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Contracts > Contract formation > Flashcards

Contract formation Flashcards

1
Q

What is a Contract

A

Legally enforceable agreement

  • Mutual Assent (offer and acceptance)
  • Consideration
  • Lack of defenses

Look first for an agreement formed, then see if it’s legally enforceable

Need all three of the above elements for an enforceable contract - check carefully for all three

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2
Q

Types of contracts

A

Can be express or implied

Quasi-contracts are not contracts but when an unenforceable contract results in unjust enrichment (referred to as unjust enrichment)
- action in restitution

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3
Q

Bilateral contracts

A

Bilateral contract is one consisting of the exchange of mutual promises - promise for a promise

Each party is both a promisor and a promisee

Most are bilateral

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4
Q

Acceptance of a bilateral contract

A

Offer can be accepted in any reasonable way

Can be accepted by promising or beginning performance

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5
Q

Unilateral contract

A

The offeror requests performance, rather than a promise - so can only be accepted by performance

The offeror-promisor promises to pay upon the completion of the requested act by the promisee

Once the act is completed, a contract is formed

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6
Q

Two situations of unilateral contract

A

A unilateral contract, which requires full performance, occurs in only two situations

1) when the offeror clearly (unambiguously) indicates that competition of performance is the only manner of acceptance, and

2) where there is an offer to the public, such as a reward offer

“Offer. . . only by”

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7
Q

Void contract

A

One that is totally without any legal effect from the beginning
- like an agreement to commit a crime

Cannot be enforced by either party

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8
Q

Voidable contract

A

One that one or both parties may elect to avoid, such by raising a defense that makes it voidable

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9
Q

Unenforceable contract

A

Otherwise valid but isn’t enforceable due to a defense, like statute of limitations or statute of fraud

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10
Q

Common law vs UCC

A

Generally, common law governs contracts

Article 2 of UCC applies to contracts involving the sale of goods

Common law governs everything else

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11
Q

Goods defined

A

Goods are all things moveable at the time they are identified as the items to be sold under the contract

So, article 2 applies to sales of most tangible things

Does not apply to the sale of real estate, services, intangibles, or to construction contracts

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12
Q

Merchant defined

A

Article 2 generally defines merchant as one who regularly deals in goods of the kind sold or who otherwise by their profession holds themselves out as having special knowledge or skills as to the practices or goods involved

Article 2 provisions dealing with general business practices (SOF, confirmatory memory, firm offers, modifications), almost anyone in business can be deemed a merchant

Some provisions are narrower and require a person to be a merchant with respect to goods of the kind involved in the subject transaction

Merchant must be acting in their business capacity in order for merchant rules to apply
- not a merchant for purposes of sales that are solely personal

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13
Q

Contracts involving goods and nongoods

A

Sale involves both goods and services, determine which aspect is dominant and apply the law governing that aspect to the whole contract

If contract divides payment between goods and services, article 2 will apply to the sale portion and common law to the services portion

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14
Q

Good faith and fair dealing - common law

A

Common law imposes a duty of good faith and fair dealing in evert contract

Breach of this duty usually involves exercising discretion in a way that deprives the other party of the fruits of the contract

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15
Q

Good faith and fair dealing - UCC

A

Every contract within the UCC imposes an obligation of good faith in its performance and enforcement

Good faith is honesty in fact and the observance of reasonable commercial standards

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16
Q

Mutual assent generally

A

For an agreement to be enforced as a contract, there must be mutual assent - One party must accept the other’s offer

Determined by an objective standard - did words or conduct manifest a present intention to enter into a contract?

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17
Q

Offer generally

A

For a communication to be an offer, it must create a reasonable expectation in the offer that the offeror is willing to enter into a contract on the basis of the offered terms
- was there an expression of a promise, undertaking, or commitment to enter into a contract?
- were there certainty and definiteness in the essential terms?
- was there communication of the above to the offer?

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18
Q

Offer and price quotations

A

Price quotations generally are not offers, but can be if given in response to an inquiry that contains a quantity term

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19
Q

Surrounding circumstances and offer

A

The circumstances surrounding the language contained in the offer is considered by courts in determining whether an offer exists

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20
Q

Offer - prior practice and relationship of the parties

A

In determining whether certain remarks constitute an offer rather than preliminary negotiations, a court will look to the prior relationship and practice of the parties involved

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21
Q

Offer - method of communication

A

The broader the communicating media, the more likely it is that the courts will view the communication as merely the solicitation of an offer

Ads, catalogs, circular letters, and the like containing price quotations are usually construed as mere invasions for offers
- unless quantity term

