Contracts Flashcards
What law governs the sale of goods?
Article 2 of the UCC
What is the UCC?
Uniform Commercial Code
What are goods?
Those movable things identifiable at the time of contract
Any contracts not regarding goods are governed by __________
General common law contract principles (only need to know majority view)
What law governs when a contract combines goods and non-goods?
Whichever is more predominant in the contract - unless the contract explicitly divides the payments
What is an express contract?
A contract formed expressly by language, either written or oral
A contract can be implied in:
- Law
- Fact
What is a contract implied in fact?
A contract formed by conduct
A contract implied in law is also known as _______
A quasi-contract
When will quasi-contract be invoked?
When contract theory fails to produce a just result
A quasi-contract can prevent ________.
Unjust enrichment of one party
A quasi-contract arises where:
One party
1. Confers a benefit and reasonably expects that they will receive payment
2. Reasonably relies on another’s gratuitous promise
What is a bilateral contract?
Both sides make promises to perform
All contracts are bilateral unless _______-
They are unilateral contracts
What kind of contract is a reward, prize, or contest?
Unilateral contracts; they can only be accepted by completing performance
An offer is a unilateral contract if it ____________.
Expressly requires performance for acceptance
What is a unilateral contract?
Can only be accepted by completing performance
When is an offeree required to give notice of acceptance of a unilateral offer?
Only if the offeree has reason to know that the offeror would not learn of the requested performance with reasonable certainty and promptness
A validly formed contract requires:
- Mutual assent
- Consideration from each party
- No defenses to formation
Whether or not mutual assent is present is governed by ________.
An objective standard
What is an offer?
Proposal communicating in definite terms a present intention to contract; can be accepted
What is acceptance?
Words or conduct manifesting assent to the terms of the offer
What is intent to be bound?
The manifestation of a present intent to contract
What test is applied to the intent to be bound?
Reasonable person standard
What is the reasonable person standard?
Whether a reasonable person in offeree’s position would believe that her assent to the offer would create a contract
Are advertisements offers?
No; merely invitations to deal
What kinds of advertisements are offers?
- Ad is in the nature of a reward
- Specific to quantity and who can accept
What terms must be provided to make a contract capable of being enforced?
The essential terms
Essential elements of an offer usually include:
- Identity of the parties
- Identity of the subject matter
- Time for performance
- Price
Offers for real estate must identify:
- Land with some particularity
- The price
An offer for the sale of goods must specify _______.
Quantity of goods required
Under the UCC, a contract may be enforceable in the absence of _______ so long as the parties otherwise intended to enter into a contract.
a price term
Why do output, requirements, and exclusivity contracts satisfy the UCC requirement to specify the number of goods in a UCC contract?
These approximate a reasonably foreseeable figure
What happens if a UCC contract specifies the number of goods, but that amount is later increased?
It’s okay as long as the increase is not unreasonably disproportionate to either:
1. The stated estimate
2. Otherwise comparable prior output or requirements
Offers to enter contracts for employment must specify ________
The duration
If the duration of an employment contract is not specified and the offer is nevertheless accepted, the contract will be considered _________.
Terminable at will
What happens in an employment-at-will relationship?
Either party can terminate the agreement at any time without the termination being considered a breach
Permanent employment means _____________.
Employment-at-will
When will termination of an employment-at-will relationship be considered a breach of contract?
When the termination violates an important public policy
What kinds of terms will not constitute an offer?
Vague and ambiguous ones
In order for the offeree to have the power to accept, the offeree must have _____ of the offer.
Knowledge
When will a lapse of time lead to the termination of an offer?
When the offeree fails to accept the offer within:
1. The time stated in the offer OR
2. A reasonable time if no time is stated
When will the death or incapacity of a party cause an offer to terminate?
Occurs after the offer but before acceptance.
Does not apply to irrevocable offers
What is revocation?
Words or conduct of the offeror indicating that an offer may no longer be accepted.
Who can revoke an offer?
Only the offeror
When is revocation effective?
When received by the offeree
What are the methods of revocation?
- Unambiguous words
- Conduct of unwillingness
- Inability to contract
_______ revocations never become effective
Lost
Can an offeree make multiple offers?
Yes, but if one offeree accepts, the offeror must notify every other offeree
When is an option contract irrevocable?
When supported by consideration
An offer is irrevocable for a reasonable period of time if there is reliance that is:
Reasonably
1. foreseeable and
2. detrimental
Start of performance on ________ makes the offer irrevocable.
A unilateral contact
When it comes to performance on a unilateral contract, and whether that performance triggers irrevocability, mere ________ is not performance.
Preparation
What is the UCC “Firm Offer” Rule?
Written offer to buy/sell goods signed by merchant promising it will be held open. is irrevocable for the stated time period or a reasonable time if no time period is stated
No _______ is required for a firm offer to be irrevocable.
Consideration
In no case will a UCC firm offer be irrevocable for longer than __________
Three months
Who is a merchant?
Those who regularly deal in goods of the kind sold.
Merchants are held to a higher standard of __________ than other sellers.
Good faith
What is an express rejection?
Statement by the offeree that she does not intend to accept the offer
Express rejection will _________ an offer
Terminate
What does a counteroffer do?
- Terminates the original offer
- Counteroffer becomes the new offer
Mere bargaining has no ________ and therefore does not _______
Legal effect
Terminate the original offer
What is an interrogative statement?
