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California Bar > Contracts > Flashcards

Contracts Flashcards

Master contracts for the California bar.

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1
Q

Offer - terms required

A
  • Real estate: land and price
  • Goods: quantity OR output/requirements K
  • Services: nature of work
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2
Q

Offer - terms required - how offer can fail

A
  • Missing price in real estate contract

- Material terms that are vague or ambiguous (appropriate, fair, reasonable)

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3
Q

Offer - means of termination

A
  1. Lapse of time (stated or reasonable)
  2. Death of a party prior to acceptance, unless irrevocable
  3. Revocation through unambiguous words or conduct of offeror, when offeree receives/becomes aware
  4. Rejection through words or conduct of the offeree
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4
Q

Offer - irrevocable offers

A
  1. Options supported by consideration; not revocable for time stated
  2. Merchants’ firm offer (signed writing); not revocable for time stated or reasonable time, up to three months
  3. Detrimental reliance if actual and foreseeable; not revocable for reasonable time
  4. Start of performance pursuant to unilateral K offer makes offer irrevocable for reasonable time to complete performance
    - Distinguish mere preparations to perform
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5
Q

Offer - means of rejection

A
  1. Counteroffer
  2. Conditional acceptance
  3. Additional terms for common law K, but not for UCC K (battle of forms)
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6
Q

Offer - acceptance - who can accept

A
  1. Person who knows about the offer at the time she accepts
  2. Person to whom it was made.

Offers can not be assigned; options can be assigned unless the option otherwise provides.

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7
Q

Offers - acceptance - mailbox rules

A
  1. All communications other than acceptance are effective only when received
  2. Acceptance is generally effective when mailed (i.e., the “mailbox rule”)
  3. If a rejection is mailed before an acceptance is mailed, then neither is effective until received
  4. If an acceptance is mailed and then a rejection, the acceptance is effective unless rejection received first and offeror detrimentally relies
  5. Cannot use the mailbox rule to meet an option deadline
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8
Q

Offers - acceptance - by shipping nonconforming goods

A
  1. General rule: acceptance and breach
  2. Accommodation (i.e., explanation) exception: counteroffer and no breach

Note: if seller accepts and then ships nonconforming goods as “accommodation,” still breach

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9
Q

Offers - acceptance - by starting performance

A

General rule: start of performance is acceptance.

- Exception: Start of performance is not acceptance of unilateral contract offers; completion of performance required

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10
Q

Consideration - past consideration

A

General rule: not consideration

  • Exception: expressly requested by promisor and expectation of payment by promisee AND (modernly) act in response to emergency; subsequent promise to pay enforceable
  • Exception: new promise or part performance of existing obligation
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11
Q

Consideration - preexisting duty

A

Under common law, generally not consideration; Art 2 needs no new consideration if modification of K is in good faith

Exceptions to common law rule:

  • addition to or change in performance (e.g., early payment of debt)
  • unforeseen difficulty so severe as to excuse performance
  • honest dispute as to duty (e.g., whether debt owed)
  • ratification of voidable obligation (e.g., K w/ minor)
  • third-party promise to pay
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12
Q

Consideration - consideration substitutes - promissory estoppel (detrimental reliance)

A
  1. Promise
  2. Reliance that is reasonable, detrimental, and foreseeable
  3. Enforcement necessary to avoid injustice.
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13
Q

Defenses - overview

A 
Simian dump
Statute of Frauds
Incapacity
Misrepresentation
Illegality
Ambiguity
Non-Disclosure
Duress
Unconscionability
Mistake
Public policy
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14
Q

Defenses - incapacity

A
  • Lack of capacity:
    1. Infants: those under 18
    2. Mental incompetents: those who lack ability to understand agreement, or
    3. Intoxicated persons: if other party has reason to know
  • Consequences of incapacity:
    1. Right to disaffirm by person without capacity
    2. Implied affirmation by retaining benefits after gaining capacity
    3. Quasi-contract liability for necessaries
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15
Q

Defenses - statute of frauds

A

MY LEGS!