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22
Q

Definiteness and offer

A

The more definite the language of the statement, the more likely it is an offer

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23
Q

Factors for considering intent to enter into a contract from offer

A

Objective reasonable person standard of intention - what reasonable person would think in the circumstances
- language
- surrounding circumstances
- prior relationship of the parties
- method of communication

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24
Q

Offer - elements

A

Promise, undertaking, or commitment to enter into a contract, not mere invitation to begin negotiations. An intent to enter into a contract

With definite and certain terms communicated to offeree

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25
Q

Definite and certain terms of the offer

A

An offer must be definite and certain in its terms

Basic inquiry is whether enough of the essential terms have been provided so that a contract including them is capable of being enforced

  • identification of the offeree
  • definiteness of subject matter
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26
Q

Identification of the offeree - offer

A

To be considered an offer, a statement must sufficiently identify the offeree or a class to which they belong to justify the inference that the offeror intended to create a power of acceptance

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27
Q

Definiteness of subject matter - offer

A

The subject matter of the deal must be certain because a court can enforce a promise only if it can tell with reasonable accuracy what the promise is

  • Requirements for specific types of contracts
  • missing terms
  • vague
  • terms to be agreed on later
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28
Q

Offer for real estate transaction

A

An offer involving realty must identify the land and the price terms

The land must be identified with some particularity, but a deed description isn’t required

Most courts will not supply a missing price term for realty

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29
Q

Offer for sale of goods

A

In a contract for the sale of goods, the quantity being offered must be certain or capable of being made certain

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30
Q

Offer for sale of goods - requirements and output contracts

A

Although sale of goods, still valid even if the quantity term is not known at the outset

The parties are assumed to act in good faith, so can’t be a tender or a demand for a quantity unreasonably disproportionate to
- any state estimate, or
- in the absence of a stated estimate, any normal or otherwise comparable prior output or requirements

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31
Q

Requirement contract

A

Buyer promises to buy from a certain seller all of the goods the buyer requires and the seller agrees to sell that amount to the buyer

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32
Q

Output contract

A

A seller promises to sell to a certain buyer all of the goods that the seller produces, and the buyer agrees to buy that amount from the seller

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33
Q

Offer for employment and other services

A

In contracts for employment, if the duration of the employment is not specified, the offer, if accepted, is construed as creating a contract terminable at the will of either party

For other services, the nature of the work to be performed must be included in the offer

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34
Q

Offer - missing terms

A

The fact that one or more terms are left open does not prevent the formation of a contract if it appears that the parties intended to make a contract and there is a reasonably certain basis for giving a remedy

If so, majority of jurisdictions and Article 2 hold that the court can supply reasonable terms for those that are missing

Price
Time

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35
Q

Missing term - price

A

Except in contracts for real property, the failure to state the price does not prevent the formation of a contract if the parties intended to form a contract without the price being settled

If contract for the sale of goods is missing a price term, Article 2 provides that the price will be a reasonable price at the time of delivery

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36
Q

Missing term - time

A

If an agreement does not specify the time in which an act is to be performed, the law implies that it is to be performed within a reasonable time

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37
Q

Vague terms - offer

A

The presumption that the parties’ intent was to include a reasonable term goes to supplying missing terms

The presumption cannot be made if the parties have included a term that makes the contract too vague to be enforced

Uncertainty can be cured by part performance that clarifies the vague term or by acceptance of full performance

If a material term is vague or ambiguous, it is not an offer at common law or under the UCC
- appropriate, fair, and reasonable signal a possible vagueness problem

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38
Q

Offer - terms to be agreed on later

A

Often, an offer will state that some term is to be agreed on at a future date

If the term is a material term, the offer is too uncertain

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39
Q

Offer - communication to the offeree

A

To have the power to accept, the offeree must have knowledge of the offer

Therefore, the proposal must be communicated to them

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40
Q

Continuing offer

A

An offer to form a series of contracts

Watch for facts in which a seller offers to sell to a buyer certain goods for a stated price over a specified time period

Can accept it multiple times until reach max

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41
Q

Termination of offer

A

An offer cannot be accepted after it has been terminated

An offer may be terminated by an act of either party or by operation of law

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42
Q

Termination - lapse of time

A

The offeree must accept the offer within the time specified or, if no time period is specified, within a reasonable time

Failing to accept within a reasonable time means the offer is terminated and can no longer be accepted

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43
Q

Lapse of time - reasonableness

A

A reasonable amount of time is a question of fact that depends on all of the circumstances at the time the offer and attempted acceptance are made
- nature of the contract
- the parties’ purposes, or
- their course of dealing

