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Contracts Flashcards

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1
Q

Applicable Law: Common Law

A
  1. Services Contracts; and

2. Real Estate

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2
Q

Applicable Law: UCC

A
  1. Sale of Goods

Applies to both merchants and individuals

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3
Q

Applicable Law: Mixed Contracts - Primary Purpose

A

Is contract primarily for goods or services?

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4
Q

Applicable Law: Mixed Contracts - Divisibility

A

Divisibility

May apply Common Law or UCC to different aspects of a contract if contract can be broken up into mini deals

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5
Q

Contract Formation (3) OAC

A
  1. Offer
  2. Acceptance
  3. Consideration
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6
Q

Creating Legal Offer - (3) ObSV

A
  1. Objective Test - Reasonable person believe you intended to enter into a contract
  2. Directed at specific person
  3. Vest power of acceptance in offeree (say “I accept” and you gucci)
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7
Q

Specificity - Common Law

A

All essential terms must be in agreement

  1. Price
  2. Quantity
  3. Parties
  4. Duration
  5. Subject
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8
Q

Specificity - UCC

A

Only essential term:

  1. Quantity
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9
Q

Requirements Contract

A

Buyer does not know how much is required, but promises only to buy from you

  • Quantity still satisfied; “all we need”
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10
Q

Output Contract

A

Seller does not now how much they will output, but promises only to see to you

  • Quantity still satisfied; “all we will produce”
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11
Q

Methods of Revocation (6) RC RC DR

A
  1. Revoke
  2. Constructive Revocation
  3. Reject
  4. Counteroffer
  5. Death
  6. Reasonable Time
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12
Q

Requirements / Definition: Revocation

A
  1. Express communication to offeree of withdrawing offer
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13
Q

Requirements / Definition: Constructive Revocation

A
  1. When offeror does something that is absolutely inconsistent with continuing the ability to contract

Contract to buy house, but sells to someone else - without property, there is no more contract

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14
Q

Requirements / Definition: Rejection

A
  1. Express communication to offeror of rejecting offer
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15
Q

Requirements / Definition: Death

A
  1. Offeror dies before acceptance

Note: if valid contract formed before death, successors must honor obligations

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16
Q

Requirements / Definition: Reasonable Time

A
  1. Reasonable time passes, offer automatically is revoked
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17
Q

Revival

A

Offerors always have the discretion to revive dead offers

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18
Q

Irrevocable Offer Types (4) CLO, UCC, UC, DR

A
  1. Common Law Option
  2. UCC Firm Offer
  3. Unilateral Contract w/ partial performance
  4. Detrimental Reliance
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19
Q

Requirements / Definition: Common Law Option (3) OTC

A
  1. Offer to contract
  2. Time
  3. Consideration
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20
Q

Requirements / Definition: UCC Firm Offer (3) MST

A
  1. Both parties merchants
  2. Signed writing by offeror
  3. Time

Time not to exceed 3 months - to keep open further, must have consideration –> conversion to CL Option

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21
Q

Unilateral Contract w/ Partial Performance

A

Offer irrevocable once performance has begun

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22
Q

Detrimental Reliance / Promissory Estoppel

A

Offer irrevocable once counterparty has taken action to their detriment in reliance on the promise

Construction / Subcontractor bidding is clearest example

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23
Q

Acceptance - Test, Master

A

Objective Test

Offeror is Master of Acceptance - Offeree must comply

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24
Q

Unilateral Offer

A

Invites acceptance through performance

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25
Q

Bilateral Offer

A

Invites acceptance through promise

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26
Q

Ambiguous Offer

A

Either performance or promise will suffice

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27
Q

Definition / Requirements: Open to All Offer

A
  1. To collect on a reward, you must know about the reward
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28
Q

Definition / Requirements: Acceptance (1)

A
  1. Must be communicated to offeror
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29
Q

Mailbox Rule

A
  1. There is a binding contract once an Acceptance is sent
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30
Q

Mailbox Rule does not apply to: (4)

A
  1. Rejection, Counteroffer
  2. Revocation
  3. Option
  4. Fax, Email?
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31
Q

