Contracts Flashcards
Sources of Contract Law –> In General
There are two principal sources of K law: Article 2 of the UCC and state CL.
–> In deciding which source of K law applies, first look for the subject matter covered by the UCC; if UCC does not apply, then CL will apply.
Sources of Contract Law –> The UCC: General
UCC governs “sales of goods”; if UCC applies, it trumps any contrary CL rule.
–> Even if UCC, CL still applies unless UCC contradicts it.
Sources of Contract Law –> The UCC: Definitions - “Sales” and “Goods”
Sales: any transaction in which the seller transfers title of goods to buyer.
Goods: any movable item; does not include intangibles (goodwill, IP), money, legal claims, services, or real property.
Sources of Contract Law –> The UCC: Hybrid Cases (predominant purpose + 3 factors)
Hybrid cases (involves both sale of goods + service Ks) - determined by PREDOMINANT purpose of the transaction (majority rule).
3 Factors for determining predominant purpose:
(1) K language: was K described as a goods K?
(2) Nature of supplier’s business (ie Best Buy sells goods)
(3) Value of goods v. services (ie $30 in goods but $2 in services)
Sources of Contract Law –> The UCC: Services Contract w/ Incidental Goods
A rendition of services w/ goods incidentally involved (such as a K w/ an artist to paint a portrait) would be governed by common law.
Sources of Contract Law –> The UCC: Sale of Goods w/ Incidental Services
A sale of goods w/ services being incidentally involved (such as the sale and installation of a water heater) would be governed by the UCC.
Sources of Contract Law –> The CL of Contracts (what does it cover + examples)
Ks that do not involve the sale of goods are covered by the CL of Ks.
—> Frequently encountered examples are services Ks, Ks involving real property, and assignments of legal claims.
Sources of Contract Law –> Basic Definitions and Concepts of Contract Law: Contractual Obligations - Express Contractual Obligations
Oral and written expressions of the agreement.
Sources of Contract Law –> Basic Definitions and Concepts of Contract Law: Contractual Obligations - Implied-in-Fact Contractual Obligations
Formed by conduct rather than words.
Sources of Contract Law –> Basic Definitions and Concepts of Contract Law: Contractual Obligations - Implied-in-Law Contractual Obligations, Definition
Arises where one party bestows benefit on another and it would be unjust not to pay the reasonable value of the benefit.
Sources of Contract Law –> Basic Definitions and Concepts of Contract Law: Contractual Obligations -Implied-in-Law Contractual Obligations, Quantum Meruit
Where a party failed to fulfill an express condition or is in material breach, breaching party may still recover in quantum meruit:
—-> Reasonable value of benefits conferred; however, recovery reduced by damaged caused by breach
Sources of Contract Law –> Basic Definitions and Concepts of Contract Law: Signed Writing Reqs
A number of rules in K law require a “signed writing” in order to create an enforceable legal obligation.
—> Majority: email and the like are suff to satisfy the writing reqs of K law.
Contract Formation: Offer and Acceptance –> The Offer: 2 Elements
To be an offer, party’s communication must meet 2 Elements:
(1) Outward manifestation (oral, written, or via conduct)
(2) Signal that acceptance will conclude the deal (grant power of acceptance)
Contract Formation: Offer and Acceptance –> The Offer: Multiple Offerees (CAR - common mult offeree situations)
Commercial Advertisements
- -> American Rule: Ads, catalogs, price lists are invitations for offers, since responses may exceed available supply of goods or services.
- ———–> EXCEPTION: language that identifies who gets limited supply of goods even if there is an excess demand (ex: first come, first services; first 10 customers)
Auction
—> Situations where an item is sold to the highest bidder.
Reward Offers
–> Offers because they are communications that promise $ in exchange for performance of specific tasks (ex: $500 for finding/returning lost dog)
Contract Formation: Offer and Acceptance –> The Offer: The Legal Effect of an Offer - 4 Ways to Terminate Power of Acceptance
Offer creates the power of acceptance in the offeree; 4 ways to terminate this power:
(1) Lapse
(2) Death or incapacity
(3) Revocation of offer by Offeror
(4) Termination by Offeree’s Rejection
Contract Formation: Offer and Acceptance –> The Offer: The Legal Effect of an Offer - Lapse of Time
Lapse occurs after time stated in offer or after a reasonable time.
Reasonable time determined by:
(1) subject matter/market conditions; and
(2) degree of urgency and means of transmission
Face-to-Face Conversation Rule
–> An offer made in face-to-face conversation generally lapses at the end of the conversation.
Contract Formation: Offer and Acceptance –> The Offer: The Legal Effect of an Offer - Death/Incapacity of Either Party
Death/incapacity of either party after offer is made terminates the power of acceptance.
Contract Formation: Offer and Acceptance –> The Offer: The Legal Effect of an Offer - Revocation By Offeror
Offeror (person who made the offer) may revoke an offer at any time, for any reason.
–> Must be revoked before acceptance + revocation must be communicated to the offeree.
Two ways to communicate revocation to offeree:
- -> Direct revocation: offeror directly communicates to offeree an intent to withdraw the offer
- -> Indirect revocation: 2 requirements:
(1) Offeror takes action that is inconsistent w/ the intent to go through w/ the offer; and
(2) Offeree learns of such action from a reliable source
Contract Formation: Offer and Acceptance –> The Offer: The Legal Effect of an Offer - Revocation of Offer Made to Multiple Offerees (Functional Equivalents Rule)
Under 2nd Rest of Ks, where an offer is made by advertisement in a newspaper or other general notification to the public, the power of acceptance is terminated when:
(1) the notice of revocation is communicated by advertisement or other general notification equivalent to that used for the offer and
(2) no better means of notification is reasonably available
Contract Formation: Offer and Acceptance –> The Offer: The Legal Effect of an Offer - Rejection by the Offeree
3 Ways:
(1) Outright rejection
(2) Rejection via counteroffer (counteroffer = rejection + new offer)
- ———> EXCEPTION: offeree can test the waters by making a mere inquiry
(3) Rejection via non-conforming acceptance (mirror image rule - CL)
Contract Formation: Offer and Acceptance –> The Offer: The Legal Effect of an Offer - Mirror Image Rule
CL Rule; acceptance must mirror the terms, and any variation is a counteroffer (and a rejection of the initial offer).
Contract Formation: Offer and Acceptance –> The Offer: The Legal Effect of an Offer - Revival of the Offer
The maker is the master of the offer.
Therefore, an offeror has the power to revive an offer that the offeree has rejected (and with it the offeree’s power of acceptance), and he can also revive an offer that has lapsed.
—> All he must do is communicate the revival to the offeree.
Contract Formation: Offer and Acceptance –> The Offer: Option Contracts (Preventing Revocation) - Definition and Reqs
Option Contract (CL) Elements:
(1) Offer
(2) Separate promise to keep it open; and
(3) Valid mechanism for enforcing subsidiary promise (consideration is the most common way)
Contract Formation: Offer and Acceptance –> The Offer: Option Contracts - Special Rule for Construction Contracts
Reliance/Construction: Cts will hold offers open when the offeree has detrimentally relied on them (such as when general contractors rely on subcontractor’s bids in forming their own bids on a project).