Contracts Flashcards
Offer
A manifestation of present intent to form a contract communicated to an identified offeree, which contains a definite and certain terms.
Termination of Offer - Five Methods
Words - Unambiguous words by offeror
Conduct - Unambiguous conduct by offeror
Lapse of time
Death of a party prior to acceptance
Words or conduct by offeree
Irrevocable Offers - Four methods
- Merchant Firm Offer
- Option Contract
- Unilateral Contract + Part performance
- Detrimental reliance
Merchant Firm Offer
WRITING signed by merchant that gives assurance that hte offer will be held open (not revoke) for a reasonable time, Restricted to three months.
Option Contract
Promise to keep the offer open (any duration) that is paid for (consideration required)
Unilateral Contract / Part performance
May not be revoked after performance has started. Applies when contract requires acceptance by performance.
Requirements contract
Where a buyer promises to buy from a certain seller, all of the goods that the buyer requires and the seller agrees to sell that amount to the buyer.
Applicable Law
Service contracts are governed by the common law, however, if goods are the predominant factor of the contgract and merchants are selling the goods, the UCC will govern. Goods are moveable tangible property.
Goods
Goods are moveable tangible property.
Quasi-Contract
An equitable remedy that applies whenever the application of contract law yields an unfair or inequitable result. Protects against unjust enrichment.
Valid Acceptance
A valid acceptance of a bilateral contract requires:
1) An offeree with the power of acceptance
2) Unequivocal terms of acceptance (Common: Mirror image rule)
3) communication of acceptance
Mailbox Rule
An acceptance is effective when mailed.
Improper performance as acceptance
Common Law: improper performance is a breach and acceptance
UCC: Operates as accepetance and breach unless hte seller is sending goods as an accomodation.
Consideration:
A bargained for exchange of legal detriment/benefit.
Pre-existing Duty rule
Applies to modification of existing contracts. When you are doing what you are already obliged to do no new consideration is needed.
No Pre-existing duty rule in UCC. No new consideration needed, just Good Faith
Contract Formation Defenses
Statute of Frauds
Illegality
Misrepresentation
Duress
Unconscionability
Undue influence
Mistake of fact
Public Policy
Ambiguity
Mistake of Fact
Mutual: Parties mistaken about a material aspect and the adversely affected party did no assume the risk of the mistake.
Unilateral: Generally insufficient to make a contract voidable.
Ambiguity
There will be no contract if
1) Parties use a material term that is open to at least two reasonable interpretations
2) Each parties attach different meanings to the term
3) Neither party knows or has reason to know the term is open to at least two reasonable interpretations
Statute of Frauds Contracts for Sale of Goods
$500 or more.
Exceptions: 1) Specially manufactured goods, 2) Goods that have been delivered or paid for., 3) Admission
Parole Evidence Rule
Evidence of prior or contemporaneous negotiations and agreements that contradict, modify or vary contractual terms is inadmissible if the written contract is intended as a complete and final expression of the parties.
Merger Clause
A clause that states the contract is complete on its face. Strengthens the presumption that the written document is finale. It strengthens the presumption that the contract is a complete and final expression of the parties.
AKA Intergration Clause
Parole Evidence Rule Exceptions
- Formation defects (fraud, duress, mistake, illegality)
- The existence of a condition precedent to a contract
- The party’s intent of ambiguous terms
- consideration problems
- a prior valid agreement which (as by mistake) is incorrectly reflected in the writing
- a collateral agreement if it does not contradict or vary the main contract and if it is not so closely connected as to be part of the main contract
- subsequent modification
Bilateral Contract
An offer that can be accepted by any reasonable way. A promise for a promise/
Unilateral Contract
A promise in exchange for performance.
Counteroffer
Operates as a rejection ending the original offer
Requirements Contract
When a buyer promises to buy from a certain seller, all of the goods that the buyer requires and the seller agrees to sell that amount to the buyer a valid offer has been made.
Detrimental Reliance
If an offeree has reasonably relied on the offer to his detriment the offer may be irrevocable.
Rejection
Offeree communicates to the offeror that the offeree is no longer interested in the offer.