Mailbox Rule - Acceptance mailed first, then phone call rejecting

A

Acceptance controls

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32
Q

Mailbox Rule - Acceptance mailed first, mail lost

A

Acceptance controls

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33
Q

Mailbox Rule - Acceptance mailed first, Rejection then mailed

A

Acceptance controls, unless counterparty detrimentally relied on rejection

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34
Q

Mailbox Rule - Rejection mailed first, Acceptance mailed

A

Whatever is opened first controls

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35
Q

Acceptance by Silence - Permitted When (5)

A
  1. Unilateral reward (inefficient to communicate Acceptance)
  2. Geographic proximity (you can see them perform)
  3. Past history of Accepting through silence
  4. Acceptance by silence is specific and offeree intends to accept by silence
  5. Implied in Fact Contracts
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36
Q

Implied in Fact Contracts

A

Acceptance inferred through actions

Hanging around barbershop

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37
Q

Acceptance / Counteroffer - Common Law

A

Mirror Image Rule

Acceptance must match terms of the contract exactly

Non-conformity is considered counteroffer

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38
Q

Acceptance / Counteroffer - Common Law; Conditional Acceptance

A

At Common Law, constitutes counteroffer

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39
Q

Acceptance / Counteroffer - UCC

A

UCC 2-207; non-conforming acceptance may constitute acceptance

Not all non-conforming terms will control

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40
Q

UCC 2-207 (1) - Acceptance (3)

A
  1. Acceptance must be seasonable; reasonable time
  2. Cannot condition acceptance upon nonconforming terms
  3. Must be for the same contract (chainsaw vs hand saw)
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41
Q

UCC 2-207 (2) - Nonconforming Terms (4) MMEO

A
  1. Both parties merchants;
  2. New terms do not materially alter the deal;
  3. Initial offer does not expressly limit acceptance to its terms; and
  4. Offeror does not reject within reasonable time to new terms
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42
Q

UCC 2-207 (3) - No Contract

A

In case of no contract but parties continue on:

Only terms parties agreed to become part of the contract

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43
Q

Knockout Rule - Minority vs Majority

A

Minority Rule - Initial terms control

Majority Rule - Conflicting terms all knock out

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44
Q

UCC 2-207 - Confirming Memo; (4) Analysis

A

If there is a confirming memo with new terms, examine:

  1. Both parties merchants;
  2. New terms do not materially alter the deal;
  3. Initial offer does not expressly limit acceptance to its terms; and
  4. Offeror does not reject within reasonable time to new terms

Generally unlikely that the new terms control

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45
Q

Consideration / Bargained For Consideration

A

Parties exchange benefit or detriment

Not doing something you are legally entitled to do constitutes consideration

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46
Q

Gifts / Conditional Gifts - Consideration?

A

No

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47
Q

Adequacy of Consideration

A

Consideration must be nominal

Pretense does not suffice

Value matters - economics is not dispositive; as long as a party wants something, this constitutes nominal value

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48
Q

Illusory Promise

A

When performance is controlled exclusively at a party’s discretion

Unenforceable

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49
Q

Satisfaction Contracts

A

Contracts which state fulfillment upon a party’s satisfaction

Enforceable

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50
Q

Past Consideration - Consideration?

A

No

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51
Q

Promising not to Sue (2)

A

Constitutes consideration if:

  1. Plaintiff has good faith basis for the claim; or
  2. There is reason to doubt validity of the claim
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52
Q

Contract Modification - Common Law

A

Preexisting Duty Rule

A promise to do something you already promised to do does not constitute consideration

For modification, need new consideratoin

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53
Q

Contract Modification - Common Law - Exceptions (3)

A
  1. Change in performance;
  2. Third party promising to fulfill; or
  3. Unforeseen difficulties which excuse performance
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54
Q

Contract Modification - Common Law - Partial Debt Payment

A

Partial payment of debt to satisfy debt obligation is enforceable only if the debt is not currently due

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55
Q

Contract Modification - UCC

A

Requires only good faith

No consideration required

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56
Q

Promissory Estoppel / Reliance

A

Occurs when a party makes a promise and the other party takes an action in reliance of that promise

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57
Q

Definition / Requirements: Promissory Estoppel / Reliance (3) RDI

A
  1. A promise is made to reasonably induce reliance;
  2. Promisee takes detrimental action in reliance of that promise; and
  3. Injustice can only be avoided by enforcing promise
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58
Q