A reply to an offer that merely requests information regarding the offer. Not a counteroffer
Only _____ statements are counteroffers.
Declarative
Conditional acceptance technically constitutes __________.
A new offer
If a proposed contract that was legal at the time of the offer becomes illegal, the power of acceptance is ___________.
Terminated
A valid acceptance requires that a party:
- Unequivocally accepts the offer
- Communicates that acceptance to the offeror
For an acceptance to be valid, it most occur before ___________.
The offer is terminated
Offeree must have knowledge of _______.
The offer
For an offer that requires acceptance by making a return promise, a statement of _____ is not sufficient to create a contract.
Intention
Offers can only be accepted by __________.
The person to whom the offer was made
What kinds of offers are assignable?
Option contracts supported by consideration
What is the mirror image rule?
At common law, acceptance must be a mirror image of the offer without any deviation
What is the UCC exception to the mirror image rule?
Whether added terms become part of the contract depends on whether one or both parties to the contract are merchants
If someone responds to an offer with additions, and only one party is a merchant, then ______________.
The additional term does not become part of the contract; it is a proposal to be accepted or rejected
If someone responds to an offer with additions, and both parties are a merchant, then ______________.
The additional term becomes part of the contract unless:
1. Offer expressly limits acceptance to terms of the offer
2. Additional term is a material alteration
3. Offeror objects to the change
______________ is always considered a material alteration
Disclaimer of warranty
Under the UCC, an offer may be accepted via _____________.
Any reasonable means
How may an offer be accepted?
- By any manner explicitly authorized by the offer
- By any reasonable means if no specific manner of acceptance is required
What is the mailbox rule?
An acceptance is effective upon dispatch
What are the exceptions to the mailbox rule?
- Offer provides otherwise
- Rejection is sent first
- Acceptance of an option contract is effective upon receipt
All communications other than _______ are effective on receipt
Acceptance
Whether or not promising to perform is acceptance depends on ___________.
Whether the contract is bilateral or unilateral
Promising to perform is acceptance for _____ contracts
Bilateral
Promising to perform is not acceptance for ________ contracts.
Unilateral
Full performance is always acceptance unless:
- There is failure to give reasonably prompt notice by the offeree OR
- Performance was substandard or improper
Starting performance is acceptance for _________ contracts.
Bilateral
Starting performance on a bilateral contract is treated as ________.
An implied promise to perform
While starting performance on a unilateral doesn’t constitute acceptance, it does ___________.
Make the offer irrevocable for the reasonable amount of time required to complete performance
Offer to buy goods can be accepted by a prompt:
- Promise to ship the goods
- Shipment of conforming goods
In order to accept an offer, a party provides a shipment of goods. However, they are nonconforming goods. This shipment is _______________.
An acceptance and a breach
A shipment of nonconforming goods will be acceptance and breach unless _______.
Seller’s shipment comes with notice of accommodation; then it’s a counteroffer
Is silence from the offeree an objective manifestation of assent?
Nom unless:
1. Parties have a prior history on dealing on such a basis
2. Intent to contract exists
2. benefits of contract are taken with reasonable opportunity to reject them
Consideration is present at any time ___________.
Promises with value or performances are exchanged
What is consideration?
A bargained-for exchange between the parties
When has a consideration been bargained-for?
When consideration is sought by the promisor in exchange for her promise and given by the promise in exchange for that promise
If the promise-breaker did not ask for _________ in return, there is no bargained-for consideration, and therefore, no contract.
Legal detriment or forbearance
There is no consideration when a _________ is given because there is no bargain involved.
Gift
Where is there legal detriment or forbearance?
When each party does something she is not legally obligated to do or refrains from doing something that she has a legal right to do so
What is token consideration?
Consideration that is entirely devoid of value.
This does not constitute adequate consideration.
A _____ promise is not adequate consideration
Illusory
A requirements contract will fail as adequate consideration if __________.
The buyer has no real obligation to buy goods she needs and can accept or reject without regard to actual requirements for the goods
Requirements contracts must have ________ in order to constitute adequate consideration.
Exclusivity
What is past consideration?
Something that happened before the promise; cannot be consideration
When will past consideration be valid consideration?
- When an act benefits the promisor AND
- That act was performed by the promisee at the express request of the promisor or in response to an emergency
Unlike the UCC, the prevailing common law view is that _________ requires consideration to be valid
Modification to a contract
A legal detriment must be new to be valid consideration unless:
- Addition or change in performance
- Unforeseen difficulty
- Third party promise to pay
No new consideration is required. for____ modifications on a sale of goods contract.
Good faith
Consideration is required for the settlement of ____ and ____ to be enforceable.
Debts
Claims
If a debt is _____ and _______, part payment is not new consideration for settlement or release.
Due
Undisputed
If a debt is ______ or _______, part payment is new consideration for settlement or release
- Not yet due
- Disputed
A promise is legally enforceable even though there is no consideration if there is one of the following substitutes:
- Seal
- Written promise to satisfy a legal obligation barred by law
- Detrimental reliance
___________ is also known as detrimental reliance
Promissory estoppel
What constitutes promissory estoppel?
- Words of promise
- Reasonable, detrimental, and foreseeable reliance AND
- Enforcement necessary to avoid injustice
What does it mean for a contract to be void?
