Contracts Flashcards
Merchant’s Firm Offer
A merchant’s firm offer arises when
1) person is a merchant
2) Offer was written signed, containing assurances that the offer will remain open
- If no time frame explicit, the offer remains open for a reasonable time, no longer than 3 months
- Equals a contract formation when accepted
- FIRMLY IRREVOCABLE
Option Contract
An option contract is when
1) the Offeree gives consideration in exchange for;
2) the offeror not to revoke an outstanding offer for a period of time
-The mailbox rule does not apply to acceptance
Unilateral Contract
An offer for a unilateral contract is one that can be accepted only by full performance.
Beginning performance may create an option, thus rendering the offer irrevocable.
Starting performance does not make full performance required by the offeree because only full performance suffices acceptance.
Confirmatory Memo
satisfies Statute of Frauds if
1) one party
2) within a reasonable time after an oral agreement was made
3) sends a written confirmation of the understanding
Recipient is then bound if
1) he has reason to know of the confirmation’s contents; and
2) he does not object to the writing within 10 days of receipt
Impracticability
1) When performance is possible, but can be accomplished only with extreme and unreasonable difficulty or expense
2) and the event was not a basic assumption at the time of K FORMATION
3) thus neither party allocated the risk
4) Usually due to unanticipated or extraordinary events.
Frustration
When the purpose of the contract becomes valueless by virtue of a supervening event.
Impossibility
1) occurs when it is objectively impossible to perform
2) and the event was not a basic assumption at the time of K FORMATION
3) thus neither party allocated the risk
4) Usually due to unanticipated or extraordinary events.
This discharges the contractual duties of both parties, but each party may recover the reasonable value of their performance through quasi contract
- unjust enrichment of P; or
- detriment suffered by P
Third-Party Beneficiary Vesting of Rights
a) assent is manifested in a manner invited or requested by the parties
b) he learns of the contract and detrimentally relies on it
c) a lawsuit is brought to enforce it
Expression of Doubt
An expression of doubt is language amounting to prospective inability to perform, but is not an anticipatory repudiation.
The innocent party may suspend performance until he receives adequate assurance that performance if forthcoming.
anticipatory Repudiation
1) Occurs when a promisor
2) PRIOR to the TIME for PERFORMANCE of his promise
3) indicates that he will NOT PERFORM when the time comes
4) Must be an
a) executory
b) bilateral K
c) where neither party has yet performed
- repudiation must be unequivocal
- nonrepudiating party can treat as a TOTAL BREACH and immediately sue
- if one party has acted, it is still a breach and must wait until the time to perform has come
- damages calculated at the time of learning of the breach
Preexisting Duty Rule
The promise to perform, or the performance of, an existing legal duty is not consideration. There must be some new or different obligation.
Exception:
a promise to perform a duty is valid consideration as long as the duty of performance is not already owed to the promisee.
Rejection of Defective Goods
Seller may, within the original time frame, cure by
1) giving notice of intention to cure
2) tendering conforming goods
which the buyer must accept
Rejection of Non comforting Goods the Seller Thought would be sufficient
1) Seller reasonably believes the goods would be acceptable
2) notifies the buyer of intent to cure
3) Seller gets further reasonable time beyond the original contract time to make a conforming tender
Consideration
1) Consideration is a bargained for exchange of something of legal value.
2) Things have legal value if it would cause the promise to incur a detriment.
3) Both parties must have consideration.
4) One promise can be consideration for another promise, unless it is an illusory promise.
Governing Law - Goods
Contracts for the sale of goods are governed by Article 2 of the UCC.
Goods are all things movable at the time they are identified to the contract.
Merchants
1) A merchant is one who DEALS
2) in goods of the kind sold or
3) who by his occupation holds himself out
4) as having knowledge or skill peculiar to the practices or
5) goods involved in the transaction.
Contract
A contract requires mutual assent and consideration.
Offer
An offer is
1) an expression of willingness to enter into a contract
2) with certain and definite terms; (in a sale of goods the quantity must be certain or capable of being made certain)
3) communicated to an offeree
* estimates are usually considered invitations to deal
Continuing Offer
A continuing offer is revocable at will unless made irrevocably by statute or by payment of consideration.
Acceptance
1) An acceptance is a MANIFESTATION of ASSENT to the terms of an offer
2) Mirror Image Rule : CL requires UNEQUIVOCAL acceptance of EVERY term of the offer.
