Contracts Flashcards
What is an illusory promise and its effect on a contract
“I reserve the right to cancel this contract” or “I’ll sell you my car but I’ll let you know when” - promisor receiver right to change their mind= NO CONTRACT
define offer
Outward manifestation of intent to enter a contract
Elements:
1) intent
2) specific terms- price, #, description
Is change in the market price of an item enough to be excused from the contract b/c of impossibility
NO
3 instances where an offer can become irrevocable
1-in CL: option contract- promise to keep offer open PLUS ADDITIONAL CONSIDERATION
2-in UCC sale of goods- firm offer to keep offer open in writing, signed by merchant
3- in CL- for unilateral offer- promise for performance- offer becomes irrevocable if person has begun performance
irrevocability can Not exceed 90 days
is the mirror image rule for service contracts or UCC/sale of goods
Service contracts/CL
Are small changes in terms of contract ok in UCC/Sale of goods contract?
Yes- little changes in terms are fine but if materially changed terms- diff widgets, diff price, not ok.
is a promise to pay a debt valid consideration
Yes
Is a promise to give a gift valid consideration?
NO
If I have the right to sue you and I give that up, is that valid consideration?
Yes
What is promissory estoppel?
a promise that induces you to rely to your detriment
Look for answers based on RELIANCE not CONSIDERATION
iN the UCC, is a clause prohibiting oral modification of a contract valid
Yes
if the terms of acceptance for the sale of goods are ADDITIONAL from terms of offer, what must happen for those ADDITIONAL terms to come into the contract?
Additional terms are automatically includes in the contract if:
1) both parties are merchants
2) new terms don’t materially alter the deal
3) the initial offer does not limit acceptance expressly to its terms
4) the offeror does not object within reasonable time to the new terms
how are conditional acceptances for offers viewed- for example- I offer to mow your law on Sat for $50, you say ok but only if you come on Sunday.
conditional acceptance= counter offer= rejection and new offer
in common law, service contracts if the acceptance does not mirror the offer what happens
it is considered a counter offfer
what is a counter offer- i.e what does it do to the original offer
= rejection of the original offer and a new offer
How do you modify a service contract
Need new consideration.
Also, can’t be supported by a preexisting legal duty that the promisor is already bound to perform
Modification is allowed if there are unanticipated difficulties and one party agrees to compensate the other
when is an offer for sale of goods irrevocable
a merchant’s signed, written offer to buy/sell goods is considered a firm offer and irrevocable if it is 1) signed, 2) written, 3) has assurance the offer will remain open
If not signed, can be on company letterhead
MUST BE A MERCHANT
what is the predominant purpose rule
If the contract has service and sale of goods, use main purpose of contract to determine which rules govern
what do expectation damages do
Put you in the position as if the contract had been fully performed.
= default type of damages
To modify a sale of goods contract do you need consideration?
NO- just good faith. Modification can be oral OR written
who bears risk of loss for sale of goods if seller is a merchant and goods are being delivered
Seller until buyer takes possession or until transferred to UPS/Delivery person
who bears risk of loss for sale of goods if seller is NOT a merchant
Seller until he makes goods available to buyer
In a requirements contract, if vendor promises to deliver ALL the widgets they have and something happens and they can’t….
look for good faith. As long as they acted in GF it is ok
what can terminate an offer
death, lapse of time, rejection of offer, counter offer, revocation of offer, indirect revocation (if buyer learns you made offer to someone else)
what are reliance damages
Ground hog day damages- as if the contract had never been done
Calculate expectation damages: I hire you to build x for $100. You breach. I hire new guy to build it for $110
Expectation damages = $10
What is assignment
Delegating benefits ($$) of a contract
what is delegation
Delegating DUTIES (what you have to do) in a contract to someone else.
Whoever you delegate to does not get $$ benefits and you are liable if they breach.
For a third party to sue for breach…
They must be intended beneficiary at time of contract
what can you do if you get a shipment of non conforming goods
Either accept or reject the non conforming good and EITHER WAY, RECOVER FOR BREACH
When can you cure a non conforming tender of goods
only if the date of performance has not yet passed
Example of performance discharged due to impracticability
if there is some very unforeseeable event- i.e snowstorm in july
How does a 3rd p beneficiary’s rights vest?
