Contracts Flashcards
Acceptance
Acceptance is an objective manifestation of mutual assent.
Any reasonable manifestation is appropriate unless the terms of the acceptance have been prescribed by the offeror (or by an invitation for offers).
Industry Custom Evidence
Industry custom evidence is appropriately introduced where there is ambiguity to the terms of the contract or the contract is silent on the matter. (Parole Evidence Rule).
Absent such ambiguity or silence, it is unlikely that industry custom will be admitted, let alone controlling.
Omission of Terms
A contract does not fail for indefiniteness so long as the material terms are provided by the parties.
UCC contracts require only clarity of quantity.
Common Law contracts must have more material terms provided (e.g. price) but may still omit some non-material terms and maintain validity (e.g. timeline for payments).
Mailbox Rule
Acceptance is effective upon dispatch. It does not need to reach the offeror to be effective.
The mailbox rule will not apply when the acceptance is sent after a rejection - only when acceptance is sent before a rejection.
Knock-Out Rule
When conflicting terms are proposed by merchant parties, each term nullifies the other (“knock out”) and defers to the UCC gap-filler to provide the term.
Additional Terms in Acceptance
Non-Merchant party:
An additional term is NOT an acceptance, because it violates the mirror-image rule. It is instead a counter-offer (rejection + new offer).
2 Merchants:
An additional term is automatically included in the contract UNLESSS
1. the term materially alters the original contract
or
2. offer expressly limits acceptance to terms offered
or
3. offeror objects to new terms within a reasonable time
If 1 of the 3 exceptions apply, then the additional term is discarded and the parties are bound to the original contract.
Frustration of Purpose
The doctrine of frustration of purpose applies to unexpected events that destroy a party’s purpose for entering into a contract. Performance does not need to be impossible.
The party claiming frustration cannot be responsible for the event that frustrates the purpose.
The contract cannot have contemplated/anticipated the frustrating event.
Warranty of fitness for a particular purpose
A warranty for fitness of a particular purpose is a warranty that is implied whenever the seller knows how the buyer will use the product and the buyer relies on the seller’s expertise/recommendations.
The seller does not need to be a merchant, nor does the merchant need to be dealing in his regular goods to be subject to the implied warranty of fitness for a particular purpose.
This implied warranty CAN be disclaimed if it is conspicuously done in writing. The specific words “fitness for a particular purpose” do NOT need to appear in the writing.
Implied-In-Law Contract (“Quasi Contract”)
An implied in law contract exists when one party confers a benefit on the other AND the party has a reasonable expectation to be compensated for that benefit.
Failure to compensate the party would lead to unjust enrichment.
- plaintiff has conferred a measurable benefit
- plaintiff acted without gratuitous intent
- it would be unfair to let the defendant retain the benefit because either 1. the defendant had the opportunity to refuse the benefit or 2. emergency circumstances compelled the plaintiff to confer the benefit before the defendant had an opportunity to refuse.
Modifications (UCC)
The UCC does not require consideration for modifications. The UCC does not follow the pre-existing duty rule.
The UCC only requires good faith for modifications.
However, if the modification either keeps the contract within the scope of the statute of frauds or puts it there, then the modification MUST be in writing. Otherwise, it will fail.
Common law: $500 or more
Michigan: $1,000 or more
Good Faith Purchaser Rule
A buyer who does not obtain good title can confer good title to a good faith purchaser. This means that if B stole from A, B does not have good title. However, if C buys from B, and does not know that the item was stolen, then C has good title - because he is a good faith purchaser.
If the purchaser does know that there is no good title, then the good faith purchaser rule will not protect the purchase. The original and true title owner can reclaim the good from the bad-faith purchaser.
Risk of Loss (UCC) Shifts from Seller to Buyer
NON-CARRIER:
Non-Merchant seller: when the seller tenders
Merchant seller: when buyer takes possession (but if the buyer breaches contract, then the risk of loss passes to the buyer for any deficit in the seller’s insurance)
CARRIER:
Shipment Contract:
1. Seller gives possession to carrier
2. seller makes the appropriate contract for shipment
3. seller notifies the buyer that goods have been shipped
(Michigan assumes that, unless otherwise stated, all carrier contracts are shipment contracts)
Destination Contract: When the seller tenders goods to the buyer at the destination itself
