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1L Winter > Contract Rules > Flashcards

Contract Rules Flashcards

1
Q

A performance or return promise is bargained for (is VC) if…

A
  1. It is sought by the promisor in exchange for his promise
  2. It is given by the promisee in exchange for that promise
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2
Q

What is performance?

A

An act, a forbearance, or a change of legal relation

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3
Q

Is a promise that benefits a third-party automatically enforceable?

A

No. See Mills.

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4
Q

When is a promise for benefit received enforceable?

A

When there is
1. A material benefit directly to the promisor AND
2. a subsequent promise to pay

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5
Q

When there is a benefit received by the promisor but no subsequent promise to pay, is there any recovery?

A

No except in rare circumstances like Crisan, a medical setting

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6
Q

What are the elements of promissory estoppel?

A
  1. Was a promise made?
  2. Would promisor reasonably expect (i.e. be foreseeable) that promise would induce action or forbearance by promisee?
  3. Did promise actually induce such action or forbearance on part of the promisee (to her detriment)?
  4. Does justice require enforcement of the promise?
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7
Q

What are the 3 grounds for enforcement of promises?

A
  1. Was there a bargain for exchange? (consideration)
  2. Was there a benefit conferred?
  3. Did promises rely on promisor’s promise to her deteriment? (promissory estoppel)
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8
Q

When is a contract unconscionable?

A

Either
1. Unfair procedural circumstances
2. It is contrary to public policy

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9
Q

What does not make a contract unconscionable by itself?

A

Inadequacy of the consideration
Parties that have unequal bargaining positions

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10
Q

What is mutuality?

A

Each party must furnish consideration to the other or else the entire agreement is unenforceable

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11
Q

When does an illusory promise have valuable consideration?

A
  1. Each of the alternatives would’ve been consideration if it alone had been bargained for
    OR
  2. Substantial possibility that before promisor exercises choice, events may eliminate the alternative that is not valuable consideration
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12
Q

Every contract imposes an obligation of…

A

good faith

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13
Q

What are limits on at-will contracts?

A
  1. Fairness
  2. Unconscionability
  3. Good faith
  4. Mutuality
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14
Q

What are fairness and public policy limits on enforcing promises?

A
  1. Unconscionability
  2. One party has flexibility under the contract
  3. Illegality/contrary to statute
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15
Q

What are the 3 standard contract remedies?

A
  1. Restitution
  2. Reliance
  3. Expectation
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16
Q

What is restitution?

A

Prevention of unjust enrichment

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17
Q

What is reliance?

A

Reimburse promisee for a change in position due to her reliance on the contract (put promises in the position she was in before the contract was made)

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18
Q

What is expectation?

A

Gives promisee value she would’ve received if promise had been fulfilled (put promisee in the position she would’ve been had the defendant performed)

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19
Q

What are 3 limitations on expectation damages?

A
  1. Unavoidable
  2. Foreseeable
  3. Reasonably Certain
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20
Q

When can a person recover emotional distress damages in breach of contract?

A
  1. Tort attached as well
  2. “Particularly likely”
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21
Q

What are avoidable damages?

A

Plaintiff can’t recover damages that plaintiff could’ve avoided without undue risk, burden, or humiliation (plaintiff has duty to enter into substitute transaction)

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22
Q

What are 2 situations where expectation damages aren’t suitable so reliance damages will be awarded?

A
  1. When plaintiff can’t show lost profits with certainty but can show expenditures
  2. When there is no legally enforceable contract, but plaintiff is entitled to some protection under promissory estoppel
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23
Q

If a plaintiff has fully performed, then…

A

The plaintiff’s remedy is limited to the contract price

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24
Q

If a plaintiff has partially performed, then…

A

plaintiff can recover reasonable value of services

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25
Q

Damages clauses are permitted if…

A
  1. amount is reasonable in light of anticipated or actual loss
  2. difficult to prove loss
    (UCC - 3. non feasibility of obtaining an adequate remedy)
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26
Q

A term fixing unreasonably large or small liquidated damages is void as a penalty (True or false)

A

True

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27
Q

Specific performance will not be awarded unless:

A
  1. Money damages are inadequate
  2. No difficulty in enforcing/supervising the order
  3. Service/good can’t be substituted on the market
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28
Q

What are other factors to consider in deciding to give specific performance?