General rule of thumb is if one month passed, raise issue

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44
Q

Offer terminated - Rejection

A

Express rejection- statement by the offeree that they do not intend to accept the offer and thus, the offer is terminated

Counteroffer can also be a rejection

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45
Q

Counteroffer as rejection

A

Offer made by the offeree to the offeror that contains the same subject matter as the original offer, but differs in its term

Both a rejection and a new offer, so terminates the original offer and becomes the new offer, reversing roles of parties

Distinguish between mere bargaining

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46
Q

Counteroffer vs. Bargaining

A

Distinguish between a counteroffer, which is a rejection, and a mere inquiry into bargaining

An inquiry will not terminate the offer when it is consistent with the idea that the offeree is still keeping the original proposal under consideration

Test is whether a reasonable person would believe that the original offer had been rejected

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47
Q

Conditional Acceptance

A

When an acceptance is made expressly conditional on the acceptance of new terms, it is a rejection of the offer

Conditional acceptance is essentially a new offer

Offer that results from a conditional acceptance cannot be accepted by performance

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48
Q

Conditional acceptance and parties ship or accept goods

A

If the parties ship or accept goods after a conditional acceptance, a contract is formed by their conduct and the new terms are not included

Conditional acceptance turns into new offer, accepted cannot be by performance so if it is, conduct is what created it so no new terms

Rejection plus new offer that cannot be accepted by performance under common law and UCC

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49
Q

When rejection is effective

A

A rejection is effective when it is received by the offeror

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50
Q

Termination of an option contract

A

Because an option is a contract to keep an offer open, a rejection of or a counteroffer to an option does not constitute a termination of the offer

The offeree is still free to accept the original offer within the option period unless the offeror has detrimentally relied on the offeree’s rejection

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51
Q

Revocation

A

A revocation is the retraction of an offer by the offeror and can happen anytime before acceptance if not irrevocable

Offeror may revoke by directly communicating the revocation to the offeree

Revocable indirectly too

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52
Q

Revoking an offer made by publication

A

An offer made by publication can be directly revoked only by publication through comparable means

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53
Q

Revoking offer indirectly

A

An offer may also be revoked indirectly if the offeree receives
- correct information
- from a reliable source
- of acts of the offeror that would indicate to a reasonable person that the offeror no longer wishes to make the offer

Two party street

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54
Q

When revocation of an offer is effective

A

A revocation is generally effective when received by the offeree
- generally, written communication is received when it is delivered to a place of business through which contract was made or another location authorized to receive it
- Does not matter whether the recipient actually reads the communication

Where revocation is by publication, it is effective when published

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55
Q

Limitations on revocation generally

A

Offers can be revoked at will by the offeror, even if he has promised not to revoke for a certain period, except
- options contracts
- merchant’s firm offer under article 2
- detrimental reliance
- beginning performance in response to unilateral contract offer
- beginning to perform when offer is indifferent as to manner of acceptance

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56
Q

Options contract

A

An option contract is when the offeree gives consideration for a promise by the offeror not to revoke an outstanding offer

The offer is irrevocable for the time stated

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57
Q

Merchant’s firm offer under article 2

A

If a merchant offers to buy or sell goods in a signed writing and the writing gives assurances that it will be held open

Offer is not revocable for lack of consideration during the time stated, or if no time is stated, for a reasonable time
- but it can never exceed 3 months even if says will be open for three months. If say more, will be bound only by three months
- 3 month limit applies only to offers not supported by consideration

Broad merchant rule - anyone in business

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58
Q

Signed writing - merchant’s firm offer

A

Writing is broadly defined

Anything that looks authenticated will work

Letter head is sufficient

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59
Q

Merchant’s firm offer - form supplied by offeree

A

If the form is supplied by the offeree, holding-open term must be separately signed by the offeror

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60
Q

Revocation - detrimental reliance

A

When the offeror could reasonably expect that the offeree would rely to their detriment on the offer, and the offeree does so rely, the offer will be held irrevocable as an option contract for a reasonable length of time

Foreseeable reliance - consider whether its something someone would do before acceptance vs after acceptance

Rare but will come up in the contractor bid situation

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61
Q

revocation - beginning performance in unilateral contract offer

A

An offer for a true unilateral contract becomes irrevocable once performance has begun
- but substantial preparations to perform do not

The offeror must give the offeree a reasonable time to complete performance

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62
Q

Acceptance in a unilateral contract

A

Acceptance is once performance in complete

Can withdraw at any time prior to completion of performance - not bound to complete performance

