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Contract and Sales > Contract/Sales > Flashcards

Contract/Sales Flashcards

1
Q

When to use UCC art. 2

A

for sale of goods! (moveable, personal house)

if contract is mixed goods/services look to the primary purpose (what they wanted when made contract)

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2
Q

When to use UCC art. 2A

A

ONLY in Texas

applies to lease of goods (not real property, but ex: lease of a car)

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3
Q

What is a Contract and 2 Ways to Create one

A

legally enforceable agreement

  1. express contract: created by parties (oral or written)
  2. Implied in fact: created by conduct
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4
Q

Restitution/Quasi-Contract

A

protects from unjust enrichment (last resort)

recover value of benefit conferred, not the contract price

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5
Q

Bilateral Contract

A

where offer can be accepted in any reasonable way (flexible)

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6
Q

Unilateral Contract

A

where offer can be accepted only by performing (not formed until total act of performing complete)

when:

  • ‘offer only accepted by performing’
  • reward, contest, prize
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7
Q

Steps to Analyzing Contract

A

1: was there an offer
2. was offer terminated
3. was offer accepted

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8
Q

What is an offer?

A

manifestation of intent to be bound

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9
Q

Is an advertisement an offer?

A

generally no b/c no quantity term so unlimited ppl could accept (not fair)

Except: if ad specifies a quantity

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10
Q

Open Price Term in Offer

A

Court will infer reasonable price at the time of delivery if price isn’t included

EXCEPT: price must be included for real estate contract

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11
Q

Requirement Contracts (UCC Art. 2)

A

ex: ‘i will buy all requirement of beans from seller’

when quantity is measured by buyers needs/requirements a specific number is not required

But buyer can’t take seller by surprise if amount goes up (even in good faith)–can’t be out of line with prior requirements

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12
Q

Offers Terminating by Lapse

A

offer lapses after stated term or reasonable time has passed (doesn’t stay open forever)

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13
Q

Offers Terminated by Revocation

A

offer terminates when offeror revokes offer

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14
Q

Direct Revocation of Offer

A

offerer indicates directly to offeree he changed his mind about the deal (no particular words are necessary)

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15
Q

Indirect Revocation of Offer

A

offeror’s conduct indicates a changed mind and offeree was aware of this conduct

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16
Q

Option Contract

A

makes offer irrevocable

a promise to keep offer open, that is paid for

no time limit

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17
Q

Firm Offer (art. 2)

A

Makes offer irrevocable

if merchant promises in signed writing to keep offer open

Signed: loose interpretation (fax, letterhead, initials)

3 month time limit no matter what!

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18
Q

Starting to Perform Under Unilateral Contract

A

makes offer irrevocable

w/unilateral offer, once offeree starts to do the job, the offeror can’t revoke

mere preparation doesn’t count

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19
Q

When is Revocation Effective?

A

revocation is effective when it is received (NOT when sent)

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20
Q

Rejection of Offer (3 main ways)

A

offer terminates when offeree rejects it by giving inappropriate response:

  1. Counter Offer (not mere questioning)
  2. Conditional Acceptance (rejection/counter)
  3. Acceptance Varying Offer only at common law
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21
Q

Acceptance Varying Offer: Common v. UCC

A

Common: must be mirror image so addition/changing terms operates as rejection

UCC: additional/different terms included if:

  • both parties merchants and
  • not material change (cause hardship/surprise, not customary to industry) and if
  • other party didn’t object to it in reasonable time
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22
Q

Death of a Party Before Acceptance

A

terminates a revocable offer but not an irrevocable offer

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23
Q

Starting Performance for Bilateral v. Unilateral Contracts

A

bilateral: means acceptance and implied promise to finish
unilateral: merely starting isn’t enough, must complete (starting makes it irrevocable)

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24
Q

Improper Performance

A

simultaneous acceptance and breach of contract

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25
Q

Accommodation Exception to Improper Performance

A

if seller says he is sending non conforming goods as accommodation it’s not acceptance/breach

buyer can send back goods at sellers expense

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26
Q

Timing of Acceptance (Mailbox Rule)

A

acceptance effective when mailed
(remember, revocation effective when received)

burden of lost letter: on offeror (all that matters is that it was mailed correctly)

