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CA Bar Prep 2022 > Contracts > Flashcards

Contracts Flashcards

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1
Q

What is parole evidence?

A

Any extrinsic evidence presented from before or during the formation of the contract to affect the understanding of a deal.

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2
Q

What is the parole evidence rule?

A

No outside evidence of prior or contemporaneous statements are admitted if there is a final writing.

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3
Q

What are the exceptions to the parole evidence rule?

A

(1) Partially integrated writing may admit evidence to add to a deal, (2) in defense of formation not an interpretation, (3) interpreting a vague or ambiguous term, or (4) in correcting typos.

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4
Q

When is a contract partially integrated?

A

Any written contract that does not have an integration/merger clause or similar provision stating it is the final agreement is partially integrated.

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5
Q

What media types of parole evidence are there?

A

Written OR Oral

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6
Q

What are “trade usage”?

A

(1) Common terms in an industry, (2) known to the parties.

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7
Q

What are the ways an express warranty can be communicated?

A

(1) Oral promises, (2) written promises, (3) showing a model.

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8
Q

When is a statement an express warranty?

A

A statement is an express warranty when it makes a claim of fact about the nature of the goods.

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9
Q

What type of warranty is showing a model or sample?

A

An express warranty.

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10
Q

What type of warranty stating that a product is “the best” or “superior”?

A

It is not warranty at all. It is “puffing.”

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11
Q

What is an implied warranty?

A

The delivered goods are fit for their ordinary and foreseeable purpose.

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12
Q

Who can make an implied warranty?

A

Any merchant seller for those goods.

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13
Q

When is there an implied warranty of fitness for particular purpose under the UCC?

A

(1) Special purpose of buyer, (2) buyer relies on seller to select a certain good, (3) seller has reason to know of buyer’s purpose & reliance on them.

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14
Q

Who is subject to implied warranties for particular fitness?

A

Anyone, even a non-merchant.

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15
Q

What kind of warranties can a seller disclaim?

A

Some implied may be disclaimed, no express warranties.

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16
Q

How can a seller disclaim implied warranties?

A

If sold (1) “as is” or “with all faults” or (2) conspicous disclaimer of “no implied warranties.”

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17
Q

What is “conspicious”?

A

It must stand out to a reasonable person so they take notice.

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18
Q

What is the scope a seller may limit remedies?

A

All remedies inclduing express warranties can be limited except if (1) unconscionable or (2) for personal injuries.

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19
Q

What remedy limitations are prima facie unconscionable?

A

Remedies for personal injuries may not be limited.

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20
Q

When does “risk of loss” primarily arise in a contract?

A

(1) Risk of damage to goods (2) after it leaves sellers control and (3) before the buyer’s control.

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21
Q

How are risks of loss allocated?

A

Risk should be allocated in writing, otherwise the risk is on (1) merchant sellers until buyer possesses, (2) buyer in a tender, (3) risk shifts from seller to buyer when the obligation is met, (4) otherwise a breaching party is responsible for all destroyed goods.

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22
Q

What is a “tender”?

A

When a non-merchant seller tells a buyer where the goods are and how to get them.

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23
Q

What is a common carrier?

A

Any 3rd party shipping company.

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24
Q

What types of delivery obligations are there?

A

(1) Shipping contract, (2) desitnation contracts

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25
Q

What is a destination contract?

A

Seller getting the goods to the location specified in the contract and bears the risk.

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26
Q

What is a shipment contract?

A

A contract provision that puts goods in the control of a common carrier.

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27
Q

Who bears the risk of loss in a shipping contract?

A

The buyer unless clearly stating otherwise

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28
Q

What kind of contract is formed by “FOB [location] “?

A

(1) A shipping contract if it is the sellers location, (2) a destination contract if anywhere else.

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29
Q

What is a common law contract performance?

A

Substantial performance is sufficient. The essential purpose of the contract is met.

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30
Q

What is the UCC article 2 rule for goods?

A

The perfect tender rule.

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31
Q

What is the perfect tender rule?

A

A perfect tender is with (1) perfect goods, (2) right place, and (3) right time.

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32
Q

What may a buyer do if the tender is not percect?

