contracts Flashcards
Merchant
anyone who regularly deals with goods of the kind sold or who otherwise by profession holds himself out as having special knowledge or skills as to the practices or goods involved.
When it comes to the implied warranty of merchantability requires a narrower standard that the person be a merchant with respect to goods of the kind involved in the transaction.
if you are a merchant purchsing for a hobby then. you are not treated as a merchant even if it’s also your profession.
Offer
A manifestation of a willingness to contract demonstrated by a promiss, committment, or undertaking, contains definite and certain terms and communicated to an identifiable oferee.
terminated by no response- by a specified time, or by a reasonable time
revocation-
effective at the time it is communicate to the offeree, by any person doesn’t have to be a party.
Irrevocable- merchant firm letter, option K, detrimental reliance
Rejection: Counter offer, words or conduct of the offeree rejecting the offer, effective when recieved by the offeror.
termination by operation of law:
death of either party,
destruction of subject matter of the K.
Superveinging illegality of sbuject matter of K.
good faith and fair dealing
UCC contracts all requiry this. It’s Honesty in fact and observance of reasonable commercial standards.
quasi contracts
are not contracts at all they are implied by courts to avoid unjust enrichment. Permit the Plaintiff to bring an action in restitution to recover the amount of the benefit conferred on the defendant.
Acceptance
Common law- each and every term of the offer must be accepted (mirror immage rule)
UCC- battle of the forms applies and only material terms are rejected from the later forms. Additional terms become part of the k, if the Oferror objects then the additional terms, even if immaterial are not part off the K.
Methods of acceptance:
UCC- any reasonable means
Unilateral K- by performance
Bilateral K- Promise or performance.
Mail Box rule
The offeror can opt out of the mail box rule.. If they send a rejection first then acceptance before it arrives is not valid.
It is deemed as being accepted when put in the mail.
void contract
void contract: totally without any legal effect from the begining
voidable contract
one that one or both parties may elect to avoid, This happens when. you use the defense of mental illness, or age.
Unenforcable contract
valid but not enforceable due to a defense extraneous to the contract formation such as the Statute of Frauds
Contract Creation
The parties must show the following when seeking for enforce a K or obtain damages.
Was there a K?
- need mutual assent
- consideration or a substitute of it?
- defenses to the creation of the K?
mutual assent
a meeting of the minds. Words or conduct that manifest a present intention to enter into the contract. (think the offer.)
Quantity Term in UCC and
Land and Price terms in real estate transactions
UCC quantity; certain or capable of being made certain.
Offer involving realty must identify the land with some particularity. Must also include PRICE (courts will not supply a price term)
Requirements’ K
and
outputs K
the buyer promises to buy from a certain seller all of the goods the buyer requires.
Outputs K: a seller promises to sell to a certian buyer all of the goods that the seller produces and the buyer agrees the amount from the seller.
ASSUME good fiath court will not permitt any unreasonably disproportionate quantity.
key words are “all” “only” “exclusivly”
Vague terms
a material term that is vague is not an offer in either the common law or the UCC. “appropriate” “fair” and “reasonable” are vague on the exam
Merchant’s firm offer:
Merchant
offers to buy or sell goods with a signed writting
and the writing gives assurance that it will be held open
it is NOT revocable for lack of consideration.
Cannot exceed 3 months
Inquiry vs. counteroffer
an inquiry is not a counter offer and does not reject the original offer
TEST that a reasonable person would believe it was an inquiry and not a counter offer
Unilateral K - Acceptance
A unilateral K is accepted if the offeree knew of the offer before acting if they discovered the offer after acting, then they cannot have accepted.
shipping nonconformiing goods EXAMPLE WHEN ACCEPTANCE BY SHIPMENT
WHEN acceptance is normall and not through shipment then nonaccomodating goods are a breach of the K.
when a merchant ships non conforming goods it is both an acceptance and a breach. Unless the offeree seasonably notifies the offerrer that the nonconforming goods are only offered as an accomocation. Buyer does not have to accept but the seller is deemed not to have breached becuase they seasonably notified.
Merchant’s confimatiory Memo:
merchants come to an oral agreement and confirmatory memo is sent with different or additional terms. Memo is treated as an acceptance and battle of the form.