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27
Q

Exceptions to the Mailbox Rule (3)

A
  1. Offer states otherwise (can contract around it)
  2. Irrevocable Offer: acceptance effective when received, not when sent b/c they will expire when option is up
  3. Rejection sent first: it is a race, and whatever reaches offeror first will be effective
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28
Q

Lack of Capacity to Contract

who (3) and what it means to the contract

A
  1. minors
  2. intoxicated
  3. retarded

incapacitated person has right to disaffirm (doesn’t have to)

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29
Q

Incapacitated but then gets Capacity

A

retaining benefit after capacity obtained means it becomes a valid, enforceable contract b/c person has implied he wants to be bound

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30
Q

Exception for Necessaries w/ Minors

A

incapacitated party is liable for necessaries (food, shelter, clothing, medical) but only reasonable value, not contract price

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31
Q

Ambiguity/Misunderstanding in Contract

A

parties on completely different wavelengths (saying same thing but meaning different things)

ship example

no contract will be made

EXCEPT: if one party knew/reason of the misunderstanding then contract interpreted for innocent party

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32
Q

Mutual Mistake

A

about material/significant facts

  • -mistake about value is NOT significant
    ex: item destroyed and neither party knew

will destroy contract

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33
Q

Unilateral Mistake

A

one party’s mistake is not a fatal flaw

EXCEPT: if other party knew/reason about the other’s mistaken belief that lead them to contract

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34
Q

What is Consideration, and What can Constitute Consideration (3)

A

bargained for legal benefit or detriment

  1. promise
  2. performance
  3. forbearance/peace of mind

adequacy of consideration is irrelevant

must be over something legal to do

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35
Q

Past Consideration

A

NOT consideration b/c the work has already been performed

can’t bargain about things already done

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36
Q

Does Contract Modification Require Consideration?

UCC v. Common

A

Common: new consideration is req to modify contract
-performing pre-existing duty is not enough

UCC: consideration is not req to modify contract for sale of goods, if modification done in good faith

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37
Q

Partial Payment of Debt

due/undisputed v. not due/disputed

A

Partial Payment if Due/Undisputed:
-ex: X owes Visa 5K, but they orally agree visa take 2K. Visa then demands other 3K. X must pay b/c there was no consideration for the agreement

Partial Payment if Not Due/Disputed
-agreeing to pay some amount early or to end good faith dispute would be consideration and it would be ok for partial payment to forgive the debt

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38
Q

Time Barred Debts

A

written promise to pay a debt that can’t be collected on b/c of the stat of limitations is enforceable even w/o consideration

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39
Q

Promissory Estoppel as Substitue for Consideration

A

foreseeable reliance may make a promise enforceable even w/o consideration (like for promises)

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40
Q

SoF: When a Writing is Required (5)

A
  1. Interest in real property (sale, lease, easement, by owner or agent)
  2. Performance of Contract Can’t be Completed w/in A Year (look at what is theoretically possible v. impossible on calendar)
  3. Sale of Goods for 500 or more
  4. Suretyship
  5. Contract Modification, if contract as modified comes w/in SoF (over 500, longer than a year) or if contract forbids oral modifications (art. 2 only-common law doesn’t let ppl add to SoF)
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41
Q

What is a Satisfactory Writing?

UCC v. Common and 2 requirements each

A

Art 2:

  1. have quantity and
  2. signed by party to be charged (so can be one way street depending on who signed)

Common

  1. all material terms (who, what)
  2. signed by person its being enforced against
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42
Q

Real Property Exception to SoF (2)

A
  1. lease of 1 yr or less
  2. Part Performance
    - requires 2 of the three:
  3. some payment
  4. possession
  5. improvements on property
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43
Q

Work Contracts Exception to SoF

A

work contract for year or more must be in SoF but if it wasn’t and they worked full time on oral contract they can still get paid.

if didn’t work full year, can’t recover on contract (use restitution)

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44
Q

Sale of Goods Exception to SoF

A

sale of goods of 500 or more in SoF

Exception: goods accepted and paid for (but only those goods actually accepted/paid for, not whole contract–so works only if goods are easily divisible. Shipments of bats v. downpayment on boat)

