Contracts Flashcards
Contract
A promise the law will enforce.
UCC Sales of goods
Governing law for Anything that can be moved. Includes pets.
Offer
communication that creates reasonable expectation that offeror is willing to enter into a K on the offered term. Does not require words. The offer must manifest a commitment to do something or refrain from doing something. It must state the offeree and give reasonable terms to be sufficiently certain enough of the essential terms provided so the K including them is capable of being enforced.
Sale of goods offer requirement
Quantity term need to be certain. UCC ARt 2. Not some, or a few. A reply communication stating the number is sufficient. “Seller’s output” or “buyer’s requirement” is sufficient. Article 2 requires obligation of good faith of the parties. Actual good faith requirement for output and the actual amount must not be unreasonably disproportionate to estimate.
Not an Offer
An invitation to negotiate, ads in paper, statement said in jest where reasonable person wouldn’t think it is an offer.
Offer requirement for sale of land
Must have price term and description of the land enough to identify the property.
Offer requirement for services
Description of the type of work being agreed to. Time to perform and price are not essential. Courts imply reasonable terms.
Offer termination.
Offeror can try to revoke it at any time before acceptance.
Direct revocation
I revoke
Indirect revocation
A reliable third party indicates to offeree that offeror is no longer willing or isn’t able to contract with them.
Irrevocable offer Option contract
Offeree gives consideration for a promise by the offeror not to revoke an outstanding offer, and the offer could not be terminated before that time, not even by the offeree.
Merchant’s firm offer.
Only applies to sales of goods and merchants. A merchant is anyone who regularly deals in goods of the kind being sold or has knowledge or skill peculiar to the goods or practices involved. Almost anyone working in business on behalf of a merchant is a merchant. A merchant’s firm offer is a promise in writing and signed promise to keep offer open. It cannot be terminated for the time stated or if no time is stated, then for a reasonable time in no event longer than 3 months. No consideration is needed.
Irrevocable offer Detrimental reliance
Offeror makes a promise in offer and should expect that offeree will rely on offer to their detriment, if they do then it is irrevocable for a reasonable time. (subcontractor’s bid).
Irrevocable offer - beginning of performance under unilateral K.
Unilateral K is one that is accepted only by performance. E.g. $100 to walk across bridge. Starting to perform is acceptance.
Offer rejection
Offeree terminates the offer.
Offer rejection - counter offer
REsponse that rejects offer but proposes new terms. E.G. price change. Requires clear rejection. Terminates K, even if agreed to original terms after. The rejection terminates original offer and can’t be re-accpted.
Not offer rejection - mere inquiry
Offeree doesn’t say “no”, but puts out feelers to see if offerror will adjust terms. E.g. Would you consider…
Offer rejection - conditional acceptance
I accept but, if, so long as. Kills original offer and provides new offer for offeror to accept or reject.
Offer rejection - lapse of time
Must accept offer within time period expressed in offer. If no time specified, then within reasonable time. Unless there is a particular standard in the industry or parties acted a specific way in the past.
Termination by operation of law.
Death, incapacity of offeror instantly kills offer. Subject matter becomes illegal or destroyed e.g. fire.
Acceptance
Timeley manifestation of assent to the terms of the offer.
Crossing offers
Even with the same terms there is no K if neither party knows of other’s offer so neither has ability to accept.
Accepting an offer
Offeror is master of the offer and state the term of acceptance to be accepted by any reasonable means. Usually can’t accept through slience unless recipient of offer is aware services are being rendered and by a word could prevent the mistake and doesnt. Or, if there is a custom of agreement between the parties that states silence can be aceptance, then the law gives effect to the agreement or custom e.g. wine of the month club.
Bilateral K
Promise to perform
Unilateral K
Start performance.
UCC Article 2 Acceptance
Offer to buy goods for current or prompt shipment can be accepted by promise to ship OR actual shipment.
Shipment of nonconforming goods (UCC)
Shipment is acceptance and a breach of K unless seller notified buyer w/n reasonable time that nonconforming goods were offered as an accommodation. Then, it is a counter offer that buyer can reject. To be an accommodation, it requires a written note with the shipment.
It is a breach because the buyer has right to perfect tender of their order.
CL mirror image rule
Acceptance must match each and every term of the offer. E.g. I accept.
UCC ARt 2 acceptance with different terms.
No mirror image rule. A communicaiton that looks like an acceptance operates as an acceptance even if it contains different terms unless acceptance is made expressly conditional on new or different terms.
2.207- Seasonable expression of acceptance operates as an acceptance unless acceptance is made conditional on assent to additional or different terms.