A

(1) reject all of the goods, (2) accept some of them, (3) sue for damages.

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33
Q

How may a buyer reject?

A

(1) Notify seller, (2) hold rejected goods using reasonable care, and (3) give seller reasonable time to arrange removal of goods.

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34
Q

What is an installment contract?

A

(1) A contract for the delivery of goods (2) in separate installments (3) over a certain period.

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35
Q

When can a buyer reject goods on an installment contract?

A

(1) Defect substantially impairs the installment, and (2) defect cannot be cured.

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36
Q

What is the effect of rejecting an installment?

A

Rejection is limited to defective installment and does not affect the entire contact, only if the installment substantially impairs the entire contract value may a buyer cancel the entire installment contract.

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37
Q

Is paying for goods upfront acceptance?

A

Not unless there is an opportunity to inspect.

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38
Q

What is required for acceptance of goods?

A

(1) Buyer confirms acceptance after a reasonable opportunity to inspect or (2) buyer is silent and fails to reject or notify seller of rejection within a reasonable time.

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39
Q

What time in UCC does delay in responding to new terms become acceptance?

A

30 days.

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40
Q

What happens to delay when payment is by check?

A

When there are checks, the time for acceptance or rejection is extended.

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41
Q

What is the effect of paying by check?

A

(1) Performance is done and (2) more time to supply cash.

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42
Q

What is a condition?

A

A limitation on the obligation to perform by the occurrence or non-occurrence of an event or circumstance.

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43
Q

What are terms for conditions?

A

If, as long as, until, provided that, or while.

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44
Q

What is the effect on obligations when there is a condition prescedant?

A

No obligation arises without the condition.

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45
Q

What is the effect of express conditions on obligations?

A

Express conditions can eliminate obligations and remove any right to sue.

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46
Q

What is the standard for adequate satisfaction?

A

A “reasonable person” standard unless a matter of art or personal taste.

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47
Q

What is an express condition prescedant?

A

Any condition that must occur first before performance is due.

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48
Q

What is a condition subsequent?

A

Any event after performance that terminates any duty to pay.

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49
Q

When may conditions be excused or be voided?

A

An action or inaction of a person intended to be protected by the condition may serve as a waiver of that condition.

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50
Q

What is sufficient to cause excuse?

A

If the other party fails to cooperate or act in good faith.

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51
Q

What is probably the most common example of actions resulting in a waiver of a condition?

A

A buyer of land failing to get a mortgage as a condition precedent.

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52
Q

At what point can a contract condition be retracted?

A

If the buyer has not yet relied upon the condition.

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53
Q

What is anticipatory repudiation?

A

An early statement of non-performance.

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54
Q

What is the effect of anticipatory repudation?

A

(1) The contract is breached, (2) performance obligations are suspended for the innocent party until retraction (3) victim can sue.

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55
Q

When can a repudiation be retracted?

A

Prior to any reliance by the innocent party on the repudiation.

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56
Q

How can a party request assurance?

A

(1) A non-breaching party may ask for assurance (2) in writing (3) when there is reasoanble grounds for expecting failure to perform.

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57
Q

When may a party request adequate assurance?

A

When there is reasonable grounds for fear of failure to perform.

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58
Q

What happens if there is no adequate assurance?

A

The obligation to perform is suspended and treated as an anticipatory repudation.

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59
Q

Can an adequate assurance give rise to a change in terms?

A

No. The deal must remain and a seller or buyer may not impose additional terms.

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60
Q

What is recission?

A

A mutual agreement between parties to terminate a contract.

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61
Q

What is the effect of recission?

A

All obligations of both parties are removed.

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62
Q

When does recision apply?

A

When there is some form of performance still in effect.

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63
Q

What is the effect of a modification agreement?

A

(1) Replaces existing obligations, (2) takes effect immediately, (3) removes prior obligations.

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64
Q

What is an accord?

A

An agreement to accept a different performance from the original obligation.

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65
Q

What is satisfaction?

A

The fulfillment of an accord that removes the obligation.

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66
Q

What happens if there is an accord with no satisfaction?

A

The original obligations will come into effect and give a right for the innocent party to seek damages for either.