It is void from the outset, so it cannot be enforced by either party
What kind of contract can be enforced by either party?
Valid
What does it mean for a contract to be voidable?
Voidable at the election of one or both of the parties to the contract
What does it mean when an agreement is unenforceable?
Even though the agreement is valid, it cannot be enforced in a court of law because it is not related to contract formation
A party may raise _________ as a defense, in relation to consideration.
Lack of consideration
Which party can raise lack of capacity?
Defendant
D who lacks capacity has a right to _________.
Disaffirm a contract
Which Ds may raise lack of capacity as a defense to a contract?
- Minors under 18
- Mental incompetents
- Intoxicated persons
Intoxication is considered a lack of capacity only if ____________.
The other person has reason to know of the intoxication
A person who does not have capacity is nevertheless legally obligated to pay for __________.
Things that are necessaries, such as food, clothing, medical care, and shelter.
Implied affirmation occurs when a contract is entered into before the party had capacity, but ___________ and ___________.
The party now has capacity
The party has continued to keep the benefits of the contract without complaint
What is the defense of “lack of volitional consent”?
Party has the legal capacity to contract, but the party’s free will is overcome by duress or coercion
If there is a lack of volitional consent, then the contract is ________.
Voidable
Contracts induced by duress or coercion are ______.
Voidable
Duress requires ____________.
An improper threat
What is economic duress?
Improper threat to breach an existing contract and the vulnerability of one party
What are the elements of undue influence?
Undue susceptibility to pressure and excessive pressure
Undue susceptibility makes a contract ________.
Voidable
Undue susceptibility can be established either by:
- The circumstances
- The existence of a confidential relationship
What contracts are subject to the Statute Of Frauds?
- Contracts incapable of being performed within one year
- Sale of goods $500+
- Promise made in consideration of marriage
- Guarantee to pay debts of another
- Executor promises to pay estate debts with own funds
- Transfers of interests in real estate
Whter a contract can be ______________ is irrelevant to whether it can be completed within one year.
Terminated early
Specific tasks do not fall within the SOF because _____________.
It is theoretically possible for any task ti be completed within a year with unlimited resources
Do contracts for life fall within the SOF?
No, because it is possible that the person will die within the year
What knd of marriage-related promises does the SOF apply to?
Not to mere promises of marriage; rather to promises to do something or refrain from doing something in exchange for getting married
SOF does not apply when the purpose of the debt being guaranteed was to _________.
Benefit guarantor
Transfers of interests in real estate are within the SOF except for __________.
Leases of one year or less
The SOF can be satisfied by:
- Writing
- Performance
- Judicial Admission
At common law, what must be included in a writing in order to satisfy the SOF?
All material terms:
1. Who
2. What
In order to satisfy the SOF, at common law, the contract must be signed by _______.
The person who is asserting. theSOF defense to the contract
Under the UCC, the only contracts that fall under the SOF are those for the sale of goods for ______.
$500 or more
For UCC contracts subject to the UCC, the writing must be sufficient to ______.
Indicate a contract for the sale of goods
If both parties to a sale of goods are merchants, rather than the typical SOF, then the _______ rule applies.
Confirmatory Memo
What is the confirmatory memo rule?
If one party sends a written confirmation, the SOF is satisfied unless the other party objects within 10 days
For a service contract, what happens if there is full performance?
SOF is satisfied
For a service contract, what happens if there is part performance?
SOF is not satisfied, but P may recover under the theory of quasi-contract
For sale of goods contracts, how does part performance affect the SOF when ordinary goods are involved?
Delivered goods satisfy the SOF; undelivered ones do not
For the sale of specialty goods, there is no SOF defense if:
- The goods are specially made for the buyer AND
- The seller has either started production or committed for their procurement
Part payment by the buyer for multiple goods satisfies the SOF, but only to the extent of ___________.
The payment made
Part payment by the buyer for a single good satisfies the SOF as to _______, and the agreement is legally binding
the single item
When it comes to a sale of land contract, 2 of the following 3 are required to satisfy the SOF.
- Buyer takes possession
- Buyer pays all/part of the purchase price
- Buyer makes substantial improvements to land
When is the SOF satisfied by judicial admission?
If the party asserting a SOF defense admits under oath that there was a contract
What is the equal dignity rule?
If the contract is within the SOF, then written authorization is required for someone else to legally enter into the contract on the principal;s behalf
If a contract is allegedly modified and falls within the SOF, then the modification _______
Must be in writing
What is a misrepresentation?
A statement that isn’t in accord with the facts
Fraud in the inducement is an _____ defense.
Equitable
When does fraud in the inducement occur?
When A enters into an agreement, knowing that it’s supposed to be a contract and what it’s about, but A entered the agreement because of false information that B gave
If there is fraud in the inducement, the contract is ______.
Voidable
Fraudulent misrepresentation makes a contract voidable if ______
The defrauded party was justified in reliance
A party may avoid a contract to which the party’s assent was induced by fraud even if ________.
The resulting transaction is fair on its terms
There is no general duty to ______, but affirmatively hiding material facts is fraudulent misrepresentation.
Disclose
Affirmatively _________ constitutes fraudulent misrepresentation
Hiding material facts
The SoL within which a party may void a contract due to misrepresentation does not begin to run until ______________.