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45
Q

Custom Made Goods as Exception to SoF

A

only if there has been a substantial beginning and they are not suitable for resale

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46
Q

Judicial Admission as Exception to SoF

A

in judicial proceeding someone says contract happened

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47
Q

Merchants Confirmatory Memo as Exception to SoF (3 elements)

A

one party can use it’s own signed writing to satisfy SoF against the other party if:

  1. both are merchants
  2. writing claims agreement and has quantity and
  3. no written objection w/in 10 days
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48
Q

Main Purpose of Suretyship Exception to SoF

A

when the promise to pay actually benefits the surety and not the primary payer

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49
Q

When Does the Parole Evidence Rule Come into Play and What does it Do?

A

comes into play only if there is a written contract

keeps out PRIOR or CONTEMPORANEOUS agreements (oral or written) that contradicts the later writing b/c you assume the last writing is complete

doesn’t keep out evidence of formation defects

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50
Q

Exceptions to Parole Evidence

(5)

(the evidence can get in)

A
  1. Typo
  2. defense against formation (ex: misrep)
  3. interpret vague/ambiguous term
  4. Add partially integrated writing (not all terms are included. the ballroom/sleeping ex)
  5. All Later events
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51
Q

Merger Clause and Parole Evidence

A

ex: ‘this contract is limited to terms here’
means writing is complete, can’t be supplanted (everything before has merged into the agreement so you can’t add anything)

52
Q

Conduct to Explain Terms/Fill in Gaps

A
  1. Course of Performance: how parties performed
  2. Course of Dealing: what they did before
  3. Usage of Trade: what others do in similar contracts
53
Q

Seller’s Express Warranty

A

(doesn’t have to use words ‘i warrant’)

any statement of fact/description of goods as opposed to sellers opinion

ex: promise about goods or use of model/sample

54
Q

Implied Warranty of Merchantability

what it is and it’s 2 elements

A

says: goods are fit for ordinary purpose. Implied if:

  1. seller is a merchant
  2. Seller deals in goods of this kind (so he has special knowledge)
55
Q

Implied Warranty of Fitness for Particular Purpose

A

says: goods are fit for buyers particular use/purpose. implied if:

  1. seller knows buyer has a special purpose and
  2. seller knows buyer is relying on seller to select suitable goods

(seller doesn’t have to be merchant!!)

56
Q

Disclaimers for Warranties

A

seller CNA disclaim implied but not express warranties

magic words: ‘as is’ or ‘with all faults’

not: no implied warrant of merchantability or fitness (unless it is very conspicuous)

57
Q

Can Seller Limit Buyer’s Remedies in Contract?

A

Yes, for breach of warranty (express or implied) if it is not unconscionable

limiting remedies for personal injury in consumer goods is considered uncons.

58
Q

Presumptions for Risk of Loss (3)

A
  1. contract can control who has risk

2. breaching party bears risk even if breach unrelated to loss

59
Q

Shipment Contract

Where Seller Completes Delivery Obligations

A

Risk is then on the buyer.

Seller must:

  1. get goods to common carrier
  2. make delivery arrangements and
  3. notify the buyer

Shipment contracts are presumed

60
Q

Destination Contract

A

seller must et the goods all the way to the specified destination before risk transfers to buyer

61
Q

FOB

A

free on board + name of city

risk passes to buyer at name of city

(if location is where seller is = shipment contract
if location is where buyer is = destination contract)

62
Q

If It’s not a Shipment Situation, who has risk of loss?

buyer is picking it up or the seller is dropping it off

A

Seller is Merchant: seller bears risk until buyer gets possession

Seller is not a Merchant: buyer bears risk of loss once seller makes goods available

63
Q

if newly constructed building is destroyed?