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67
Q

What is the distinction between a modification and accord?

A

A modification is immediate whereas an accord is a change that arises later after satisfaction.

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68
Q

What language is employed for accord & satisfaction?

A

“If …. then …..”

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69
Q

What is a novation?

A

(1) An agreement by both original parties (2) to substitute one party for another party to perform the obligation (3) which excuses any duties of the original party who originally promised to perform.

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70
Q

What is a delegation?

A

Where one party contracts another party to perform an obligation outside the knowledge or consent of the original party.

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71
Q

How are novation and delegation different?

A

(1) Novation is mutual removing obligation, (2) delegation is unilateral not removing obligation.

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72
Q

What is the effect of delegation on obligations?

A

No effect, the original obligation applies and the innocent party may go after the delegating party.

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73
Q

When can impossibility be raised?

A

As an excuse from performance after an unforeseen event barring the ability to perform.

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74
Q

What is impracticability?

A

The same as an impossibility, but where the cost of performance exceeds the entire value of the contract.

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75
Q

What is the effect of death on an obligation?

A

Obligations pass to the estate unless a necessary and special party died.

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76
Q

What is a “special” person?

A

Any party that singularly can perform a certain action such as a unique painter or artist.

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77
Q

What is the effect on a contract of subsequent governmental regulation making performance illegal?

A

The obligation to perform is suspended.

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78
Q

What is the effect of unintentional destruction on performance?

A

If a contractor or producer then the obligation remains, but if the subject matter is destroyed, it is removed.

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79
Q

May a seller rely on destruction of goods for impracticability when they bear the risk of loss?

A

Yes. They are still liable for the risk of loss, but they are excused from performing.

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80
Q

What is the effect of an increase of cost on impracticability?

A

It does not remove the obligation unless EXTREME or conscionable

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81
Q

What is a frustration of purpose?

A

(1) Unexpected event destroys a party’s purpose for the contract, (2) frustrated party did not cause the event, and (3) non-occurence of the event was a basic assumption.

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82
Q

When is a basic assumption present in a contract?

A

When the purpose in contracting is known to both parties at the time of contract performance.

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83
Q

What is a breach?

A

Failure to perform an absolute duty.

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84
Q

What must a non-breaching party demonstrate to recover?

A

A willingness to perform, but for the breach.

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85
Q

What happnes when there is a minor breach?

A

A non-breaching party recieves a substantial benefit giving rise only the right to supplement with damages and still obliges performance.

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86
Q

What is an example of a minor breach?

A

Installing a brand of pipe different from what is specified in the contract.

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87
Q

What is a material breach?

A

Non-performance of substance, no benefit to innocent party, contract ends, and counter-performance obligation is removed.

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88
Q

What do courts consider in determining material breach?

A

(1) Benefit conferred to victim, (2) performance so far by breacher, (3) hardship on the breaching party to perform.

If the cost to perform exceeds the benefit given it is not material.

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89
Q

What is the effect of a failure of time?

A

Failure to perform within stated time is not material UNLESS time is essential to the contract. An inclusion of dates in a contract is not per se essential.

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90
Q

When may a seller cure a defect?

A

When the seller gives the buyer a notice within a reasonable period of time or before performance comes due.

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91
Q

What is required for rejection?

A

(1) Timely notice to seller (2) without exercising any kind of posessory act over the goods.

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92
Q

What happens to a sellers rights if a good is not delivered on time?

A

The seller loses the right to cure.

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93
Q

What are the remedies for breach?

A

Legal & equitable

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94
Q

What are quasi-contract remedies?

A

Promissory Estoppel or reliance damages

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95
Q

What remedies are availble for a non-contract with partial performance?

A

Restitution

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96
Q

What conditions are for specific performances?

A

(1) The legal or monetary remedy is inadequate and (2) reasonably capable of performance.

97
Q

When is specific performance always available?

A

All land contracts because all land is unique.

98
Q

What goods are available for specific performance?

A

Unique goods such as artwork and antiques.

99
Q

Are generic personal service contracts subject to specific perfomance?

A

Generally no, courts are highly unlikely to force an employee to perform.

100
Q

What equitable remedies are available to employers for unique or high-value employees?