63
Q

preparations to perform in unilateral - revocability

A

Substantial preparations to perform, as opposed to the beginning of performance, do not make the offer irrevocable but may constitute detrimental reliance sufficient to make the offeror’s promise binding to the extent of detrimental reliance

64
Q

Beginning performance to bilateral contract and revocability

A

Bilateral contracts may be formed upon the start of performance by the offeree

Once the offeree begins performance, the contract is complete and revocation becomes impossible

Notification of the start of performance may be necessary

65
Q

Offer terminated by operation of law generally

A

Following events will terminate an offer by operation of law:
- death or insanity of either party
- destruction of the proposed contract’s subject matter, or
- supervening illegality

66
Q

Termination - death or insanity of either party

A

Death or insanity of either party will terminate an offer by operation of law unless the offer is of a kind the offeror could not terminate, such as, an option supported by consideration
- does not need to be communicated to other party

But death does not automatically terminate a contract

67
Q

Acceptance generally

A

An acceptance is a manifestation of assent to the terms of an offer

Must be communicated

68
Q

Who can accept an offer

A

Generally, only the person to whom an offer is addressed has the power of acceptance

A member of a class to which an offer has been directed also has power to accept

Generally, an offeree’s power of acceptance cannot be assigned
- but if the offeree paid consideration to keep the offer open, the right to accept is transferable

Offeree must know of the offer in order to accept it

69
Q

Acceptance - bilateral contract

A

Unless an offer specifically provides that it may be accepted only through performance, it will be construed as an offer to enter into a bilateral contract and may be accepted either by a promise to perform or by the beginning of performance

Any reasonable manner

70
Q

Silence as acceptance

A

Unless the offer provides otherwise, acceptance of an offer to enter into a bilateral contract must be communicated to the offeror

Generally, an offeree can’t be forced to speak or have their silence treated as acceptance

But a court may find silence works as an acceptance if, because of prior dealings or trade practices, it would be commercially reasonable for the offeror to consider silence as an acceptance
- if recipient of services knows or should have known that the services were being rendered with the expectation of compensation and, by a word, could have prevented the mistake, the recipient may be held to have accepted the offer if they fail to speak

71
Q

Method of acceptance

A

Unless otherwise provided, an offer is construed as inviting acceptance in any reasonable manner and by any medium reasonable under the circumstances

72
Q

Acceptance under article 2 - offer for shipment

A

Under article 2, an offer to buy goods for current or prompt shipment is construed as inviting acceptance either by promise to ship or by current or prompt shipment of conforming or nonconforming goods

73
Q

Mirror image rule

A

Traditional contract law - an absolute and unequivocal acceptance of each and every term of the offer

At common law, any different or additional terms in the acceptance make the response a rejection and counteroffer

Acceptance must mirror offer exactly

74
Q

Acceptance of offer for unilateral contract generally

A

If an offer provides that it may be accepted only by performance, particular rules
- completion of performance
- notice

75
Q

When unilateral contract is accepted

A

A unilateral contract is not accepted until performance is completed

Offeree is not obligated to complete the performance merely because he has begun

Complete performance constitutes an acceptance

Has to know of offer when accepts it - if acts without knowledge and learns of it later, their acts were not an acceptance

76
Q

Notice - begin performance as acceptance

A

Generally, the offeree is not required to give the offeror notice that he has begun the requested performance but is required to notify the offeror within a reasonable time after performance has been completed

No notice is required if
- the offeror waived notice, or
- the offeree’s performance would normally come to the offeror’s attention within a reasonable time

77
Q

Shipment of nonconforming goods - acceptance

A

The shipment of nonconforming goods is an acceptance creating a bilateral contract

Also a breach of the contract unless accommodation shipment rule

78
Q

Accommodation shipment rule

A

Shipment of nonconforming goods is a breach unless the seller seasonably notifies the buyer that a shipment of nonconforming goods is offered only as an accommodation
- buyer is not required to accept accommodation goods and may reject them
- if the buyer rejects, shipper isn’t in breach and may reclaim because the tender does not constitute an acceptance of the buyer’s original offer

This applies only when shipment is used as a form of acceptance

79
Q

Battle of the forums generally

A

Article 2 abandoned the mirror image rule and inclusion of additional or different terms by the offeree in a definite and timely acceptance does not constitute a rejection and counteroffer, but rather is effective as an acceptance

Unless the acceptance is expressly made conditional on assent to the additional or different terms

Whether the additional or different terms become part of the contract depends on whether or not both parties are merchants

80
Q

Nonmerchant - additional/different terms in acceptance

A

If any party to the contract is not a merchant, the additional or different terms are considered to be mere proposals to modify the contract and do not become part of the contract unless the offeror expressly agrees