That party either knows or has reason to know of the misrepresentation
Non-fraudulent misrepresentation still makes a contract voidable if:
- Innocent party justifiably relied on misrepresentation
- The fact misrepresented was material
When does fraud in factum occur?
Where A makes/signs an agreement, but either:
1. Does not realize that it is supposed to be a contract
2. Doesn’t understand the nature/content of the agreement
Because of some false information that B gave to A
Mistake of fact differs from misrepresentation because _______
The party is making a mistake of her own
A mistake is defined as ________.
A belief that is not in accord with the facts
Mistake of fact applies only to ________ facts.
Existing
If both parties share the same mistaken belief, the mistake is a ________ one.
Mutual
A mutual mistake is a defense if:
- Mistaken basic assumption of existing fact
- Material adverse effect on agreement AND
- No assumption of risk
In order to be a mistaken basic assumption of existing fact, the mistake must be in regard to _______ of the contract, not _________.
Subject matter
Value
There is a presumption that the seller assumes the risk of knowing:
- What she owns AND
- What she’s selling
A unilateral mistake of material fact by only one party only voids a contract if:
- Requirements of mutual mistake are satisfied AND
2a. the other party knew/should have known of the other party’s mistake OR
2b. Enforcement of the contract would be unconscionable
Mistake due to ambiguity is a ____________.
Contract formation defect
Under the defense of mistake due to ambiguity, there will be no contract if:
- A material term is subject to at least 2 reasonable interpretations
- Each party has a different meaning in mind AND
- Neither party is aware of any ambiguity at the time of contract
A court has the power to _________ to avoid unconscionable terms.
Refuse to enforce:
1. A provision OR
2. An entire contract
Unconscionability is always determined at the time of ________
Contract formation
The basic test of unconscionability is whether ___________.
The contract (or a provision) is so one-sided as to be unconscionable under the circumstances existing when the contract was formed
A contract will be unconscionable if there is substantially disparate _______.
Bargaining power
A contract will be unconscionable if it goes against ______ policy.
Public
A contract will be unconscionable if there is inconspicuous ____________.
Risk shifting
Contracts of ______ are unconscionable.
Adhesion
What is the public policy defense of illegality?
If either the consideration or the subject matter of a contract is illegal, the contract is not legally enforceable
A contract for illegal consideration or subject matter is _________.
Void
A contract for illegal subject matter is not void if:
- P didn’t know subject matter was illegal, but D did
- Party is not as culpable as the other party. and seeks relief
If a contract was formed for an illegal purpose, the contract is ________.
Voidable
Which party may void a contract for illegal purpose?
Party who was:
1. Unaware of illegal purpose OR
2. Was aware but did not facilitate purpose, and purpose didn’t involve serious moral turpitude
A contract that violates a regulatory statute may be unenforceable as against public policy if _____________.
The policy against enforcement outweighs the interest of enforcement.
A contract that violates a regulatory statute will be unenforceable unless ________
Those intended to be protected by the statute would be harmed by a finding of unenforceability
What is the parol evidence rule?
Limits the admissibility of prior expressions or contemporaneous or oral statements
What is the principle behind the parol evidence rule?
The final contract is more reliable than anything said or written earlier
What is the test for the parol evidence rule?
There must be:
1. Integration AND
2. Any additional statement was signed
The parol evidence rule does not apply to _________ oral or written agreements.
Subsequent
What is an integration?
A written agreement intended to be the final contract between the parties
How do the parole evidence rules for partial and complete integration differ?
For complete integrations, no contradicting supplements are allowed.
For partial integrations, supplements showing prior agreements that add consistent terms are allowed.
Parol evidence is gnerally inadmissible to _____ or _____ the written contract.
Contradict
Change
The only time that parol evidence may contradict a written contract is to show _______/
A clerical error
Parol evidence can be used to show _________ defects.
Formation
Parol evidence can be admitted to establish an oral __________ to the parties’ performance under the contract.
Condition
Parol evidence is admissible to show an additional contract if it is a ______________ contract.
Consistent collateral
Parol evidence is admissible to explain or interpret ___________ in the contract.
Ambiguous terms
What is a merger clause?
Indicates that the contract is the final integration of the agreement between the parties
What is reformation?
An equitable action to modify a written contract to reflect the true intent of the parties
What are the three main approaches used to determine if ambiguity exists in a contract?
- Four Corners: no extrinsic evidence is allowed
- Plain Meaning: Court considered circumstances of the agreement, but not preliminary negotiations
- Liberal Approach: Court considers preliminary negotiations
A writing is interpreted as a ________.
Whole
All writings that are part of the same transaction are interpreted __________.
Together
If the _______ purpose of the parties is ascertainable, that purpose is given great weight.
Primary
_____ and ______ terms are given greater weight than general language.
Specific
Exact
________ negotiated terms are given greater weight than _________ terms.
Separately
Standardized
As a general rule, the contract is interpreted against ______ in disputes involving the interpretation of contract language.
The drafter
Where language has a generally prevailing meaning, it is interpreted in accordance with ________________.
That ordinary meaning unless a different intention is manifested
Technical terms and words of art are given what meaning?
Their technical meaning when used in a transaction within their technical field
Express terms are interpreted according to their use in various situations. In what order are those usages prioritized?
- Course of performance: same people, same contract
- Course of dealing: same people, different contract.
