of K

80
Q

Express Conditions

A
  • Conditions parties create found within the contract itself
  • “Subject to” or “if” language in clause
  • Time is of the essence clauses:
    Only when included a conclusion date to K
  • Ct has to really look into whether pty is reasonably trying
  • Satisfaction clauses:
    Ct would treat as subject to reasonableness test (sort of objective)
  • Community judgment about whether unreasonably withholding satisfaction
  • A subjective test is used if performance is so customized and personal that the only way to be satisfied is to gear towards individual person
  • Pay when paid clauses
  • Require express performance (aka perfect performance)
81
Q

Constructive Conditions

A

conditions that don’t explicitly say the order of performance
- only substantial performance is required
- Constructive Conditions Precedent: DEPENDANT
When one pty MUST perform first
- Constructive Conditions Concurrent: MUTUALLY DEPENDANT
When pty’s can perform simultaneously
Mostly UCC
- Independant:
Promisor goes first regardless of whether other pty has performed

82
Q

Condition Rules

A
  1. Default is to find constructive conditions in contracts
  2. First give effect to parties’ dates/language (“before” “when”)
    - Promotes freedom of contract/predictability
  3. If parties duties can be performed simultaneously, default is concurrent constructive
    - efficiency
  4. If one pty’s contractual duty takes time to perform and the other does not, default is pty who takes time goes first
    - fairness & predictability
  5. If order of performance is unclear, cts should create constructive conditions that will best give effect to the deal the parties were trying to create
    - efficiency/predictability/freedom of contract
83
Q

Satisfying Conditions/Substantial Performance

A

for constructive conditions, only substantial performance is required
- for non-breaching pty:
Extent non-breaching pty didn’t receive an essential contract benefit
Extent non-breaching pty can get damages to substitute for loss of the contract benefit
- for breaching pty:
Extent breaching pty will have wasted time/money
Likelihood breaching pty will cure deficiencies
Extent breaching pty acted in good faith

84
Q

UCC Satisfying Conditions

A
  1. Establish Concurrent Conditions between buyer & seller
    - Obligation of buyer is to transfer and deliver and obligation of buyer is to accept and pay (UCC § 2-301)
    - Tender of delivery by seller = buyer accepts and pays (UCC § 2-507)
    - Buyers duty is to accept and pay for the goods - constructively conditioned upon tender of the goods
  2. Establishes Payment Methods § 2-511
    - Payment is due before completion of any delivery
    - Payment will be given in any reasonable means ordinary to course of business unless seller requires legal payment, then he must give buyer reasonable time to obtain it
    - A check is conditional and faulty check is dishonor?
    - Sellers duty is to provide what they asked conditioned on the availability
  3. Delivery of Goods § 2-503
    - Buyer has to give seller reasonable notification to accept delivery of goods
    - Tender must be at reasonable hour/must give buyer reasonable time to get goods
    - Buyer must furnish conditions suited for receipt of goods
  4. Buyer has right to inspect goods upon delivery § 2-513
  5. Perfect Tender Rule § 2-601
    - If goods fail to conform to what was agreed in K, buyer may…
    - Reject entire delivery
    - Accept entire delivery
    - Accept some and reject the rest
    - Non-conforming goods could include different item, wrong item, or wrong timing of delivery
    - Must give you EXACTLY what they ask for - you can accept if not but that’s on you
  6. Seller can notify buyer of intent to fix nonconforming goods and must fix within reasonable time without penalty § 2-508
    - If time for performance has not yet expired, seller has until end of K to fix problem
    - If seller rejects delivery that buyer believes to be acceptable condition, seller may have additional reasonable time to sub for conforming goods
    - If buyer rejects and seller has time they could fix it
85
Q

Divisibility

A

R.2d § 240
- If a contract is divisible, then it can be separated into segments and performed at diff times
- If not divisible, can’t be separated into segments/all performance has to be around the same time
- In a divisible contract, if there’s breach of one part, then breach only applies to that part and rest of K stays intact
- Factual determination based on what the parties meant in their deal

86
Q

Excuse

A

even though pty is not released from contractual duty, they’re allowed to not perform obligations
- Happens when pty waives a condition and when pty makes it seem like they’re going to waive and other pty relies on that waiver
- You didn’t do what you were supposed to do but it’s okay we understand

87
Q

Discharge

A

liberation of pty’s contractual duties
- Happens when a pty has fully performed their duties or when something out of pty’s control makes it impossible to perform duties
- You did it but we released you of the obligation to do it (cancelled bc of severe weather and not possible)

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