Contracts Flashcards
1
Q
Contracts choice of law
A
- Services or real estate: common law
- Goods: UCC
- Mixed: both if divisible, otherwise apply predominant purpose test
2
Q
Offer requirements
A
- Commitment by the offeror: manifestation of present intent to be bound
-
Communication to a specific oferee
- Exception for reward offers
- c.f. advertisements, which are usually treated as an invitation to receive offers from the public
-
Definite and essential terms
- Common law: parties, subject matter, price, quantity
- UCC: quantity
3
Q
Termination of an offer
A
-
Revocation by the offeror
- Express or constructive retraction
- Effective upon receipt by the offeree
-
Rejection by the offeree
- By words, conduct, or counteroffer
- Effective upon receipt by the offeror
- Lapse of time
-
Operation of law
- Death, destruction of the subject matter, supervening illegality
4
Q
Methods of accepting an offer
A
-
For unilateral contracts
- By complete performance (offeree must be aware of and motivated by offer)
-
For bilateral contracts
- By return promise
- By beginning performance
5
Q
Mirror image rule
A
At common law, any change in terms will be a rejection and counter offer
6
Q
UCC acceptance by return promise
A
- Acceptance including a change in terms is valid unless agreement to the changed terms is made a condition of acceptance
- If not, terms are a proposal for change to the contract
- For merchants, new/different terms control unless:
- The original offer limited acceptance to its terms
- They materially alter the offer
- The offeror does not object within a reasonable time
- Knock-out rule applies
7
Q
Knock-out rule
A
- When both parties are merchants: terms in a purported acceptance that conflict with original terms will knock one another out
- Court will replace with a reasonable gap-filling term
8
Q
UCC acceptance by performance
A
- Shipment of conforming goods
- Shipment of non-conforming goods, unless buy is notified that the good were sent as an accommodation
- In this case, there is both an acceptance + breach
9
Q
Consideration
A
A bargained-for exchange of legal detriment
10
Q
Situations without consideration
A
- Illusory promises: only one party is bound to perform and performance is discretionary
-
Gratuitous/gift promises
- c.f. executed gift (legally biding intent to gift + actual/symbolic delivery)
- May be enforced by promissory estoppel
-
Past consideration
- But, modern trend is to allow recovery to prevent injustice (quasi-K)
11
Q
Substitutes for consideration
A
-
Promissory estoppel/detrimental reliance:
- Reliance on promise is foreseeable and reasonable
- Promisee in fact relies on promise
- Justice requires enforcement
- Quasi-contract: implied in law to avoid unjust enrichment, promisee gets value of the benefit they conferred
12
Q
Requirements for modification
A
- Common law: new consideration
- UCC: good faith, but no additional consideration
13
Q
Parol Evidence Rule
A
- If contract is fully integrated, evidence of prior or contemporaneous communications that vary or supplement terms of the writing is not admissible
- Evidence that explains meaning of terms may be admissible
- If contract is only partially integrated, evidence of prior or contemporaneous communications that vary the terms of the writing is not admissible
- Evidence that supplements terms or explains meaning of may be admissible
14
Q
Effect of a merger clause
A
Presume that a writing is completely integrated.
15
Q
Exceptions to Parol Evidence Rule
A
- Attacking validity of written agreement
- Explaining terms
- Proving the existence of an oral condition precedent
Note: PER does not apply to subsequent communications or modifications
16
Q
UCC warranties
A
-
Express warranty: a promise, description, or sample that is a basis of the bargain
- General disclaimer for an express warranty is not valid
- Opinion ≠ warranty
-
Implied warranty of merchantability
- “As-is” disclaimer okay if verbal or written so long as “merchantability” term used
- If in writing, the disclaimer must be conspicuous
-
Implied warranty of fitness for a particular purpose: if seller knows and buyer relies
- As-is disclaimer valid if conspicuous writing
17
Q
Defenses to formation
A
-
Absence of mutual assent:
-
Mutual mistake (void)
- Mistaken as to a basic assumption that materially affects performance
-
Unilateral mistake (voidable)
- Only voidable by mistaken party only if non-mistaken party knew or had reason to know of misunderstanding
-
Mutual mistake (void)
- Absence of consideration (no K)
- Misrepresentation/fraud (voidable)
- Duress or undue influence (voidable)
-
Incapacity (voidable)
- Voidable only by party lacking capacity at time of contract. If they later gain capacity (e.g. turn 18) may be deemed to have ratified and thus become bound
- Exception: recovery of reasonable value for necessities
18
Q
Defenses to enforcement
A
-
Illegality (void)
- Of consideration or performance
-
Unconscionability (unenforceable)
- Standard: “shocks the conscience” at the time of contracting
- Statute of Frauds (unenforceable)
19
Q
When does statute of frauds apply
A
M. SOUR:
- Marriage
- Surety
- Exception: guarantor’s primary purpose is own economic motivation
- One-year
- UCC > $500
- Exception: merchant confirmation, specially manufactured goods
- Real property
- Exception: part performance
20
Q
Part performance (real estate)
A
A land sale will be enforceable in the absence of a written contract if purchaser can show 2+/3:
- Payment
- Possession
- Significant improvements to land
21
Q
Merchant conformation
A
An agreement for the sale of > $500 of goods (UCC) will be binding without written contract, provided that
- Both parties are merchants
- Seller sends a written a memo of agreement
- Recipient has reason to know of contents
- Recipient does not object within 10 days
Note: agreement is only enforceable to the quantity in written memo