Consideration
- bargained for exchange between the parties
- that which is bargained for must be considered of legal value (this is a benefit to the promisor or a detriment to the promisee)
just needs to have the posability of value. aka bitcoin
CANNOT BE FOR SOMETHING ALREADY DONE Very bad is “I promise to give you $ bc you did X for me today”
except a past act that was done by the promisee for the promisor was done at the REQUEST of the prommisor or in response to an emergency then the subsequent promise was made there is proper consideration.
Promissory estoppel or detrimental reliance
no consideration necessary. A promiss becomes enforcable when to prevent injustice
1 the promisor should reasonably expect to induce action or forbearance;
2 and such action or forbearance is in fact induced.
expectation damages under the contract are profided.
often relief is limited to “that which justice required”
Mistake
defense-
Unilateral mistake- contract is voidable if nonmistaken party knew or should have known of mistake.
mutual mistake- contract is voidable by adversely affected party if
Mistake concerns basic assumption on which contract was made
the mistake has a material effect
the party seeking avoidance did not assume risk.
A mistake in value isn’t a mistake.
Remedy is: In subcontractor case, avoidance of the k.
Misunderstanding
A term with at least two possible meanings the definition depends on the parties’ awareness of the ambiguity
neither party aware- no K unless both parties intended the same meaning
both parties aware- no k unless both parties intended the same meaning
One party aware- Binding K based on what the ignorant party reasonably believed to be the meaning of ambiguous words.
subjective intent for these.
Fraudulent Misrepresentation
Fraudulent Misrepresenation: Fraud in the inducement: inducing another to K by fraud then it’s voidable, if the other party
justifiably relied on the representation.
material misrepresentation
Doesn’t matter if the misrep is fraudulent K is Voidable, by innocent party if the justifiably relied on the the misrepresenation and it was a material misrepresentation.
Materiality
1. it would induce a reasonable person to agree
2 marketer knows that it would induce a specific person to agree even if a reasonable person would not.
Capacity defense- age
Minors: also called infants on the bar. under the age of 18. Cannot enter a K binding on themselves, however adults can make a binding contract benefiting a minor.
anytime before or shortly after turning 18 they can disaffirm a K. Failure to disafirm a K within a reasonable time after reaching 18 will result in the contract being affirmed and enforacble.
Permited K are sudent loans, insurance Ks, agreement’s not to reveal and employer’s proprietary information.
Capacity defense- mental incapacity
no ability whatsoever to k once a guarian has been appointed. K is voidable and during lucid intervals or full recovery may affirm.
Intoxicated persons
Voidable promis if the other party knew he was intoxicated. They can affirm when recovereed.
Duress
Are voidable so long as not affirmed.
Duress:
1. party threatens to commit a wrongful act that would seriously threaten the other contracting party’s property or finances;
2. there are no adequate means availible to prevent the threated loss
undue influence
- susceptibility to pressure by one party
- excessibe preasure by the other party.
Statute of Frauds
Writing signed by the party to be charged.
- reasonably identify the subject matter
- indicate that a contract has been made between the parties
- state with reasonable certainty the essential terms.
Agreements always requireng statute of Frauds
MY LEGS
Marriage
Year- promises that cannot be performed within a year from date of K (work until i die can still happen within one year not sof)
Land sales
Executors and administrators- promises to pay estate debts from own funds
Goods- for $500 or more. Exceptions- specially manufactured goods, goods accepted or paid for
Suretyship- promise to pay another’s debts.
Statute of Frauds UCC not requried
SWAP specially manufactured goods- writeten confimaiton by a merchant admission in court or performance- payment or delivery of goods.
Merchant confimatory memo rule:
one party within reasonable time after oral agreememnt sents another a written confimation of the understanding that’s fine for SOF and binds recipient if
1. has reason to know of it’s contents
he does not object to it in writing within 10 days.
Noncompliance with SOF
noncompliance makes a contract unenforcable at the option of the party to be charged. IF not raised as a defense then it’s waived.
Part performance- SOF
unequivocally indicates that parties have Ked for the sale of land takes the K out of SOF
UCC 1. goods have been specially manufactured or 2. paid for or delivered.
If taken out of SOF then the performing party can get expectation damages.
Unconscionability
Always look at bargaining power first. A court may refuse to enforce a provision or an entire K or to modify the K to avoid unfair terms usually due to some unfairness in the bargaining process.
