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Introduction to the MEE > Contracts > Flashcards

Contracts Flashcards

1
Q

UCC Contracts

A

Sale of Goods

Rules for merchants and non-merchants.

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2
Q

What is a merchant?

A

Merchants are parties who deal in goods of the kind; or

By their occupations hold themselves out as possessing knowledge or skill concerning the goods involved in the transaction.

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3
Q

Common Law Contracts

A

Real Property and Services.

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4
Q

Requirements for a Valid Contract

A

(1) One party must make a binding offer to the other; (2) the offer must be accepted by the other party; and (3) there must be consideration.

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5
Q

Offer

A

An indication of willingness to perform some obligation or refrain from doing something (enter into a bargain).

Terms must be sufficiently certain.

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6
Q

Inquiries or Invitations to Make an Offer

A

Are NOT an offer.

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7
Q

Advertisements

A

Generally, not offers, but rather, invitations to make offers.

For an advertisement to be an offer the advertisement should (1) target a specific or limited audience, (2) have definite terms, and (3) require the offeree to do something.

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8
Q

Offer Termination

A

When it has: (1) lapsed; (2) been revoked; (3) been rejected; (4) met with a counteroffer; or (5) by operation of law.

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9
Q

Lapses

A

No acceptance within a reasonable time.

What constitutes a reasonable time is a question of fact.

Use 30 days as a default rule.

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10
Q

Offers are Freely Revokable

A

Party making the offer can revoke any time prior to acceptance.

Revocation prior to acceptance precludes the formation of a contract.

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11
Q

Rejection and Counteroffer

A

Offeree that communicates rejection of an offer or responds with counteroffer terminates the original offer.

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12
Q

Rejection Meaning

A

A manifestation of intent not to accept an offer.

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13
Q

Operation of Law

A

Death of the offeror or even that makes contract impossible terminates an offer.

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14
Q

Firm Offer Rule
-Irrevocable Offers-

A

(1) Signed written offers (2) promising to be irrevocable and (3) made by a merchant are revocable for time stated but not more than 3 months.

Since the firm offer must be made by a merchant, this will only arise under the UCC where a sale of goods is involved.

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15
Q

Option Contract
-Irrevocable Offers-

A

Parties exchange consideration for the promise to keep an offer irrevocable for an agreed time – if not time stated than a reasonable time.

Unless terms recite otherwise, an option contract is not created until RECEIPT of the acceptance.

Can appear under the UCC or Common Law.

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16
Q

Part Performance
-Irrevocable Offers-

A

An offer that invites performance as a reasonable method of acceptance makes the offer irrevocable upon partial performance.

Mere preparation is not enough.

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17
Q

Detrimental Reliance
-Irrevocable Offers-

A

A detrimental reliance that the offer will remain open.

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18
Q

Counteroffer Meaning

A

If you propose a change to the terms of an original offer, you are making a new offer – a counteroffer; there can be no contract until the counteroffer is accepted.

An offer made by the offeree to the offeror that concerns the same subject matter as the original offer but differs in its terms.

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19
Q

Acceptance

A

Requires a meeting of the minds (mutual assent).

May arise by communication or performance.

May be express (by word of mouth or in writing) or inferred by conduct, e.g., if he receives goods and makes use of them.

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20
Q

Validity of Acceptance

A

(1) Must take place while the offer is still in force; (2) Under common law, must be on the same terms as the offer; (UCC has exceptions) (3) Must be unconditional; and (4) Must be communicated to the offeror.

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21
Q

Mirror Image Rule – Common Law

A

For an acceptance to form a contract the acceptance must be a “mirror image” of the offer.

Any deviation from the terms is a counteroffer. (an offer and acceptance with new or additional terms is an offer and a counter offer)

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22
Q

Mirror Image Rule – UCC
-One or None are Merchants-

A

Offer and Acceptance with New or Additional Terms

A contract is created according to the original terms of the offer.