A

Injunctions.

101
Q

What are the exceptions to UCC Article 2 bars on reclamation of goods by a seller?

A

(1) A credit sale, (2) where buyer is insolvent at time of receipt, and seller demands reclamation within 10 days of receipt by the buyer.

102
Q

When may a seller reclaim after 10 days of receipt?

A

If the buyer makes a fraudulent statement about their financial situation at least three months prior to the receipt.

103
Q

What are expectation damages?

A

Putting the injured party in the position they would have been in had the contract been performed.

104
Q

When do reliance damages apply?

A

When there is breach and profits are uncertain.

105
Q

What are reliance damages?

A

Legal remedies to put the injured party in their prior position before the contract formed.

106
Q

What are restitution damages?

A

The reasonable value conferred from partial performance.

107
Q

What are incidental damages?

A

Costs incurred by the seller or buyer in dealing with a breach in caring for the goods or finding a replacement buyer.

108
Q

When are incidental damages available?

A

Always. Foreseeability is irrelevant.

109
Q

What are consequential damages?

A

The indirect damages of a breach that were reasonably foreseeable at the time of contract formation.

110
Q

When are punitive damages available in contracts?

A

Never.

111
Q

When are liquidated damages upheld?

A

(1) Reasoanble amount and (2) difficult to ascertain at time of formation.

112
Q

What damages are available if the liquidated damages are excessive?

A

The injured party is still entitled to actual expectation or reliance damages.

113
Q

When must an employee have a duty to mitigate?

A

When there is comperable employment. No duty to take inferior employment.

114
Q

What is entrustment?

A

(1) Stolen goods, (2) sold by a merchant, (3) to a BFP

115
Q

What is the rule for entrustmant?

A

An owner has no rights against a bona fide purchaser (BFP).

116
Q

When does a bona fide purchaser have no notice?

A

Purchasing a good from a merchant who regularly sells those goods.

117
Q

When is there a third-party contract?

A

Two parties enter into a contract for the benefit of a third party.

118
Q

What is a third party beneficiary?

A

The intended and named person (or class of persons) who is not a party of the contract, but may still directly enforce the contract.

119
Q

Who promises to perform for the third-party?

A

The Promisor

120
Q

Who is the one securing a promise for a third-party?

A

The Promisee

121
Q

What rights do incidental beneficiaries have?

A

None. Only an intended third-party beneficiary has a right to enforce a contract.

122
Q

Is consideration required for assignment?

A

No. However, present transfer language is required and it may be revoked.

123
Q

When may a contract assignment of benefits be revocable?

A

(1) Gratuitous assignments are revocable, (2) assignments for consideration are not.

124
Q

Who does the assignee have a right to sue?

A

(1) Obligor for non-excusable breach and (2) assignor if for breach of implied warranty. (Not actually being able to assign, previously assigning to someone else etc.)

125
Q

When is a gratuitous assignment irrevocable?

A

(1) Obligor has already performed, (2) assignee has received a written claim or tangible object signifying a right to collect, or (3) detrimental reliance by the assignee.

126
Q

What is more likely prohibition or invalidation?

A

Prohibition.

127
Q

What is the priority for multiple assignees?

A

The consideration assignees wins over all others followed by chronological order.

128
Q

What is the contract formula?

A

K = MA (O + A) + C - D

129
Q

What is MYLEGS for SOF

A

Marriage,
Year or more services,

Land,
Executors,
Goods $500+,
Sureties

130
Q

What is a surety?

A

A promise to pay if the debtor does not pay.

131
Q

What are the contents required for the statute of frauds?

A

(1) Essential material terms (quantity of goods in UCC), and (2) signature of parties to be bound.

132
Q

What are the land use exceptions to the SOF?

A

(1) Lease of less than a year or (2) performance of 2 of 3 from: (a) full or partial payment, (b) possession, or (c) improvements to land.

133
Q

What happens to any statute of frauds with a judicial admission?

A

Elimintated

134
Q

What is required for a valid contract?

A

(1) Mutual assent, (2) consideration, (3) no defenses that may invalidate.

135
Q

What is mutual assent?