Analyze by the circumstances at the time K was formed
If court finds unconsionable:
- refuse to enforse
- ef=nforce the remainder of the K without the unconsionable clause
- limit the applicaiton of the clause to avoid unconsionable result.
This is BOILERPLATE
Contracts of adhesion “take it or leave it” signer unable to procure necessary goods, from any seller without agreeing to a similar provison.
General Rules of Contract construction
General rules: contracts are construed as a whole, words are generally given their
ordinary meaning, written or typed terms prevail over printed, custom and usage in
business and locale is considered, court will try to find contract valid, and ambiguities are
construed against the contract’s preparer
Parole Evidence
Parties to a K reduce their agreement to writing with the intent that it embody the final and full expression of their agreement.
It’s an integrated K. any statements or writings prior or contemporanious with the K is inadmissible.
Integrated agreement
the writing must have been intended as the finall expression of the agreement
whether the integration was intended to be complete or partial.
Partial integration allows terms to supplement with consistent additional terms. But cannot be contradicted.
Merger clause:
states agreement is complete on its face, is evidence of full integration.
UCC Gap-Fillers
If missing, Article 2 provides: price (reasonable at time of delivery), place of delivery (seller’s business), time of shipment (reasonable), time for payment (receipt of goods), and assortment (buyer’s option)
Noncarrier Risk of Loss cases
Merchant seller- risk passes to the buyer upon taking physical possession
non merchant seller- risk passes upon tender of delivery
Carrier Risk of Loss cases:
Shipment K
Shipment contracts: Seller must deliver to the shipper. Risk of Loss shifts from seller to the buyer when goods are delivered to the shipper
this is anyting that does not contain an FOB term.
Carrier Risk of Loss cases:
Destination K
MUST CONTAIN AN F.O.B. TERM. (free alongside, free along board)
destination K: seller must tender delivery of goods to the buyer at the destination. risk of losss shifts from the seller to the buyer when the seller tenders delivery of goods to the buyer at the destination
FOB: risk passes on delivery to FOB location
risk of loss and breach
Defective goods: buyer has right to reject goods the risk does not pass to the buyer until the defects are cured or she accepts the goods in spite of their defects.
If the buyer revokes then their acceptance is treated as never having the risk of loss pass to them from the seller.
if The goods were Identified but the loss had not shifted to the buyer and they were destroyed not at the fault of the parties then the contract is avoided.
Warranties
Types of waranties: —title, against infringement, merchantability, fitness, express
Warranty of title:
ANY SELLER NOT JUST MERCHANTS. seller of goods warrants that title transfered is good. It;s an automatic waranty
can be disclaimed or modified if the buyer is given notice
Warranty against infingement:
ANY SELLER NOT JUST MERCHANTS
goods are free of patent, trademark, copyright, or similar claims. Unless the buyer requested a violating good.
implied warranty of merchantability
implied in every contract for a sale by a merchant who deals in goods of that kind sold that there is a warranty that the goods are fit for the ordinary purpose for which such goods are used.
If defective and seller doesn’t know it doesn’t matter they are absolutely liable.
disclaimer can only occur by mentioning merchantability if in writing it must be conspicuous
Fitness for a particular purpose
ANY SELLER NOT JUST MERCHANTS
whenever any seller has reason to know the particular purpose for which the goods sold are to be used and that the buyer is relying on the merchant’s skill and judgment to select goods and the buyer does in fact rely.
Can be disclaimed only by conspicuous writing. Can be super general.
Disclaimer of the warranty ofwarranties
“as is” will make all warranties including implied ones disclaimed. cannot be fine print or hidden.
a buyer denies examining or does exaim the exact goods then there is no warranty. Course of dealings can also disclaim.
Warranty damages
Damages—difference between goods tendered and as warranted
Modification of K terms Common Law
General contract law a K cannot be modified unless the modification is supported by new consideration. Modern view permit’s modification without consideration if 1. modification is due to circumstances that were unanticipated by the parties when the K was made
2. it is fair and equitable.
Oral modification is effective under common law even if the written K expressly requires that the K be modified only in writing.
Modification of K Terms UCC
UCC only requires that the modifications be made with good faith, but does not require consideration.
