Contracts Flashcards
Applicable/Governing Law
The UCC applies to all contracts regarding the sale of goods, and tangible and movable property. Common law applies to all other contracts. Here….
UCC - mention goods, merchant
CL - provision of services or relating to real property
If there is a dispute as to whether the contract is for goods or services, the predominant purpose for the contract as a whole will provide the applicable law for the entire contract.
Statute of Frauds
Contracts must be made in writing and signed if it is for the sale of $500 or more, or for property
Time of the Essence Clause
Generally, time to perform is not an essential element in the contract unless otherwise agreed between the contract or required from the nature of the contract
Only valid if there is extra consideration to ensure that the k is completed on time
Parole Evidence Rule
When a contract was made in writing, evidence existing prior or concurrently with the contract is not allowed in the contract
Exception: subsequent agreements between the parties or construing the ambiguous factors included in the contract
Modification (UCC)
Under the UCC, parties are allowed to modify the contract without consideration as long as it’s done in good faith
Anticipatory Repudiation
Anticipatory repudiation requires that one party expressly and unambiguously states their intent not to perform their duty prior to the date of due performance
Request for Guarantee
A party can request to the other party a request for guarantee to perform when reasonable doubt for the party’s performance exists
Contract Formation
A valid k requires mutual assent to an agreement shown by an offer, acceptance, and consideration
Defense: Mistake
Unilateral: where one party to the k is mistaken to a material aspect of the k. The non-mistaken party did not know or shouldn’t have known that the mistaken parties’ belief
Mutual: both parties are mistaken upon a basic fact of the k
Defense: Parole Evidence Rule
The PER is a rule that bars admitting evidence to a k that is fully integrated (intended to be the final expression of the parties’ agreement)
Fraud is the exception to PER
Defense: Fraud
Fraud is a contractual defense where one party is entitled to recission of the k. Needs to prove that the party made an intentional misrepresentation of material fact and intended to induce and did justifiably induce the plaintiff and the plaintiff suffered damages
K Remedy: K modification
A modification is a change in contractual terms. Under CL, a modification must have new consideration to be effective
K remedy: Reformation
Reformation is an equitable remedy to change the k into the actual agreement of the parties
Equitable Remedy Defense: Unclean Hands
UH is where a party seeking an equitable remedy has committed a wrong within the same transaction as the cause of action
Equitable Remedy Defense: Laches
Laches is a defense to equitable remedies due to undue delay to bring the claim and prejudice to the defendant
The court will look at the SOL, length of the delay, and the reason for the delay
Consideration
Bargained-for exchange
Under the UCC: satisfied by good faith and fair dealing of the parties
Acceptance
Manifestation of assent to terms of offer - can be satisfied expressly or impliedly with acknowledgement or performance
Mirror-image rule
Any other terms will be considered counter-offers and rejections of initial offer
Merchant’s acceptance (READ)
When a merchant’s acceptance is conditional on the Buyer’s assent to additional terms of the acceptance, it can be said that the merchant rejected the offer and proposed a counter
Terms of K
Parties are not required to determine all terms at the outset but material terms must be definite and certain.
UCC: most important term is quantity
Acceptance by Performance
Acceptance can be made through performance. When a party begins to perform, acceptance of and formation of a k is implied
Perfect Tender Rule
Under UCC, a k needs to be performed to the exact terms. The seller needs to follow the k and provide the goods as the k states and when the k states. If the seller sends non-conforming goods, it is up to the buyer whether they will act on the breach.
When non-conforming goods are sent, the buyer can accept, reject and sue for breach, or reject and give the seller reasonable notice.
When the seller does not send the goods on time, that is also considered breach.
As a general rule, a merchant buyer is entitled to reject goods if the goods are nonconforming
Considered nonconforming if there is any defect whatsoever. Need to be exactly as promised
Buyer is entitled to inspect the goods within a reasonable amount of time
General rule: buyer’s acceptance of nonconforming goods constitutes acceptance
Merchant Rule
Under the UCC, if 2 or more parties are both merchants then there are certain rules that follow
Merchant = someone who sells goods in that field
Cover Price
In a breach of UCC goods contract, the non-breaching party may ask for compensatory damages that are made of the cover price
Awards the non breaching party the k amount minus the price of the non conforming goods
Restitution
Unjust enrichment
Disclaiming the Warranty of Merchantability
Implied warranty for anyone in the chain of selling, cannot disclaim the implied warranty of merchantibility
Offer - CL
At CL, an offer is the manifestation of willingness to enter into a bargain. An offer requires intent to enter into a k, definite and certain terms, and communication to the offeree.
