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Rule Statements > Contracts > Flashcards

Contracts Flashcards

1
Q

UCC Article 2

A

Article 2 of the UCC applies to sales of goods contracts. Goods are all things moveable at the time of identification

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2
Q

Common Law

A

The common law applies to all other contracts that do not deal with the sale of goods

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3
Q

Predominant Purpose Test

A

For contracts that contain both the sale of goods as well as services, the issue of what law to apply to this contract will arise. Therefore, the predominant purpose of the will govern. If the predominant purpose of the contract is for services, then the common law will apply, however if it is the sale of goods that is the predominant purpose then the UCC will apply

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4
Q

Mutual Assent:

A

In order to have a valid contract there must be a valid offer, acceptance of that offer and sufficient consideration. Along with that, there must be no defense as to the formation

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5
Q

Offer

A

An offer is a manifestation of intent to enter into a contract with definite and specific terms, communicated to an identified offeree. If the contract is not definite enough, especially as to duration it is not enforceable. The offer must contain the subject, parties, quantity and price in Common law contracts, while the UCC requires subject, parties and quantity

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6
Q

Termination

A

An offer can be terminated before acceptance. If an offer is terminated before it is accepted, then it cannot be revived. An offer is terminated by any of the following before acceptance, revocation of the offer, a counter offer, acts that are contrary to acceptance of the contract, rejection of the offer, offeror dies, or lapse of time

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7
Q

Revocation of Offer

A

An offer can be revoked at any time before acceptance through unambiguous words or conduct indicating unwillingness or inability to contract.

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8
Q
  • Indirect Revocation:
A

Occurs when the offeror takes definite action inconsistent with entering into a contract and the offeree acquires reliable info into that fact

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9
Q

Irrevocable Offers:

A

Generally, an offeror is capable of freely revoking an offer. However there are some instances in which an offer is no longer capable of being revoked. Those are option contracts, UCC firm offers, performance has started, and detrimental reliance.

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10
Q
  • Option Contract
A

An offer is irrevocable if valid consideration is given in exchange for keeping the offer open.

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11
Q
  • UCC Firm Offer
A

Under the UCC, an offer for the buying or sale of goods is irrevocable when a merchant in a signed writing makes an explicit promise to keep the offer open. The offer can stay open for a specific period time or a reasonable time not exceeding 90 days

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12
Q
  • Offeree started performance:
A

A unilateral offer is one that requests performance as opposed to a bilateral promise that requests a promise. When the offeree in a unilateral contract starts performance the offeror can not revoke the offer

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13
Q
  • Detrimental reliance:
A

An offer is irrevocable if the offeree reasonably and detrimentally relies of the promise in a foreseeable manner

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14
Q

Acceptance

A

the offeree must manifest a willingness to enter into a deal and to accept in a manner that is dictated by the offeree in the offer. In a bilateral contract, the acceptance occurs when the performance starts and in unilateral contracts acceptance occurs when the performance is completed.

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15
Q
  • Mailbox Rule:
A

Under the mailbox rule, an offer is accepted when the offeree places a letter in the mailbox that accepts an offer. This however does not apply to option contracts or contracts in which the offeree rejects or alters the contract first.

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16
Q

Nonconforming Goods:

A

Under Article 2, an offer to buy goods is construed as inviting acceptance either by promise to ship or by current or prompt shipment of conforming or nonconforming goods. If the goods are nonconforming it is considered acceptance as well as a breach unless the seller tells the buyer the nonconforming goods is only an accommodation.

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17
Q

Consideration

A

: Consideration is the is the transfer of legal value that was bargained for exchange and that benefits the promisor or causes detriment to the promisee

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18
Q

Pre-Existing Duty Rule:

A

: a promise to act that a party is already legally obligated to do is not considered valid consideration. It may become sufficient if there is an addition or change in performance or unforeseen difficulty that is so severe it excuses performance.

  • UCC Exception: There is not consideration requirement under the UCC to modify a contract. The only thing that is required is good faith. It must be in writing if it falls under SOF or if the contract states any modification must be in writing.
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19
Q

Duress:

A

(1) an improper/wrongful threat made; (2) induced a party to enter into a contract; AND (3) the threatened party has no reasonable alternative but to enter into the contract.