A

all loss is on contractor

64
Q

Performance Requirement: UCC v. Common law

A

UCC:
-Perfect tender rule: seller must deliver the perfect goods in right place/right time and if not buyer has right to reject

Common Law:

  • -performance doesn’t have to be perfect, substantial performance is all that is req (almost is good enough)
  • party can’t commit material breach
65
Q

Option to Cure for UCC

A

seller who fails to make perfect tender has option to cure:

if time in contract has not expired: seller has option to cure within that time

if time has expired: no option to cure unless seller had reason to believe the buyer would take the not perfect goods due to prior dealings

66
Q

Installment Contracts in UCC

A

req/authorizes delivery in separate installments

perfect tender rule doesn’t imply so buyer can only reject for substantial impairment

reject installment if substantial impairment in installment
reject contract if entire contract has become substantially impaired

67
Q

Implied Acceptance

A

buyer keeps goods after having opportunity to inspect them (merely paying not enough)

68
Q

Consequences of Accepting Goods

A

once accepted, you can’t reject

buyer can get damages if seller is in breach

69
Q

Consequences of Rejection/revocation of acceptance

A

return: buyer return goods at sellers expense
refund: buyer get money back he’s paid for goods
damages: buyer get damages from seller for breach

70
Q

Seller’s Right to Refuse a Check

A

seller has right to refuse taking a personal check but if he does, the buyer has a reasonable time to get cash, even though contract deadline passed

71
Q

If seller’s performance isn’t perfect, what can buyer do? (3)

what can buyer do in common law?

A

UCC

  1. reject all goods, not just the non conforming ones
  2. accept all goods, not just conforming ones
  3. accept some goods, reject rest

get damages no matter what

Common:
buyer always get damages but only excused from contract if breach is material (breaching party get restitution for work done)

72
Q

Finishing Contract Late

A

not a material breach unless time is of the essence

73
Q

Divisible Contract

A

when payment can be made on a per unit basis, the breaching party can recover the contract price for any unit on which he substantially performed

74
Q

Anticipatory Repudiation

A

Excuse to contract unless redacted. must be very clear that there will be a breach.

if so, can stop and immediately sue for damages.

person w/anticipatory repudiation can change his mind and contract can resume as long as other party hasn’t relied on breach

75
Q

Failure to Give Adequate Assurances

A

if other party is only unsure of ability to finish, ask for this (it’s not anticipatory repudiation)

buyer can, in writing, ask seller for adequate assurances about quality of goods

but can’t use it to rewrite the contract (just pay me in cash now) or demand particular assurances (just must be adequate)

76
Q

Later Agreements by the Parties (4)

A
  1. Rescission
    - agreement to cancel contract
    - each party must have some performance remaining
  2. Modification
    - agreement to replace existing contract w/new one
    - replaces old contract immediately, so can only sue on new one
  3. Accord/Satisfaction
    -agreement to accept performance in future satisfaction of an existing duty
    (satisfaction is the performance of the accord)
  4. Novation:
    - agreement to substitute new party for existing one
    - if original parties don’t consent, no novation
77
Q

Impossibility (aka Impracticability for Art. 2)

A

later unforeseen event makes performance impossible so provides seller w/excuse

78
Q

Is destruction of something necessary for performance an excuse b/c of impossibility/impracticability?

A

Common law: yes, excuse for non performance

UCC: yes but:

  • seller w/risk of loss when goods destroyed excused
  • seller excused only if damaged goods had been IDed in contract (set aside for this particular sale)
79
Q

Supervening Government Regulations

A

excuses contract if stat. passed that prohibits contract’s function or action

80
Q

Increased Cost of Sellers Performance

A

MBE: never excuses seller’s performance

Texas: may excuse seller’s performance. look at:

  • how much he’s loosing and
  • percentage increase
81
Q

Frustration of Buyer’s Primary Purpose

A

excuse for contract only if seller knew of buyer’s purpose when they entered contract

82
Q

Failure of Express Condition

what it is, language used, and 2 types

A

express condition: limits obligations made by other contract lang but doesn’t create independent obligation

lang: ‘if’ ‘as long as’ ‘when’ ‘provided/on condition’

strict compliance w/condition required

ex: I will buy house provided it appraises for 2 million dollars
1. Condition Precedent: event happens, then contract. ‘if it rains, then..’
2. Condition Subsequent: event cuts off obligation ‘until — you can do…’

83
Q

Satisfaction Clauses

A

will only pay if satisfied

satisfaction is measured by reasonable person unless it is for work of art or matters of personal taste

84
Q

2 Ways to Excuse a Condition

A
  1. Failure to Cooperate
    - person protected by condition does’t try to fulfill her part of bargain
  2. Waiver
    - voluntarily give up protection of condition
85
Q

Specific Performance as a Remedy

A
  • real property
  • UCC if goods are unique (including antiques) or there is an inability to buy substitute goods
  • never service contracts
86
Q

Unpaid Seller’s Right to Reclaim Goods

A

generally no right to get goods back from buyer who hasn’t paid

Exception: buyer is insolvent when he receives goods and seller makes demand w/in 10 days

(don’t assume insolvency!)

