Contracts Flashcards
Applicable law
Article 2 of the Uniform Commercial Code (UCC) governs contracts for sale of goods. Goods are defined as movable things. Otherwise, Common Law dictates, unless it’s a mixed contract, where the predominant purpose of the contract will determine the appropriate law.
formation
a contract is formed when there is an offer, acceptance, and consideration and there exists no defenses for formation
Offer
manifestation of intent to be bound, there are reasonable and definte terms, and it is communicated to an identifiable oferee
Merchant firm offer
an offer is not revocable if it is made by a merchant, signed in writting, that gives assurances that it will be held open for a period stated in the writting. If no time is stated, a reasonable time is to not exceed 90 days
acceptance
Acceptance requires a manifestation of assent for the terms of the offer by the offeree
Bilateral contracts acceptance
the start of performance manifests acceptance
Unilateral contracts
Starting preformance only renders a contract irrevocable, where acceptance exists only when performance is complete. If beginning performance, an offeree must inform the offeror of completion within a reasonable time of completion of preformance
Retraction of a unilateral offer can happen when
either by lapse by a reasonable time or earlier by revocation
revocation
retraction of an offer by the offeror and is only valid if communicated to the oferree before acceptance
counter-offer
response made by the oferree to the offeror that contains the same subject matter as the orginal offer but differs in terms. It operates as a rejection of the orginal offer as well as the new offer
consideration
bargined for exchange of something for legal value. Courts will not question the adequacy of consideration - a mere peppercorn may suffice
Illusory contract
attempt to contract however is not legally binding
If the contract says a party can cancel before a certain date the contract is
illusory until that date, and binding after that
Implied in fact K
A contact based on a tacit promise, inferred when conduct creates a contract, a benefit was received that could have been refused, and it would be fair to presume payment was expected.
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Option K
An offer is not revocable if the offeree gives consideration for a promise by the offeror to refrain from revoking an offer for either a stated period of time or reasonable time if no time is specified. Option K are an exception to the mailbox rule, and are accepted upon return not upon mailing
Mutual mistake
A contract is voidable when both partis are msitaken as to a basic assumption on which the contract is made, the mistake is material to the K and the party asserting the mistake did not bear the risk of mistake
Voidable K means that when you void, you can either
rescind or reformed
Unilateral mistake
A mistake by one party that is unknown to the other party concerning a basic assumption that has a material effect. A unilateral mistake is generally not a valid defense to formation of a K but can be if one party knew or had reason to believe the other party was mistaken, or the non-mistaken party had a duty to disclose
conditions
makes preformance obligatory only when the condition occurs.
Concurrent conditions
occur simultaneously but each function as a condition precedent to the other
Satisifcation co ndition
can be viewed subjectively but good faith. Even if objectively satisifactory by reasonable persons, client decides his own subject satisfaction
Breach
Occurs when a party fails to perform when
1) condition precedents are satisfied
2) time to perform arrives
3) performance is not discharged
material breach- if a party does not receive the substantial benefit of their bargain, the breach is material, and what can they do damage wise
1) they are no longer obligated to continue performance under terms of the contract, and 2) they will have an immediate right to all remedies for breach of the entire contract, including total damages.
Minor breach
A breach of a contract is minor if a party gains the substantial benefit of their bargain despite defective performance. A minor breach does not relieve the aggrieved party of performance under the contract; it merely gives them a right to damages for the minor breach.
Which contracts need to be in writting in order to be valid
Marriage, a contract that cannot be performed within a year, land sale or land leases for over a year in length, executor guarantees to pay, contracts for goods valued over $500 and suretyships.
For a writing to be valid under SOF, it must included
Writings must be signed by the party charged, reasonably identify the subject matter, indicate there is a contract and state the essential terms.
Where there is part performance that unequivocally indicates acceptance and there is no writing,
a party will be estopped from claiming there was no contract based on a lack of a writing.
Writings for SOF can be
a number of writings, no need for only one signed document. E-mail messages suffice, including signature or not.
Partial performance
Requires two of three: 1) payment in whole or in part; 2) possession; and or 3) valuable improvements.