by relying on the agreement b/ contracting parties
if you delegate your duties under a contract, can you still be sued
Yes
what is the merchant exception to the statute of frauds
a confirmation that is signed and sent by one merchant to another binds both parties if the recipient has reason to know of contents and does not object within 10 days
If performance is completed and you are just waiting for payment does anticipatory repudiation apply
NO- only when someone is supposed to perform the they tell you definitively before performance is due that they can’t perform/ won’t perform
If performance is complete can you sue for breach
You have to wait till the day performance/Payment is DUE
what terms must be in offer for service contract/ cl?
price, quantity, parties, subject matter- all essential terms
What terms must be in offer for sale of goods, bcc?
parties
Subject matter
quantity
what is a bilateral offer
parties exchanging promises or promise for starting performance
Note- most offers on MEE will be bilateral
what is a unilateral offer
offeror makes promise and offer must perform completely to accept
Can also be a reward or contest- for reward, party must know about reward
Does the death of the offeror before acceptance revoke the offer
Yes
how can you accept a bilateral offer vs unilateral offer
Bilateral: make promise or START performance
Unilateral: must COMPLETE performance
for sale of goods contract, if any party is not a merchant and there are small changes to the offer in the acceptance
= valid acceptance but the contract will not include those changes or additions unless the other side agrees
for sale of goods contract, if both parties are merchants and there are new or additional terms to the offer
The changes WILL be part of the contract UNLESS
- they materially alter the contract
-the offeror expressly said no additional terms
-the other party objects to additional terms
when is acceptance valid
mailbox rule- acceptance if valid when placed in the mail
Exception: option contract or firm offer- acceptance is valid when received
what is the preexisting duty rule
if a party makes a promise to do something they already had a duty to perform- it is NOT valid consideration.
Look for this in contract modifications
If A and B contract for A to build a house. Later B tells A he will pay him extra to finish on time, is that valid consideration?
No- b/c of preexisting duty rule- B already had obligation to finish on time so NO consideration
when does the knock out rule apply to an acceptance for UCC sale of goods contract
when the acceptance has DIFFERENT (not additional or new) terms from the offer. All the DIFFERENT terms are knocked out and filled with UCC gap fillers
Requirements to rescind a contract based on mutual mistake
1) mistake of fact existed at time contract was formed
2) mistake relates to basic assumption of contract
3) mistake has material impact on transaction
4) Adversely affected party did NOT assume risk of mistake
Requirements for recession with unilateral mistake
- Mistake would make enforcement of contract unconscionable OR
-Non mistake party failed to disclose mistake or caused the mistake
what is fraudulent misrepresentation
if a party can show there was intentional misrepresentation of a FACT that the other side relied on–> contract is voidable.
Can be thru lie or omission/ non-disclosure
What is fraud in inducement?
using lies to induce another to enter a contract–> voidable.
If I tell you there is plenty of affordable parking or if I don’t tell you there was a murder in the bldg
what is undue influence
when one party unfairly persuades another to enter a contract
Look for naive young person
What happens to a contract if they were threatened to sign based on the threat of physical harm?
What about threat of a lawsuit
When a party is physically compelled by duress - threat of physical harm to enter a contract, it is VOID
If a party is induced to enter a contract due to other duress- i.e the threat of lawsuit in bad faith- it is voidable
is intoxication considered an incapacity to enter a contract
Yes, but the other party must know you are intoxicated
when does the statute of frauds apply
marriage
suretyship
contracts that can’t be performed within one year of making
sale of goods >$500
real property
Exceptions to statute of frauds- when the SOF is NOT satisfied but the court may still enforce the contract
- service contract where one party hasFULLY PERFORMED
- sale of goods > $500 where all goods have been delivered or full payment was made
-specially/custom made goods - letter or memo confirmation if BOTH PARTIES ARE MERCHANTS
-sale of land where purchaser has paid all or part of purchase price plus has taken possession of land or substantially improves property
-estoppel - illegality
-unconscionability
what is the implied warranty of merchantibility
says that the goods are fit for ordinary purpose. Only implied when the seller is a merchant
Can be disclaimed by selling something “AS IS”
what is the implied warranty of fitness for a particular purpose
buyer is relying on seller’s skill to select the goods OR
Buyer has specific use for the goods
Seller doesn’t need to make oral express statement
Don’t have to be a merchant
Disclaimed by “AS IS”
what is required for modifications of service contracts
additional consideration
is it valid consideration to pay extra money for early completion of a job
yes
Just can’t pay xtra for regular on time completion b/c of preexisting duty rule
What is accord and satisfaction
when there is a genuine dispute over the validity or amt owed under the contract.
New agreement= accord
Satisfaction= when new performance is completed, paid
What is the parol evidence rule
extrinsic evidence of oral or written communication PRIOR or AT THE SAME TIME as the written contract are generally inadmissible if it contradicts the contract terms
When will the court hear and consider parol evidence?
