Contracts Flashcards
I. Formation
Applicable Law
Article 2 of the UCC governs contracts for sale of goods. Goods are defined as movable things. Otherwise, CL dictates, unless it’s a mixed contract, where the predominant purpose of the contract will determine the appropriate law.
Offer
- A manifestation of intent to contract
- With definite and certain terms
- Communicated to the offeree
Merchant Offer
An offer is not revocable if it is made by a merchant, in a signed writing, that gives assurances that it will be help open for a period that is stated in the writing, if no time stated, a reasonable time not to exceed 90-days.
Termination
lapse of time, death/destruction, supervening illegality
Revocation
Offeror may revoke an offer prior to a timely acceptance.
Rejection - Counteroffer
Rejection of terms of original offer, new offer.
Acceptance
Unequivocal assent to the terms of the offer.
Consideration
Bargained for exchange of legal detriment.
Option Contract
An offer is not revocable if the offeree gives consideration for a promise by the offeror to refrain from revoking an offer for either a stated period, or reasonable time if no time is specified.
Mirror Image Rule
Under the CL, an acceptance must mirror the offer.
Merchant
A merchant is one who regularly deals in goods of the kind sold in the contract or who holds themself out as a merchant.
Battle of the Forms - UCC
Unlike CL, which has the mirror image rule does not need a mirror the offer, and can include different or additional terms. Offeree’s additional terms are deemed included only if:
- Both parties are merchants
- The terms are not a material change
- The offer doesn’t limit acceptance to the exact terms; and
- No objection was made within reasonable time.
Promissory Estoppel
Acts as consideration when a party makes a promise that:
- Foreseeable induces reliance by the other party.
- The other party relies on the promise, and
- Injustice can be avoided only be enforcing the promise.
Defenses to Formation
1. Statute of Frauds (MRDOG)
- Marriage
- Real Property
- Debt of another
- K that cannot be completed in less than year
- Contracts for Goods over $500
- Unconscionability
A contract may be void where the provisions are so one-sided that they are unconscionable at the time of formation. Applies where one party has unequal bargaining power.
- Adhesion Contracts
K with unequal bargaining positions.
- Incapacity - minors, mental
- Mistake - mutual mistake or unilateral mistake
- Illegality
- Misrepresentation
Defendant makes a misrepresentation of material fact.
- Ambiguity - material misrepresentation of past or recent
- Fraud - If either party had defrauded the other into executing the K.
- Duress
Duress is a wrongful pressure exerted upon a person to coerce that person into a contract he or she ordinarily wouldn’t enter.
- Parol Evidence Rule
A party cannot introduce evidence of a prior or contemporaneous agreement that contradicts a later integrated writing.
Statute of Frauds - UCC
- Merchant’s confirmatory memorandum
- Goods accepted and paid for
- Custom-made goods
- Party admission of contract information
II. 3rd Party Beneficiary
- Performance by the promisor will benefit a third party. 3PB status arises when the designee assumes the duties of the delegator to perform to the obligee.
- Privity
- Intent to benefit
- Classification
- Vesting
- Defenses
Assignment
- Transfer of a right under a contract to a third party. The assignor indicates a present intent to divest himself of a right and set them up in an assignee.
- Privity - contracting parties must be in privity. Exception - assignments.
- Right Assignable - an assignment will be denied where it would materially vary the risk or duty of the obligor (not too personal).
- Valid Present Assignment - assignor must have a present intent to transfer an existing contractual right.
- Effect of Valid Assignment - the assignee has the same rights as the assignor under the contract.
- Defenses.
Delegation
- Authorization to another to render performance of a legal duty.
- Is Duty delegable - a duty is delegable if it does not materially affect the obliges bargain to require that a stranger’s performance be accepted ( too personal/prohibited by the K).
- Assumption of Duties - an assumption is a promise given for consideration to perform another’s duty.
- Effect - Delegee is responsible. If the delegee does not perform, the delegator is secondarily liable.