- Custom & Usage: different people, different (but similar) contracts
If terms are left out of a contract for the sale of goods, _________ will apply.
Default UCC terms
If not specified in a contract for the sale of goods, the time for shipment or delivery shall be ____________.
A reasonable time
If not specified in a contract for sale of goods, the place for delivery of goods is ______________ or ______________.
Seller’s place of business
If she has none, then the seller’s residence
In a contract for the sale of goods, a merchant seller’s delivery obligation is complete when the buyer receives goods at:
- Seller’s place of business OR
- Location of goods known to the buyer
In a contract for the sale of goods, a non-merchant seller’s delivery obligation is complete when _____________.
The seller tenders goods
What is tender?
Telling a buyer:
1. Where the goods are
2. How to get them
A contract that requires the seller to ship the goods via 3rd-party carrier is either:
Shipment or destination contract
If a contract for the sale of goods is otherwise silent, a shipment contract is presumed where _________________.
The contract requires shipment by a third-party carrier
Under a shipment contract, the seller is not responsible for ____________.
The arrival of the goods at the final destination
Under a shipment contract, the seller’s obligation is complete before ______________.
The goods are actually delivered to the buyer
Under a shipment contract, the seller is legally obligated to:
- Deliver goods to common carrier and make reasonable delivery arrangements
- Deliver any document necessary to enable buyer to obtain possession
- Promptly notify the shipment’s buyer
What’s the difference between shipment and destination contracts?
Shipment contracts occur in the seller’s own city. Contract ends at shipment.
Destination contracts occur in the non-seller’s city. Contract ends at delivery
Under a destination contract, the seller is required to __________.
Deliver the goods at a particular location
When do risk of loss issues arise in a contract for the sale of goods?
After the contract is formed but before the buyer receives the goods, the goods are damaged or destroyed, but neither party is at fault.
In a contract for the sale of goods, ________ controls as to risk of loss.
Agreement of the parties
In a contract for the sale of goods, the breaching party is liable for any uninsured loss even if _____________.
The loss is completely unrelated to the breach
In the sale of goods, seller bears the risk of loss until ____________.
Completion of delivery obligation
An express warranty of quality can be given by:
1 Statement of fact
2. Promise
3. Conduct
In a contract for the sale of goods, statements of value or opinion are not _______.
Express warranties
Every seller of goods automatically warrants that the title conveyed to the buyer:
- Is good
- Its transfer is rightful
A warranty of merchantability is implied in every contract for a sale of a good by a seller who is _______.
A merchant with respect to goods of that kind
The implied warranty of merchantability requires that goods sold by “merchants” must ________________.
Be fit for their ordinary purpose
If a buyer has a particular purpose for purchasing the goods that the seller is aware of, then the goods must ___________.
Be fit for that particular purpose
What is a disclaimer of warranties?
A contract provision that eliminates warranties.
_____ warranties generally cannot be disclaimed
Express
An implied warranty of merchantability can be disclaimed if _________.
Conspicuous
When is an implied warranty of merchantability conspicuous?
When the disclaimed portion of the contract is in different print/font from the rest of the contract
What two phrases effectively eliminate implied warranties?
“As is”
“With all faults”
One can limit remedies unless ________.
Unconscionable
Limitation of remedies is prima facie unconscionable when _____________.
A breach of warranty on consumer goods causes personal injury
What 3 alternatives has the UCC set forth for determining to whom warranty liability extends?
- Extends to any natural person in the family/household of the buyer if they would reasonable use the goods and are injured (most common option)
- Same as above, but removes “in the family/household”
- Same as above, but removes “and are injured”
In a contract for the sale of goods, the price is a reasonable price at the time of delivery if:
- Nothing is said as to the price
- The price is left to be agreed by the parties and they fail to agree
- The price is to be fixed in terms of some agreed market or other 3rd party standard and is not set
A price to be fixed by the seller or by the buyer must be fixed in _________.
Good faith
What happens if a price is payable in goods?
Each party becomes a seller of goods
If not specified in the noncarrier contract to sell goods, payment is due ________.
Upon tender of delivery
If not specified in a carrier contract to sell goods, payment is due _________.
When buyer receives goods
Under the UCC parol evidence rule, unlike the common law rule, ___________.
A merger clause doesn’t conclusively determine that an agreement is completely integrated
What is mutual recission?
An express agreement by both parties to cancel the original contract
An agreement to rescind is itself a ______ contract supported by _______.
Binding
Consideration
There is no general rule requiring ________ for discharge by mutual agreement.
A writing
For mutual recission to be available, the original contract must be __________ on both sides
Executory - in other words, neither party has finished performance
Under the UCC, a seller’s tender of the goods (delivery) and ____________ are concurrent conditions of exchange.
a buyer’s tender of payment
If the contract rights of ________ have already vested, the contract cannot be discharged by mutual rescission.
a third party
Unilateral recission is available only. if_____________.
One of the parties to the contract has an adequate legal ground to rescind. thecontract
What is an accord?
An agreement to accept a different performance in satisfaction of the existing obligation
A promise to accept a lesser performance for an obligation __________ and ______ is not a valid accord, because there is no consideration.
Currently due
Undisputed
Accord does not discharge the prior contract; it simply _____________ until the accord is satisfied
Suspends the right to enforce the original contract
What is satisfaction?