Intent - must demonstrate present intent
Language
Context - can help establish intent (offers in jest, preliminary negotiations, rewards/auction bids
Definite and certain terms -> QTIPS
Quantity - stated and ascertainable
Time of perfomance - can be missing and court can say “reasonable”
Identity of parties - must be identified
Price - must be stated in real estate ks, UCC ok “reasonable price at time of delivery”
Subject matter - must be identified clearly
Communication - such that the offeree has knowledge
K Defense: Impossibility
Impossibility is a defense to a contract when the performance of the contract is absolutely impossible to perform
K Defense: Impracticability
Impracticability is a defense to a contract when the performance of the contract is extremely difficult to perform
K Defense: Frustration of Purpose
FOP is a defense to a contract when the whole point of making the contract has been defeated
No more main purpose
K Defense: Illegality
Illegality is a defense to a k because illegal performances are not valid
Breach of K
A breach of k occurs when a party does not perform their obligations under the contract. A party may also infer breach form AR and sue for damages
Damages
Damages for breach of K include expectation, restitution, and reliance
Damages must be foreseeable, caused by breach, and there is a duty to mitigate by the non-breaching party
Damages: Expectation
Expectation damages put the party in the position if the contract had been performed
Damages: Reliance
Reliance damages put the party in the place the position if the k had been performed
Restitution
Restitution damages prevents the unjust enrichment of the other party
Duty to Mitigate
There is a duty to mitigate damages
A subsequent TP may come in to perform in the wake of another party so that performance may be completed while the parties wait for a lawsuit to determine damages –> then when awarding damages, the court will award expectation damages in the cost of substitute performance less the cost of the action contracted performance
Rescission
When two parties enter into a contract and one of the parties has misrepresented
Grounds:
Misrepresentation - false statement of fact where the declarant knew or had reason to know it was false, that was made to a TP, and the TP justifiably relies
Damages for Rescission
Compensatory (3) - expectation, reliance, consequential
Damages must be foreseeable, unavoidable, causal, and certain
Non-disclosure/Concealment (K)
Generally, a party is not required to disclose, however, a party is required to disclose when there is a concealment of a material fact
Fraud
Material misrepresentation Scienter (D's knowledge its false) Intent to induce reliance Actually induces Damages Defenses
Breach of K under UCC
After prove valid k, next prove material breach
For breach of k under the UCC, only material breaches will allow ___ to prevail
Breach of Implied Warranty of Merchantability
Under the implied warranty of merchantability, when a company in the industry who normally sells a good then sells the good to a customer, there is an implied warranty of merchantability
Duty to Disclose (property law)
Under common law, there was no duty to disclose and the buyer was entitled to do their own inspections.
Modernly, the seller has a duty to disclose material defects in the property that they are unaware of and could not easily discover
Misrepresentation
Make misrep
Intent to induce P
P relied
Damages
Property Disclosure
Common law: generally seller not required to disclose property defects
Modernly: required to disclose property defects not easily visible or found and also cannot conceal latent defects
Express Warranty
In k law, when buyer asks a question regarding some aspect of the property and the seller confirms that there is nothing wrong = express warranty and overrides any disclaimers given to the seller with the property
Adequate Assurances
When a party is unsure that the other party will be able to perform, the party can request adequate assurances, this is where a party will ask the other party if they will be able to perform
The other party is required to respond either that they can perform the k or that they cannot perform within a reasonable time (UCC 30 days)
Merchants = needs to be writing
K Modification
Under the UCC, a k can be modified if it is done in good faith.
Repudiate Anticipatory Repudiation
A party that has anticipatorily repudiated can retract repudiation and still perform if the time for performance has not passed
However, if the non-breaching party has agreed to the breach, started suit, or detrimentally relied on the breach, cannot repudiate
Mailbox Rule
The MBR provides that an acceptance is effective upon dispatch, even if the other party has not received it, as long as it is out of the control of the sender
Defense: Specific Performance
Valid K
$ damages inadequate
Feasibility of enforcement
No defenses
Defense: Good faith
In every k, there is an implied good faith and fair dealing
Condition Precedent
A condition precedent must occur before one party’s obligation is due
A party may not interfere with a k by preventing the condition or else it will be a waiver
Breach of Implied Warranty of Merchantability
Under the implied warranty of merchantability, when a company in the industry normally sells the good to a customer, there is an implied warranty of merchantability.
Offer - UCC
Inviting acceptance in any manner and by any medium reasonable in the circumstances. The UCC will use gap fillers for missing terms except for subject matter and quantity.
Offer Termination
- Rejection
- Counter - rejection and new offer (distinguish from inquiry)
- Revocation - offeror can revoke an ordinary offer at any time before acceptance. Can be…
* direct or indirect (can be from reliable 3rd parties)
* unambiguous words or conduct that is inconsistent the intention of the k
* of which the offeree is aware - Exceptions - offers that are irrevocable
* UCC firm offers - made by merchant, signed writing, gives assurance it will be held open, 3 month limit on irrevocability
* Option k - offeror grants offeree an option to enter into k, consideration required and irrevocable for state option period
* Detrimental reliance and part performance