81
Q

Merchants - additional/different terms in acceptance

A

If both parties to the contract are merchants, additional terms in the acceptance will be included in the contract unless
- they materially alter the original terms of the offer, such as by changing a party’s risk or the remedies available.
- the offer expressly limits acceptance to the terms of the offer, or
- the offeror has already objected to the particular terms, or objects within a reasonable time after notice of them is received

82
Q

Merchants - different terms in contract

A

Split over whether terms in the acceptance that are different from the terms in the offer will become part of the contract

Some courts treat different terms like additional and do the same test

Other courts follow the knockout rule

83
Q

Knock out rule

A

Conflicting terms in the offer and acceptance are knocked out of the contract because each party is assumed to object to the inclusion of such terms

Gaps are filled by UCC gap fillers

84
Q

Meeting of the minds - article 2 acceptance

A

Even though a response with different terms can constitute an acceptance under Article 2, there still must be a meeting of the minds or there is no contract

Watch for differences in the price, quantity, or quality terms - likely indicate that there isn’t sufficient meeting of the minds to constitute a contract

85
Q

Material alter terms - additional terms

A

Material change causes hardship or surprise

Whether a term would materially alter is a fact question

Changing a party’s risk or remedies available materially alter

Industry custom would not materially change

Disclaimers materially alter

86
Q

Merchant’s confirmatory memo

A

A merchant’s memo confirming an oral agreement that contains different or additional terms is also subject to the battle of the forum provisions

Despite the fact that there is a contract at the time the memo is sent - put through battle of forum as if it were an acceptance

87
Q

Uncertain if contract but act as though - battle of forums

A

If cannot be determined which specific communications were the offer and the acceptance but the parties act as though there is a contract, binding contract even though when its making is uncertain

88
Q

Mailbox rule

A

Acceptance by mail or similar means is effective at the moment of dispatch if the mail is properly addressed and stamped, unless
- offer stipulates that acceptance is not effective until received,
- an option contract, which is effective when received
- offeree sends a rejection and then sends an acceptance, which arrives first is effective
- acceptance then a rejection, acceptance effective with exception

Applies only to acceptance - revocation and rejection are effective once received

Does not matter whether lost in the mail

89
Q

First sends acceptance, then a rejection

A

The offeree sends an acceptance and then a rejection, the acceptance is effective unless the rejection arrives first and the offeror detrimentally relies on it

90
Q

Acceptance by unauthorized means

A

An acceptance transmitted by unauthorized means or improperly transmitted by authorized means may still be effective if it is actually received by the offeror while the offer is still in existence

91
Q

Auction contracts

A

A sale by auction is complete when the auctioneer so announces by the fall of the hammer or in another customary manner

An auction sale is with reserve unless the goods are explicitly put up without reserve
With reserve means that the auctioneer may withdraw the goods at any time until announces completion of the sale

92
Q

Consideration generally

A

Courts will enforce a promise as a contract only if it is supported by consideration or a substitute for consideration

What legally enforceable means

93
Q

Elements of consideration

A

1) a bargained-for exchange between the parties, and

2) legal value
- constitute a benefit to the promisor or a detriment to the promisee
- don’t measure actual value

94
Q

Bargained-for exchange

A

Promise induce the detriment and the detriment induce the promise

No bargain involved when one party gives a gift to another

95
Q

Consideration - act or forbearance by promisee

A

An act or forbearance by the promisee is sufficient consideration to form a contract if it benefits the promisor

The benefit does not need to be economic - can be the gratification of influencing the mind of another

If agree to give up legal right of something could have done, there is consideration

96
Q

Past consideration

A

A promise given in exchange for something already done does not satisfy the bargain requirement

Exceptions

97
Q

Exceptions to past consideration

A

Where a past obligation is unenforceable because of a technical defense, that obligation will be enforceable if a new promise is made in writing or is partially performed

Under modern trend, if a past act benefitted the promisor and was performed by the promisee at the promisor’s request or in response to an emergency, a subsequent promise to pay for that act will be enforceable

98
Q

Adequacy of consideration

A

Generally, courts do not inquire into the adequacy or fairness of consideration

If there is a possibility of value in the thing bargained for, consideration will be found even if the value never comes into existence

Token consideration

Sham consideration

99
Q

Token consideration

A

Something entirely devoid of value, insufficient to be consideration

100
Q

Sham consideration

A

Insignificant sum recited in the contract

Insufficient if not paid

101
Q

Legal benefit vs legal detriment

A

Legal detriment results if the promisee does something they are not legally obligated to do or refrains from doing something they have a legal right to do