* any different or additional terms in the acceptance make the response a rejection and counteroffer
Mailbox Rule
An acceptance by mail is effective at the moment of dispatch, and a revocation of an offer is effective only when received.
Promissory Estoppel
A promise is enforceable without consideration if necessary to prevent injustice if
1) the promisor should reasonably expect to induce action or forbearance; and
2) action of forbearance is actually induced
* reliance damages given
*also available in cases of misrepresentation
when AT THE TIME the statement was made,
the speaker INTENDED to INDUCE the other party to enter the agreement and KNEW the assertion was untrue
Statute of Frauds UCC
A contract for the sale of goods of $500 or more must be evidenced by a signed writing indicating
1) a contract was made and
2) specifying the quantity
Cover Damages
When a buyer buys replacement goods, it can then sue the breaching seller for the cost of cover
Which is
K price - cover price
Offer Lapse
Offer may be terminated by offer’s failure to accept within time specified in offer. If no deadline, then within a reasonable time.
Offer Termination
An offer can be terminated by the death of either party.
Bilateral Contract
Can be accepted by either a promise to perform or the beginning of performance
Not consideration
Gifts
Past or Moral consideration: promise or exchange for something you have already done, material benefit conferred on a promisor and the benefit was not intended as a gift.
Defense: Statute of Frauds - Year
Contracts for services that will take longer than a year must be in writing and signed by the party to be charged.
There is an exception where the contract is for lifetime services, because that person may die within a year.
Defense: Lack of Capacity to K
Contract is voidable if a party’s mental capacity is so deficient that he is incapable of understanding the nature of the agreement.
Defense: Unilateral Mistake
If only one party is mistaken, contract can still be formed
Acceptance: Implied in Fact
Implied contracts are formed by manifestation of assent by conduct rather than oral or written language.
Breach
1) Failure to PERFORM in ACCORDANCE with the contract terms
3) Material
a) Obligee has no received the substantial BENEFIT of his bargain
Modification
1) CL: must be agreed to by BOTH parties and supported by CONSIDERATION
2) Modern law: both parties agree and the agreement is reasonable
Statute of Frauds
1) the contract itself does not need to be in writing but there must be one or more writings
2) SIGNED by the party to be bound
3) the writing must evidence that there is a contract and state the ESSENTIAL TERMS with reasonable certainty
4) If essential terms are not included, its does not satisfy SOF and extrinsic evidence cannot be submitted to supply the missing terms
SOF Land Requirements
a) description of land
b) parties
c) price
SOF Defenses
1) Full performance of a K that cannot be performed within one year will usually take the K out of SOF
2) Partial Performance of Land Sales indicates a K
a) payment
b) possession
c) valuable improvement
3) Estoppel
Damages General
1) Damages should put the NONBREACHING party in the position he would have been in had the K been PERFORMED
2) Damages must be certain, proved by P
2) Breach of employment = full K price
3) Land sale K = K price - FMV
Mitigation for Damages
1) A non breaching party may NOT recover AVOIDABLE damages
2) Employment: a non breaching party must accept a COMPARABLE job if available
3) Goods: damages decreased by cost SAVED and replacement goods
Specific Performance
an EQUITABLE remedy in which a court orders a BREACHING party to PERFORM that which he has promised to perform under the contract.
Requires:
1) parties have entered a K
2) P must have ALREADY PERFORMED or be READY and ABLE to perform
3) legal remedy must be INADEQUATE
* UCC will grant specific performance if after reasonable effort, the buyer is unable to secure substitute goods
BFP
Purchaser
1) purchased for VALUE
2) in GOOD faith
Restitution
1) Remedy to prevent unjust enrichment
2) when a defendant RECEIVES a BENEFIT of an UNENFORCEABLE K
3) Defendant may be required to PAY the cost of services performed
4) for the unjust gain
* here, K rate is evidence of value of the services but actual damages may be different
Governing Contract
1) Contracts for the sale of goods are governed by Article 2 of the UCC.
a) goods are all things MOVABLE at the time they are identified to the K
Reliance Damages
The amount the PROMISEE spent in reliance on the promise.
Expectation Damages
1) Damages for what the promisee was promised
2) flow directly from the contract
3) Under UCC: K price less (market price or replacement goods price)
Consequential Damages
1) SPECIAL Damages OVER and above standard EXPECTATION damages
2) Result from non-breaching party’s particular circumstances
3) Can be recovered if only at the TIME of K FORMATION, a reasonable person would have FORESEEN the damages as a PROBABLE RESULT of breach
* lost profits of an existing or new business counts but must be certain and not speculative
Incidental Damages
Expenses reasonably incurred by the buyer incident to the seller’s breach.