  1. Marriage (provide a dowry or child support)
  2. Cannot be performed w/in 1yr (not: life; task)
  3. Interest in Land (except lease of 1yr or less)
  4. Executor (promise to pay w/ own funds)
  5. Sale of goods over $500
  6. Surety (promise to pay if another does not; exception if “main purpose” benefits guarantor)
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16
Q

Defenses - statute of frauds - satisfying

A
  1. Performance
  2. Writing
  3. Judicial admission
  4. Estoppel
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17
Q

Defenses - statute of frauds - satisfying - performance

A
  • Real estate: 2 of 3 - pay, improve, possess
  • Services: full performance
  • Goods:
    1. Ordinary goods - extent of performance; delivered but no payment, paid but no delivery
    2. Special goods - seller makes “substantial beginning”
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18
Q

Defenses - statute of frauds - satisfying - writing

A
  1. Common law: all material terms, signed by party to be bound
  2. Art 2: writing that there is K w/ quantity; merchant’s confirmatory memo (recipient has reason to know of contents; doesn’t object w/in 10 days)
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19
Q

Defenses - illegality

A
  1. Subject matter is illegal: not enforceable.

2. Subject matter is legal: enforceable if P did not have reason to know of D’s illegal purpose.

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20
Q

Defenses - ambiguity

A

No contract if:

  1. parties use a material term that is open to at least two reasonable interpretations
  2. each party attaches different meaning
  3. neither party knows or has reason to know term open to at least two reasonable interpretations

If 1 party knows of ambiguity and other does not, term enforced as understood by unknowing party

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21
Q

Defenses - duress; unconscionability; public policy

A
  1. Duress: econ/physical. Need [i] improper threat (usu. to breach); [ii] vulnerable party (usu. no reasonable alternative)
  2. Unconscionability: unfair surprise (procedural) OR oppressive terms (substantive); tested by court as of time agreement was made
  3. Public policy: exculpation from intentional or reckless conduct; covenant not to compete w/o r’ble need or r’ble time and place limits
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22
Q

Defenses - misrepresentation; non-disclosure

A
  1. Misrepresentation: [i] statement of “fact” before K; [ii] by party or agent; [iii] that is false; and [iv] induces K. No wrongdoing req if material.
  2. Non-disclosure: generally must be wrongdoing unless fiduciary relationship
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23
Q

Defenses - mistake

A
  1. Mutual: relief if basic assumption, material, party seeking avoidance did not assume risk
  2. Unilateral: no relief unless palpable
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24
Q

Terms - parol evidence rule - when applicable

A
  1. Final written contract

2. Earlier written/oral statement OR simultaneous oral statement of one or both parties

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25
Q

Terms - parol evidence rule - prohibitions and exceptions

A
  • Not allowed: looking at PE to:
    1. Change/contradict terms in written deal
    2. Add consistent terms to written deal, unless [i] partial integration or [ii] terms would ordinarily be in separate agreement.
  • Exceptions: looking at PE OK to determine:
    1. If mistake in integration (i.e. clerical error)
    2. If defenses apply (misrep., fraud, duress, etc.)
    3. If condition precedent applies
    4. Meaning of term (resolve ambiguity)
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26
Q

Terms - interpretation based on conduct

A
  1. Course of performance: same people, same K
  2. Course of dealing: same people, different but similar K
  3. Custom and usage: different but similar people, different but similar K
27
Q

Terms - battle of forms

A

Applies only to Art 2 Ks

  1. Both parties are merchants
  2. Additional term not “material” [fact question]
  3. Additional term not objected to by original offeror
28
Q

Terms - gap fillers

A

Applies only to Art 2 Ks

  1. Price: reasonable at time of delivery
  2. Place: seller’s business; if none, home
  3. Time for shipping/delivery: reasonable
  4. Time for payment: when buyer receives goods
29
Q

Terms - delivery obligations for seller w/ common-carrier delivery

A
  1. Shipment K: seller’s obligation complete when goods get to carrier; r’ble delivery arrangements made, buyer notified
  2. Destination K: goods arrive at destination.
  3. Determining type of K: usually shipment; determine with “FOB” term
    - FOB seller/goods city: shipment K
    - FOB anywhere else: destination K
30
Q

Terms - risk of loss

A
  1. Agreement: agreement of the parties controls.
  2. Breach: breaching party liable for any uninsured loss even if breach unrelated
  3. Common carrier delivery: risk shifts from seller to buyer when seller completes delivery obligation
  4. Fall-back: risk of loss –
    - Shifts from a merchant-seller to the buyer on buyer’s “receipt” of goods
    - Shifts from nonmerchant seller when he “tenders” goods
31
Q