A

(1) Offer, (2) valid acceptance, (3) objective manifestation of assent.

136
Q

What is consideration?

A

(1) A bargained-for exchange, (2) of legal value, (3) between the parties.

137
Q

What are the types of contract voiding?

A

(1) Void, (2) voidable, and (3) unenforceable.

138
Q

What is a void or voidable contract?

A

(1) Void: never had any legal effect, [annulment] (2) voidable: one or both parties may elect to void the contract. [divorce]

139
Q

What are the types of contracts?

A

(1) Bilateral, (2) unilateral, and (3) quasi-contract.

140
Q

When is there a unilateral contract?

A

(1) offer-promise agrees to pay upon completion of the act requested; (2) once performance starts contract is formed and promisor must pay.

141
Q

When is there a quasi-contract?

A

(1) A benefit was conferred without payment, (2) the actor reasonably expected compensation, (3) the benefit was received, (4) no payment would be unjust enrichment.

142
Q

What are the different applicable laws for contracts?

A

(1) Common law for most contracts and (2) UCC for goods.

143
Q

What is an offer?

A

An objective manifestation of a present intent to contract.

144
Q

What is required for terms?

A

Terms must be definite and certain to be enforceable.

145
Q

What counts as sufficient terms in an offer under the UCC?

A

Quantity must be certain or capable of being made certain. Price is not always necessary.

146
Q

What is required for an offer?

A

The offeree must know of the offer and have the power to accept.

147
Q

When is an advertisement an offer?

A

Only when (1) highly specific as to quantity (2) clearly indicate who may accept, and (3) how.

148
Q

When may an offer be terminated?

A

(1) Revoked by offeror, (2) rejected, (3) lapse of time, (4) death or insanity of either pary, (5) destruction of contract subject matter, and (6) supervening illegality.

149
Q

What is the method of revocation?

A

(1) Unambiguous statement by offeror to the offeree, (2) awareness by offeree.

150
Q

What are the limits on revocation?

A

(1) Only effective upon receipt by offeree, (2) irrevocable after acceptance, (3) if unilateral irrevocable after start of performance for a reasonable time.

151
Q

What is considered performance?

A

Anything beyond mere preparation, must include substantive work.

152
Q

When are offers irrevocable?

A

(1) Option contract, (2) UCC firm offers, (3) Detrimental reliance by offeree.

153
Q

What is necessary for an option contract?

A

(1) Promise to keep an offer open, (2) under common law a consideration in exchange for the option, and (3) under UCC no consideration required.

154
Q

What is the default time under the UCC for firm offers?

A

Three months for these offers.

155
Q

What is necessary for detrimental reliance?

A

The offeree’s reliance must be reasonable under the circumstances.

156
Q

What are the methods for rejection of an offer?

A

(1) Express rejection, (2) Counteroffer, (3) Conditional acceptance, or (4) Acceptance with additional terms.

157
Q

What are insufficient to be considered counteroffers?

A

(1) Requests for information or (2) request for additional consideration without rejection. E.g. “Would you be willing to consider…”

158
Q

What is sufficient to create a rejection from conditional acceptance?

A

Terms such as “if” or “provided that” or “so long as” unless the condition would be included anyways as part of an employed warranty.

159
Q

What are the effects of additional terms with acceptance?

A

(1) Common law: acceptance must mirror the offer and any additional terms creates a counteroffer. (2) UCC: If only one party is a merchant terms of offer govern, contract is formed and additional terms are excluded as mere proposals to modify. (3) UCC: Where both merchants additional terms become part of contract with certain exceptions.

160
Q

What is the “mirror image rule”?

A

Acceptance must mirror the offer’s terms, it cannot add, omit, or change terms of the offer.

161
Q

What are the exceptions for two merchants with added terms under the UCC?

A

(1) Contract is formed unless, (2) additional terms materially change the offer, (3) offer expressly limits acceptance to original offer terms, or (4) offeror objects within a reasonable time.

162
Q

How can a seller accept through shipping?

A

(1) Providing a promise to ship or (2) promptly shipping conforming goods. (3) shipping non-conforming goods, although that creates breach.

163
Q

What are the mailbox rules?