Definition / Requirements: Quasi-Contract (3) MPU

A
  1. Plaintiff confers measurable benefit on defendant;
  2. Plaintiff has reasonable expectation of compensation; and
  3. Unjust to to let defendant keep benefit without paying

Damages limited to fair value of benefit conferred

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59
Q

Moral Obligation + Subsequent Promise

A

Minority rule

You were saved and promised to pay for rescue - enforceable in minority jurisdictions

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60
Q

Seal

A

Has no binding force

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61
Q

Contract Defenses (7) MIMFDIU

A
  1. Misunderstanding
  2. Incapacity
  3. Mistake
  4. Fraud / Misrep / Nondisclosure
  5. Duress
  6. Illegality
  7. Unconscionability
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62
Q

Misunderstanding (3)

A
  1. Both parties use a material term that is open to two or more reasonable interpretations;
  2. Each side attaches a different meaning to the term; and
  3. Neither party knows or should know of the confusion
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63
Q

Incapacity (3) / Contract for Necessity

A
  1. Minors
  2. Mentally impaired
  3. Intoxicated

Incapacitated party may void

Contract for Necessity - pay fair value for necessities exchanged

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64
Q

Mistake

A

A belief not in accord with present fact

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65
Q

Mutual Mistake (3)

A
  1. There is a mistake of fact, existing at the time the deal is made;
  2. The mistake relates to the basic assumption of the contract and has a material impact on the deal; and
  3. The impacted party did not bear the risk of mistake
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66
Q

Unilateral Mistake (2.5)

A

May rescind if:

  1. Prove all elements of mutual mistake; and

2a. The mistake would make the contract unconscionable; or
2b. The other side knew of, or had reason to know of, or cause the mistake

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67
Q

Misrepresentation (3)

A

A statement that is untrue at the time of contracting

  1. Misrepresentation of present fact;
  2. That is material or intentional; and
  3. Made under circumstances in which it is justifiable to rely on the representation
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68
Q

Fraud

A

Intentional representation

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69
Q

Fraud in the Execution

A

Tricking someone to sign something that they did not know is a contract

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70
Q

Nondisclosure

A

Normally you do not need to disclose all material facts of a deal

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71
Q

Nondisclosure - Breach (2)

A
  1. Fiduciary Relationship; or

2. Actvice concealment

72
Q

Duress

A

Improper threat that deprives a party of meaningful choice

73
Q

Undue Influence

A

Use of high pressure tactics to overcome more susceptible party

74
Q

Illegality

A

Unenforceable

75
Q

Illegality - In Furtherance Exception

A

Contracts made in furtherance of an illegal act is not illegal

Cab ride to assassination is not illegal - although hit is

Less guilty party may recover restitution

76
Q

Contracts Against Public Policy

A

Unenforceable, although may not technically be illegal

77
Q

Unconscionability - 2 Types

A

Shocks the conscience

  1. Procedural
  2. Substantive
78
Q

Procedural Unconscionability

A

A defect in the bargaining process

79
Q

Substantive Unconscionability

A

Substance of the contract is a rip off

80
Q

Statute of Frauds

A

Certain contracts are required to be committed to writing

81
Q

Statute of Frauds - Contract Types (5) MSOUR

A
  1. Marriage
  2. Suretyship
  3. Outside 1 year
  4. UCC +$500
  5. Real Estate
82
Q

Statute of Frauds - Main Purpose Exception

A

Statue of Frauds will not apply if a contract was entered into for a surety’s benefit

The surety will have benefitted from the contract and so the injured party may not sue them - go after the gurantor

83
Q

Statute of Frauds - Real Estate

A

Only real estate contracts that transfer title are subject to the Statute of Frauds

84
Q

Statute of Frauds - Satisfaction (2)

A
  1. Writing; or

2. Performance

85
Q

Statute of Frauds - Satisfaction - Common Law - Services Contract within 1 Year

A

Full performance by either side satisfies Statute of Frauds

86
Q

Statute of Frauds - Satisfaction - Common Law - Writing Signed by Party Against Whom Rights are Asserted (3)