But if buyer has sold goods to BFP third party no right for seller to reclaim EXCEPT seller can reclaim goods from anyone if buyer misrepresented his solvency to seller in writing w/in 3 months before delivery

87
Q

Liquidated Damgages are Upheld if (2)

(and UCC exception)

(and what is best way to go about it)

A
  1. damages are difficult to estimate at time of contract and
  2. reasonable forecast of probable damages (not a penalty)
    - reasonableness measured at time time of the contract

UCC: liquidated damages can be reasonable at time of contract or in light of actual damages–either valid

Better if per diem, graduated amount than one overall lump sum

88
Q

Expectation Damages

A

put injured party in as good a position as full performance would

89
Q

Common Law Expectation damages

A

What someone expected to get paid

what someone expected to make (expenditures and profit)

90
Q

UCC Expectation damages for Buyer (3 options)

A
  1. Cover Damages: cover price - contract price
    - getting goods elsewhere
    - if covered in good faith
  2. Market Damages: market price-contract price
    - if buyer doesn’t bother to cover/doesn’t cover in good faith
  3. Loss in value: value as promised - value delivered
    - if buyer keeps non conforming goods
91
Q

UCC Expectation damages for Seller (4 options)

A
  1. Resale damages: contract price-resale price
    - if resells in good faith
    - no damages if you resell for contract price
  2. market damages: contract price -market price
    - doesn’t resell in good faith or not at all
  3. Lost Profit: if seller is a volume dealer (unlimited supply so lost ability to sell two instead of one)
    - must pay lost profits from breach
  4. Contract price: for custom goods for buyer
    - can’t resell b/c custom or made to order
    - buyer gets the stuff
92
Q

Incidental Damages

A

cost to injured party of transporting/caring for goods and arranging substitute transaction

93
Q

Consequential Damages

A

damages reasonably foreseeable to breaching party at time of contract–based on what the parties are told

not available to seller under UCC 2

94
Q

Avoidable Damages

UCC v. Common and what a comparable job is

A

common: can’t recover if didn’t mitigate w/reasonable effort (ex: don’t have to take another job, but you’re damages will be reduced by what you could make)
- comparable job: same kind of work in same city

UCC: don’t have to do anything, no such thing as avoidable damages

95
Q

Entrustment (UCC)

A

when owner entrusts goods to merchant who deals in goods of that kind (ex: jewelry dealer) he has no rights against a BFP who buys his stuff

-sue jeweler for conversion

96
Q

Third Party Beneficiary

what is it and who are parties

A

when 2 ppl enter into a contract intended to benefit a third party

Third Party beneficiary: person not party to contract but has rights b/c contract intended for her

Promisor: person who promises to perform for third party beneficiary

Promisee: person who secures the promise

97
Q

Incidental v. Intended Third Party Beneficiary

A

Incidental: person benefited by contract on accident, contract wasn’t made for her
-no rights

intended: contract for that person. right to enforce

98
Q

Donee v. Creditor Beneficiary

A

donee: person getting performance as a gift
creditor: person getting performance to repay debt (rare)

99
Q

Rescission/Modification of Third Party Beneficiary Contract

A

Promisor/promisee can rescind and modify contract until rights of third party vest. Vest when:

  1. third party assents
  2. third party learns/relies
  3. third party sues to enforce

(but contract language will prevail)

100
Q

Promisor liability to third party beneficiary

A

third party can sue breaching promisor even though there is no privity of contract

steps into shoes of promisee (so promisor can assert defenses against third party he could against promisee)

101
Q

Promisee Liability to third party beneficiary

A

if promisor doesn’t perform as promised the promisee is only liable if:
1. third party beneficiary was a credit beneficiary