A

(1) Offers are effective upon RECEIPT; (2) Acceptance are effective upon DISPATCH; (3) offers invite acceptance in any reasonable manner.

164
Q

What is the effect of instantaneous two-way communication?

A

Treated as if the parties are in each other’s presence.

165
Q

What are the limitations on the mail box rules.

A

(1) Offers may stipulate acceptance form, (2) If both a rejection & acceptance are sent the first to arrive prevails, (3) options are accepted upon receipt. (4) Revocation is effective only upon receipt.

166
Q

What notice is required for unilateral contracts?

A

The offeree is only required to notify the offeror within a reasonable time after completion.

167
Q

When may an offer requiring acceptance by promise be formed without a promise?

A

(1) The offeree begins to perform, (2) the offeror knows & acquiesces.

168
Q

What is a “bargained-for exchange”?

A

The promise must induce the detriment and the detriment must induce the promise.

169
Q

What is a “detriment”?

A

An obligation to do or refrain from doing something one would others not be obligated to do or refrain from doing.

170
Q

What is the effect of “pre-existing duty” on consideration?

A

A promise to perform a pre-existing duty or obligation generally does not constitute consideration.

171
Q

What is an exception to the “pre-existing duty” rule in contracts?

A

(1) A valid agreement to perform (e.g. pay a debt after the statute of limitation runs on the original debt) creates a binding new promise that is enforceable for that new promise or (2) third-party unassociated with original duty can form a contract for identical performance under modern rules.

172
Q

What are considered invalid consideration?

A

(1) Promises of gifts or conditional gifts, and (2) illusory promises where there is no obligation to perform. E.g. I promise to give you a million dollars if I become a billionaire and I’m in a good mood.

173
Q

What is promissory estoppel?

A

A promise is enforceable when (1) it is reasonable to expect reliance (2) promisee actually has detrimental reliance, and (3) injustice will occur without enforcement.

174
Q

What are the key defenses to contract formation? 🛑

A

(1) Incapacity, (2) statute of frauds, (3) illegality, (4) misrepresentation or fraud, (5) duress, (6) unconscionability, (7) misunderstanding, (8) mistake.

175
Q

What is incapacity?

A

(1) Infants, (2) mentally impaired, (3) intoxication.

176
Q

What are the rights of the incapacitated?

A

The person who lacked the capacity to contract may disaffirm rendering the contract void.

177
Q

What are the contract enforcement exceptions to infancy?

A

Contracts with minor children may be enforced or otherwise recognized where (1) implied affirmation or ratification after age of majority, (2) for the necessities of life.

178
Q

What is an infant under contract law?

A

Any person who is a minor.

179
Q

What is required for implied affirmation or ratification?

A

(1) Agreement prior to capacity, (2) capacity gained; and (3) benefits are retained.

180
Q

What are the two primary methods of satisfying or supplementing the statute of frauds (SOF)?

A

(1) a signed writing or (2) performance.

181
Q

What writings satisfy the SOF?

A

(1) A writing, (2) with signatures of parties to be charged, and (3) material terms.

182
Q

What is the UCC exception to the signed writing requirement?

A

(1) Both parties are merchants, (2) signed writing memorializing oral agreement with essential terms sent, and (3) receiving party failed to respond within 10 days.

183
Q

When does performance satisfy the SOF?

A

(1) Service requires full performance, (2) goods require delivery and acceptance, (3) real estate requires two of either (a) full or partial payment, (b) possession, (c) improvements to property.

184
Q

What is a special exception to performance for goods?

A

Statute of Frauds may be satisfied if the goods are custom-made and the party begins work.

185
Q

What contracts fall under the SoF?

A

(1) Marriage contracts, (2) Service contracts incapable of being performed within a year, (3) land-related contracts, (4) executor promises, (5) guarantees, (6) sales of goods worth $500+.

186
Q

What is the effect of a “lifelong” deal or contracts that say nothing about time for performance?

A

Does not require the statute of frauds unless it necessarily will take more than one year to perform.

187
Q

What is illegality in contracts?

A

(1) Illegal subject matter, (2) legal subject matter, but illegal purpose, (3) legality based on existing law at time of of formation.