A

Signed writing against party whom the rights are being enforced

  1. Show contract has been made;
  2. Identifies parties;
  3. Contain essential elements
87
Q

Statute of Frauds - Satisfaction - Common Law - Real Estate (2) (2/3)

A
  1. Signed writing; or
  2. Partial performance if 2/3 are met:
  3. Possession;
  4. Payment; or
  5. Improvements to the Property
88
Q

Statute of Frauds - Satisfaction - UCC - Sale of Goods - Signed Writing

A

Signed writing will satisfy;

  1. No need to mention price;
  2. Must mention quantity
89
Q

Statute of Frauds - Satisfaction - UCC - Sale of Goods - Partial Performance

A

Partial performance satisfies the Statute of Frauds, but only for the amount delivered and accepted

90
Q

Statute of Frauds - Satisfaction - UCC - Custom Made Goods Exception

A

If goods are custom made, Statute of Frauds is satisfied once counterparty has undertaken a substantial beginning

91
Q

Statute of Frauds - Satisfaction - UCC - Judicial Admission

A

Statement made in pleading or during testimony

92
Q

Statute of Frauds - Satisfaction - UCC - Confirming Memo

A

If both parties are merchants, confirming memo satisfies if it is not rejected

93
Q

Statute of Frauds - Equal Dignity Rule

A

Signed writing is needed to authorize an agent to act on your behalf

94
Q

Statute of Frauds - Subjecting Modification to the Statute of Frauds

A

Modified contracts are only subject to the Statute of Frauds if the the deal as modified is subject to the rule

95
Q

Parol-Evidence Rule

A

Once a contract is fully integrated, any previous oral discussions or writings are not part of the deal

PER does not apply to subsequent modifications after the contract has been fully integrated

96
Q

Full Integration

A

Contract expresses all terms of the agreement

97
Q

Partial Integration

A

There is a final writing, but not all terms are included

98
Q

Merger Clause - Identify Integration

A

Merger clauses within contracts state the contract is fully integrated

99
Q

Natural Omission

A

Courts will examine whether a term would naturally be omitted from a contract

If so, then may be admissible

100
Q

Parol-Evidence Rule - UCC

A

UCC assumes partial integration of all contracts

Unless parties would have certainly included a disputed term in writing

101
Q

Parol-Evidence Rule - UCC Exception (3)

A
  1. Will not bar evidence of defense;
  2. Even with fully integrated deals, a party may introduce evidence of a separate deal
  3. Even with fully integrated deals, a party may introduce evidence of prior communications relating to defining an ambiguous term
102
Q

Warranties (2)

A

Promise about a term of the contract that shifts risk to promise-making party

Warranties may be disclaimed

103
Q

Express Warranty

A

A promise that affirms of describes goods and is in part of the bargain, or a sample of the goods sold, constitutes an express warranty

104
Q

Implied Warranty of Merchantability

A

A merchant, dealing in goods they normally sell, warrants the goods sold are fit for ordinary commercial purposes

May be disclaimed - must be conspicuous

105
Q

Implied Warranty of Fitness for Particular Purpose

A

When a buyer relies on a seller’s expertise that a good will be used for a special purpose

Nonmerchants, such as salespeople, can warrant a good’s fitness

Can disclaim, must be in writing

106
Q

Conditions (2)

A

Shift risk of parties if something in the future happens

Express or Implied

107
Q

Express Conditions

A

Created by language of the contract

Must be strictly satisfied

108
Q

Satisfaction Conditions - 2 Methods

A

Contract is enforceable per the satisfaction of counterparty

Objective Test - If most reasonable people would be satisfied

Subjective Test - for aesthetic executions, like art

109
Q

Condition Waiver (2)

A
  1. Conditions may be waived by words or conduct

2. Wrongful interference or hindrance

110
Q

Implied Conditions - Constructive Condition of Exchange

A

One party’s performance is conditioned on another party’s performance

111
Q

Common Law - Performance - Doctrine of Substantial Performance

A

A party will satisfy the Constructive Condition of Exchange if no material breach has occurred

Breach must not be willful

112
Q

Recovery - CCE Minor Breach

A

Parties injured by minor breach may recover:

  1. Cost of completion; or
  2. Diminution of market value
113
Q

Recovery - CCE Major Breach

A

No recovery on contract, but maybe quasi-contract

114
Q

Recovery - Breach of Express Contract, Quasi Contract Recovery

A

Usually not

115
Q

Divisibility - Substantial Performance?