Legal benefit is forbearance or performance of an act that the promisor was not legally entitled to demand or expect

102
Q

Preexisting legal duty and exceptions (5)

A

Traditionally, performing or promising to perform an existing legal duty is insufficient consideration

Exceptions:
- new or different consideration is promised
- the promise is to ratify a voidable obligation
- preexisting duty is owed to a third person rather than to the promisor
- honest dispute as to the duty, or
- unforeseen circumstances sufficient to discharge a party, or under the modern view, if the modification is fair and equitable in view of circumstances not anticipated when the contract was made

103
Q

Preexisting duty rule and modern view

A

Even if preexisting duty, consideration if the modification is fair and equitable in view of circumstances not anticipated when the contract was made

104
Q

Modification and UCC

A

A good faith agreement modifying a contract subject to the UCC does not need consideration to be binding

105
Q

Consideration and discharging debt

A

Although happens all the time in real world, payment of a smaller sum than due on an existing debt is generally not sufficient consideration

But courts will attempt to avoid this result by applying the exceptions

Sufficient if the new consideration is of a different type or if the claim is to be paid to a third party

Bona fide dispute to underlying claim or alteration of the consideration, partial payment on existing debt is supported by consideration

106
Q

Modification of contracts - common law

A

Under general contract law, a contract can’t be modified unless modification is supported by new consideration

Modern view permits modification without consideration if
- the modification is due to circumstances that were unanticipated by the parties when the contract was made, and
- it is fair and equitable

Modern view on MBE, discuss both in essay question

107
Q

Modification of contracts - UCC

A

Consideration isn’t necessary to modify contracts under UCC

All the parties need are good faith promises of new and different terms

108
Q

Consideration - refrain from suing

A

A promise to refrain from suing on a claim constitutes consideration if the claim is valid or the claimant in good faith believed the claim was valid

109
Q

Illusory promise and examples of not illusory (6)

A

If only one party is bound to perform, the promise is illusory and will not be enforced

Not illusory:
- Conditional promises unless the condition is entirely within promisor’s control
- contracts where a party has the right to cancel if the right is somehow restricted
- exclusivity agreements because the court will find an implied promise to use best efforts
- voidable promises
- unilateral and option contracts, and
- gratuitous suretyship promises made before or at the same time that consideration flows to the principal debtor

Closely analyze contract terms - language can make a big difference
- all widgets I require is not illusory, but all widgets I want is

110
Q

Right to choose alternative courses - illusory

A

A promise to choose one of several alternative means of performance is illusory unless every alternative involves legal detriment to the promisor

Will not be illusory if
- at least one alternative involves legal detriment and the power to choose rests with the promisee or a third party, or
- a valuable alternative is actually selected

111
Q

Promissory Estoppel

A

Consideration is not necessary if the facts indicate that the promisor should be estopped from not performing

A promise is enforceable if necessary to prevent injustice if
- the promisor should reasonably expect to induce action or forbearance, and
- such acton or forbearance is in fact induced

Foreseeable detrimental reliance

112
Q

Contracts of minors

A

Anyone under the age of 18 generally lack capacity to enter into a contract binding on themselves

But contractual promises of an adult made to a minor is binding on the adult

States have created a few statutory exceptions - student loans, etc

Disaffirmance and affirmance
Necessities

113
Q

Disaffirm contract

A

A minor may choose to disaffirm a contract any time before or shortly after reaching the age of majority
- only about a month after turn 18

Contract must be disaffirmed as a whole

If a minor chooses to disaffirm, they must return anything that they received under the contract that still remains at the time of disaffirmance

But no obligation to return any part of the consideration that has been squandered, wasted, or negligently destroyed

114
Q

Contracts with minors and necessities

A

Necessities are items necessary for subsistence, health, or education

A minor may disaffirm a contract for necessities, but will be liable in restitution for the value of benefits received
- reasonable value

115
Q

Contracts with minors - affirmance

A

A minor may affirm - choose to be bound by the contract in whole, upon reaching majority

A minor affirms either expressly or by conduct, such as by failing to disaffirm the contract within a reasonable time after reaching majority
- about a month
- retaining benefits after gaining capacity is implied affirmation

116
Q

Mental incapacity

A

One whose mental capacity is so deficient that they are incapable of understanding the nature and significance of a contract may disaffirm when lucid or by a later appointed legal representative

Can likewise affirm during a lucid interval or complete recovery

Contract is voidable

Liable for necessities in restitution

117
Q

Intoxicated persons

A

One who is so intoxicated that they don’t understand the nature and significance of their promise may be held to have made only a voidable promise if the other party had reason to know of the intoxication

