contracts Flashcards
In a sentence or two, define an assignment.
An assignment occurs when a party to an existing contract transfers her rights under the contract to a third party.
When an assignment might materially change the contract, is an assignment permissible?
No, an assignment must not materially change the duty or materially increase the burden on the obligor.
In a sentence or two, describe the common law option contract.
An option contract is one where the offer includes a certain time period certain period of time where the offeror promised not to revoke the offer. For an option contract at common law, the offeree must give consideration for the offeror to keep the promise open, and the consideration should be memorialized in writing.
When are liquidated damages provisions enforceable?
Liquidated damages provisions are enforceable if they are reasonable, i.e. damages difficult to ascertain at time contract is made and the amount is a reasonable forecast of the projected losses.
After an anticipatory repudiation, the non-repudiating party has several remedies. List them.
The non-repudiating party has several remedies including (1) treating this as repudiation and suing immediately, (2) suspending performance and waiting to sue, (3) treating the repudiation as an offer to rescind the contract, or (3) to ignore the repudiation and urge performance.
What are the rights of a third-party intended versus incidental beneficiaries?
Where a third-party is not a party to the contract, they may still have a cause of action to sue and enforce the contract if they are an intended beneficiary. Whereas intended beneficiaries have rights to sue a breaching party, incidental beneficiaries do not have any rights to sue for breach of contract.
There are limited exceptions to when a contract covered by the Statute of Frauds may be enforceable as an oral contract. List these exceptions.
(1) Performance of a service contract; (2) there has been conveyance of real property, possession of the property or improvements to property; (3) delivery of goods or substantial performance of a specially made good
Where the buyer has goods and the buyer is in breach, what is the measure of seller’s damages?
The seller may recover the full contract price.
Does death or incapacity terminate the power to accept a contract?
Yes. If either the offeror or offeree dies or loses capacity, the power to accept an outstanding offer is terminated automatically.
What are “gap fillers?”
Under the UCC, gap fillers will supply missing terms to the contract. These may include price, place of delivery, time for shipment, and time for payment. Under the common law, the court may supply gap fillers on a reasonable basis.
Following a breach of contract, the injured party may be entitled to damages. These damages may be in the form of monetary or non-monetary relief. An award for damages may be limited. Describe when this may happen.
Concepts that limit or have the potential to limit recovery include: (1) the duty to mitigate damages; (2) foreseeability of the damages; (3) ability to calculate loss with reasonable certainty.
In a sentence, state the UCC rule for contract modification.
Under the UCC, a contract can be modified without additional consideration as long as it was sought in good faith.
Describe the “battle of the forms rule.”
The battle of the forms rule determines whether additional terms will be included as part of the contract. This depends on it one or both parties are merchants. If one or more parties is not a merchant, any additional terms is a proposal and will not become part of the contract unless the other party assents. Where both parties are merchants, the additional term automatically becomes part of the contract unless: the offer expressly limits acceptance to its terms; the addition is a material alteration, or if the offeror objects to the additional term within a reasonable time.
What is an accord?
An accord is an agreement where one party promises to render substitute performance and the other party promises to accept that substitute in discharge of the existing agreement. An accord suspends that original agreement until satisfaction.
When may a contract be unenforceable based on public policy reasons?
Contracts can be found unenforceable on grounds of public policy not only to protect one of the parties involved, but also because what the contract represents could pose harm to society as a whole.
When does the buyer have the risk of loss?
In a shipment contract or a F.O.B. as the seller’s place of business, the buyer has the risk of loss, i.e., the seller must get the goods to a carrier.
Contract formation requires offer, acceptance, consideration and a lack of formation defenses. List the formation defenses.
(1) Incapacity or Infancy; (2) Illegality; (3) Misrepresentation or Fraud; (4) Duress; (5) Unconscionability; (6) Misunderstanding; (7) Mistake; (8) Statute of Frauds.
Under the UCC, court consider the perfect tender rule in evaluating whether there was a material breach. What does perfect tender mean?
Perfect tender means that the seller’s performance must be perfect with respect to the goods delivered and the manner of delivery.
In a sentence, describe rejection of an offer.
Rejection by the offeree terminates the offer and the offeree’s power of acceptance.
In a sentence, define expectation damages.
Actual or expectation damages seek to put the nonbreaching party in the position he would have been in but-for the breach. Calculation of these damages aims to provide the nonbreaching party with the benefit of his bargain.
What is the warranty of title?
A warranty of title is implied in all sale of goods contracts. It conveys that the title conveyed is good and its transfer is rightful, and the goods shall be free from a security interest or encumbrance, unless the buyer has knowledge of such interest.
What is satisfaction (in the context of accord and satisfaction)?
Satisfaction is the performance of the accord which then discharges both the original agreement and the accord.