Acceptance
A valid acceptance requires 1) an offeree with the power of acceptance, 2) unequivocal terms of acceptance and 3) communication of acceptance
Mirror Image Rule
At common law acceptance must be to a mirror image of the offer.
Mirror Image Rule is N/A to UCC.
UCC Acceptance
No mirror image required. Acceptance with additional terms is valid acceptance.
Both Merchants - New terms are part of the contract unless they materially alter the contract.
Only one party is a Merchant - New terms are proposal to the contract.
Methods of acceptance
- Bilateral Contract: Promise to perform
- Unilateral Contract: Complete Performance plus notice
- UCC 2-206: Promise or Performance, Shipment of non-conforming goods will be an acceptance and breach unless there is a letter of accommodation.
Perfect tender rule:
UCC Only
If the goods or tender of delivery fail in any respect to conform to the contract, the buyer may: 1) Reject the whole, 2) Accept the whole, 3) Accept any commercial units and reject the rest.
Conditional Acceptance
A conditional acceptance deals with situations where the offeree’s response to an offer contains additional terms and states that acceptance is conditional on those new terms. Although a conditional acceptance would then terminate the offer, the parties then conduct themselves as if there is a contract.
a. Common Law: The conditional acceptance is treated as a counteroffer, and the later conduct is treated as acceptance of that counteroffer. Thus, all the terms of the conditional acceptance are part of the contract.
b. UCC: The contract is based solely on the conduct. The conditional acceptance is not treated as a counteroffer, and is not part of the contract. Thus, the terms appearing only in the conditional acceptance are not part of the contract.
Consideration
Consideration is a legally sufficient bargained for exchange of legal detriment.
Promissory Estoppel
Requires a promise, foreseeable detrimental reliance on the promise and enforcement necessary to avoid injustice.
A substitute for consideration
Quasi-Contract
An equitable remedy in the form of fictional contract created by courts for equitable, not contractual, purposes. It is a legal substitute for consideration that, in equity, is a remedy when a contract is unfair or yields inequitable results. Protects against unjust enrichment.
Contract Defenses
Statute of Frauds
Illegality
Duress
Undue Influence
Incapacity
Misrepresentation
Unconscionability
Mistake
Incapacity
An incapacitated person may do one of the following:
1. Disaffirm a contract for a reasonable period after becoming capacitated.
2. Affirm the contract after becoming capacitated
Illegality
A contract is unenforceable if the subject matter of the contract is illegal. Exceptions: Plaintiff is unaware of illegality while Defendant is aware, parties are not equally liable, the illegality is a failure to obtain a license for revenue raising purposes.
Unconscionability
Unconscionability will be shown through 1) oppressive terms or 2) unfair surprise 3) at the time of an agreement.
Undue Influence
The person is influenced by a person of influence, higher bargaining power or trust.
Mutual Mistake
Both parties are under a mistaken belief regarding a material aspect of the agreement and the adversely affected party did not assume the risk of the mistake. The resulting contract is unenforceable.
Unilateral Mistake
A mistake by one party is generally insufficient to make a contract voidable. Exception: non-mistaken party knew or should have known of the mistake, the contract is voidable by the mistaken party.
Duress
Duress exists when a person is induced by the unlawful act of another person to enter into a contract or to perform some other act in a context that deprives them of the exercise of free will.
Economic Duress exists when there is a wrongful act that is so coercive that a reasonably prudent person without any reasonable alternative has given into the perpetrator’s pressure and agreed to an unfavorable contract.
Accord & Satisfaction
An accord is a new agreement based upon an existing contract. Performance of the new agreement is satisfaction. Can sue for breach under both agreements when a party fails to perform.
“If and Then” are the terms the BAR uses for A&S.
Novation
A duty may be discharged by a novation. A novation is a contract substituting a new party for one of the parties to a contract. Elements:
1. A previous valid K
2. An agreement among all parties
3. Immediate extinguishment of K duties between original K parties, and
4. A valid new mutual rescission
Commercial Impracticability
Seller’s duty to perform is discharged where it is impracticable includes embargo, crop failure, war, labor strike, or unforeseen cost increase.
Estoppel
Estoppel prevents a person or organization from adopting a position, action or attitude, inconsistent with an earlier position if it would result in an injury to another person.