SOF for Goods K
Quantity must be determined
If indefinite, must be able to be made certain by reference to OBJECTIVE, EXTRINSIC facts
Replevin
A buyer can bring an action
1) to RECOVER the goods if
2) the goods are IDENTIFIED to the contract; and
3) the buyer, after reasonable EFFORT,
4) is unable to secure ADEQUATE SUBSTITUTE goods
Injunction
An order to refrain from acting
Preliminary Injunction
To preserve the STATUS QUO until a full trial on the merits is held.
Party seeking the preliminary injunction must show:
1) it will suffer IRREPARABLE injury if injunction is not granted;
2) its harm OUTWEIGHS the harm the defendant will suffer if granted
3) it is LIKELY to PREVAIL on the merits.
Unclean Hands Defense
1) When the party seeking SPECIFIC PERFORMANCE is GUILTY of some wrongdoing in the transaction.
2) the defending party must not be guilty go any inequitable or wrongful conduct.
Unfairness in K formation
1) Equity is a system of justices administered according to fairness rather than strictly formatted rules.
2) It is discretionary on the part of the courts
3) The courts will consider whether a contract is unfair or unconscionable when deciding whether to grant specific performance.
Illusory Promise
1) an APPARENT commitment that in facts DOES not limit the party’s options; or
2) any agreement the does not actually provide a mutuality of obligation
2) does not qualify as consideration
Punitive Damages
1) available for intentional torts
2) awarded to punish a defendant for wrongful conduct
Equitable Lien
1) Imposed when a defendant’s RETENTION of property would result in his UNJUST ENRICHMENT
2) Plaintiff is not entitled to any INCREASE over the value of the property that was misappropriated
3) Puts the lien holder AHEAD of unsecured creditors the proceeds of the property
4) if proceeds are worth LESS than the property misappropriated, the plaintiff can seek the deficiency from defendant
5) Doctrine of tracing used to find misappropriated fund’s current form
Laches
a defense used to say that the
1) plaintiff has UNREASONABLY DELAYED
2) asserting an EQUITABLE Claim; and
3) the delay has resulted in PREJUDICE or HARM to the defendant
4) thus relief should be BARRED
* looks at whether the passage of time has harmed defendant such as in loss if witnesses, evidence, etc.
Constructive Trust
1) Imposed when a defendant’s RETENTION of property would result in his UNJUST ENRICHMENT
2) under a constructive trust, the property is held by the defendant in TRUST FOR THE PLAINTIFF
3) with the sole obligation being to CONVEY property to the plaintiff
4) Tracing is used to impose a constructive trust on the PROCEEDS of WRONGFULLY ACQUIRED PROPERTY that has INCREASED in value
Purchase Money Resulting Trust
1) a person/TRUSTEE takes legal title; and
2) the BENEFICIARY gives consideration BEFORE OR AT THE SAME TIME title is taken
3) TRUSTEE’S sole duty it to convey possession
4) where only part of the purchase price is given, the resulting trust is in a pro rata share of the title
Fraudulent Misrepresentation
Is representation of
1) MATERIAL fact
2) Past or present
3) made with knowledge of the FALSITY and with
4) INTENT to DECEIVE
5) upon which the plaintiff actually RELIES
* P can
a) RESCIND the K and restore the status quo from before the K
b) seek RESTITUTION for unfair benefit defendant received
c) AFFIRM the k and seek damages
Innocent Misrepresentation
Defendant
1) honestly and in good faith
2) asserts a MATERIAL FACT
3) that is NOT TRUE
4) and the plaintiff RELIES on it
* P can RESCIND the K and restore the status quo from before the K
TRO
To preserve the STATUS QUO until a REGULAR ADVERSARY-type HEARING can be held on a motion for a preliminary injunction.
The moving party must:
1) give the other party NOTICE of the TRO (unless the moving party can make a strong showing why notice should not be required such as reason to think evidence or subject matter of TRO will be destroyed)
2) it will suffer IRREPARABLE injury if injunction is not granted;
3) its harm OUTWEIGHS the harm the defendant will suffer if granted
4) it is LIKELY to PREVAIL on the merits.
* expire automatically when a motion for preliminary injunction is granted or denied