May affirm the contract upon recovery

Recovery for necessaries under restitution

118
Q

Duress and undue influence

A

Contracts induced by duress or undue influence are voidable and may be rescinded as long as they are not affirmed

Party’s assent is procured by an improper threat is common type of duress

119
Q

Advantage of economic needs and duress

A

Taking advantage of another person’s economic needs is not duress but withholding something someone wants or needs will constitute economic duress if
- the party threatens to commit a wrongful act that would seriously threaten the other contracting party’s property or finances, and
- there are no adequate means available to prevent the threatened loss

120
Q

Undue influence (duress)

A

Elements of undue influence:
- undue susceptibility to pressure by one party, and
- excessive pressure by the other party

Undue influence concerns often arise when the dominant party is in a confidential or caregiver relationship with the influenced

121
Q

Ambiguous contract language - defense

A

If the contract includes a term with at least two possible meanings, the result depends on the parties’ awareness of the ambiguity
- neither party aware: no contract unless both parties intended the same meaning
- both parties aware: no contract unless both parties intended the same meaning, or
- one party aware: binding contract based on what the ignorant party reasonably believed to be the meaning of ambiguous words

Subjective intent taken into account

122
Q

Mutual mistake

A

Both parties entering into a contract are mistaken about existing facts (not future happenings) relating to the agreement, the contract may be voidable by the adversely affected party if
- the mistake concerns a basic assumption on which the contract is made
- the mistake has a material effect on the agreed upon exchange, and
- the party seeking avoidance did not assume the risk of the mistake

123
Q

Mutual mistake - party who bore risk

A

Not a defense if party asserting it bore the risk that the assumption was mistaken

Commonly occurs when one party is in a position to better know the risks that the other party or where the parties knew that their assumption was doubtful

124
Q

Mutual mistake - mistake in value

A

If mistake about existence of subject matter, no contract

Mistakes in the assumptions as to value will generally be enforceable because both parties usually assume the risk that their assumption as to value is wrong

125
Q

Unilateral mistake

A

Only one of the parties is mistaken about facts relating to the agreement - mistake will not prevent formation

But if the non mistaken party knew or had reason to know of the mistake made by the other party, the contract is voidable by mistaken party

The mistake must have a material effect

126
Q

Unconscionability

A

Allows a court to modify or refuse to enforce an entire contract or a provision in it to avoid unfair terms

Usually due to some unfairness in the bargaining process

Two basic test
- unfair surprise and oppressive terms
- tested at the time contract was formed

Unfair price alone is not a ground for unconscionability

Seldom a good defense on the MBE

127
Q

Common instances of procedural unconscionability

A

Inconspicuous risk-shifting provisions

Exculpatory clause releasing a contracting party from liability for their own intentional wrongful acts; ones for negligent acts may be found unconscionable if the clauses are inconspicuous, but commonly upheld if in activities that are known to be hazardous

Limitations on remedies not unconscionable unless it is inconspicuous
- but if contract limited a party to a certain remedy and that remedy fails of its essential purpose, may be found unconscionable

128
Q

Effect if court finds unconscionable clause

A

If a court finds as a matter of law that a contract or any clause of the contract was unconscionable when made, the court
- refuse to enforce the contract
- enforce the remainder of the contract without the unconscionable clause, or
- limit the application of any clause so as to avoid an unconscionable result

129
Q

Statute of Frauds

A

Certain agreements that must be evidenced by a writing signed by the party sought to be bound
- promises in consideration of marriage
- performances not within one year from date of contract
- interest in land
- executor or administrator promises personally to pay estate debts
- goods priced at 500 or more
- promises to pay debt of another - suretyship

130
Q

Promises in consideration of marriage

A

Consideration is marriage must be executed by a writing
- applies to promises that induce marriage by offering something of value other than a return promise to marry

131
Q

Performance not within one year from date of contract

A

A promise that by its terms cannot be performed within one year is subject to SOF
- does not matter how long it actually takes, theoretically

Date runs from the date of the agreement

Part performance does not satisfy

If the contract cannot be performed within a year, full performance by one party will remove it from the statute

Lifetime contract does not fall within this

132
Q

Interests in land

A

Promise creating an interest in land must be evidenced by a writing

Not only agreements for sale of real property, but also
- leases for more than a year
- easements for more than a year
- mortgages and most other security liens
- fixtures
- minerals or structures if they are to be severed by the buyer