A
  1. Consequences on defendant - is there disproportionate harm?
  2. Type of contract (personal service, land, sale of goods)
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29
Q

What is the restitution remedy for the breaching party?

A

Old approach - no recovery for the breaching party
Modern approach - breaching party may recover in restitution for amount of services actually provided MINUS any losses incurred by the non-breaching party

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30
Q

What is a breaching buyer allowed in restitution under the UCC?

A

The breaching buyer is entitled to restitution for any amount above:
(1) liquidated damages OR
(2) 20% of value of total performance (contract price) or $500, whichever makes restitution smaller

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31
Q

Do parties have to show an intention to be bound to the contract for the contract to be enforceable?

A

Generally yes

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32
Q

Do advertisements or ad-like communication generally show an intentional to be bound?

A

Generally no

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33
Q

What cases are exceptions where an advertisement can imply an intention to be bound?

A

If the ad changes people’s behavior OR a reasonable person would understand it as indicating intent to be bound

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34
Q

What is the common law rule regarding indefiniteness?

A

(1) Contract terms must be reasonably certain
(2) Must provide reasonable basis for determining breach & appropriate remedy
(3) If terms are left open, it indicates no intent to be bound

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35
Q

What is the UCC rule regarding indefiniteness?

A

Contract is formed in “any manner sufficient to show agreement” including conduct
It does not fail for indefiniteness if there is:
(1) intention to be bound
(2) Certain basis of a remedy
But the quantity of good can’t be left open

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36
Q

What is the UCC rule regarding contracts with open price arrangements?

A

Open price terms are OK. Price is “reasonable price at time of delivery”

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37
Q

When is there no mutual assent to parties that attach materially different meanings to their assent?

A

(a) neither party knows meaning of the other
(b) each party knows or has reason to know the meaning attached by the other

38
Q

When is there mutual assent even though the parties attach materially different meanings to their assent?

A

(a) A doesn’t know of any other different meaning and B knows meaning of A’s manifestation (Cow hypo)
OR
(b) A has no reason to know of any other meaning, but B has reason to know of the meaning attached by A

39
Q

How do we know if there is an offer?

A

1) Must intend to be bound
2) Must be definite (“reasonably certain basis” for “appropriate remedy”)
3) No misunderstandings
4) Not terminated prior to acceptance (rejection/counteroffer, lapse of time, revocation, death/incapacity)

40
Q

What is the general rule for revocation?

A

Offer can be revoked until it’s accepted UNLESS
the promise
(1) asks for performance (part performance creates an option contract that can’t be revoked)
(2) asks for promise of performance (bilateral contract that can’t be revoked)
(3) is ambiguous and the offer invites EITHER performance OR promise, then beginning performance is acceptance (but must render complete performance or will breach)

41
Q

If an offer asks for performance, is the offeree in breach if they stop performance?

A

No. The offeree hasn’t “accepted” until performance is finished

42
Q

If an offer is ambiguous, and the offeree begins performance, can the offeree stop performance?

A

No, not without breaching because both parties intend to be bound

43
Q

What are the requirements for an offer to be binding as an option contract?

A

1) It is in writing and signed by the offeror
2) Has valuable consideration (nominal OK)
3) Proposes exchange on fair terms
4) It is timely or
5) It is made irrevocable by statute

44
Q

If an offer induces reliance and the offeror should expect the offer would induce action, then…

A

The offer constitutes a binding option contract

45
Q

What are the steps to finding of mutual assent as common law?

A

1) Did the offeror make an offer?
2) Did the offeree make an acceptance that conforms to the terms of that offer?
- If the offeree introduces new terms, then offer is “rejected” and the power of acceptance is terminated under the deviant acceptance rule
- But it is OK to make implicit terms explicit or “suggest” new terms (issue of whether the offeree’s response is absolute with an inquiry attached or conditional)

46
Q

What is the “mirror image acceptance” rule?

A

Common law rule
If offeree’s response has any changes in the terms of an offer, then the offeree has made a counteroffer and not issued a valid acceptance
Acceptance is only effective if it is the mirror image of the offer

47
Q

What is the UCC rule for acceptance?