In a sentence, state what types of contracts are governed by the Uniform Commercial Code (UCC).
Article 2 of the UCC governs contracts for the sale of goods.
Making an offer requires the demonstration of three requirements. What does this include?
An offer requires a demonstration of intent to enter into a contract, definite and certain terms, and communication to the offeree. This creates the power of acceptance in an offeree, unless revoked.
When does a seller have the risk of loss?
In a destination contract or a F.O.B. as the buyer’s address, the seller has the risk of loss, i.e., the seller must get goods to buyer.
What is the defense of illegality?
A contract with an illegal subject matter is not enforceable. A contract with a legal subject matter but illegal purpose is enforceable by a party that did not know about the contract’s illegal purpose.
In a sentence or two, define promissory estoppel.
Where contract formation fails, promissory estoppel is a substitute for consideration. In order to avoid an injustice, courts will use promissory estoppel to enforce a promise without consideration if the promisor knew that the promissee would rely through action or forbearance on the promise that was made, the promisee relied or changed position based on the promise, and such reliance was to his detriment.
In a sentence or two, define an intended beneficiary.
An intended beneficiary is where one party contracts with another with the intention of benefitting a third party. This intent can be manifested by the contract or by some verbal expression by the contracting parties.
In a sentence, state the general rule for the Statute of Frauds.
The Statute of Frauds provides an important exclusion to the general rule in contract law that a contract need not be in writing and that oral and written agreements are equally enforceable. The Statute of Frauds requires that for a contract to be enforceable it must be in writing and signed by the party to be charged (i.e., signed by the party against whom enforcement is sought).
Under the UCC, conflicting terms will cancel each other out. What is the “knock out rule?”
The knock out rule provides that conflicting terms cancel each other out and neither enters a contract. The contract consists of the otherwise agreed upon terms, and the court will supply “gap fillers” as needed.
The perfect tender rule applies to contracts for single delivery. Does the perfect tender rule apply to installment contracts?
No, under an installment contract the buyer’s ability to reject goods due to improper tender is limited.
The cost of completion of a contract must take into account the doctrine of waste and diminution in value. Describe these concepts.
Where an award might be wasteful, such that the cost to restore would greatly exceed the difference in value, damages may be determined by the difference in value between the land as promised and its current value.
In a sentence, define counteroffer
A counteroffer is an offer made by the offeree to the offeror regarding the same subject matter as the original contract but containing different terms. A counteroffer is a rejection and new offer.
Describe how to determine whether an offeror had intent to enter into a contract.
An offer must convey a reasonable expectation to the offeree that the offeree is willing to enter into a contract. Language, conduct and context can help demonstrate a present intent to enter into a contract. Interpretation of intent is based on an objective reasonable person standard.
May a seller limit a buyer’s remedies for breach of warranty?
Yes, as long as the limitation is not unconscionable.
Does the common law every apply to aspect of a contract for the sale of goods?
Article 2 of the UCC applies to the sale of goods, although common law principles remain applicable when not displaced by the UCC. This typically arises on the MEE in the context of option contracts and firm offers.
What is the defense of impossibility?
Impossibility excuses both parties from their obligations under a contract if the performance has been rendered impossible by events occurring after the contract was formed. This typically arises due to destruction of the contracts subject matter, death or incapacity, or a contract that was legal at the time of formation, but now it is illegal.
In a sentence, define anticipatory repudiation.
An anticipatory repudiation arises when either party to a contract unequivocally communicates that he will not perform under the contract.
In a sentence, define when a demand for adequate assurances is appropriate.
Under the UCC, a party to the contract may demand adequate assurances if they have a reasonable belief that the other party will not be able to perform its obligations under the contract.
In a sentence, describe incidental damages.
A seller is entitled to incidental damages which include any commercially reasonable costs incurred as a result of the breach.
In a sentence or two, define an incidental beneficiary.
An incidental third-party beneficiary is a party who will benefit as a practical matter from the contract, but there is indication that a third party was an intended beneficiary to the contract.
Where a seller has goods and the buyer is in breach, how should the seller’s damages be calculated if the seller resold the goods?
The seller’s damages are the difference between the contract price and the resale price.
In a sentence, describe the parol evidence rule.
Under the parol evidence rule, a party cannot introduce extrinsic evidence of prior or contemporaneous agreements offered to contradict, vary, or modify an unambiguous writing which the parties intended to be a full and final expression of an agreement.
How does an effective assignment occur?
For an effective assignment to occur, the assignor must manifest the intent to transfer the rights to the assignee, and the assignee assents to the assignment.
The common law follows the “mirror image rule.” Define this.
Under the common law mirror image rule, an acceptance must mirror the offer’s precise terms. If the response adds or omits terms, the purported acceptance is a rejection and counteroffer.
