Contracts Flashcards
What are the elements of a quasi-contract (implied-in-law K)?
- 1) P has conferred a benefit to D
- 2) P reasonably expects to be paid
- 3) D knowingly accepted benefit
- 4) D would be unjustly enriched if P is not compensated
What are ways to revoke an offer?
1) Express revocation by offeror
2) Constructive revocation
3) Offeree rejects offer
4) Counteroffer
5) Offeror dies/becomes incapacitated
6) Lapse of time or reasonable time passes
7) Subject matter of offer becomes destroyed or becomes illegal
Are advertisements considered to be offers?
Usually no. Ads are instead considered as invitations to deal bc they usually fail to confer a power of acceptance to the other party. But an exception applies if ad is very specific/leaves nothng open to negotiation
Firm Offer
UCC > applies only to merchants
Firm offer must be (1) written (2) signed by merchant and (3) contain an explicit promise not to revoke
Option K
A promise to keep an offer open w/ given consideration
mirror image rule
CL: acceptance must mirror the offer. An acceptance that contains additional terms will be treated as a rejection and counteroffer
§2-207 when both parties are merchants
K is formed with additional terms unless:
* Additional terms materially alter the offer
* Offeror expressly limits acceptance to the offer’s terms or
* Offeror objects within a reasonable time
If any of the above apply, the K will still be formed, just w/out the additional terms
§2-207 when both parties are NOT merchants
- K is formed without additional terms
- Additional terms are considered mere proposals to modify the K
Mailbox rule
An acceptance sent by mail is effective when the letter is sent
Does the mailbox rule apply to rejections, revocations, counteroffers, UCC firm offer?
No.
A rejection sent by mail is effective when?
A rejection sent by mail is effective only upon receipt
What are the defenses to formation [DUMMM-IS-I?]
Duress
Unconscionability
Misunderstanding
Mistake/Ambiguity
Misrepresentation/Fraud/Non-disclosure
Incapacity
Statute of Frauds
Illegality
Duress (2 types)
A threat that deprives a party from making a meaningful choice to contract
Economic duress : when one party makes threats to induce another party to contract or modify a contract
Undue influence: arises when a party puts very intense sales pressure on another party, who often seems weak-minded or susceptible to high-pressure sales tactics.
Unconscionability
A K that shocks the conscience. The K so unfair to one party that no reasonable person in that party’s position would have agreed to it.
Two types:
- Procedural: a defect in the bargaining process itself usually
- A hidden (surprise) term or terms difficult to understand
- An absence of meaningful choice (take-it-or-leave-it contract, no other contracting option) when parties have greatly unequal bargaining power
- Substantive: substance of contract itself is a rip-off, unfair
- One-sided terms
- Gross disparity in value of consideration exchanged
(Some jurisdictions require both to be present for deal to be struck down. Others only require one to be present)
Mistake
Mutual Mistake (affecting both parties): Allows the adversely affected party to rescind if:
* (1) There is a mistake of fact, existing at the time the deal is made
* (2) mistake relates to a basic assumption of K and has a material impact on the deal
* (3) the impacted party didn’t bear the risk of mistake
Unilateral mistake (affecting one party). Allows the adversely affected party to rescind if:
(1) party can prove all the elements of mutual mistake AND
(2) mistake would make K unconscionable OR other side knew of/had reason to know of/caused the mistake
Impracticability/Impossibility
a party’s duty to perform may be discharged if (1) an unforeseeable event occurs that makes performance impractical or impossible (2) the nonoccurrence of the event was a basic assumption on which the contract was made, and (3) the party seeking to discharge the contract was not at fault.
frustration of purpose
applies when an unexpected event occurs that destroys a party’s purpose in entering into the K, even if performance of the K is not rendered impossible.
If the unexpected event is not the frustrated party’s fault and nonoccurrence of the event was a basic assumption of the contract, the frustrated party is entitled to rescind the contract without paying damages.
Parol Evidence Rule
CL
* Complete integration: PER bars evidence of prior agreements that supplement or contradict the K. The use of a merger clause is generlly proof of complete integration.
* Partial Integration: Evidence used to supplement the terms of a written K is admissible, but evidence that contradicts the K is not.
UCC
* Presumes that a K for the sale of goods is only partially integrated (unless K contains merger clause indicating otherwise). Evidence that supplements the K is admissible but evidence that contradicts it is not.
What are the exceptions to the parol evidence rule?
To show:
- Whether writing is integrated (partially or completely)
- Meaning of an ambiguous term
- Defense to contract formation or enforcement (fraud, duress, mistake, misrepresentation)
- Grounds for granting or denying remedy (rescission, reformation)
- Modifications (oral or written) made after the writing
- Condition precedent to the existence of a contract
What is a major breach (material breach)? Is the non-breaching party still required to perform?
- Material breach occurs when one party’s failure to perform under K substantially deprives the other party of the benefit they bargained for
- Material breach by one party excuses performance by the other
- The breaching party can only recover in restitution for any benefit conferred on the nonbreaching party, minus damages for the breach
What is a minor breach (substantial performance)? Is the non-breaching party still required to perform?
- A minor breach occurs if the breaching party has substantially performed, and the non-breaching party will receive the substantial benefit of the bargain.
- In a minor breach, the non-breaching party is still obligated to perform, but can still sue for damages
- The substantially performing party can generally recover the contract price minus any cost that the nonbreaching party incurred to receive full performance
Nonbreaching party can only recover expectation damages
Is a failure to perform by time stated in K considered a material breach? What about if there is a “time is of the essence” clause?
- Failure to perform by time stated in K is not a material breach if performance is rendered within a reasonable time after the time stated
- If a “time is of the essence” clause is included in K, making timely performance essential, then failure to perform by that time is a material breach
If a party adds an express condition to forming a K and then decides to waive it, can the other party refuse to K?
No. The party who added the express condition did it for their own protection/benefit. If they decide to waive the condition (either expressly or through conduct like continuing to perform), that’s ok and the K is formed.
When is an assignment/delegation not permitted?
(1) expressly prohibited by K or
(2) other contracting party has a substantial interest in having delegating party perform (ex: personal services K involving taste or skill)
What is specific performance and what types of Ks is it limited to?
- When a non-breaching party asks a court to order the breaching part to perform a K.
- Specific performance is typically limited to Ks involving real estate and sale of unique goods
What are the requirements for a court to mandate specific performance?
- (1) there must be a valid K
- (2) the terms of the K must be certain/clear enough to allow a court to make an order
- (3) the non-breaching party has satisfied any conditions
- (4) money damages are inadequate
- (5) it is feasible for the court to enforce and supervise the breaching party’s performance and
- (6) no defenses exist
The court will not grant specific performance if D can assert what?
a court will not grant specific performance if D can assert laches or unclean hands against P
* laches: P waited an unreasonably long time to seek specific performance and the delay resulted in prejudice to D
* unclean hands: P engaged in unethical or immoral acts relating to the K
Restitution
A breaching party is entitled to recover in restitution the reasonable value of the benefit conferred on the non-breaching party in the way of part performance, minus any damages the non-breaching party suffered due to the breach
Reformation
when a court modifies a written K because K fails to reflect the intent of the contracting parties
A court may reform a written K due to mutual mistake if:
- (1) there was a prior agreement
- (2) the parties agreed to put the prior agreement in writing and
- (3) there is a difference between the prior agreement and the writing due to mistake