SOF exception where you cant claim SOF
1) full performance; 2) judicial acknowledgement of the agreement; 3) estoppel 4) when the purpose of making the guarntee was to benefit the person making the promise
SOF exceptions - UCC Version
– 1) Merchant’s confirmatory memorandum (the other party does not object in a reasonable time); 2) goods accepted and paid for; 3) custom made goods; or 4) party admission of contract formation.
Common law and modifications
Contract modification must be supported by considerations
Exceptions include if there is a change in preformance or promise, if it is fair and equitable modification is due to a changed circumstance and the K is not fully preformed by either party
UCC and modifications
consideration is not required if done in good faith
Parol evidence rule
a party cannot introduce evidence of a prior or contemporaneous agreement that contradicts a later integrated writing
Exceptions to parol evidence rule
proof of a condition
clerical error
to establish a defense of formation
interpert vague terms
supplement a K that is only partially intergrated
When should you assume a K is partially intergrated
when there is no time or date of compleition or merger clause
Condition precedent
renders preformance condition upon the compleition of the condition
Exceptions to condition precedent
When the protected party fails to cooperate in good faith or they voluntarily excuses the condition
Frustration of purpose
discharges performance under a K if the purpose of the K no longer exists.
Frustration of purpose - frustration of purpose discharges performance under a contract if the purpose of the K no longer exists. Performance is excused if
1) principal purpose if substantially frustrated
2) by an unforeseeable supervening event
3) both parties knew about the purpose at formation
Impossibility
discharges preformance if it would be objectively impossible to preform due to unforeseen circumstances
Duress
wrongful pressure exerted upon a person in order to coerce that person into a K that they ordinarily woulnt enter. This will invalidate the K
Impracticability
Available when an event occurs after K formation that is unanticipated by both parties makes the performance unreasonably difficult or expensive
Unconscionability
K may be avoided where the provisions r so one sided that they are unconscionable at the time of formation. Applies where one party has unequal bargaining power
Time is of the essence
failure to preform by a specified date is generally not deemed a material breach unless the K contains a speific time of the essence clause. This is a term of art whereas a normal K can be completed within a reasonable time, even if there is a compleition date listed
UCC Perfect tender rule
A seller must deliver conforming goods. The smallest non-conformity is a breach, where the buyer may reject all or a portitn of the goods. This includes timely manner, perfect quality and correct quanity.
exceptions to Perfect tender rule
if the seller has a right to cure (time of performance has not expired)
installment K where the installment must be so defective it substantially impairs the value of the entire K
Nonconforming goods- Upon receiving non-conforming goods, the buyer may
sell the goods in public or private sale but must notify the seller beforehand
mirror image rule
under the common law, an acceptance must mirror the offer and additional terms is a counteroffer that revokes the inital offer
Merchant
one who regularly deals in goods of the kind sold in the K or who holds themselves out as a merchant. Special rules apply to K’s between merchants.
Battle of the forms
UCC article 2 states: acceptance does not need to mirror the offer, and can include different or additional terms. Oferees additional terms are deemed included only if 1) both parties are merchants 2) terms are not a material change 2) offer does not limit acceptance to exact terms 4) no objection was made within reasonable time
Promissory estoppel will allow a P to pursue damages when
1) P reasonably and foreseeably relied to their detriment on the promise
2) promisor should have reasonably expected a change in position in reliance on that promise
3) enforcement of the promise is necessary to avoid injustice even without consideration
Adequate assurance
A party with reasonable grounds for insecurity regarding preformance may request adequate assurance via writting. If the other party does not provide these assurance within reasonable time, the asking partty may treat that as an anticipatory repuidation
Anticipatory reputation
Occurs when a party communicates that they are unable or unwilling to preform before preformance is due
What happens when a party communicates that they are unable or unwilling to preform before preformance is due
Aggrieved party may
1) treate the anticipatory repudiation as a breach and sue immediately
2) suspend preformance and wait to sue when preformance is due
3) treat the repudiation as an offer to rescind/contract as discharged
4) ignore and urge preformance
Anticipatory repudiation retraction
A repudiation can be retracted unless the aggrieved party has
1) cancelled the K
2) materially changed the position
3) indicated repudiation as final
Expectation damages include all
Damages include all expected profits that would have been realized if the K was fully preformed by breaching party
Reliance Damages
If P’s expectation damages r too speculative to measure, they may elect to recover based on their reasonable reliance on the K. Reliance damages are awarded to p the cost of preformance and r designed to place the P in the position had they K never been formed
Misrepresentation
D makes a misrepresentation of material fact for the purpose of inducing the P to rely on misrepresentation to their detriment. Nominal damages r not available
Gratuitous Promise
if consideration is provided for past services, the promise is invalid
Assignment of rights
A transferor of rights where an obligor contracts with an assignor and the assignor assigns their right to be the obligors performance to the assignee.