A

If a contract is clearly divisible, then the deal will be broken up to determine whether there has been substantial performance

116
Q

Performance - UCC (2)

A
  1. Perfect Tender
  2. Perfect Delivery

Performance is the one time the UCC is more stringent than the Common Law

117
Q

Elements: Perfect Tender

A
  1. Perfect Goods
  2. Perfect Delivery

Installment Contracts not subject to Perfect Tender

118
Q

Nonconforming Performance - Revocation of Acceptance

A

Buyer may revoke acceptance when goods seemed okay on delivery but a defect is found within a reasonable time

119
Q

Seller’s Right to Cure (2)

A

If seller fails Perfect Tender, seller may cure if:

  1. There is time left on the contract; or
  2. The seller has reasonable grounds to accept nonconforming delivery
120
Q

Delivery

A

Delivery is assumed to be a one time delivery

121
Q

Delivery - Installment Contracts

A

Goods can be delivered in lots / installments over a period of time

122
Q

Delivery - Installment Rejections

A

A buyer may reject a nonperfect installment delivery if there is substantial impairment in the shipment that cannot be cured

123
Q

Methods of Delivery (3)

A
  1. Tender at Seller’s Place of Business
  2. Shipment Contract
  3. Delivery Contract
124
Q

Tender at Seller’s Place of Business

A

Seller gives goods to buyer

125
Q

Shipment Contract (3)

A

Requires seller:

  1. Get goods to common carrier;
  2. Make an arrangement for delivery; and
  3. Notify buyer
126
Q

Destination Contract (2)

A

Requires seller:

  1. Deliver goods to buyer;
  2. Notify buyer
127
Q

Risk of Loss Analysis (4)

A
  1. If risk of loss has been dealt with in contract, contract controls
  2. With breach, breaching party bears loss
  3. No breach, examine shipment type
  4. No breach, is seller merchant
128
Q

Risk of Loss - Shipment Contract

A

Risk of Loss - Buyer

129
Q

Risk of Loss - Destination Contract

A

Risk of Loss - Seller

130
Q

Risk of Less - Merchant (2)

A

If Merchant: Risk of Loss stays with seller until buyer receives goods

If Not Merchant: Risk of Loss stays with buyer when seller tenders goods

131
Q

Excuse (5) IIDFM

A
  1. Impracticability
  2. Impossibility
  3. Death
  4. Frustration of Purpose
  5. Modification / Cancellation
132
Q

Impossibility (3)

A

Performance excused if impossible:

Illegality
Subject matter is destroyed
Special person dies

133
Q

Impracticability

A

Ability to perform is very difficult

Economic cost not dispositive

134
Q

Death

A

Death after contracting does not excuse obligations

However, if there is a special interest in having one person perform and they die, performance is excused

135
Q

Frustration of Purpose

A

If the purpose for the contract is undermined

Like watching royal wedding, but was cancelled

136
Q

Modification / Cancellation

A

May walk away if both sides have remaining performance

137
Q

Accord and Satisfaction

A

Parties agree that performance of an earlier contract will be changed to a new type of performance

New Performance = Accord

Excusal of Initial Performance = Satisfaction

138
Q

Novation

A

When both parties agree that a substitute person will take over contractual obligations

With valid Novation, original promisor no longer has obligations

139
Q

Anticipatory Repudiation (2)

A
  1. Clear; and
  2. Unequivocal

statement to counterparty that you will not honor your contractual obligations

140
Q

Anticipatory Repudiation - Post-Repudiation Action (2.5)

A
  1. Sue immediately; or
  2. Wait and demand performance
    1. If only payment is pending, must wait until contract time is up, then sue
141
Q

Anticipatory Repudiation - Retraction (2)

A

Retraction permitted if:

  1. Counterparty has not initiated lawsuit; or
  2. Counterparty has not detrimentally relied on repudiation
142
Q

Anticipatory Repudiation - UCC - Adequate Assurance of Performance

A

Under the UCC, buyers can request an AAP from seller

If there is no response within reasonable time, silence constitutes repudiation

143
Q

Expectation Damages

A

Seeks to put party in economic position they would have been had contract been honored