- Novation - Mutual assent to substitute a new 3P agreement.
III. Performance
1. Covenant v. Conditions
Covenant - Is an absolute duty to perform (failure to perform equates to breach).
Condition - A condition makes performance obligatory only when the conditions occur. Concurrent conditions occur simultaneously, but each functions as a condition precedent to the other.
a. Type
1. Express
One in which the parties have shown their agreement by words.
- Implied in Fact Contract
A contract is based on a tacit promise, inferred when conduct creates a contract, a benefit was received that could have been refused, and it would be fair to presume payment was expected.
- Implied in Law
A condition not expressly mentioned in the contract is imputed by law from the nature of the transaction or from the parties’ conduct.
b. Satisfied
Can be viewed subjectively, but in good faith. Even if objectively satisfactory by a reasonable person, the client decides his own subjective satisfaction.
- Complete Performance
A condition can be satisfied by complete performance.
- Substantial Performance - Requires two of three:
- Payment in whole or in part
- Possession; and or
- Valuable Improvements
c. Excuse - SWAP DIVE
S. Substantial Performance
W. Waiver - can be implied by conduct, can be retracted unless detrimental reliance
A. Anticipatory Repudiation
It occurs when a party communicates that they are unable or unwilling to perform before the performance is due.
- Treat the anticipatory repudiation as a breach and sue immediately.
- Suspend performance and wait to sue when performance is due.
- Treat the repudiation as an offer to rescind/contract as discharged.
- Ignore and urge performance.
P. Prevention
When either party wrongfully prevents or hinders the occurrence or happening of a condition.
D. Divisibility
The court will allow the plaintiff to recover the sections of the K completed, and conditions will be satisfied for each complete part. A K is divisible where:
- The K can be divided into two or more parts
- Division will still give the party essentially what he bargained for
- Price can be determined per unit
- Plaintiff was not calling for performance of the whole.
I. Impossibility of Performance
Impossibility is an excuse for the nonperformance of duties under a contract, based on a change in circumstances, the nonoccurrence of which was an underlying assumption of the contract, that makes the performance of the contract impossible.
V. Voluntary Disablement
Anticipatory repudiation through conduct.
E. Estoppel
Before the condition occurs based on the promisor’s detrimental reliance.
- Can be implied through conduct.
- Reasonable person test employed.
- Revocation allowed unless promisor changes position.
Adequate Assurances
A party with reasonable goods for insecurity regarding performance may request adequate assurances.
IV. Discharge of Duty - I’M FOR SANDI
I. Impossibility
I. Impossibility discharges performance if it would be objectively impossible to perform due to unforeseen circumstances.
M. Modification
M. Under CL, the contract modifications must be supported by consideration. Under UCC, consideration is not required for contract modifications in good faith.
F. Frustration of Purpose
F. Frustration of the purpose of discharge performance under a contract if the purpose of the contract no longer exists. Performance is excused.
- The principal purpose is substantially frustrated.
- By an unforeseeable supervening event; and
- Both parties knew the purpose of formation.
O. Occurrence of Condition Subsequent
O. Will discharge duty to perform.
R. Rescission
R. Mutual agreement by parties terminates their K.
S. Substituted Contracts
S. A second separate contract that alters the first K. Majority requires new consideration: rights given up under the original K.
A. Accord and Satisfaction
A. An accord is an executory agreement intended to compromise an existing obligation. Satisfaction is the performance of the accord.
N. Novation
N. When all parties to a contract agree to release a party to a contract and substitute a third party in their place.
D. Defense to Formation
D. Mutual mistake, lack of consideration, illegality, capacity.
I. Impracticability
I. The defense of impracticability is available when an event occurs after contract formation that is unanticipated by both parties making the performance unreasonably difficult or expensive.
V. Breach
A contract breach occurs when a party fails to perform.
- Conditions precedent are satisfied.
- Time to perform arrives; and
- Performance is not discharged
Major Breach
Excuses injured party’s counter-performance and allow for the right to damages.