Generally all contractual rights may be assigned other than the ones that
substanitally change the obligors duty or risk
assign future rights to arise from future K
Prohibited by law
Assignments clauses
prohibts the assignment of the K will be construed as barring only the delegation of assignor duties. A clause prohibiting the assignment of rights, like the right to payment, generally will not bar the assignment of those rights. The assignor has the power but not the right to assign, so if an assignment is made, the obligor has the right to sue for the breach.
Delegation of duties
A delegation is a transfer of duties. It generally consists of a situation where the obligor/delegator promises to perform for the obligee but then delegates their duty to the delegatee.
Generally duties may be delegated except
1) those that involve personal judgment and skill,
2) the delegation would change the obligee’s expectancy,
3) a special trust was created in the delegator by the other party to the contract, and
4) where there is a contractual restriction on the delegation.
Enforcement of expired debt
An exception to the pre-existing duty rule, no consideration is required to contract to receive pre-existing defaulted debt.
Quasi-k
When there is a failed contract, the defendant is required to make restitution to the plaintiff. Requires 1) plaintiff confers a non-gratuitous benefit to defendant, 2) the defendant knows the plaintiff’s expectation because they knew of the benefit and did not decline, and 3) the defendant would be unjustly enriched if they retain the benefit.
Illegal K
A statute to raise revenue will not prevent contract enforcement if the contractor has not obtained a statutorily required license. Typically occurs when a client refuses to pay an unlicensed contractor, and claims the contract was illegal, therefore unenforceable.
Novation
When all parties to a contract agree to release a party to a contract and substitute a third party in their place.
express warranties
created by seller’s affirmation/promise, description of good
What is not an express warranty
Mere puffery or exaggerations or opinions regarding the product
Implied warranty of merchantability
implied in every sales contract is a warranty of merchantability or that the goods subject to the K are of a suitable quality or condition appropriate for the sale of goods in a given market
An implied warranty of merchantability need not to be stated in the K to be valid however
the disclaimers of wattanty must be explicit and conspicuous
An implied warranty of merchantability need not to be stated in the K to be valid however
the disclaimers of wattanty must be explicit and conspicuous
FOB Buyers location
seller bears the risk of loss until the goods arrive at the buyers location
FOB Seller’s location
Buyer bears the risk of loss upon shipment of the goods by the seller
Incidental damages
damages awarded for costs and losses that naturally flow from the breach
Duty to mitigate
Nonbreaching parties have a duty to mitigate damages. If a party prematurely incurs additional expenses absence a breach, they will not be able to recover.
Force Majeure events
force majeure events or acts of god can excuse for performance when not the cause of either party
UCC Knock out rule
Conflicting terms cancel each other out and neither enter the K. The K then consists of agreed-upon terms and the court will supply missing terms if needed
Acceptance in the case of UCC
does not need to mirror the offer like CL an
When are you not able to use the doctrine of anticipatory repudiation
does not apply when the date of performance has not passed and the nonrepudiating party has fully performed. Under those circumstances, the nonrepudiating party must wait until the repudiating party’s performance is due before filing suit.
Mailbox rule
provides that an acceptance is effective upon proper dispatch.
Proper dispatch for Mailbox rule
requires that the offeree no longer has control or possession of the acceptance, such as with a properly mailed letter.
What happens if the mailbox letter sent to the offeror the offeror dies before picked up
Offer is not accepted
Capcity
must be 18 years and older and not mentally incomptent at the time of the K.