Battle of the Forms between merchants
When terms of offer and acceptance don’t match: the different terms become part of K unless (1) they materially limit terms; (2) offer was expressly limited; (3) offeree already rejected that term or does so within reasonable time.
Battle of the forms material alteration
Anything changing parties rights or remedies. E.g. new disclaimer of warranty.
Battle of the forms expressly limited
Offer states it must be accepted as is and can’t be altered.
Battle of the forms UCC
2.207 is ambiguous. If terms of acceptance are actually different from terms of offer, most find the conflicting terms knock eachother out. UCC substitutes a reasonable term in its place. Keep the K on the agreed upon terms.
Mailbox rule
Acceptance is effective when its mailed if it is properly addressed even if never received. Revocation is effective when received.
Doesn’t apply if the offeror opts out of the mailbox rule. An acceptance under an option K is effective only upon receipt not the mailbox rule. Doesn’t apply if offeree uses unauthorized means to accept.
Consideration
Bargained for exchange for something of legal value. (benefit of promisor or detriment of promise)
Bargain
not a gift. Really need bargain.
Legal value -consideration
promise to do something or actually doing it that one is not already legally obligated to do. Or promise to refrain from doing something that one is legally allowed to do.
Sham consideration.
Something that is not really intended to be consideration. E.g. a car for $1.
Past consideration
Something that was done, usualy an act, that would have been consideration if it were bargained for when done, but it wasn’t bargained for. E.g. saving stranger from burning building.
Consideration - pre-existing duty
Promise to perform something party is already legally obligated to do is not consideration.
Problem arises when seeking to modify a K. A K cannot be modified without consideration usually.
Exceptions that permit modification without new consideration: (1) promise to do anything new or different from original promise no matter how slight the change; (2) Unanticipated circumstances - not anticipated at time of K so long as modification is fair and equitable and not fully performed on both sides; (3) Article 2 of UCC does not follow pre-existing duty rule and permits modifications without new consideration if done in G.(good faith includes inability to make money). IF for more than $500 modification, MUST be in writing.
- Installment Ks – party who made a waiver MAY retract it by giving reasonable notice to the other party that strict performance will be required of any term previously waived UNLESS retraction would be unjust in view of a material change of position in reliance on the waiver.
Defenses to underlying K apply to modification.
Illusory promise
Not consideration. A promise that is empty promise and manifests no real committment. “If I feel like it”.
Illusory promise satisfaction clause
Not illusory. Can get out of K by saying you don’t like the product. But, there is still obligation of good faith.
Illusory promise exclusive agency K
One party agrees to represent other as exclusive agent gives an obligation to use best efforts to represent brand and is not illusory. Can’t get out of K based on this.
Material breach
Only entitled to cancel the K if breach is material. E.g. nonbreaching party did not receive the substantial benefit of the bargain. If the breach is only minor, the nonbreaching party is not entitled to cancel the K.
Factors determining materiality of breach: (1) amount of benefit the nonbreaching party received; (2) adequacy of damages remedy; (3) extent of part performance by breaching party; (4) hardship to the breaching party; (5) whether the breaching party’s behavior was negligent or willful, and (6) liklihood of the breaching party’s completing performance.
Defense: Statute of frauds
A K is not enforceable unless evidenced by a writing signed by the party to be bound when (1) marriage is consideration; (2) can’t complete it within 1 year. (no set date of performance does not fall within SOF); (3) interest in land ( K with a broker is not interest in land.) But full performance by seller takes K out of SoF. PArt performance by buyer may as well. Part peformance must unequivocally indicate the parties have contracted for sale of land and need (a) payment of purchase price in whole or part; (b) possession of land; (c) valuable improvements on the land. (4) executor the writing must be signed by executor; (5) goods for sale of $500 or more unless specially manufactured goods that are not sutiable for sale to anyone but one particular buyer, or written confirmation by merchant. In K between merchants, if one party witihn reasonable time of an oral agreement sends the other party written confirmation, it binds the recipient unless they object within 10 days of reciept. ; (6) suretyship - guarantor of debt of another person.
SoF writing requirements
Sale of goods need quantity, sale of land needs price and description, service needs description of work.
Defense: Absence of mutual assent Mistake
Mutual mistake
Unilateral mistake
A factual error regarding fundamental matter that has a material effect on the agreed exchange. Goes to heart of the deal. But if the party assumed the risk of a mistake, they can’t use the mistake as a defense.
Party assumes the risk when they know they don’t know a fact of if a party is in superiors position to know a fact.