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23
Q

Mirror Image Rule – UCC
-Both are Merchants-

A

Offer and Acceptance with New or Additional Terms

A contract is created that includes the new or additional terms.

Unless: (1) there is an objection; (2) the new or additional term is a material alteration; and (3) the original offer expressly says it can only be accepted as stated.

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24
Q

Acceptance by Performance

A

Creates a contract.

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25
Q

What happens if the performance deviates from the terms of the offer?

A

Non-conforming performance/ acceptance creates a contract and a simultaneous breach.

Non-conforming performance/ acceptance accompanied by written explanation creates a counteroffer.

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26
Q

Mailbox Rule

A

Acceptance of the offer is effective upon dispatch.

Revocation of offer is effective upon receipt.

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27
Q

Exceptions to Mailbox Rule

A

Does not apply where the offer states that acceptance will not be effective until received.

Does not apply where the acceptance is in response to an option contract; acceptance must be received to be effective.

Where rejection is sent before acceptance, whichever is received first controls.

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28
Q

Consideration

A

An exchange of promises to perform acts in the future.

May take the form of a commitment to pay, to perform or to surrender a right in exchange for another’s promise to act.

Promise for a promise is sufficient.

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29
Q

Inadequate Consideration

A

Past consideration is not sufficient legal consideration.

Pre-Existing Duty – if a party to a contract is under a pre-existing duty to perform, then no consideration is given for any modification of the contract and the modification is therefore voidable.

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30
Q

Consideration Principles

A

(1) A valuable consideration is required, i.e. the act, forbearance, or promise must have some economic value; (2) Consideration need not be adequate but it must be sufficient (as long as it has some economic value); (3) Consideration must move from the promisee. (4) Consideration must not be past.

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31
Q

Material Benefit Rule
-Past Consideration Exception-
(Some States)

A

A promise not supported by consideration may be enforceable if it is made in recognition of a benefit previously received by the promisor from the promise.

Does not apply (and the promise is not enforceable) if the promisee conferred the benefit as a gift, or to the extent that the value of the promise is disproportionate to the benefit conferred.

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32
Q

Terms

A

Must be sufficient such that an assent to the terms creates a contract.

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33
Q

Contract Modification
-Generally-

A

When parties change the terms of an existing contract the law regards the modification as a brand-new contract.

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34
Q

Contract Modification
-Common Law-

A

Modification requires new consideration!

Some states permit a writing to substitute for new consideration.

Some states permit modification without new consideration where the change is necessitated by unforeseen circumstances.

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35
Q

Contract Modification
-UCC-

A

Modification permitted without new consideration!

Requires good faith!

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36
Q

Unconscionability

A

Gross inequality of bargaining power, together with terms unreasonably favorable to the stronger party, may confirm indications that the transaction involved elements of deception or compulsion, or may show that the weaker party had no meaningful choice, no real alternative, or did not in fact assent or appear to assent to the unfair terms.

37
Q

Misrepresentation

A

A false statement made to encourage you to enter into a contract, but you would not have otherwise entered into the contract.

38
Q

Duress

A

Either actual violence or the threat of violence was used to make the other party enter into the contract (“sign this contract or I’ll shoot you!”).

39
Q

Undue Influence

A

Improper pressure other than violence (e.g., blackmail).

40
Q

Mistake

A

If absolutely fundamental, as it gets to the very heart of the transaction, the contract will be considered void from the outset.

Must be a mutual mistake!

41
Q

Illegality

A

Contracts that violate the law are void and unenforceable by either party.

42
Q

Statute of Frauds
MY LEGS

A

Require a writing for the following:

Marriage
Year or Longer (entrance date)
Land Sales
Executors of Estates
Goods ($500 or more)
Suretyship

43
Q

Statute of Frauds –Requirements
(Contract Specific)

A

Under the Statute of Frauds, a contract [insert] is unenforceable unless (1) referenced in a writing sufficient to indicate a contract has been made and (2) signed by the party against whom enforcement is sought.