Performance of the accord agreement
What is the effect of satisfaction?
Discharges both the original contract and. the accord contract
If accord is not satisfied, the non-breaching party may sue either on:
- The original un-discharged contract
- Breach of the accord agreement
What is modification?
An agreement by the parties to an existing contract to accept a different agreement in satisfaction of the existing obligation
The prevailing common law view is that a modification to a contract requires ________ to be valid.
Consideration
The legal detriment or forbearance must be new to be valid consideration unless:
- Addition or change in performance
- Unforeseen difficulty OR
- 3rd party promise to pay
Under the UCC, no _________ is required for good faith modifications on a sale of goods contract.
New consideration
A modification on a sale of goods contract is valid if the party modifying the contract acted ______.
In good faith
If a contract as allegedly modified is within the SOF, then the modification must be _________.
In writing
If a contract expressly prohibits oral modification or requires writing, and there is a modification, what do you do under common law?
Ignore any provisions expressly requiring writing
In UCC Contracts, provisions requiring modifications in writing are valid unless ____________.
There is a waiver
What is the effect of modification of a contract?
Immediately discharges the terms of the original contract that were modified
What is a novation?
An agreement by both parties to substitute a different person to receive the benefits and assume the duties of the original contract
What are the requirements of a valid novation?
- Previous valid contract
- Agreement by all the parties, including the new 3rd party
- Valid and enforceable new contract
In a novation, if all parties do not agree to the substitution, then it is a _________, which does not excuse performance.
Delegation
What is the effect of novation?
It immediately extinguishes the contractual duties between the parties to the original contract
The party being replaced by novation is excused from _______.
Any liability for non-performance
When do later unforeseen events have to occur in order to potentially end a contract?
After contract formation but before performance
When do unforeseen events make a contract impossible to complete?
- Circumstances affecting the contract have changed
- Change not due to any act by D
- Change of circumstances causes performance to be objectively impossible
When is performance objectively impossible?
No one could perform the duties of the contract
If a ________ law makes performance of the contract illegal, performance is excused.
Supervening
Does death or physical incapacity of a person excuse performance?
Only if the specific person was necessary to effectuate the contract
When does the destruction of the subject matter of the contract discharge the duty to perform?
When it is not the fault of either party
When are goods destroyed so as to end a contract under the UCC?
When the goods are totally destroyed before the risk of loss has passed to the buyer without the fault of either party
What effect does temporary impossibility have on a contract?
Suspends the contractual duties without discharging them
What is the subjective test of impracticability?
Examines whether the performance would be commercially unreasonable at the time of contract formation
Performance of a contractual obligation is impracticable when:
- Circumstances affecting the contract have changed
- Change is not due to any act by D AND
- Undue hardship on D
What is the effect of temporary impractability?
Suspends contractual duties but will not discharge them
Uncertain _______ or _______ are too typical to ever be impracticable.
Weather
Market conditions
What is frustration of purpose?
Supervening events unforeseeable at the time. of contract formation destroy the purpose of the contract that was known by both parties
Frustration of purpose occurs when:
- Both parties know the purpose of contract
- Unforeseeable supervening event out of D’s control AND
- Original purpose unavailable
How is frustration of purpose distinguished from impossibility?
Performance is still technically possible, but the purpose no longer exists
A party’s performance does not become due until _____________.
All express conditions to it have occurred or are excused
What is an express condition?
Language in a contract that states something must occur before someone’s performance is due
When is there a conditional acceptance?
When conditional language appears in one person’s response to the offer
If a condition for acceptance is not met, ______________.
There is no contract
A condition does not make a promise to perform illusory because __________.
The possibility that the condition might occur limits the party’s freedom of action by binding her to perform if the condition is satisfied
There must be _____ compliance with all conditions
Strict
If an express condition is not satisfied, performance is ________.
Excused
If it is clear that the purpose of the condition was to benefit or protect one of the parties, the language of the condition will be interpreted as if __________.
That intention had been embodied in the contract terms
A performance that is subject to an express condition cannot become due unless:
- The condition occurs OR
- Its nonoccurrence is excused
Which party can waive an express condition?
The party protected by the condition
If a party waives a condition, that party may reinstate the condition with respect to ________.
Future acts of performance
When does estoppel occur in regards to express conditions?
Before the condition is satisfied, the party protected by the condition causes the other party to believe she won’t require satisfaction of the condition
If the party protected by an express condition intentionally/negligently prevents the condition from occurring, the condition is ________.
Eliminated
The nonoccurrence of an express condition may be excused in order to avoid ___________ forfeiture.
Disproportionate
What is forfeiture?
Denial of compensation resulting when the obligee loses her right to the agreed exchange after relying substantially on the expectation of that exchange
What is anticipatory repudiation?
Where a party unambiguously states to the other party, before performance, that they will not perform or are unable to perform. This excuses the other party from performance and gives them. aright to sue for recovery.
Anticipatory repudiation only occurs when ___________.
A party unequivocally manifests:
1. An intention not to perform
2. An inability to perform
When does anticipatory repudiation arise through conduct?
Where there is a contract for services in exchange for a thing and before services are completed, the thing is sold or transferred to someone else
A non-repudiating party may treat the anticipatory repudiation as an offer to __________.
Rescind the contract
How soon after anticipatory repudiation may the non-repudiating party sue?