A

Contract formed in any manner sufficient to show agreement, including conduct
Acceptance may be “in any manner and by any medium reasonable”
Additional terms are merely proposals that do not affect offer and acceptance between merchants - they’re automatically part of the contract

48
Q

What are some forms of valid acceptance?

A

1) Mirror Image Rule
2) UCC Rules
3) Battle of Forms
4) Mailbox Rule
5) Silence as Acceptance

49
Q

What is the parol evidence rule?

A

If you have a
1) completely integrated writing, then
2) extrinsic parol evidence of
3) prior or contemporaneous agreements
4) is inadmissible to contradict, vary, or even add to the writing

50
Q

If writing is partially integrated, then…

A

The parol evidence rule allows extrinsic evidence to add to, but not contradict, the contract

51
Q

Can oral agreements be used to interpret the contract to see if it’s completely or partially integrated in the first place?

A

Yes, in some places. See Berg.
But it doesn’t mean that the oral agreement can be established as part of the agreement or is enforceable.

52
Q

What is the statute of frauds rule under the UCC?

A

(1) Sale of goods over $500
(2) Must be “some writing sufficient” to indicate a contract
(3) Signed by party against whom the enforcement is sought
(4) must specify a quantity

53
Q

Between merchants, a “confirmatory memorandum” satisfies the statute of frauds as long as

A

(1) the party receiving it has reason to know the contents
(2) it’s not objected to within 10 days

54
Q

What is the parol evidence rule under the UCC?

A

A final expression may not be contradicted by a prior or contemporaneous agreement
But it may be explained or supplemented by:
(1) the course of dealing or trade usage AND
(2) evidence of consistent additional terms (unless written agreement was the complete and exclusive statement of terms)

55
Q

What does the UCC reject in regard to the parol evidence rule?

A

1) Assumption that a writing is integrated
2) Using default rules of construction, rather, it uses commercial context
3) Contract does NOT have to be ambiguous first

56
Q

Do people have a duty to read?

A

Generally yes unless
1) They are prevented from doing so
2) Induced not to read

57
Q

What are the general rules regarding assent to standardized forms?

A

1) If you have “reason to believe” that like writings are regularly used, then you adopt the writing as an integrated agreement
2) Treats alike all those similar situated without regard to knowledge or understanding
3) Where the other party has reason to believe that the party manifesting assent would NOT have done so HAD SHE KNOWN the writing contained a particular term, that term is NOT part of the agreement

58
Q

What is the rule regarding warranty of merchantability?

A

Unless otherwise indicated, UCC 2-314 implies warranty that goods are merchantable if S is a merchant

59
Q

What is the definition of merchantable?

A

1) Pass without objection in trade
2) Fair average quality
3) Fit for the ordinary purpose…
4) Conform to the promises made on the container

60
Q

What is the rule regarding warranty of fitness for a particular purpose?

A

If the seller has “reason to know” any “particular purpose” for which goods are required, then there’s implied warranty of fitness for a particular purpose unless this warranty is excluded under 2-316

61
Q

How can a merchant exclude an implied warranty of merchantability?

A

1) Language must be specific (mentions warranty of merchantability)
2) And if in writing, it must be conspicuous

62
Q

How can a merchant exclude an implied warranty for fitness for a particular purpose?

A

1) Must be in writing
2) Conspicuous

63
Q

What are ways that merchants, in practice, exclude implied warranties?

A

1) Excluded by an “as is” clause
2) If a buyer examines goods or has the opportunity to examine the goods but fails to do so, no warranty if there is a defect that would’ve been revealed if they did so
3) Implied warranties can also be excluded in the course of dealing

64
Q

What is duress?

A

Any wrongful act or threat which overcomes the free will of a party

65
Q

What is the test for economic duress?

A

1) Threat of wrongful act to breach the contract
2) Overcomes party’s free will:
a) no other avenues of alternative performance
b) legal remedy inadequate

66
Q

What is the modern standard of whether a threat must be illegal to count as duress?

A

Whether the threat is improper or wrongful, it does not have to be illegal

67
Q

What are questions you should ask yourself about duress?

A

1) Is the threat illegal?
2) Is the threat fair (wrongful or improper)?

68
Q

What is the pre-existing legal duty rule?

A

When a party merely performs an act that she is already legally obligated to do, she can’t demand additional compensation for it because there’s no VC

69
Q

What is the unforeseen circumstances/additional obligations exception to the revision of contract duty?