Terms - warranties

A
  1. Express: facts, promise, sample/model.
  2. Implied warranty of merchantability: IF seller is a merchant who deals in goods of that kind, THEN warranty that goods are fit for ordinary purposes.
  3. Implied warranty of fitness for a particular purpose: IF buyer has particular purpose, relies on seller to select suitable goods, seller has reason to know of purpose and reliance, THEN warranty that goods fit for particular purpose
32
Q

Terms - warranties - limits

A
  1. SOL: 4 yrs from tender of delivery
  2. Buyer’s inspection: no implied warranties as to obvious defects
  3. Disclaimer: applies to implied warranties only; must be conspicuous or say “as is”; “w/ all faults”
  4. Privity: lack of privity not defense
33
Q

Performance - goods contract - obligations and remedies

A
  1. Basic obligation: perfect tender
  2. If less than perfect tender, buyer has right to keep and sue for damages or reject “all or any commercial unit” and sue for damages
    - No right to reject in installment K unless “substantial impairment”
  3. Sometimes seller has right to cure
    - Time for performance not yet expired
    - Seller had reasonable ground to believe would be acceptable, perhaps with a money allowance
34
Q

Performance - goods contract - acceptance and consequences

A

Once accepted, can’t reject

  • Payment w/o opportunity to inspect not accept.
  • If don’t reject w/in r’ble time, it’s acceptance
  • Retention is acceptance
35
Q

Performance - goods contract - acceptance - revocation

A

Can revoke acceptance if:

  1. Nonconformity substantially impairs value
  2. Excusable ignorance of grounds for revocation or reasonable reliance on seller’s assurance of satisfaction
  3. Revocation within a reasonable time after discovery of nonconformity
36
Q

Remedies - reclamation from an insolvent buyer of goods

A
  1. Buyer insolvent at time it received goods
  2. Seller demands return of goods w/in 10 days of receipt (or w/in r’ble time if buyer made express representation of solvency before delivery)
  3. Buyer still has goods at time of demand
37
Q

Remedies - replevy from an insolvent seller of goods

A

Can replevy upon tendering full payment if:

  1. Part payment by buyer
  2. For identified goods
  3. Seller becomes insolvent w/in 10 days of first payment
38
Q

Excuse - other party’s performance

A
  1. Nonperformance
  2. Anticipatory repudiation: unambiguous statement or conduct before performance due indicating that repudiating party will not perform
    - Immediate claim for damages for breach, UNLESS non-repudiating party has completely performed; then must wait until performance due
    - Can retract if no material change in position by other party; duty to perform reimposed but can be delayed until adequate assurance provided
  3. If reasonable grounds for insecurity, can make written demand for adequate assurance and if commercially reasonable can stop performance until assurance received
39
Q

Excuse - breach

A
  1. Minor breach: if get substantial benefit of bargain, must perform but get damages
  2. Material breach: if no substantial performance, no obligation to perform
  3. Divisible contract exception
40
Q

Excuse - condition

A
  1. Strict compliance required for satisfaction of express condition
  2. Benefited party can waive
  3. Benefited party cannot hinder or interfere w/ other party’s ability to satisfy
41
Q

Excuse - rescission

A
  • Parties may cancel by express agreement
  • Ks must be executory on both sides: rescission itself is K & must be supported by consideration; here, giving up right to performance by other party
  • Cannot rescind if 3PB rights have vested
42
Q

Excuse - accord and satisfaction

A
  • Accord: agreement in which party to exist K agrees to accept substitute performance
  • Satisfaction: performance of accord
  • Breach by debtor: creditor may sue on K or accord
  • Breach by creditor (i.e., sues on original K): debtor may raise accord as equitable defense and ask suit to be dismiss OR wait for damages and then sue for breach of accord
43
Q

Excuse - novation

A

Agreement between BOTH parties to an existing contract to the substitution of a new party, i.e., same performance, different party.