If the K falls within the SOF then it must be in wiriting. if it was less than $500 before and will now be for $500 then you must reduce it to writing.
if a k explicitly states that modification requires a writing then it must be followed. If a non merchant you need a spearate signature.
Conditions
A party may not have to perform unless some condition is fulfilled. Failure to perform if not fulfiled would deem their feairure justified.
Here you’re not breaching just releaved from having to perform.
Has the condition been excused?
1. Hindrance or failure to cooperate
2. Breach of contract
3. Anticipatory repudiation—party unequivocally indicates he will not perform before
time of performance
4. Prospective inability or unwillingness to perform—doubts as to party’s performance
5. Substantial performance
6. Divisibility of contract
7. Waiver or estoppel
Condition types
Precedent- one that must occur before an absolute duty of immediate performance arises in the other party.
concurrent: capable of occuring together bound to perform at same time.
Subsequent- when it occurs cuts off an already existing absolute duty of performance.
If K is not enforcible bc of a failure of a condition, and one party has fully performed they can recover damages under UNJUST ENRICHMENT.
Hindrance or failure to cooperate
One party preventing the condition from occuring by wrongful action will legallly excuse the condition.
Conditions and Breach
Legally excuses the condition if there has be a MATERIAL breach, not a minor one.
Anticipatory repudiation
promisor indicates that he will not perform when time comes.
Sue immediately, spend your own performance and wait to sue until the performance date, treat the repudiation as an offer to rescind and treat the K as discharged. You can still urge performance.
must make sure that they have unequivicovly repudiated.
Prospective inability or unwillingless to perform.
reasonably believs the other party will be unable or unable to perform. less thanrepudiation. suspend performance until you get adequate assurance.
substantial performance
condition of complete performance can be excused. This is only applied in a CONSTRUCTIVE condition is involved not for an express.
Divisibility of K
Three tests must all be perfomed:
- performance of each party is divided into two or more parts under the K
- number of parts due from each party is the same
- performance of each part by one party is agreed on as the equivalent of the coresponding part.
not considered a condition.
Price per unit is ALWAYS this.
UCC this is an installment K.
Discharge of Duty
Once determined that a party is under an immediate duty to perform the duty to perfrom must be discharged. 1. Performance or tender of performance
- Occurrence of condition subsequent
- Illegality of subject matter after contract was made
- Impossibility, impracticability, or frustration of purpose
- Rescission of contract
- Modification of contract
Discharge of Duties
nonoccurrence of the event was a basic assumption of the parties in making the K and neither has assumed the risk of the event occuring, k duties can be discharged.
Impractability
Also called impossibility:
impposible to perform the duty. it’s objectively impossible. Never subjective. Must happen after K entered into. All excused from their duty.
can be Partial Impossibility or temprory (suspends
If a party partially performed they can recover in quasi-K at the K rate or reasonable value
Impractability:
Test: extreme and unreasonable difficulty and or expense and its nonoccurence was a basic assumption of the parties.
Destruction of Contract
If it is a K to build then the construction co is not entitled to anything but the original K price with a delayed time of completion (bc construction is not rendered impossible). If they are remodeling or repairing and there is nothing left to repair they can recover in restitution the value of what was done.
Frustration
Performance is STILL POSSIBLE
- supervening act or event.
- parties did not reasonably foresee the intervenig act at time of contracting
- PURPOSE of the K is almost completely destoryed
- Purpose of the K was realized by both parties at the time of making the K.
Mutual Rescission
is discharge by an express agreement between the parties. Consideration can be giving up by each party of her right to counter performance by the other
third party beneficiary issue- their interest cannot have vested.
can be made orally unless SOF or land.
novation
new k substitutes a new party to receive the benefits and assume duties that originally belonged to the old parties under the old K. Discharges the old K.
- previous valid K
- agreement among all parties including the new party to the K
- the immediate extinguishment of contractual duties as between the original K parties
- a valid and enforcable new K.
Accord
an accord is an new agreement that suspends the original agreement until a new future performance is conducted. Satisfaction occurs when the performance has occurred and thus the original K is discharged.
There’s usually a dispute for an amount due. modification would want the K to continue
Breach
the promisor is under an absolute duty to perform and this performance has not been discharged, then the failure to perform in accordance with the contractual terms will amount to a breach of the K.
The nonbreaching party will show that they were willing and able to perform but for the breaching party’s failure to perform.