22
Q
Rights of third-party beneficiaries
A
-
Intended beneficiaries: can sue on K
-
Donee benficiary: intended recipient of a gift promised by K
- Can only sue promisor unless promisee told 3PB about the gift and 3PB detrimentally relies
-
Creditor beneficiary: receives the benefit of the contract as repayment of a debt owed by a party
- Can sue either promisor or promisee (but m ay only recover once)
-
Donee benficiary: intended recipient of a gift promised by K
- Incidental beneficiary: cannot sue on contract
Note: Contract modification okay until rights in 3PB vested, otherwise notice and consent of 3PB are required
23
Q
Rights of third-party beneficiaries
A
-
Intended beneficiaries: can sue on K
-
Donee benficiary: intended recipient of a gift promised by K
- Can only sue promisor unless promisee told 3PB about the gift and 3PB detrimentally relies
-
Creditor beneficiary: receives the benefit of the contract as repayment of a debt owed by a party
- Can sue either promisor or promisee (but m ay only recover once)
-
Donee benficiary: intended recipient of a gift promised by K
- Incidental beneficiary: cannot sue on contract
Note: Contract modification okay until rights in 3PB vested, otherwise notice and consent of 3PB are required
24
Q
Assignment
A
- Occurs when: right to contract benefit is transferred to a 3P after contract formation
-
Rights: Party to K may only assign rights they could enforce themselves;
“assignee steps into the assignor’s shoes” - Effects: establishes privity between obligor and assignee; removes privity between obligor and assignor
- Liabilities: assignee may sue obligor and assignor
25
Q
Delegation
A
- Occurs when: duties to perform on contract is transferred to a 3P after contract formation
- Proper when: generally proper, unless involves personal judgment or skill
- Obligations: Delegatee agrees to satisfy performance obligations of delegator
-
Liabilities:
- Delegator can still be sued by obligee (unless novation).
- Delagatee can only be liable/compelled to perform if receive consideration for delegation
26
Q
Conditions that excuse performance
A
- Anticipatory repudiation
- Prospective inability to perform
- Estoppel
- Waiver
27
Q
Conditions that satisfy performance
A
- Substantial performance
- Complete performance
- Performance on a divisible contract
- UCC: perfect tender and delivery
28
Q
Conditions that may discharge an existing duty
A
- Modification
- Recission
- Impossibility
- Impracticability
- Frustration of purpose
- Accord and satisfaction
- Release/novation
29
Q
Conditions that create impossibility
A
- Illegality
- Death of necessary person
- Destruction of subject mater
Note: temporary impossibility merely suspends performance
30
Q
Impracticability
A
- Performance becomes impracticable
- Due to an unanticipated event
- Party seeking to discharge duty is not at fault
31
Q
Frustration of purpose
A
- An unforeseeable event frustrates the principal purpose for entering the contract
- The party seeking discharge did not cause the intervening event
32
Q
Accord and satisfaction
A
- Accord: an agreement between parties to accept alternate performance to discharge a pre-existing duty between them
- Satisfaction: performance of new terms
Note: accord can also be satisfied by performing on original agreement (c.f. modification)
33
Q
Conditions that prevent an offeror from revoking their offer
A
- Option (offeree must pay consideration to keep open)
-
Merchants/UCC: firm offers
- Offer signed in writing to keep offer open for time stated
- If no time stated, reasonable time < 3 months
- Detrimental reliance
- Part performance
Note: after option and firm offer periods expire, offeror must still affirmatively revoke original offer
34
Q
Novation
A
- All parties expressly agree to release and substitute a party
- No writing required
35
Q
Common law breach
A
-
Material breach:
- Party does not receive the substantial benefit of the bargain
- May suspend performance and pursue remedy
-
Minor breach:
- Party receives substantial benefit of the bargain
- Must continue to perform, but may seek damages
36
Q
Anticipatory repudiation
A
An unequivocal statement/conduct indicating that a party will commit a breach can be treated as material breach.
- Failure to provide reasonable assurances within 30 days = repudiation
- Repudiating party may retract repudiation, unless other party
- Acts in reliance on repudiation
- Signals acceptance of repudiation
- Brings suit
-
Effects: aggrieved party may
- Treat as breach and sue immediately
- Early suit only an option if nonbreaching party has performance remaining besides payment
- Wait until performance date, and then sue
- Treat as breach and sue immediately
37
Q
UCC breach
A
-
Perfect tender: if goods or delivery are defective in any way, buyer can sue for breach
- If buyer rejects nonconforming goods, seller can cure if time for performance remains
- Does not apply to installment contracts; apply substantial performance standard instead
- Warranty: breach occurs when the goods fail to fulfill the terms of the warranty
38
Q
Damages
A
-
Expectation damages: put the non-breaching party where it would have been had the promise been performed
- Expectation damages must be reasonably foreseeable at K formation
- Also includes incidental and consequental damages, if reasonably foreseeable at K formation
- Reliance damages: If expectation damages too speculative, cost of performance made in reliance of K
- Restitution damages: value of the benefit conferred (only if breach was not willful)
-
Liquidated damages: agreed-to damage term in K
- Enforceable only to compensate for breach
- Intended to be a liquidated damages clause, not a penalty
- Reasonable estimate of damages in regards to anticipated harm
Note: Duty to mitigate. Non-breaching party can’t recover avoidable damages, has a duty to make reasonable efforts to mitigate.