188
Q

What is misrepresentation or fraud?

A

Any (1) false assertions, (2) concealment of material facts, (3) misstatements about material facts or (4) other intentionally deceptive representation (5) made before contract formation or performance.

189
Q

When does fraud or misrepresentation void a contract?

A

Where the innocent party detrimentally relies on the misrepresentation.

190
Q

What is undue influence?

A

(1) Contract entered into (2) under excessive pressure, (3) by someone unduly susceptible to pressure.

191
Q

What is duress?

A

(1) A wrongful act or threat, (2) that overcomes a parties free will, such as (a) physical threats or (b) coercion and threats.

192
Q

When is a contract unconscionable?

A

When (1) terms or bargaining are (2) unfair or oppressive (3) to one party. E.g. exculpatory clauses for intentional acts or absence of meaningful choice by disadvantaged party.

193
Q

What is a misunderstanding?

A

Ambiguity concerning terms of the contract causing confusion.

194
Q

What are the forms of misunderstanding?

A

(1) Neither are aware, (2) one is aware, (3) both parties are aware.

195
Q

What is the effect of mutual misunderstanding where neither is aware?

A

No contact formed unless both parties intended the same meaning.

196
Q

What is the effect of unilateral awareness of ambiguity or misunderstanding?

A

Contact formed and enforced according to the intention of the unaware party.

197
Q

What is the effect of both parties being aware of the ambiguity or misunderstanding?

A

No contract formed unless both parties intended the same thing.

198
Q

What is mutual mistake?

A

Where both parties are (1) mistaken about (2) underlying factual assumption (3) at contract formation then (4) contact may voidable.

199
Q

When is a contract void under mutual mistake?

A

(1) Both parties are mistaken concerning a basic assumption of fact, (2) mistake materially affects agreed-upon exchange, and (3) adversely affected party did not assume the risk of the mistake.

200
Q

What is the effect of unilateral mistake?

A

(1) Does not prevent contract formation (2) unless mistaken party’s mistake is material and knowing party knew or should have known of the mistake.

201
Q

Who bears the risk of loss during shipment?

A

(1) Shipment contracts: Buyer, (2) Destination contracts: seller, (3) non-carrier delivery puts risk of loss on buyer upon physical possession from merchant or (4) for non-merchant seller buyer takes risk upon tender of delivery.

202
Q

What is FOB?

A

Seller bears the risk and expense of getting goods to a named location and risk passes to buyer upon delivery to that location.

203
Q

What is the effect of breach upon risk of loss?

A

If buyer rejects defective goods or revokes acceptance the risk does not pass to the buyer until the defects are cured or acceptance.

204
Q

When may a buyer revoke acceptance after receiving goods?

A

(1) If within a reasonable time (2) buyer discovers defect, and (3) defect substantially impairs the goods value or (a) buyer accepted goods on reasonable belief defect would be cured and no cure, (b) buyer was excusably ignorant of defect or (c) reasonably relied on seller’s assurances of conformity.

205
Q

When does a seller have the ability to cure?

A

(1) Seller gives notice to buyer of intent to cure, (2) time for performance has not yet expired, and (3) reasonable grounds to believe delivered nonconforming goods would be acceptable.

206
Q

What is substantial performance?

A

A performance is substantial if at least halfway complete regardless of perfect performance.

207
Q

What is the effect of substantial performance?

A

The other party is obligated to perform regardless of original performance quality.

208
Q

What is a material breach?

A

A party fails to perform under a non-UCC contract substantially depriving the other party of the benefit they bargained for and expected or within the time required.

209
Q

What are the characteristics of material breach?

A

(1) Excuses performance of other party, (2) question of fact, (3) enables recovery of damages to the extent they are foreseeable as probable result of breach.

210
Q

When does a material breach arise from lack of timeliness?

A

(1) Failure to perform by time stated is not material if rendered within a reasonable time after deadline, unless (2) “time is of the essence” clauses are present then it is a material breach.

211
Q

What is a contract condition?

A

Any agreed-upon limitation to the performance of the contract.

212
Q

What is the essence of a condition?

