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2022 MBE > Contract-Formation/Defense > Flashcards

Contract-Formation/Defense Flashcards

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1
Q

Offer

A

is valid when it manifests objectively serious intent to be bound and is directed at a specific offeree.

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2
Q

Offer content requirement

A

CL—essential terms (parties, quantity, price, subject);

UCC—quantity.

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3
Q

Termination of offer: 8 ways

A

I. Offeror—

(1) revocation,
(2) action inconsistent + offerree learns,
(3) death,

II. Offerree—

(4) Rejection,
(5) counteroffer,
(6) time lapse,

III. Nature—

(7) Destruction
(8) illegality

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4
Q

Irrevocable offers: 4 types

A

(1) firm offer (UCC),
(2) option K (CL);
(3) promissory estoppel;
(4) partial performance in unilateral K (offerree began performance)

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5
Q

Firm offer:

A

(a) made by merchants;
(b) written, signed by merchant;
(c) explicit promise not to revoke for time no more than 90 days.

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6
Q

Option K:

A

Makes an offer irrevocable if

(a) Offeror promised to keep offer open for a specific period of time; and
(b) Promise was supported by consideration

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7
Q

Acceptance must be

A

definite and timely

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8
Q

Acceptance of an offer that’s unclear whether bilateral or unilateral

A

perform or return promise

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9
Q

Acceptance of unilateral K:

A

(a) Full performance; and

(b) notice to offeror that you accepted within a reasonable time

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10
Q

Acceptance content requirement

A

Acceptance under CL must be: mirror image. No acceptance when additional/different terms—will function as a counter-offer and rejection.

Acceptance under UCC: Acceptance exists despite additional/different terms. © offer made acceptance conditional

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11
Q

Acceptance under UCC: If additional/different terms and one party is not merchant

A

Acceptance exists. Additional/different terms are proposed additions to be separately accepted by offeror.

© If acceptance is conditional based on assent to new/different terms, it is a counteroffer.

©© If “conditional” acceptance of the offer already states the term implied in the sale (like implied warranty of merchantibility), not a counteroffer.

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12
Q

Acceptance under UCC:

If additional terms and both are merchants, 3 situations

A

Additional terms automatically included in K unless

(1) terms materially alter the deal;
(2) recipient object within reasonable time; or
(c) offer explicitly conditioned acceptance on proposed terms.

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13
Q

Acceptance under UCC:

If different terms and both are merchants

A

Different terms “knock” each other out and a UCC gap filler will used instead

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14
Q

Mailbox rule: Acceptance

A

Acceptance sent by mail is effective upon dispatch.

Exceptions exist

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15
Q

Mailbox rule: Revocation

A

effective when received

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16
Q

Mailbox rule: Rejection

A

effective when received

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17
Q

Mailbox rule: Exceptions to acceptance

A

Acceptance effective upon receipt if

(1) irrevocable offers; or
(2) offer says acceptance isn’t effective until receipt.

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18
Q

Mailbox rule when offeree rejects first then accepts:

A

whichever gets received first will control.

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19
Q

Mailbox rule when offeree accepts first then rejects:

A

acceptance controls, unless offeror receives rejection and detrimentally relies.

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20
Q

Consideration:

A

legal detriment to the promisee or benefit to the promisor

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21
Q

Promises for past consideration:

A

At CL, past legal detriment is not consideration. But promise may be enforced under material benefit rule.

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22
Q

Material benefit rule

A

A promise for past consideration may be enforced to the extent necessary to prevent injustice if

(a) party performs unrequested service that constitutes a material benefit
(b) the other party promises to pay after

© party had donative intent

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23
Q

Consideration for K modification at CL:

A

Modification must be supported by consideration

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24
Q

Pre-existing duty rule:

A

A promise to do something you’re already legally obligated to do is not consideration. (e.g. modification by promise to pay more more for someone to complete K not enforceable)

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25
Q

Exceptions to pre-existing duty rule

A

Sufficient consideration exists for

(1) A promise to a 3rd party to perform something you are already contractually obligated to perform for another
(2) Promise to give a different legal duty
(3) Promise to pay partial debt before debt is due

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26
Q

Consideration for K modification under UCC:

A

Modification doesn’t need new consideration if made in good faith.

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27
Q

Consideration for assignment:

A

Consideration is not necessary to make a valid assignment; the presence of consideration affects only the revocability of the assignment

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28
Q

Accord

A

A party’s agreement to accept a different performance from what was promised in the existing K, in satisfaction of the other party’s duty.