44
Q

Excuse - destruction of subject matter

A
  • Service K: depends if performance is impossible (K to repaint house; burns down) or just more difficult (K to build house; burns down); only impossible excused
  • Goods K: do risk of loss - if risk on buyer, buyer pays; if on seller, buyer does not pay, gets damages if performance still possible (e.g., can procure substitute goods)
45
Q

Excuse - death or physical incapacity

A

Does not make K obligations disappear

- EXCEPTION: death of K party who is “special” person excuses performance

46
Q

Excused - subsequent law or regulation

A
  • If later law makes performance of K illegal, excuse by impossibility
  • If later law makes mutually understood purpose of K illegal, excuse by frustration of purpose
47
Q

Excuse - impossibility and impracticability

A
  1. Impossibility: must be objectively impossible; K duties could not be performed by anyone
  2. Impracticability: extreme and unreasonable difficulty/expense; nonoccurrence was a basic assumption of K parties
48
Q

Excuse - frustration

A
  1. Supervening act or event
  2. Parties did not reasonably foresee
  3. Purpose of K (almost) completely destroyed as a result
  4. Both parties aware of purpose at time of K formation
49
Q

Third-party beneficiary - types

A
  • Intended vs. incidental: only intended have rights; look if - named in K; receives performance from promisor; has r’ship w/ promisee to indicate intent to benefit
  • Creditor vs. donee: creditor if was a creditor of the promisee before K
50
Q

Third-party beneficiary - vesting

A
  1. 3PB manifests assents
  2. 3PB materially changes positions in justifiable reliance ok K
  3. 3PB brings suit to enforce K
51
Q

Third-party beneficiary - who can sue?

A
  1. 3PB can recover from promisor, subject to defenses promisor has against promisee
  2. Promisee can recovery from promisor
  3. ## Beneficiary cannot recover from promisee, unless creditorPromisor: makes promise that benefits 3PB
    Promisee: obtains promise that benefits 3PB
52
Q

Assignment - definition

A

X and Y contract; Y assigns rights to X’s performance to Z

  • X: obligor
  • Y: assignor
  • Z: assignee
53
Q

Assignment - restrictions - in contract

A
  • Prohibition (“rights hereunder not assignable”): assignor is liable for breach, but assignee unaware of prohibition can still enforce assignment
  • Invalidation (“all assignments of rights under this K void”): breach by assignor and no rights in assignee
54
Q

Assignment - restrictions - if contract silent

A

Common law bars an assignment that substantially changes duties of obligor; typically, this is assignment of right to K performance other than right to payment

55
Q

Assignment - how to effect

A

Assignor must manifest intent to immediately and completely transfer rights; writing usually not required

56
Q

Assignment - revocability

A
  1. Assignment for value not revocable
  2. Gratuitous assignments revocable
    - EXCEPTION: obligor has already performed; assignee can show detrimental reliance
57
Q

Assignment - who can sue?

A
  1. Assignee can recover from the obligor, subject to defenses obligor has against assignor
  2. Assignor for consideration cannot recover from obligor, but can sue for breach of warranties:
    - Right assigned actually exists
    - Right assigned not subject to any then-existing defenses by obligor
    - Assignor will do nothing after assignment to impair the value of assignment
58
Q

Assignment - successive assignments

A
  1. Gratuitous: last assignee generally wins
  2. For value: first assignee wins
    - EXCEPTIONS (“four horsemen” rule): subsequent assignee for value who does not know of earlier assignment prevails if first to obtain ONE of:
    [i] payment; [ii] judgment; [iii] novation; [iv] indicia of ownership
59
Q

Assignment - to whom is performance due?

A
  • Payment by obligor to assignor is effective until obligor knows of assignment
  • Modification agreements between obligor and assignor effective if obligor did not know of assignment
60
Q

Delegation - definition

A

X and Y contract, with Y promising to perform for X; Y delegates duty to Z

  • X: obligee
  • Y: obligor/delegator
  • Z: delegate
61
Q

Delegation - restrictions

A
  • Generally, contractual duties are delegable; limitations are very limited
  • Delegations permitted unless: (1) contract prohibits delegations OR assignments or (2) “personal services contract” that calls for VERY SPECIAL skills.
62
Q

Delegation - liability

A
  1. Delegator always remains liable.

2. Delegate liable only if receives consideration from delegating party

63
Q

Consideration - consideration substitutes

A
  1. Payment to settle legal claim
  2. Payment of debt barred by statute of limitations
  3. Promissory estoppel (detrimental reliance)

California Bar (13 decks)

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