A

(1) Performance is contingent on the occurrence of an event, (2) indicated by words such as “if” or “provided that” or “subject to” and (3) failure of a condition relieves obligation to perform without breach.

213
Q

What are the types of conditions?

A

(1) Condition precedent and (2) condition subsequent.

214
Q

What is a condition precedent?

A

A condition that must occur before performance is due and non-performance excuses performance.

215
Q

What is a condition subsequent in a contract?

A

A condition that occurs after performance has begun and excuses duty to perform regardless.

216
Q

What controls the interpretation of conditions?

A

The purpose of the contract. Substantial performance of a condition may suffice if it fulfills the condition’s purpose. Intent of parties control.

217
Q

How may be a condition be waived?

A

If the party protected or benefiting from a condition chooses to waive or estop the condition from enforcement.

218
Q

What is an excuse in contracts?

A

A legal suspension of performance obligations from (1) breach, (2) repudiation, (3) substantial frustration, or (4) impossibility/impracticability.

219
Q

What is insecurity?

A

(1) A contracting party, (2) has reasonable grounds to believe, (3) other party will be unwilling or unable to perform the contract.

220
Q

What may an insecure party do?

A

Demand an adequate assurance of the other party and suspend performance until an assurance.

221
Q

What is required for a demand for adequate assurance?

A

(1) Must be in writing, (2) based on reasonable and justifiable grounds.

222
Q

When does a party not need to respond to a demand for assurance?

A

If the demand is unjustified or unreasoanble.

223
Q

What is an adequate assurance?

A

A commercially reasonable commitment from a party that it will perform according to the contract.

224
Q

What is the effect of failing to respond a legitimate demand for assurance?

A

Insecure party may treat contract as repudiated; if adequate assurances are made insecure party must perform to avoid breach.

225
Q

What is anticipatory breach?

A

Anticipatory repudiation is a clear communication or indication of an intent not to perform.

226
Q

What is required for an anticipatory repudiation?

A

(1) Unambiguous act, (2) prior to full performance, (3) indicating non-performance.

227
Q

When may a party not withdraw a repudiation?

A

If the other party has (1) materially changed position in reliance on the repudiation. (2) cancelled the contract in response, or (3) indicated they consider the repudiation to be final.

228
Q

What are the non-repudiating parties options?

A

(1) Treat the anticipatory repudiation as a total repudiation and sue, (2) suspend performance until performance date is due and wait to sue, (3) treat repudiation as an offer to rescind and treat contract as discharged or (4) ignore repudiation and urge repudiator to perform.

229
Q

What is impossibility?

A

(1) When an unforeseeable event, (2) not anticipated or assumed to occur, (3) makes performance objectively impossible.

230
Q

How does impossibility differ from impracticability?

A

Identical to impossibility except that performance is possible only with extreme and unreasonable difficulty or expense.

231
Q

What are common unforeseen events?

A

Damage or destruction of a contract’s subject matter, death if non-delegable, or subsequent law or regulation.

232
Q

What is frustration of purpose?

A

(1) unexpected event destroys either party’s purpose for contract, (2) unforeseen event was not fault of frustrated party, (3) non-occurrence of event was a basic assumption.

233
Q

What is the effect of frustration?

A

The obligations to perform are discharged.

234
Q

What is a voluntary recission?

A

Duties are discharged when (1) both parties agree to rescind and (2) agreement is itself a new binding contract, (3) supported by consideration, except (4) at-will employment.

235
Q

What are the limitations on rescission?

A

(1) Mutual rescission may be oral unless writing required if rescinding agreement is subject to SOF or UCC as part of consideration and (2) if rights of a third-party beneficiary have vested.

236
Q

When is a unilateral rescission permitted?

A

(1) contract formation defense or (2) court ordered remedy.

237
Q

What is “at-will”?

A

The ability to rescind a contract by any party at any time according to the terms of the agreement.

238
Q

If a buyer is notified of an assignment of payment will the buyer be liable for failing to pay?

A

Yes, the buyer must pay the assignee the seller’s value if they have been properly notified and can be sued by the assignee.

239
Q

When is a consideration not necessary in a modification?

A

If it is for the sale of goods so long as it is done in good faith.

CA Bar Prep 2022 (14 decks)

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