Generally, accord requires consideration to be valid.

29
Q

A promise to accept a lesser amount–enforceable?

A

unenforceable without consideration.

Consideration exists if

(1) the other party honestly disputes the claim OR agrees to forego an asserted defense; OR
(2) payment is a different type than called for.

honest dispute:If a claim is subject to dispute, it can be discharged if the person against whom the claim is asserted in good faith

(a) tenders a negotiable instrument (e.g., a check) that conspicuously states (e.g., “payment in full”), and
(b) the claimant accepts the payment

30
Q

Novation

A

substitution of a new contract for an old one when the original obligor is released from his promises under the original agreement and a NEW OBLIGOR (3rd party) becomes liable.

accord is not a novation

31
Q

Satisfaction of an accord

A

the performance of the accord agreement. it discharges both the original K and accord.

32
Q

Breach of an accord

A

If party who promised a different performance breaches the accord, the other party can sue either under the original K or accord.

33
Q

Promises that do not need consideration to be binding (2 theories of liability):

A

promissory estoppel,

quasi-K

34
Q

Promissory estoppel:

A

∑(a) D made a promise that’s reasonably expected to induce reliance;

(b) P detrimentally relied;
(c) enforcing the promise would avoid injustice.

© written charitable subscription (charity need not show reliance)

35
Q

Quasi-K (implied-in-law K) exists when

A

∑ (a) P gives a measurable benefit;

(b) P reasonably expected to get paid;
(c) it would be unfair to let D keep the benefit

36
Q

promissory estoppel recovery

A

recovery limited to reliance damages, not contract price.

37
Q

Defenses to Formation: Intoxication

A

a contract entered into by a party while intoxicated is voidable only where the other party had reason to know of the intoxication.

38
Q

Defenses to Formation: Mistake (mutual)

A

Mistaken party can void K due to mutual mistake if ∑4 mistake

(a) relates to basic assumption of K;
(b) existed when K was formed;
(c) has material impact on the transaction
(d) mistaken party didn’t assume the risk of mistake.

39
Q

Defenses to Formation: Mistake (unilateral)

A

Unilateral mistake ∑ 3

(a) mistaken party didn’t assume the risk of mistake; and

(b) (i) nonmistaken party caused/failed to disclose mistake/knew or shouldve known the other’s mistake OR
(ii) mistake would make enforcement unconscionable; and

(c) rescinding K wouldn’t seriously prejudice the nonmistaken party

40
Q

Defenses to Formation: Misunderstanding

A

∑(a) involves a material term open to different interpretation
(b) neither knows or should know of confusion. (e.g. $12.50 vs. $1250)

41
Q

Defenses to Formation: Misrepresentation

A

∑ 3: Deceived party can render K voidable if:

(a) material or fraudulent misrepresentation of present fact;
(b) induced assent to the K;
(c) justifiable reliance on the misrepresentation.

42
Q

A misrepresentation is fraudulent if

A

(a) knowing or reckless false assertion of fact (b) with the intent to mislead

Statement about a future event: generally opinion and not a statement of fact. © when the opinion implies that it is based on facts unknown to the listener, the listener may be justified in believing that the speaker knows of facts that justify the opinion, or at least that the speaker does not know of any facts that are incompatible with the opinion

43
Q

A misrepresentation is material if

A

A misrepresentation is material when the

(1) information would cause a reasonable person to agree (to the K), or
(2) the person making the misrepresentation knows the information would cause this particular person to agree.

44
Q

Defenses to Formation: Undue influence definition

A

K is voidable if assent is induced by unfair/excessive persuasion from someone who dominated (eg, prison guard/prisoner) or held a special relationship of trust and confidence (lawyer/client)

45
Q

Defenses to Formation: Undue influence test

A

Test: whether P could exercise free and competent judgment

Factors: a dominant-dependent relationship, lack of expertise, diminished mental capacity

46
Q

Defenses to Formation: Duress

A

K is voidable if assent was induced by an

(a) improper threat that deprives a party of
(b) meaningful choice and
(c) party promptly disaffirmed.

47
Q

Defenses to Formation: Duress–improper threat

A

Threat of criminal prosecution (regardless of validity).© threat of civil action is not improper, unless pursued in bad faith.

Merely economic threat generally not sufficient © threat that breached the contractual duty of good faith and fair dealing (e.g., refusing to deliver truck under the contract unless P paid more); the lender’s use of the attachment process

48
Q

Defenses to Formation: Duress–meaningful choice

A

meaningful choice: person has no reasonable alternative such that threat induced assent.