Minor breach:
oblegee gains a substantial benefit of her bargain. it does not relieve the aggried party of their duty to perform under the K.
Material Breach
if obligee does not recieve substantial benefit of her bargain, breach is material.
non breaching party my treat the contract as at it’s end, no counterperformance, will have an immediate right to remedies for the entire contract and total duties.
Factors to consider if a breach is minor or material.
amount of benefit on the nonbreaching party,
adequacy of compensation on the nonbreaching party,
extent of part performance of the breaching party,
hardship to the breaching party,
negligent or willful behavior of the breching party,
likelihood that the breaching party will perform the remainder of the K.
Might need them on an essay answer
Perfect tender rule
A ucc rule.
goods or their delivery fail to conform to the K in any way the buyer generally may reject all, accept all, or accept any commercial units and reject the rest.
Buyer has accepted the goods when they have indicated that the goods conform after having a reasonable amount of time to inspect the delivery.
However if they accept defected they can get damages for the breached amount.
Perfect Tender rule- revoking acceptance
Buyer may revoke acceptance if the goods have a defect that substantially impairs their value to her and
- she accepted them under the reasonable belief that they would be cured of the defect.
- there was difficult discovering defects or bc the sellers assurance that the goods conformed to the K.
Installment contracts- Perfect tender rule.
nonconformity of one delivery does not impair the whole contract, the entire contract is only impared if there is a substantial impairment to the whole contract.
Seller’s right to cure
cure by notice and new tender within time for performance. The buyer must then accept the goods.
Beyond original contract time- if the seller reasonably believed they were acceptable, and the buyer rejects them the seller can reasonably notify the buyer that they will make conforming tender within a further reasonable time beyond the original contact.
seller reasonably believed the goods were conforming if:
- trade practice, or prior dealings with the buyer lead seller to believe that the goods would be accepted.
- seller could not have known the defect despite proper business conduct.
specific performance
specific performance: legal remedy is inadequate this is an order from court ordering the preaching party to perform or face contempt of court charges. (good for land, and rare things) not available for service K because of indentured servitude
injunction preventing a party from acting (employee working for competitor)
Non compete clauses:
services to be performed are unique and the covenant is reasonable meaning it is to protect a legitimate interest of the party benefited by the covenant, reasonable in geographic scope and duration, and does not harm the public.
Laches
a claim that the P has delayed bringing an action that the delay has prejudiced the D.
bonafide purchaser
sold to a purchaser for value and in good faith.
Replevy
WHEN BUYER has partially paid for the goods, they have been identified under the K and Seller has not delivered he may replevy the goods if
seller becomes insolvent within 10 days after receiving buyers first payment, OR
goods were purchased for personal, family, or household purposes.
Buyer must tender any unpaid portion of the purchase price to the seller.
special case when the buyer can’t find adequate substitute goods (COVER)
compensatory damages
to put the non breaching party in the position they would have been in had the promise been performed.
expectation damages
sufficient damages for her to buy a substitute performance. Also known as Benefit of the bargain damages.
reliance damages
cost of the P’s performance, to put the p back in the position they would have been in had the contract never been formed.
consequential damages
may be recovered if at the time the contract was made a reasonable person would have forseen the damages as a probable result of the breach.
of the breaching party knew or had reason to know of the special circumstances giving rise to the damages. (aka a seller can never claim these)
liquidated damages clauses
- damages for contractual breach must have been difficult to estimate or ascertain at the time the K was formed,
- The amount agreed on must have been a reasonable forecast of compensatory damages in the case of breach.
if unreasonable the courts will consure it as a penalty andnot enforce the provision.
Buyer’s damages in sale of goods
- the market price or
- the cost of buying replacement goods (cover) plus incidental and consequential damages (less expenses saved as a result of the sellers breach.
Warranty damages
difference between the value of the goods as delivered and the value they would have had if they had been according to contract, plus incidental and consequential damages.
consequential damages- UCC
- the seller had reason to know of the general or particular requirements
- the subsequent loss resulting from the needs could not be prevented by cover.
Buyer Repudiates or refuses to accept conforming goods
- recover the difference between the market price (@ time and place of delivery)
- resell the goods and recover the difference between the K price and the resale price
- if they are inadequate recover under a lost profits measure the difference between the K price and the cost to the seller.