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20
Q

Fraudulent Misrepresentation:

A

: (1) knowingly, (2) making a false representation, (3) of material fact, AND (4) other party reasonably relies on the misrepresentation to his detriment.

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21
Q

Mutual mistake

A

may be rescinded/reformed
Elements: (1) both parties are mistaken as to a basic assumption, (2) mistake is material, AND (3) person asserting the mistake did not bear the risk of the mistake.

22
Q

Unilateral mistake

A

A mistake that is unknown to other party = NOT a valid defense. - BUT, if one party knew or had reason to believe of the mistake = voidable by mistaken party - mistake as to price/value is NOT considered material

23
Q

Parole Evidence Rule

A

The parol evidence rule generally prevents a party to a written contract from presenting extrinsic evidence of a prior or contemporaneous agreement that contradicts the terms of the final written agreement. In determining whether contracting parties intended for their written contract to be a final agreement, the court must first determine whether the writing is integrated. The writing can either be: totally integrated – the writing completely expresses all of the terms of the parties’ agreement or partially integrated – the writing sets forth the parties’ agreement about some, but not all, terms.

24
Q

Express Conditions Precedent:

A

A contract may provide that a party does not have a duty to perform unless some condition is fulfilled. These are called conditions precedent. Conditions precedent can be excused by a protected party’s failure to cooperate or by waiver. However, the waiver can be retracted as long as the other party has not relied upon it.

25
Q

Obligations of Good Faith and Fair Dealing:

A

Every contract contains an implied obligation of good faith and fair dealing to act honestly and fairly. The UCC contracts it is defined as honesty in fact and the observance of reasonably commercial standards of fair dealing in the trade.

26
Q

Warranties:

A

Contracts for the sale of goods automatically include a warranty of title. They usually include certain implied warranties and express warranties.

27
Q

Express Warranty

A

An express warranty is any affirmation of fact or promise made by the seller to the buyer, any descriptions of the good, and any sample or model creates an express warranty if the statement, description, sample, or model is part of the basis of the bargain. Itt only needs to come at a time in which the buyer could have relied on it.

28
Q
  • Implied warranties
A

Implied in every contract for a sale by a merchant who deals in goods of the kind sold is the warranty to be merchantable. To be merchantable, the goods must be fit for the ordinary purpose for which such goods are used.

29
Q
  • Implied warranty of the fitness for a particular purpose:
A

A warranty will be implied in a contract for the sale of goods if ANY seller hass reason to know the particular purpose for whith goods are to be used and the buyer is relying on the seller’s skillamd judgement to select the suitable goods and the buyer relies on the seller’s skill or judgement

30
Q

Substantial Performance:

A

Occurs when one party substantially performs in a contract and confers upon the other the material benefit of the contract. If one party substantially performs then the non breaching party must still perform. Generally, the substantially performing party can recover the contract price minus the cost to the other party of obtaining the promised full performance.

31
Q
  • Material Breach/* Minor Breach
A

A party does not render substantial performance. To determine if breach was material courts analyze: (1) extent of performance, (2) hardship, (3) adequacy of compensation for loss to non-breaching party, (4) likelihood breaching party will cure, (5) whether breach was intentional. A material breach excuses non-breaching party’s performance.

will not excuse performance (but may bring separate action for damage resulting from the breach).

32
Q

UCC Perfect Tender Rule:

A

Under the perfect tender rule, Seller must deliver conforming goods. Smallest non-conformity is a breach and buyer may reject all or a portion of the goods. A rejection of goods must be made within a reasonable time. However, the seller has Right to Cure if, a. Time for performance has not yet expired; OR b. May have further reasonable time to substitute if reasonable grounds that substitute goods would be accepted(same type of non conforming goods had been accepted by the buyer in the past).

33
Q
  • Installment Contracts
A

May only be cancelled where an installment is so defective that it substantially impairs the value of the entire contract. b. Buyer can reject an installment only if non- conformity substantially impairs that installment and the time to cure has past.

34
Q

Anticipatory Repudiation

A

When a party unequivocally states that they are unable or unwilling to perform unless there has been a material change in the other party’s position. If occurs, the non-breaching party may: a) treat the contract as repudiated and may seek damages before the time of performance is due; b) treat the contract as discharged; c) wait until performance is due and then sue; OR d) urge the other party to perform. A party can retract its repudiation if timely (when the non-breaching party has not relied on it).