Mutual mistake - both parties are mistaken about same material fact. (defense)
Unilateral mistake - only one party is mistaken about material fact. (Not a defense).
Defense: Absence of mutual assent Misunderstanding
K includes amibiguos language so words can be inteptreted differently. No K unless both parties meant the same thing. If one party knew about ambiguity and other did not know, the K is based on the party unaware of the ambiguity.
Defense: absence of mutual assent Mirepresentation.
Untrue assertion of material fact. Induces other party to justifiably rely on it. Makes K voidable, not void. A voidable K can only be enforced if the aggreived party wants it to be.
Defense: Absence of mutual assent Fraud
Intentional misrepresentation. Damages recoverable in addition to recission.
Defense Incapacity to K: Infants
Infants (under age of majority) generally lack capacity to enter K that is binding on themselves. They may affirm upon reaching age of majority. Affirmance may be express or by conduct (failing to disaffirm the K within a reasonable time after reaching majority). Disaffirmance discharges all liability. Minor can enforce K if want to, otherwise, they may void it.
K’s for necessities, things they need to survive, such as food, clothing, shelter, medical care, are not voidable. Minor can still disafirm them, but they have to pay for the value received of the benefit but not the K price.
Defenses Lack of mental capacity
agreement with person is voidable by that person when they are so deficient they can’t understand nature or significance of agreement. They can void it or a guardian may.
Defense: voluntary intoxication
K voidable if the other party had reason to know of the intoxication.
Defenses: involuntary intoxication
K voidable if person could not understand the nature or significance of agreement.
Defense : Illegality
subject matter or consideration is illegal. E.g. gambling in a state that prohibits gambling.
Defense: Duress -
Physical- threaten physical harm to contracting party renders K void. (b) economic -taking advantage of other party’s economic needs is usually not a defense. Ecnomic is only a defense when (1) a party threatens a wrongful act that seriously threatens the other party’s property or finances; AND (2) the other party has no other means to prevent the threatened loss.
Defense: Undue influence:
Person susceptible to pressure, confidante or caregiver uses power to pressure susceptible person into agreeing to an unfair K.
Defense: Unconsionability
allows the court to refuse to enforce unfair K or even unfair terms within a K. E.g. unfair surprise. (small print), unequal bargaining party e.g. K of adhesion.
MUST have procedural and substantive unconsiounability but don’t have to be equal
i. Procedural unconscionability: absence of meaningful choice due to unequal bargaining power, inclusion of terms that are inconspicuous and/or hard to understand, deceptive business practice, take it or leave it, deprived a meaningful choice when forced to sign agreement without time to read or understand.
ii. Substantive uncionsionability: K terms are so unfair or one-sided that a reasonable person would not have agreed to them. Consider prevailing commercial practices and other circumstances.
Remedy : Specific performance
Only available if legal remedy is inadequate and subject matter is rare or unique. Land is always unique, rare goods. Not available for services only an injunction can be used as alternate remedy for services.
Remedy - non monetary remedies under Article 2
Buyer’s nonmonetary remedy: (1) cancellation, (2) right to replevy identified goods; (3) buyers right to specific performance.
Seller’s nonmonetary remedies (1) right ot withhold goods; (2) right to recover goods.
Right to demand assurances if there are reasonable grounds for insecurity then can demand written assurance of performance.
Monetary damages - Compensatory Expectation damags.
Standard measure. Get the benefit of the bargain so give the nonbreaching party what they would need to buy substitute performance.
a. Common law calculation: = losses in value caused by the breach + gains prevented by the breach – savings resulting from not having to perform.
i. Partial performance – if P partially performed and incurred expenses, P first recovers expenses and then receives the expected profit of the K. Compensate to same extent as if K had been performed.
Monetary damages compensatory Reliance damages
Put the plaintiff where they would have been if the K had never been formed. Use if damages are too speculative to get expectation damages and instead award plaintiff the cost of their own performance.
Monetary damages Consequential damages
Recovered only if at the time the K was made, a reasonable person would have forseen the damages as a probable result of the breach. Special damages that reflect losses over and above standard expectation damages. E.g. lost profits resulting from breach.These damages do nOT flow directly from the breach.
Monetary damages Incidental damages (UCC)
K for sale of goods and include expenses reasonably incurred by a buyer in inspection, receipt, transportation, care, and custody of goods rightfully rejected, and other expenses reasonably incident to seller’s breach.
Certainty rule/limitation on damages
Plaintiff must prove losses suffered were certain and not speculative.