Almost any form of signing will suffice, so long as the signer had the intention of authenticating the instrument.

44
Q

Merchant Memo Rule
-Exceptions to the UCC Statute of Frauds-

A

If, (1) within a reasonable time, (2) a signed writing in confirmation of the contract and sufficient against the sender is received, and (3) the party receiving it has reason to know its contents, it satisfies the requirements against such party unless written notice of objection to its contents is given within 10 days after it is received.

45
Q

Specially Manufactured Goods
-Exceptions to the UCC Statute of Frauds-

A

Goods not saleable in the ordinary course of business become binding when manufacturer begins production or procurement of necessary material for the Buyer.

46
Q

Performance

A

A court may deem an oral contract enforceable if the parties (or one party) has partly performed the contract.

47
Q

Admission

A

If a party admits under oath (such as in a deposition or in a court proceeding), the existence of a contract, it may then be deemed enforceable.

48
Q

Promissory Estoppel
(Detrimental Reliance)
-Quasi Contract-

A

(1) The promisor, when making the promise, should have reasonably expected that the promisee would change his position in reliance on the promise; (2) the promisee did in fact change position in reliance on the promise; (3) the change in position was to the promisee’s detriment and (4) injustice can be avoided only by enforcing the promise.

49
Q

Unjust Enrichment
-Quasi Contract-

A

One party confers a benefit on another that a reasonable person would have expected to provide consideration for.

50
Q

Warranty of Merchantability

A

Merchants who regularly deal with the goods involved in a transaction impliedly warrant (warranty of merchantability) (1) that the goods are “fit for their ordinary purpose” and (2) that they will “pass in the trade without objection”.

51
Q

Warranty of Fitness for a Particular Purpose

A

It warrants that the goods will be fit for the buyer’s particular use or purpose rather than the ordinary purpose of the goods.
To establish this warranty, the buyer must prove: (1) The seller’s expertise regarding the goods; (2) The seller’s knowledge of the buyer’s purpose for the goods; (3) The buyer’s reliance on the seller’s expertise.

52
Q

FOB Buyer’s Place of Business

A

Places risk of loss on seller while the goods are in transit.

53
Q

FOB Seller’s Place of Business

A

Places risk of loss on buyer while the goods are in transit.

54
Q

Time of the Essence

A

The mere designation of a particular date upon which a thing is to be done does not result in making that date the essence, or a “material” term of the contract.

Therefore, unless the contract explicitly states that time is of the essence, a material breach will not be found solely because a party fails to perform by the date given.

55
Q

Non-Competition Clauses

A

Public Policy disfavors them.

Enforceable if the clause is reasonable in: (1) time; (2) geography; and (3) scope.

56
Q

Installment Contracts

A

Contract sells the same goods repeatedly for the same price.

Each installment treated as its own contract.

57
Q

Divisible Contracts

A

Contract requires the same service to be repeated more than once for the same price.

Each division treated as its own contract.

58
Q

Parol Evidence
-Completely Integrated-

A

Prior to or contemporaneous agreements are inadmissible to supplement the terms of a contract under circumstances where a contract is completely integrated.

59
Q

Parol Evidence
-Partially Integrated-

A

Where contract is partially integrated contract, prior to or contemporaneous agreements are admissible to supplement the terms of a contract.

Parol evidence never permits prior to or contemporaneous agreements to contradict the terms of contract – only to explain ambiguous terms.

60
Q

Integrated Meaning

A

A written agreement is considered to be integrated if it constitutes a final expression of one or more terms of an agreement and is considered to be completely integrated if the parties adopted the writing as a complete and exclusive statement of their agreement.

61
Q

Parol Evidence
-Exceptions-

A

Fraud
Mutual Mistake
Misrepresentation
Condition Precedents

DOES NOT apply to subsequent agreements.

62
Q

Condition Precedent

A

A condition that must be met before performance is due.