- if the writing is a partial integration, then the court will hear parol evidence if consistent with the writing
what is a total integration
= final and complete understanding of the parties, has merger clause, then parol evidence is not admitted
Exceptions to the parol evidence rule, when oral conversations made prior to contemporaneous to the writing will be admitted
- if a term is ambiguous and they help clarify
- if there is evidence of a condition precedent
(…if I can get a loan”
for common law, service contracts, when can a party recover damages
if they have not substantially performed
If the party who fails to substantially perform is in material breach
what is the perfect tender rule
Party must delivery perfect goods, perfect delivery otherwise breach
under a service contract, is a delay in performance breach?
not necesarily
for installment contracts with multiple shipments, when can a buyer reject a non conforming shipment?
only if non conformity substantially impairs value of shipment and CAN NOT be cured
what is an express condition
Written in the contract- “on condition that”
Must be met fully
if condition is NOT met, no contract
what is condition precedent vs condition subsequent
Condition precedent, if this doesn’t happen, the other party has no duty to perform
Condition subsequent- duty to perform will be excused if x happens.
what happens if the offeror dies or gets mentally incapacitated after the offeree has dispatched an acceptance
offer terminates upon death or mental incapacity of offeror even if you found out after you accepted- unless consideration was paid to keep offer open
if an offer has been accepted, does the death of offeror terminate the contract
NO
if the subject matter of the offer is terminated, what happens to the offer
It is terminated
when is a revocation of an offer able to be made
Anytime before acceptance
if a revocation is sent by mail, when is it effective
when received
what does a counter offer do to the original offer
it is a rejection and a new offer
what does acceptance of a unilateral offer require
COMPLETE PERFORMANCE
if the offer does not become aware of an offer until after complete performance…
Then his act is NOT an acceptance
can the offeror dictate the manner and means in which an offer is accepted
Yes`
When can silence operate as acceptance of an offer
Generally silence is NOT acceptance of an offer unless
1) the offeree has reason to believe the offer could be accepted by silence so he was silent with intent to accept that way
2) because of previous dealings, patterns of behavior, it is reasonable to believe the offeree must notify the offeror if he intends NOT to accept
can acceptance of an offer be a promise to ship goods or actually shipping the goods
YES
If a rejection is send then an acceptance which controls
the first one received
in a unilateral offer, when is offeree required to give notice of their performance
After performance is complete unless the offer requires notice or offeror would not learn of performance w/I a reasonable amt of time
when a performance is delegated is the delegator still liable
Yes unless there is a novation which releases the original delegator.
When can an offer be revoked
Before acceptance
can an offer limit methods of acceptance
Yes
is a promise to surrender/not file a lawsuit adequate consideration
Yes as long as the claim is valid and the surrendering party honestly believes at the time that the claim is valid
For a unilateral offer that can only be accepted by complete performance, what happens when the offeree begins performance
Offer becomes irrevocable. And any expenses incurred by offeree in preparing to perform are recoverable as reliance damages
Under the UCC, does a demand for adequate assurances need to be in writing
Yes
What is the condition on enforcing a liquidated damages provision
It must be reasonable, where the deposit is no more than 10% of the purchase price
What is the measure of recovery for intentional misrepresentation
benefit of the bargain
Elements of misrepresentation
- misrepresentation was fraudulent- person knowingly or recklessly intended to induce the other
- misrepresentation induced consent to contract
- party who was harmed justifiable relied on misrepresentation
If misrepresentation is proved, what happens to the contract
It is voidable, can be rescinded
What is a quasi contract
When a p confers a material benefit on D and it would be unfair to let D to retain the benefit
A party who substantially but not fully performs can recover what type of damages
Expectation or reliance
A party who fails to substantially perform (i.e commits a material breach) can only recover what type of damages
Restitution
both parties have diff understanding about meaning of term in contract, then what will be used to define meaning of term
Trade usage even if one of the parties is not aware of that usage
For employment contracts how is obligation to mitigate loss limited
To comparable work in same locale
if a BUYER repudiates or breaches a contract with specifically identified (unique) goods, who bears the risk of loss
buyer.
Seller can recover any deficiency between the seller’s insurance coverage and contract price
If one party clearly repudiates its contract obligations, can the other party immediately seek damages
YEs
When is an express warranty created
When seller makes affirmation of FACT or promise about goods that becomes part of basis of bargain- buyer relies on seller’s promise.
