Contracts Flashcards
Consideration: What are the rules for modification under the common law and Article 2?
Under general contract law, a contract can’t be modified unless the modification is supported by new consideration. However, some courts permit modification without consideration if: (1) the modification is due to circumstances that were unanticipated by the parties when the contract was made and (2) it is fair and equitable. This usually means that a party encountered difficulties in performing bordering on impracticability.
Under the UCC, consideration isn’t necessary to modify; all the parties need are good faith promises of new and different terms. Good faith means there must be a legitimate commercial reason for the modification.
Defenses: What is the defense of duress and undue influence?
Contracts induced by duress or undue influence are voidable and may be rescinded as long as they are not affirmed.
Withholding something someone wants or needs will constitute economic duress if: (i) the party threatens to commit a wrongful act that would seriously threaten the other contracting party’s property or finances; and (ii) there are no adequate means available to prevent the threatened loss.
Elements of undue influence are: (1) undue susceptibility to pressure by one party, and (2) excessive pressure by the other party.
Termination of Offer: When is an offeror entitled to revoke an offer at will?
An offeror is entitled to revoke an offer at will any time before acceptance, even if he has promised not to revoke for a certain time, unless an exception applies which limits the offeror’s power to terminate. A revocation is generally effective when received by the offeree.
Termination of Offer: What are the most common limitations on an offeror’s power to revoke?
Option contract: One way an offeror’s power to revoke may be limited is when an option contract is present. An option is a distinct contract in which the offeree gives consideration for a promise by the offeror not to revoke an outstanding offer.
Merchant’s Firm Offer under Article 2: Another way an offeror’s power to revoke may be limited is if the offeror has made a merchant’s firm offer under Article 2. (1) If a merchant, (2) offers to buy or sell goods in a signed writing, and (3) the writing gives assurances that it will be held open the offer is not revocable for lack of consideration during the time stated. Under Article 2, if the term of an offer assuring that the offer will be held open is on a form supplied by the offeree, the term must be separately signed by the offeror to be enforced by a firm offer.
Detrimental Reliance: When an offeror could reasonably expect that the offeree would rely to her detriment on an offer, and the offeree does so rely, the offer will be held irrevocable as an option contract for a reasonable length of time.
Breach: What is the duty of each party to render performance?
In every contract, the duty of each party to render performance is impliedly conditioned on the other party rendering his performance or making a tender of his performance.
Breach: When is the condition of complete performance excused in common law contracts?
In contracts not involving the sale of goods, the condition of complete performance may be excused if the party has rendered substantial performance.
Breach: What are the rules for determining if performance is substantial?
The rules for determining whether performance is substantial are the same as those for determining whether a breach is minor or material: If the breach is minor, performance is substantial; if the breach is material, performance is not substantial.
Breach: What do courts look at in determining whether a breach is material (performance not substantial) or minor (performance substantial)?
To determine whether a breach is material, the court looks at: (i) the amount of benefit received, (ii) the adequacy of damages, (iii) extent of performance, (iv) hardship to the breaching party, and (v) whether the breach was negligent or willful.
Breach: What is the rule for timeliness of performance in common law contracts?
A reasonable delay in performance is usually considered a minor breach unless the nature of the contract is such as to make performance on the exact day of vital importance or the contract, by its terms, provides that time is of the essence.
Breach: What happens when there is a material breach of a divisible contract?
If a contract is divisible, a party who has performed one or more parts is entitled to collect the contract price for those parts even if it breaches the other parts. However, the nonbreaching party has a cause of action for each of the unperformed units and may withhold counter-performance for those units.
For a contract to be divisible: (i) the performance of each party must be divided into two or more parts under the contract, (ii) the number of parts due from each party must be the same, and (iii) the performance of each part by one party is agreed on as the equivalent of the corresponding part from the other party.