Only enforceable by the party for whose benefit the condition exists.

63
Q

Condition Subsequent

A

A condition that ends the obligation to perform.

64
Q

Concurrent Conditions

A

When performance must occur simultaneously.

65
Q

Substantial Performance Rule

A

Standard of performance required to comply with real property, services and multiple delivery sale of goods contract.

66
Q

Perfect Tender Rule

A

Single Delivery Contracts under the UCC require perfect performance.

67
Q

Failure of Perfect Tender

A

If goods, or tender of delivery, fail in any respect to conform to the contract, the buyer has the right to: (i) Accept the goods; (ii) Reject the entire shipment; or (iii) accept part and reject part.

68
Q

Breach of Contract

A

Where one party breaches the contract, the other is under no further obligation to perform.

69
Q

Anticipatory Repudiation

A

A party communicates that he will not perform by the time of contract performance (can rescind if no reliance).

Non-breaching party may suspend performance and treat the anticipatory repudiation as a material breach; or wait a reasonable time for performance.

70
Q

Demand for Adequate Assurances

A

Where one party to a contract develops a reasonable belief that the other party may not perform, the party developing the insecurity may demand adequate assurance that performance will occur.

Failure to be provided adequate assurances within a reasonable time may be regarded as a breach of contract which thereby excuses further performance from the party demanding assurances.

71
Q

Retracting the Repudiation

A

A repudiating party may, under some circumstances, retract its repudiation.

But the power to retract a repudiation terminates when the aggrieved party has done any of the following: (1) cancelled, (2) materially changed his position, or (3) otherwise indicated that he considers the repudiation to be final.

72
Q

Incidental Damages

A

Any costs incurred in a reasonable effort, whether successful or not, to avoid loss (such as the cost of inspecting, storing, shipping, or insuring goods).

73
Q

Consequential Damages

A

To recover there must be shown that: (1) the breaching party knew or had reason to know the harm would result because of a breach and (2) there is a reasonable certainty as to the amount of damages.

74
Q

Punitive Damages

A

Generally unavailable unless evidence of egregious and intentional misconduct.

75
Q

Resale of Goods

A

Contract Price –Lower Resale Price + Incidental and Consequential Damages

76
Q

UCC Contract Damages
-Buyer and Seller-

A

Contract Price – Market Price + Incidental and Consequential Damages (No goods received)

Contract Price – Market Value + Incidental and Consequential Damages (Goods received but not acceptable)

77
Q

Lost Profits

A

When the difference between the contract price and the resale price fails to put the seller in as good a position as performance by the buyer would have put him in, and the seller has an unlimited supply of goods (high volume), the measure of damages is the seller’s reasonable lost profit on that contract.

78
Q

Liquidated Damages

A

To be enforceable must be: (1) if there is a breach, damages difficult to quantify and (2) the amount agreed upon must be a reasonable estimate.

79
Q

Specific Performance

A

Right to replevy goods that is available to a buyer where goods are unique or where the buyer cannot cover.

80
Q

Injunction

A

Stop the party from doing something.

81
Q

Reformation

A

Rewrite the contract.

82
Q

Recission

A

Undo or cancel the contract as if it never happened.

83
Q

Third Party Beneficiaries
-Incidental-

A

Recover nothing.

84
Q

Third Party Beneficiaries
-Intended-

A

Can recover under (1) breach of contract where the beneficiary provided consideration (creditor) or (2) under quasi contract where the done beneficiary detrimentally relied.

85
Q

Assignments

A

Contracts are freely assignable unless stated otherwise.

86
Q

Assignment of Rights Only

A

Benefits are transferred to a third party but not the obligations.

Benefit holder is only one who can bring a claim for recovery.

87
Q

Assignment of a Contract

A

A transfer of both the benefits and obligations to a third party.

Original contracting party remains secondarily liable.

88
Q

Novation

A

A complete substitution of parties that relieves the original obligated party from liability.

Introduction to the MEE (5 decks)

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