A

Where a subsequent agreement imposes an additional obligation or burden not previously assumed, the agreement - supported by VC - is valid and binding

70
Q

When is modification binding under common law?

A

Modification is binding if it’s fair and equitable in view of circumstances not anticipated

71
Q

Does an agreement modifying a contract need a consideration to be binding?

A

No

72
Q

What are reasons for not enforcing mutual mistakes?

A

1) Economic - can no longer assume parties are both better off
2) Fairness - exchanges should be substantially equal
3) Autonomy - if there’s misinformation, it’s not clear the party is really exercising their autonomy

73
Q

A mutual mistake makes a contract voidable if it affects…

A

1) basic assumption on which contract was made
2) material effect
3) affected party does NOT bear risk

74
Q

A unilateral mistake makes contract voidable if…

A

1) basic assumption on which the contract is made
2) material effect
3) affected party does NOT bear risk AND
4) enforcement of contract would be unconscionable OR
other party has reason to know

75
Q

What is the difference between the two types of unilateral mistakes?

A

1) Mechanical miscalculation - contract is voidable
2) Error in judgment - no rescission of contract

76
Q

What is the rule regarding duty to disclose?

A

When there is a direct misrepresentation or an affirmative act of concealment, contract is voidable

77
Q

What information does a seller have a duty to disclose?

A

1) Information materially affecting value
2) Accessible only to seller that seller knows is not known by buyer OR
3) Not within diligent observation by buyer

78
Q

When does a seller have a duty to disclose?

A

1) Special relationship
2) Course of dealing
3) Nature of fact (ex: murder)

79
Q

When does a seller not have a duty to disclose?

A

1) Arm’s length transaction
2) Buyer expected to discover by ordinary inspection

80
Q

Does a seller have a duty to disclose the obvious?

A

No

81
Q

Does a seller have to disclose the benefits of a product?

A

No, they do not unless they are directly asked.

82
Q

Under the UCC, do you need valuable consideration to revise a contract?

A

No, you only need good faith

83
Q

Can promissory estoppel apply to cases where the parties make an oral modification to the contract after it was formed?

A

Yes. See Fried v. Fisher

84
Q

If performance can be rendered simultaneously, then..

A

they are due simultaneously
UNLESS language or circumstances indicate otherwise

85
Q

What is the UCC rule regarding the delivery and payment of goods?

A

Unless otherwise agreed, all goods called for by a contract for sale must be tendered in a single delivery and payment is due only on such tender

86
Q

What are questions to ask to determine if non-performance is excused because of a failure of a condition precedent?

A

1) Has the first party performed?
2) If not, was their performance a condition precedent?
- if it was a condition precedent, then the 2nd party is excused because of failure of condition precedent

87
Q

When simultaneous exchange is not possible, then…

A

Service contract: must substantially perform before the other party has duty to pay
Sale of goods: if all goods can be delivered in a single delivery, then delivery is condition precedent to payment. But if full delivery at one time is impossible, seller can get payments for individual lots if price can be apportioned

88
Q

What is the modern rule for impossibility and impracticability?

A

1) Impossibility: strictly not possible
2) Impracticability: unforeseen circumstances cause extreme and unreasonable burden

89
Q

What does frustration of purpose mean?

A

Where after a contract is made, a party’s
1) principal purpose is
2) substantially frustrated
3) without his fault
4) by the occurrence of unforeseeable event which the parties assumed wouldn’t occur
5) duty to render performance is discharged
6) unless the language or circumstances indicate the contrary

90
Q

What are justifications for non-performance?

A

1) Failure of condition precedent
2) Impossibility
3) Impracticability
4) Frustration of purpose

91
Q

What is the perfect tender rule?

A

Buyer has the right to insist that seller tender goods that perfectly meet the terms of the contract

92
Q

What topics does the statute of frauds apply to?

A

MYLEGS
M - Marriage, in consideration of (pre and postnups)
Y - Year (contracts that go longer than a year)
L - Land (sales, leases, house)
E - Estate (executor of an estate promises to pay the estate’s debts out of his/her assets)
G - Goods ($500 or more)
S - Surety (a guarantor of a loan)

1L Winter (2 decks)

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