Liquidated damages
Stipulation of what damages will be should there be a breach. Must be reasonable in view of actual or anticipated harm caused by breach. To enforce, damages must be difficult to estimate or ascertain at time K was formed, amount agreed on was a reasonable forecast, and not a penalty.
UCC rule - courts can consider actual damages to validate a liquidated damages clause, even if the clause was not a reasonable forecast of damages at time formed, it will be valid if reasonable in light of subsequent actual damages. 2-718(1).
Restitution
Not really part of K law, but focuses on unjust enrichment when one has conferred a benefit on aother without gratiutious intent. Generally, it is the value of the benefit conferred. Often desirable in a losing K.
Recision
If there was a mutual mistake, misrepresentation of facts or law, (or other defenses?).
REformation
When the writing setting forth the agreement between the parties is changed so it conforms with the original intent of the parties. Used with mistake and misrepresentation.
Mutual Assent
whether a reasonable person would interpret the parties’ words and conduct as reflecting a sincere intent to enter into an agreement. Manifestation of mutual assent requires each party make a promise and/or begin or complete performance. Requires Offer, acceptance, consideration
Certainty of terms under UCC
Subject matter and quantity must be specified except for output Ks and requirements ks. Price term is never required. Court will infer purchaser is obligated to pay a reasonable price at time of delivery
Acceptance - shipment of nonconforming goods
i. Shipment of nonconforming goods is an acceptance and a breach of K unless, seller notified buyer w/n reasonable time that nonconforming goods were offered as an accommodation. Then, it is a counter offer (not a breach) that buyer can reject. To be an accomodation REQUIRES a note with the shipment.
Installment contract nonfonroming shipment
UCC § 2-612(2) provides that a buyer may reject any installment that is nonconforming if the nonconformity substantially impairs the value of that installment and it cannot be cured.
Usage of trade uses
evidence rule, even a writing that purports to be the final and exclusive agreement of the parties can be explained or supplemented by consistent usage of trade, so long as the evidence of the trade usage does not fully contradict the contract.
Battle of the forms K between merchants
- Between merchants – different terms become part of K unless (1) they materially limit terms; (2) offer was expressly limited e.g. accept as is; (3) offeree already rejected tht term or does so within reasonable time.
UCC battle of the forms addl information
Under the UCC, an acceptance with additional terms does not constitute a rejection and counteroffer, but rather is an effective acceptance unless made expressly conditional on the assent to the additional terms.
If both parties are merchants,the additional terms become part of the contract unless they materially alter the terms of the offer, the offer expressly limited the acceptance to its terms, or they are objected to within a reasonable time.
A “merchant” is one who regularly deals in goods of the kind sold or who otherwise by his occupation holds himself out as having knowledge or skill peculiar to the practices or goods involved. For purposes of the UCC battle of the
forms provisions, a merchant is almost anyone in business because anyone in business has knowledge of business practices. Here, the store owner is clearly a merchant.
Promissory estoppel
promises that WILL be enforced even if they are missing a requirement. E.g. they are indefinite, or violate SoF.
a. Promissory estoppel (detriminetal reliance): A party made a promise that the party should have reasonably expected would induce an action or forbearance on the part of the promissee or a third person; (2) the promise DID induce such an action or forbearance; AND (3) injustice can be avoided only by enforcement of the promise.
A. Reliance on the promise MUST have been reasonable
B. Modern view: remedy limited as justice requires. Usually only expenditures that were incurred by P in reasonable reliance on the promise.
1. Construction Ks: promissory estoppel may apply by a general K against a subctonractor where the subk induces justifiable and detrimental reliance by submitting a bid that is in turn used by the general K in their bid.
2. Exception for charitable donations: PE may be used to enforce a promise to make a charitable donation even without evidence the charity/promissee relying on the promise.
Noncontractural enforceable promise - unjust enrichment/quasi-contract
A. Party seeking recovery provided benefit to another party;
B. Party seeking recovery had a reasonable expectation of compensation for the benefit conferred
C. It would be unjust for the other party to retain the benefit w/o paying for it.
1. Damages: reasonable value of goods or services rendered, deducting the value of any benefit the prevailing party receipves.
a. Usually In emergency or medical cases. Hard in a divorce case.
Conditions
Conditions are future uncertain events that qualify a party’s performance obligations. May be express or implied. “if, on condition that, provided that, subject to, in the event of” (not required, but trigger condition)
Condition precedent
Events that must occur (unless excused or waived) before a contractual duty is triggered and performance is due. If they don’t occur, performance is NOT due and NO BREACH.
1. Non occurring condition IS NOT a breach itself unless one party was required to make it occur.