102
Q

Promisor Liability to Promisee

A

promisee can recover damages from promisor if no performance

but if it’s a donee beneficiary there isn’t a lot of damage

103
Q

Delegation of Duties

A

transfer of a burden under a contract

contractual duties can be delegated w/o consent of person who is owed the performance (obligee)

104
Q

Exceptions to Delegation of Duties (2)

A
  1. contract language controls (if it prohibits delegation or assignment then you can’t)
  2. if it says no delegation it also means assignment and vice versa
105
Q

Rights of the Obligee under Delegation of Duties

A
  1. delegating party is still liable, since obligee never gave up any rights
  2. delegatee who gets consideration is also liable (delegating party gets pushed down to surety)
106
Q

Assignment of Rights

what is it, the 2 steps to do it

A

transfer of the benefit under a contract

two ppl make a contract then one transfers his rights in the contract (like to receive money) to a third party

  1. make a contract
  2. assign rights under the contract w/present language of transfer (‘i assign…i transfer’)
107
Q

Is consideration required for an assignment of rights?

A

No, b/c gift assignments are ok.

But gift assignments are easily revocable by the original party accepting the benefit

if there as consideration for the assignment then it can’t be revoked

108
Q

Restrictions on assignments of rights

A
  1. contract language
    - if it says ‘rights under this contract are not assignable’ it’s ok to assign
    - if it says ‘all assignments under this contract are void’ then not ok to assign
  2. can’t substantially change duties of obligor
    - assignment of right to payment not substantial
    - assignment of services is substantial
109
Q

Can you assign a requirement contract?

A

yes, as long as the assignee’s requirements are not out of line with the assignor

110
Q

Who is Liable in an Assignment?

A

if original party didn’t do work: material breach, original parties sue

if assigned party doesn’t get money: can sue original parties-steps into shoes of assigning party

only required to pay assigned party when notified

111
Q

Multiple Gift Assignments

A

last gratuitous assignee prevails over the earlier ones because each later one revokes the earlier one

112
Q

Multiple Assignments for Consideration

A

first assignment for consideration prevails over all later assignments for consideration and any prior assignments for gift

Except: later assignee for consideration will win if he doesn’t know of earlier assignment and is first to get payment/judgment against obligor (not just to notify but first to get judgment)

113
Q

Which Contracts can’t be assigned? (2)

A
  1. long term contracts

2. unique personal service

114
Q

If landowner breaches contract for construction after work has started but before it is complete?

A

contractor gets profits he would have gotten + cost incurred

he can stop work as soon as breach occurs

115
Q

if landowner breaches construction contract before work starts

A

contractor can get profits he would have earned

116
Q

Buyers right to Replevy

A

when seller refuses to deliver goods, buyer can recover them if:

  1. goods are IDed in the contract
  2. Buyer is unable to cover (get substitute goods after reasonable effort)
117
Q

Warranty of Title and Warranty Against Infringements

A

warranty of title: seller’s implied warranty that he had clear title to sell the item

warranty against infringements: implied w/merchants only, that the item is free of trademark/patent issues

118
Q

CIF Shipment

A

price in contract includes goods, shipping, insurance

119
Q

Illusory

A

a promise with unqualified right to cancel/withdraw at any time by one party

  • promisor not bound to perform in the end
  • lacking consideration
120
Q

If Place of Delivery of Time of Payment not specified in contract

A

assume sellers place for delivery and assume payment upon delivery

121
Q

Firm Officer Elements

A

must be in writing
must be signed by person making the offer
3 months

122
Q

send in order can be accepted by

A

sending buyer notice you got order and will be sending the stuff

prompt shipment of conforming goods

prompt shipment of non conforming goods would be acceptance and breach unless notification of accommodation

123
Q

things that must be in writing (6)

A 
marriage 
years
land
executor (out of pocket)
goods over 500 
surety
124
Q

Promissory Estoppel (consideration substitute) (4)

A
  1. promise by P
  2. reasonable expectation of reliance when made
  3. actual reliance
  4. interest of justice
125
Q

assignments can be revoked unless (3)

A
  1. assignee collects (b/c gift/deal is complete)
  2. consideration given for assignment
  3. assignee detrimentally relied

revoked if assignor collects from creditor

Contract and Sales (1 decks)

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