Contract Value w/ Breach vs Contract Value w/o Breach

144
Q

Expectation Damages - Limits (3)

A
  1. Reasonably certain calculation;
  2. Only general damages or foreseeable consequential damages;
  3. Duty to Mitigate
145
Q

Reasonably Certain Damages Calc

A

Expectation Damages must be calculated with reasonable certainty

Speculative damages will be left out

146
Q

General Damages

A

Recoverable, the types of losses anyone would suffer

147
Q

Foreseeable Consequential Damages

A

Recoverable, losses only this particular person would suffer

148
Q

Unforeseeable Consequential Damages

A

Unrecoverable unless breaching party had reason to believe such losses were possible at the time of contracting

149
Q

Mitigation

A

Breached against party has duty to reduce the amount of damages suffered on account of the breach

Mitigation efforts must be reasonably similar to original contract

150
Q

Lost Volume Profits

A

Recovering lost sales - you could have had two, but only sold one

Recover the profits you would have otherwise earned

151
Q

Incomplete Performance Recovery

A

If there is a breach, performing party must stop their performance

Cannot complete the building just to run up damages

Contract Price - (Amount Already Paid - Amount Needed to Finish)

152
Q

Economic Waste / Diminution of Market Value

A

How much lower the market value is of what you got vs what you expected

153
Q

Reliance Damages

A

Seeks to put a party in the same economic situation they would have been in had the contract never been entered into

154
Q

Restitution

A

Provide the plaintiff the equal amount of economic value conferred to the defendant

155
Q

Liquidated Damages (2)

A

Provided expressly in contract

Requires:

  1. Amount of liquidated damages was reasonable at the time of contracting; and
  2. Actual damages from breach would be difficult to calculate
156
Q

Punitive Damages

A

Never awarded

157
Q

Specific Performance (2)

A

Awarded only when monetary damages are insufficient to compensate

  1. Common Law - presumed unavailable for service contracts

2, UCC - Only available for unique goods

158
Q

Right of Reclamation (3)

A

Arises when buyer becomes insolvent

  1. Buyer is insolvent at time they receive goods;
  2. Seller must demand goods within 10 days of receipt or within reasonable time of insolvency notice from buyer; and
  3. Buyer still has goods
159
Q

Intended Beneficiary

A

Intended to have been conveyed contractual rights

Has right to sue

160
Q

Incidental Beneficiary

A

No right to sue

161
Q

Creditor Beneficiary

A

Third Party Beneficiary in a deal where promisee agrees to pay a prior debt from the promisor

162
Q

Donee Beneficiary

A

No clear obligation, but promisee clearly intends to confer a gift of enforcement to Third Party

163
Q

Revoking Third Party Rights (4)

A

May bar revocation based on promissory estoppel or:

  1. Beneficiary detrimentally relied on rights;
  2. Beneficiary manifests intent to the contract; or
  3. Beneficiary filed lawsuit to enforce contract
164
Q

Assignment

A

Transfer of rights under a contract

165
Q

Delegation

A

Transfer of duties under a contract

166
Q

Assignment Scope

A

Generally, all rights my be assigned, in whole or in part, unless expressly prohibited in contract

167
Q

Prohibition of Assignment

A

If you assign this is a breach, and counterparty any recover

168
Q

Invalidation of Assignment

A

If you assign there is a breach, and counterparty cannot recover since there was no right to assign to begin with

169
Q

Assignment without Consideration

A

Last assignment will generally control

170
Q

Assignment with Consideration

A

First assignment for consideration controls

171
Q

Delegation

A

Generally okay unless:

  1. There is special interest in having a specific party execute; or
  2. Not prohibited by contract
172
Q

Delegation with Consideration

A

Creates liability

173
Q

UCC Auction

A

When lots constitute separate sales

174
Q

Auction - Completing Sales

A

Auctioneer announces end

For simultaneous end and bid, Auctioneer reserves discretion to continue

175
Q

Reserve Auction

A

Auctioneer may withdraw goods at any time

176
Q

Non-Reserve Auction

A

Goods cannot be withdrawn unless no bid has been received within a reasonable time

Bar Prep (3 decks)

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