49
Q

Defenses to enforcement: Illegality

A

K is unenforceable if K involves consideration or performance that is illegal

50
Q

A party who performed under a contract that contemplates illegal conduct

A

can recover if K does not involve illegal consideration/performance and the party is unaware of other party’s illegal purpose

if she knew of the other’s illegal purpose, unless she (1) knew that illegal use involved grave social harm or (2) acted for the purpose of furthering the illegal use

51
Q

Defenses to enforcement: SoF requirement

A

(a) writing
(b) signed by the party whom the K is asserted (party disputing the existing K);
(c) contains essential terms

52
Q

SoF types

A
  1. Contracts that can’t be performed within one year of making.
  2. UCC sale of goods for 500 or more
  3. Sale of land
  4. Marriage
  5. Surety
53
Q

Exception to SoF for sale of land

A

Part performance: SoF satisfied if 2 of the following exists:

(1) possession
(2) payment
(3) improvement to the land

54
Q

Exceptions to SoF for UCC $500+ sale of goods

A

Writing is not required for:

(1) specially manufactured goods (customized goods + seller made a substantial beginning);
(2) quantity delivered and accepted;
(3) part payment;
(4) merchant confirmatory memo

55
Q

Exception to SoF for surety

A

Main purpose: writing not required if alleged promisor who agreed to pay someone’s debt did so for his own economic advantage.

56
Q

SoF requirement for modification of K

A

SoF applies to K modification if the final modified K would be in the SoF world. Applies to both UCC and CL.

© UCC modification: writing required only if modification relates to subject matter or quantity

57
Q

Quasi K recovery

A

recovery limited to restitution damages, not contract price.

58
Q

Unconscionability

A

defense to contract enforcement

A contract is unconscionable when it is so unfair to one party that no reasonable person in the position of the parties would have agreed to it.

59
Q

Offer: revocation

A

In general, can revoke any time by communicating to offeree before acceptance

(revocable EVEN IF IT STATES it will remain open for a specific amount of time, unless irrevocable).

60
Q

Defenses to Formation: K is void due to mental incapacity if

A

Void if an individual is adjudicated mentally incompetent (mental illness, guardianship).

© liable for reasonable value of necessities under quasi K

61
Q

Defenses to Formation: K is voidable deu to mental incapacity if

A

Voidable if there has been no adjudication, if D was (a) unable to understand the nature of the transaction; AND (b) other party had reason to know

© liable for reasonable value of necessities under quasi K

62
Q

Defenses to Formation: Age

A

Voidable by minor (or minor can choose to hold adult to the K).

To void, must void before 18 or within “a reasonable time after.”
© can recover reasonable value of necessities under quasi K

63
Q

SoF: Merchant’s confirmatory memo exception ∑ 3

A

In contracts of $500+ where both parties are merchants,

(a) when one sends a writing sufficient under SoF to be enforced against himself,
(b) receiving party has reason to know its contents, and
(c) the receiving party does not object in writing within 10 days,

then the contract is enforceable against the receiving party even though he has not signed it.

64
Q

merchant definition

A

A merchant is a person who

(1) regularly deals in the type of goods involved in the transaction or
(2) otherwise by his occupation holds himself out as having knowledge or skill peculiar to the practices or goods involved in the transaction.

65
Q

Acceptance under UCC:

additional terms on the acceptance materially alter the K if

A

A term materially alters the original contract if it results in surprise or hardship if incorporated without the express awareness by the other party

© reasonably limiting remedies = not material alter

66
Q

Agreement regarding SoL:

A

any parties to a sale of goods contract can modify the statute of limitations period. Minimum 1 year maximum 4 years.

67
Q

Consideration: illusory promise

A

A contractual obligation supported by illusory promise not enforceable.

Illusory promise: promise that pledges nothing b/c promisor can choose whether to honor it. (e.g. orders will be binding only when I accept it)

68
Q

Defenses to enforcement: Illegal contract because a party doesn’t have a license

A

K is enforceable if the licensing requirement’s purpose is economic (e.g., raise revenue).

K is unenforceable if the licensing requirement’s purpose is regulatory (e.g., protect public) and public policy clearly outweighs the interest in enforcing the K.

69
Q

SoF UCC exception for specially manufactured goods

A

Specially manufactured goods (customized goods + seller made a substantial beginning. © For this exception to apply, the goods cannot be suitable for sale to others in the ordinary course of the seller’s business

2022 MBE (18 decks)

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