It can’t not be when seller gives opinion or praise about quality or value of goods
when does a seller have a right to reclaim goods
Under UCC, a non breaching seller can reclaim goods from a buyer when seller:
1) discovers the buyer received the goods while insolvent AND
2) demands goods return within 10 days after receipt.
Note- 10 day limit does not apply when buyer misrepresents solvency in writing within 3 mo of delivery
is a lifetime employment contract subject to SOF
No b/c it could end tomorrow
Elements for anticipatory repudiation
- party must clearly and unequivocally indicate they won’t perform
- if they don’t retract repudiation or indicate it is final, other party can treat as breach, get damages or demand performance
Does a contract for employment need to include salary
YES b/c it is material term
does a 3rd p beneficiary of a contract get to consent to modifications of the contract
NO
under the modern view, lost profits of a new business ARE recoverable if they are ___
Established with reasonable certainty
Under UCC, can an irrevocable offer by a merchant guaranteeing the offer will remain open for x amt of time be ORAL?
NO
Does a bidder’s retraction of a bid revive prior bids?
NO- auctioneer’s acknoledgement of a subsequent bid acts as rejection of prior bid
when can lack of capacity be used- is it in answer to complaint or as basis of motion to dismiss
In answer to complaint as affirmative defense
Does a suretyship contract (to answer for the debt of another) need to be signed by person to be charged
Yes
if you are NOT a merchant, and there are additional terms in the acceptance how are they treated
like a proposal
For contract for sale of goods, defaulting BUYER is entitled to what type of refund for payments made on contract
Refund of any payments made on contract less damages payable to seller PLUS either amt from liquidated damages provision of penalty of 20% of value of total performance or $500, whichever is less
two instances when seller has right to cure defective tender
1) if time for performance has not yet lapsed
- if the seller had reasonable grounds to believe the buyer would accept the goods despite the fact they are non-conforming (ie. past history of accepting non conforming goods)
Explain how statute of frauds applies to an oral contract for sale of goods > $500
oral contract for the sale of goods is valid and enforceable unless the contract is for the sale of goods for $500 or more. In that case, the contract must be in writing and signed by the party to be charged (i.e., the one against whom enforcement is sought) in order to satisfy the SOF and be enforceable. The writing need only be sufficient to indicate that the parties intended to enter into a contract.
Exception to statute of frauds once goods are delivered, accepted and paid for, even if agreement was oral
A contract for the sale of goods is outside the UCC Statute of Frauds to the extent that goods are received and accepted, and to the extent that payment has been made and accepted.
What needs to be in writing for sale of goods to satisfy SOF
e UCC requires a memorandum for a sale of goods for $500 or more to (i) indicate that a contract has been made, (ii) identify the parties, (iii) contain a quantity term, and (iv) be signed by the party to be charge
define consideration
a legal detriment or bargained for exchange
consideration ~ promisor estoppel
promissory estoppel is a substitution for consideration. If there is a promise, reliance that is foreseeable and justifiable and enforcement necessary to avoid injustice, the promise will be enforced
performance obligation
Under common law, a party must substantially perform its contractual obligations to demand performance, usually payment from the other party.
define acceptance
Manifestation of asset to terms of an offer made in a manner invited by the offer. effective on dispatch
when can a buyer reject goods
for any reason under perfect tender rule.
Revocation of acceptance of goods
But if buyer accepts the goods, he can no longer reject them. Can revoke acceptance
1) if the non conformity substantially impairs the value to him,
2)or he accepted the goods b/c he had a reasonable belief the non conformity would be cured and it wasn’t
3) or he didn’t discover the non conformity b/c the non conformity was difficult to discover or b/c of seller’s assurances
or 4) he revokes within a reasonable time after he discovers or should have discovered th non convormity
A buyer who revokes acceptance ay recover the purchase price paid
General damages for breach of contract
The normal measure of damages for breach of contract is expectation damages, which aim to give the non breaching party the benefit of the bargain. Expectation damages must be foreseeable and proven with reasonable certainty.
duress vs undue influence
Duress= threats of force
Undue influence= unfair or excessive persuasion by someone in special relationship of trust (family member, caregiver, lawyer/accountant)
implied in fact contract can be established by…
conduct alone. Comes when party
1) intentionally engages or failed to engage in conduct
2) knows the conduct/indaction may cause the the other party to understand they assent
When are punitive damages for torts allowed
ONLY for reckless or intentional torts
NOT for negligence
if a party enters a contract despite conscious ignorance of facts related to a mistake…
They then assume the risk of that mistake
promissory estoppel in regards to bids by subcontractors
if the contractor relies on the subcontractor’s bid, it makes it irrevocable
B/c subcontractor reasonably expected to induce reliance on offer and offer relied on offer to their detriment.