Minor Breach
If a party gains the breach does not relieve the aggrieved party of performance under the contract; it merely gives them a right to damages for a minor breach.
Material Breach
If a party does not receive the substantial benefit of their bargain, the breach is material and:
- They are no longer obligated to continue performance under the terms of the contract, and
- Will have an immediate right to all remedies for breach of the entire contract, including total damages.
VI. Remedies
General
Loss of expectancy under contract. The contract market price differential at the time of the breach.
Special - Consequential
Compensation given for only those injuries that the D at the time contract was made had reason forsee as a probable result from his breach.
Liquidated Damages
Provisions in contracts that set the number of damages in advance in even of possible losses.
Expectation Damages
These damages include all expected profits that would have been realized if the contract was fully performed by the breaching party.
Reliance Damages
If a plaintiff’s expectation damages are too speculative to measure, they may elect to recover based on their reasonable reliance on the contract.
Avoidable Consequence Rule
P cannot recover for damages that he could have avoided by reasonable efforts on his part.
Incidental Damages
Incidental damages are expenses a non-breaching party incurs as a result of a breaching party’s breach.
Quasi-Contract
When there is a failed contract, the defendant must make restitution to the plaintiff.
- Plaintiff confers a non-gratuitous benefit to the defendant.
- The defendant knows the plaintiff’s expectation because they knew of the benefit and did not decline.
- The defendant would be unjustly enriched if they retained the benefit.
Recission/Restitution
Recession - purpose is to undo the contract
Restitution - used to prevent unjust enrichment.
Specific Performance
*Christina Aguilar Earns Much Cash Dancing Erotically
C - Valid Contract A - Adequacy of Legal Remedy E - Enforceability of Decree M - Mutuality of Remedy C - Conditions (Satisfied) D - Defenses(unclean hands, Laches, BFP) E - Equitable Conversion (land only)
Mitigation
A party to a contract has an obligation to avoid damages to the extent possible by taking steps to prevent loss when such steps do not involve undue risk, expense, or inconvenience.
Unconscionability
A contract may be void where the provisions are one-sided and that they are unconscionable at the time of formation. Applies where one party has unequal bargaining power.
Time of the Essence
Failure to perform by a specified date is generally not deemed to be a material breach unless the contract contains a specific time is of the essence clause.
UCC Perfect Tender Rule
A seller must deliver conforming goods. The smallest non-conformity is a breach, where the buyer may reject all or a portion of the goods. Two exceptions:
- If a seller has a right to cure
- Installment contracts
Non-Conforming Goods
Upon receiving non-conforming goods, the buyer may sell the goods in a public or private sale but must notify the seller beforehand.
Promissory Estoppel
A plaintiff can pursue damages when.
- The plaintiff reasonably and foreseeable relied to their detriment on the promise.
- Th promisor should have reasonably expected a change in position in reliance on that promise.
- Enforcement of the promise is necessary to avoid injustice.
Defenses to Formation
- Statute of Frauds
- Unconscionability
- Adhesion Contracts
- Incapacity
- Mistake
- Illegality
- Misrepresentation
- Ambiguity
- Fraud
- Duress
- Parol Evidence Rule
Statute of Frauds
- Marriage - SM
- Real Property - PP
- Debt of Another - MPD
- One Year - FP
- Goods $500 or More - RG
3rd Party Beneficiary
- Define
- Privity
- Intent to Benefit
- Classification
- Vesting
- Defenses
Assignment
- Define
- Privity
- Right Assignable
- Valid Present Assignment
- Effect of Valid Assignment
- Defenses
* Sub Assignment
* Successive Assignment
Delegation
- Define
- Is Duty Delegable?
- Assumption of Duties?
- Effect
- Novation
Performance
- Covenant v. Conditions
- Condition
a. Type - Express
- Implied in Fact
- Implied in Law
b. Satisfied - Complete Performance
- Substantial Performance
- Divisibility
c. Excuse - SWAP DIVE