Immediately - unless the non-repudiating party has already completed performance, in which they must wait until the contract becomes due
What is the adequate assurance doctrine?
Expressions of doubt by one party give the other party the right to demand adequate assurance of due performance
In a contract for the sale of goods, a party to the contract with reasonable grounds for insecurity is entitled to:
- Request assurances AND
- Suspend performance pending reciept of assurance
Failure to provide an adequate assurance within __________ can be treated as repudiation, which may give rise to a right to terminate the contract.
A reasonable time - not to exceed 30 days
The adequate assurance doctrine requires that a party respond to a demand for adequate assurances only if the demand is ______ and _______.
Reasonable
Justified
When is demand for adequate assurances reasonable and justified?
The party making the demand must have reasonable grounds for insecurity with respect to other’s performance
When does a breach of contract occur?
When a party to the contract does not perform after performance comes due
If performance has not come due, there cannot be ______.
A breach
What is the Perfect Tender Rule?
A seller performs her obligation under. a contract for the sale of goods upon delivering perfect tender?
What are a buyer’s options if tender is less than perfect?
- Reject all goods and sue for damages
- Accept all goods and sue for damages
- Accept some, reject nonconforming, and sue for damages
When does a seller of less-than-perfect tender have the option to cure?
- Time for performance has not expired OR
- Reasonable grounds to believe that less-than-perfect tender is acceptable
What is an installment sales contract?
A contract that requires or authorizes multiple shipments in installments with multiple payments
What is the standard for determining whether a buyer can reject a less than perfect installment or cancel an installment sales contract?
Substantial impairment contract
A buyer can reject a less than perfect installment only if _______________-.
Nonconformity:
1. Substantially impairs the value of that installment
2. Cannot be cured
After a less-than-perfect installment, a buyer can cancel the entire contract only when __________
The nonconformity substantially impairs the value of the whole contract
In an installment contract, a buyer’s previous acceptance of a nonconforming tender does not constitute a waiver of her right to __________.
Reject a later nonconforming tender
If a buyer first accepts less than perfect tender, she cannot later _______
Reject those goods
A buyer accepts when she indicates to the seller after __________ that the goods conform to contract requirements or that she will keep the goods despite the fact that they are nonconforming
Reasonable opportunity to inspect
In order to reject a delivery, a buyer must:
- Reject OR
- Appropriately notify the seller of rejection
Within. reasonable time after tender/delivery
Generally, acceptance of tender or delivery is implied if _______ goes by without complaint.
More than a month
A buyer accepts if she does any act inconsistent with __________.
The seller’s ownership of the goods
A buyer can revoke after acceptance of goods if:
- Nonconformity substantially impairs value of the goods
- Excusable ignorance or reasonable reliance on seller’s assurances of conformity AND
- Revocation within reasonable time after discovery of noncomfority
If an agreement would be a contract, it’s not invalid just because it leaves particulars of performance ___________.
To be specified by one of the parties
Any specification on particulars of performance, any specification must be made:
- In good faith
- Within the limits set by commercial reasonableness
By default, specifications relating to the assortment of goods are ____________.
At the buyer’s option
By default, specifications relating to the shipment of goods are ________.
At the seller’s option
At common law, a material breach is a refusal under the contract with goes to ___________.
The heart of the promised performance
Material breach is a question of _____.
Fact
Where all or part of the performances to be exchanged under an exchange of promises can. be rendered simultaneously , they are _________
To that extent due simultaneously, unless the language or circumstances indicate otherwise
Where one party’s performance requires a period of time, that party must ____________________ before the other party is required to perform.
Complete its performance
If there is a multiple lump sum payment, how much of the payment will constitute material breach?
Providing less than half
When is a contract divisible?
When the same act is performed a certain number of times and the performer is paid on aper-performance basis
When is there material breach of a divisible contract?
Based on each individual performance; so is recovery
What are expectation damages?
The damages sufficient to put P in the position P would have been in had D not breached the contract
What kind of damages are awarded by default?
Expectation damages
All the rules for monetary damages for breach of contract are premised on protection of ________________.
P’s expectation interest
What is the general formula for determining expected damages?
Loss in value + Other loss - cost avoided - loss avoided
What is the loss in value in terms of expected damages?
The difference between the performance the non-breaching party should have received under the contract and what was actually received
What is “other loss” for the purposes of determining expectation damages?
Any consequential and incidental damages
What is “cost avoided” when determining expectation damages?
The additional costs the non-breaching party can avoid by rightfully discontinuing performance under the contract as a result of the other party’s breach
What is “loss avoided” when determining expectation damages?
The beneficial effets of the breach due to the nonbreaching party’s ability to salvage or reallocate resources that otherwise would have been devoted to performing under the contract
What are incidental damages?
Reasonable costs of finding a replacement after a breach of contract
When are incidental damages recoverable?
Always, as long as the costs are reasonable
What are consequential damages?
Damages from breach due to the special needs or position of the buyer
Consequenetial damages are also known as _______ damages.
Special
Consequential damages are only recoverable if _________________________.
They were reasonably foreseeable by the breaching party at the time the contract was form
When are consequential damages foreseeable?
D had reason to know of P’s special circumstances at the time of the contract
What are reliance damages?
Put P in the same economic position she would have been in had the contract never been formed
What are restitution damages?