Contracts to build or a broker’s contract do not fall within statute

Full performance will take it out
- part performance depends

133
Q

Executor or administrator promises personally to pay estate debts

A

A promise by an executor or administrator to pay the estate’s debts out of their own funds must be evidenced by a writing

134
Q

Authorizing something on someones behalf and SOF

A

Authorization to do something on someone else’s behalf must be in writing if underlying deal would be subject to SOF

Equal dignity rule

135
Q

Suretyship

A

Promise to answer for the debt or default of another must be evidenced by a writing

Must be collateral to another person’s promise to pay and not a primary promise to pay

But if main purpose or leading object of the promisor is to serve a pecuniary interest of his own, the contract is not within the SOF even though the effect is still to pay the debt of another

136
Q

Goods priced at $500 or more

A

Sale of goods for a price of $500 or more is within the SOF and generally must be evidenced by a signed writing to be enforceable

Writing is sufficient even though it omits or incorrectly states a term
- but the contract is not enforceable beyond the quantity of goods shown in the writing

Exceptions

137
Q

SOF exceptions when goods $500 or more

A

Even if for sale of goods for $500 or more, not writing required if
- specifically made goods
- written confirmation by a merchant
- admission in court
- performance

138
Q

SOF and contract modifications

A

A written contract can be modified orally, but the modification must be in writing if the contract as modified falls within the SOF

139
Q

Common law and provisions prohibiting oral modifications

A

Even if a written contract expressly provides that it may be modified only by a writing, the parties can orally modify the contract

140
Q

UCC - provisions prohibiting oral modifications

A

Under UCC, if a contract explicitly provides that it may not be modified or rescinded except by a signed writing, that provision is given effect

But if provision is between a merchant and non merchant, need non merchant’s separate signature on that provision

141
Q

SOF - performance of land sale contracts

A

Seller conveys property to the buyer, the seller can enforce the buyer’s oral promise to pay

Buyer can also seek to specifically enforce an oral land sale contract under the doctrine of part performance
- part performance that unequivocally indicates that the parties have contracted for the sale of land
- most jurisdictions require at least two of the three: payment, possession, valuable improvements

142
Q

SOF and installment land contract

A

Orally agree to an installment land contract and in the absence of other facts (like a large down payment), possession plus payment does not unequivocally indicate a contract for the sale of land because facts also consistent with a lease

143
Q

Partially paid for or accepted goods and SOF

A

Out of the SOF when the goods have been either paid for or accepted

If only partially paid for or accepted, the k is enforceable only to the extent of the partial payment or acceptance
- not enforceable beyond the quantity of goods accepted or paid for

144
Q

Specially manufactured goods

A

Contract is enforceable if goods are to be
- specially manufactured for the buyer
- are not suitable for sale to others by the seller in the ordinary course of their business, and
- the seller has, under circumstances that reasonably indicate that the goods are for the buyer, made a substantial beginning in their manufacture or commitments for their purchase before notice of repudiation is received

145
Q

SOF and admissions

A

If the party against whom enforcement is sought admits pleadings, testimony, or otherwise in court that the contract for sale was made, the contract is enforceable without a writing

But it is not enforced beyond the admittance

146
Q

Merchant’s confirmatory memo rule and SOF

A

In contract between merchants, if one party, within a reasonable time after an oral agreement has been made, send to the other party a written confirmation of the understanding that is sufficient under SOF to bind the sender

Will also bind the recipient if
- they have reason to know of one of the confirmation’s contents, and
- they do not object to it in writing within 10 days of receipt

147
Q

SOF writing requirement

A

SOF does not require a formal written contract

Requires only one or more writings that
- reasonably identify the subject matter of the contract
- indicate that a contract has been made between the parties, and
- state with reasonable certainty the essential terms

148
Q

SOF - essential or material terms

A

Something in writing evidencing the essential terms

No definitive list of essential terms - what is essential depends on the agreement, its context, and the subsequent conduct of the parties

Enough in the writing to enable a court to enforce the contract
- evidence can explain the particulars, but not admitted to add a missing term

149
Q

Essential terms in land sale contracts

A

Must contain a description of the land and the price

150
Q

Essential terms in employment contracts

A

Must state the length of employment

151
Q

Essential terms in sale of goods

A

Signed writing indicating that a contract has been made and specifying the quantity term

152
Q

Signature requirement - SOF

A

Liberally construed

Any mark or symbol made with the intention to authenticate the writing

Under UCC, party’s initials or letterhead may be sufficient

153
Q

Contract violates SOF

A

If a contract violates the SOF, in almost all cases a party can sue for the reasonable value of the services or part performance rendered, or the restitution of any other benefit that has been conferred

Contracts (6 decks)

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