If the good to be delivered is destroyed, does it excuse both party’s performance
Yes, if the destruction is w/o fault of either party and BEFORE risk of loss passed to buyer
When are the duties of a contract assignable- i.e painting your neighbor’s house instead of yours
If it doesn’t materially change the duty
or increase the burden or risk
or impair the person’s ability to get paid for performance
Or if the contract says the duty is not assignable
if person mails acceptance but then calls same day with rejection and other party relies on that rejection and then goes to contract with someone else….
Then b/c they relied on that rejection
between two merchants, if there are additional terms in acceptance, do you still have a contract?
Yes, based on the original terms
this is an example of what? horse comes onto neighbor’s property in a storm, is injured. neighbor takes care of horse for 2 weeks, gets it vet treatment. If owner then comes to claim horse but doesn’t want to pay vet bill and cost of keeping it for two weeks, on what grounds could neighbor sue
Unjust enrichment b/c horse owner would be unjustly enriched if not forced to pay for vet and food, stall, etc.
Can a warranty for fitness- that goods are fit for a particular purpose- be disclaimed?
Yes- if there is an express disclaimer for all implied warranties or if it being sold AS IS.
frustration of purpose- explain and example?
if an UNFORSEEN EVENT happens that destroys one party’s purpose in entering into the contract,
The event that arises must not be the fault of the frustrated party, and its nonoccurrence must have been a basic assumption of the contract.
The frustrated party is entitled to rescind the contract without paying damages
jerseys designed for horse racers but then just before, earthquake destroys racetrack.
under UCC, a modification for sale of goods over $500,
Must be in writing.
The only exception is for specially manufactured goods that ARE NOT SUITABLE FOR SALE TO OTHERS.
Do you need to mitigate damages? I.e if you contract with someone for termite remediation, do you need to call them immediately when you find the infestation or can you wait and then call them
You must mitigate damages and call them immediately.
Under UCC, would buyer or seller of goods typical have risk of loss until buyer receives goods
Typically seller has risk of loss till buyer gets goods BUT if buyer is in breach of contract (say by failing to pick up goods by designated time)- risk shifts to buyer
Under UCC, what are two ways a seller can accept an offer to buy goods
By shipping or promising to ship the goods. If the seller ships the goods, then acceptance is effective immediately and creates a contract w terms identical to those of the offer
can a non breaching party recover for damages if they didn’t mitigate
They can NOT recover for damages that COULD HAVE BEEN MITIGATED BY REASONABLE EFFORTS- ie hiring another bar prep coach.
MUST MITIGATE DAMAGES!!
does failure of a condition precedent (i.e.not getting a loan if the condition says the contract depends on getting a loan), can the other party get damages?
No b/c failure of a condition precedent relieves the party of a duty… so NO damages. If I can’t get a loan, my duty to go thru with the contract is eliminated so no damages to the seller.
which has more weight if there is a controversy- Course of Dealings between the parties or Express Term of contract
Express term of contract
statutes of frauds does not apply to leases when they are
one year or less
firm offer rule- keeping offer for sale of goods open- do both parties have to be merchants?
NO- just the party selling the goods.
A third party intended beneficiary can VEST their rights by doing what
relying on the contract OR FILING A LAWSUIT based on the contract
if a contract is not breached but say the logs to be removed caught on fire … the other party can get what type of damages
Restitution
Contract will be discharged due to impracticability but can still get $ for time you put in
Modification of service contracts- CL
generally need new consideration BUT modifications are enforceable WITHOUT new consideration if the modifications rest on circumstances not anticipated by parties when contract was made and the modifications are FAIR AND EQUITABLE
a contract that violates a state law- may be enforced if… (think car insurance)
contract that violates a state statute may be declared unenforceable on grounds of public policy. However, when the contract violates a policy that was intended for the benefit of a contracting party seeking relief, the contract may be enforceable in order to avoid frustrating the policy behind the statute
For a unilateral mistake to a contract, if that party bore the risk, can they rescind the contract
NO
if one party to a contract hinders another’s performance what is it a violation of
good faith and fair dealing
If a party to a service contract RETRACTS their repudiation (i.e now says they can perform) what happens
The other party must honor their retraction and is still bound to the contract UNLESS
1) the other party expressly cancelled the contract
2) the other party materially relied on the retraction
3)the other party indicated the repudiation was final