35
Q

Demand for Adequate Assurances:

A

If there are reasonable grounds for being insecure about performance, a party may request in writing adequate assurances. If the other party does not give assurances after asked to do so, the requesting party may treat that as an anticipatory repudiation.

36
Q

Expectation Damages:

A

Expectation damages are the default remedy in contract law. They Arise directly from the breach, and meant to put the non-breaching party in the same position it would have been in but for the breach.
- To recover, damages must be: (1) caused by D; (2)foreseeable; (3) certain (not speculative); AND (4) unavoidable (reasonable steps were taken to mitigate damages).

37
Q

Consequential Damages:

A

Consequential Damages are special damages and reflect losses over and above standard expectation damages. - To recover, damages must be: (1) reasonably foreseeable at the time of contract formation; (2) arise from P’s special circumstances that D had reason to know of; AND (3) certain (not speculative).

38
Q

Punitive Damages:

A

Punitive damages are meant to punish defendant. Generally, they are not available for breach of contract. They may be awarded for breach of contract involving fraud or
tort claims.

39
Q

Mitigation of Damages

A

A party CANNOT recover damages that could have been avoided. The party Must take reasonable step to mitigate losses. If a party fails to do so, the court will reduce total damages by the amount that could have been avoided.

40
Q

Restitution:

A

Restitution is Awarded to prevent unjust enrichment when one party
confers a benefit on another. A party cannot recover both restitution and expectation damages. The person seeking the damages can recover the value of benefit conferred.

41
Q

Specific Performance:

A

Specific Performance is an Equitable remedy that is only available if monetary damages are inadequate to compensate an injured party. It is Not awarded for personal service contracts, but injunctive relief may be awarded.

42
Q
  • Covenants not to compete:
A

Most courts will grant an order of specific performance to enforce a covenant not to compete if 1. the services to be performed are unique that render money damages inadequate and 2. the covenant is reasonable. The covenant must be reasonably necessary to protect a legitimate interest of the person benefitted and must be reasonable as to geographic scope and duration.

43
Q

3rd party beneficiary:

A

Generally, party who is not in privity of contract with another party CANNOT assert a claim for breach of contract. However, a 3rd party can assert a claim if they are an intended beneficiary.
A 3rd party beneficiary may claim rights and sue to enforce a contract ONLY IF his rights have vested à when he: (a) accepted the benefit; (b) detrimentally relied; OR (c) sues to enforce.
- Once vested, the contract cannot be changed or modified without consent of the 3rd party.

44
Q
  • Intended 3rd Party Beneficiary:
A

Intended 3rd party beneficiary is not a party to the contract, but has rights under the contract b/c parties intend their respective performances to benefit the identified third-party.

45
Q
  • Incidental 3rd Party Beneficiary:
A

à Someone who just happens to benefit from the contract (but has NO legal rights).

46
Q

Delegation of Duties:

A

All contract duties are delegable UNLESS: a) contract prohibits delegation or assignment; b) delegation is against public policy; c) personal service contract calls for very specific skills; OR d) delegation materially alters the expectancy of the obligee

47
Q

Material Breach

A

a material breach of contract occurs when the non-breaching party does not receive the substantial benefit of the bargain. The material breach allows the non-breaching party to withhold any promised performance and to pursue remedies for the breach, including damages. The breaching party who failed to substantially perform generally cannot recover contract damages, but may be able to recover through restitution.

48
Q

Parol evidence rule(UCC)

A

Under the UCC parol evidence rule, the express terms of a written contract for the sale of goods (e.g., soap) cannot be contradicted by evidence of prior or contemporaneous agreements. However, the UCC permits express terms to be explained or supplemented by evidence of the following: course of performance, course of dealing, trade or usage.

49
Q

Course of performance

A

sequence of conduct relevant to understanding the current transaction between the parties if (1) the agreement involves repeated occasions for performance by a party and (2) the other party accepts performance without objection—as seen with the 10% interest rate

50
Q

Course of dealing

A

sequence of conduct concerning previous transactions between the parties that establishes a common basis of understanding for interpreting their conduct

51
Q

Trade usage

A

any practice or method of dealing in the parties’ business or industry that is practiced with enough regularity to justify an expectation that it will be practiced in the instant case

Rule Statements (13 decks)

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