Restores to a party any benefit conferred to the other party
Where contract theory fails to produce a just result, _______ is available as an equitable doctrine to prevent the unjust enrichment of one party.
Quasi-contract
What is the measure of damages under a quasi-contract?
Restitution (the prevention of unjust enrichment)
Are there punitive damages for breach of contract?
No.
A non-breaching party must take reasonable steps to _________ damages.
Mitigate
What happens if someone fails to take reasonable steps to mitigate damages?
Defeats any claim for consequential damages
Mitigation expenses can be recovered even if ________.
Mitigation efforts were not succesful
Damages must be established with _______ to be recoverable.
Reasonable certainty
When expectation damages are too uncertain, the court turns to ________.
Reliance and restitution damages
Damages must have been ________ by the breach of contract to be recoverable
Caused
Contract damages will only be awarded if they were foreseeable at the time that ___________.
Parties entered into the contract
Liquidated damages are those that are ___________.
Specified in the contract
Liquidated damages clauses are valid if:
- Damages are difficult to ascertain at the time of contract formation
- Reasonable forecast of damages AND
- Not punitive
A liquidated damages clause is presumptively invalid when the damages figure is _____________.
A single set number (since that’s not a reasonable forecast)
A liquidated damages clause is presumptively valid when the damages figure is ___________.
A sliding scale that adjusts based on some variable
When will specific performance be granted?
- No defenses
- Valid contract
- Available for both parties
- Legal remedy is inadequate
- P has fully performed all obligations
- Enforcement is feasible
The equitable remedy of ______________ is generally available for real estate contracts.
Equitable remedy
Specific performance is not available for real estate contracts when ____________.
There is a bona fide purchaser
Can there be specific performance for service contracts?
No, because that would be involuntary servitude
While the court cannot force D to perform under a services contract, the court does have the discretion to _________.
prohibit D from performing similar services for other parties
Under the UCC, specific performance is available for:
- Unique goods
- Other appropriate circumstances
___________ is generally not sufficient to justify specific performance under the UCC
Rise in market price
What are unique goods under the UCC?
Antiques, works of art, custom made items, etc.
What is the unclean hands defense?
Equity will deny relief to a party who has engaged in wrongful conduct with respect to the case at hand
What is rescission?
Contract is voided and rescinded
Grounds for rescission include:
- Mistake
- Misrepresentation
- Undue influence
- Lack of capacity
- Lack of consideration
- Coercion
- Illegality
What is reformation?
Court alters the parties’ written agreement to conform with the parties’ original intent and understanding
What are grounds for reformation?
- Mistake
- Misrepresentation
What is reclamation?
Under the UCC, a seller may recover goods from a buyer if:
1. Buyer insolvent when goods received
2. Seller demands return within 10 days of buyer’s receipt
3. Buyet still has goods at the time of the demand
In order for the court to award reclamation, the buyer must still have the goods at time of the demand unless ____________.
The goods are sold to a third party before the original seller’s reclamation demand
Third-party beneficiaries to a contract have a legal right to _________.
Enforce the contract
Generally, parties who make a contract for. an intended beneficiary retain the right to _____________.
Modify the duty with a subsequent contract
The power to modify a contract benefiting third parties is terminated when ____________.
The intended beneficiary materially changes her position in reliance on the promise
Who is a promisor?
A party who promises to perform for the benefit of the 3rd party beneficiary
Who is a promisee?
A party to whom performance for the benefit of the third party beneficiary is owed
Who is a third party beneficiary?
The party intended to benefit from the contract
For a third party beneficiary to have contract rights, the third party beneficiary must have _______ and ________ the contract.
Known of
Relied upon
________ beneficiaries have contract rights; ________ beneficairies do not.
Intended
Incidental
What are the two types of intended beneficiaries?
- Creditor beneficiary
- Donee beneficiary
What is a donee beneficiary?
The promisee made the contract in order to confer a gift on the third party
What is a creditor beneficiary?
The promisee made the contract in order to discharge an obligation to a third party
There cannot be a creditor beneficiary unless that third party was already ________.
A creditor of the promisee
The original parties will lose their power to discharge or modify the contract if the beneficiary:
- Detrimentally relies on the promise
- Brings suit on the promise
- Manifests assent to the promise at the request of either party
Contracts cannot be cancelled or modified without the consent of the third party if ______________.
The third party had knowledge of and relied upon the contract
When can a third-party beneficiary sue a promisor for breach of contract?
Only if they were the intended beneficiary
The beneficiary does not waive her right to subsequently sue the promise by _________.
Suing the promisor
When sued by a third party beneficiary, the promisor may assert any defense against the beneficiary that ____________.
The promisor could assert against the promisee
What kind of third-party beneficiary can sue a promisee?
Only a third-party creditor beneficiary
In a contract with a third-party beneficiary _______ and ______ cannot both recover
The promisee
The third-party beneficiary
In a contract with a third-party beneficiary, who may the promise sue?
The promisor
An assignment is to be distinguished from a promise to _____________
Do something in the future
What is an assignment?
The present transfer of the rights or benefits under a pre-existing contract to a third party
What are the two steps required for assignment?
- Valid contract between two parties
- One party to contract transfers rights or benefits under contract to third party
Who is an assignor?
Party who makes the assignment
Who is an assignee?
Party who was not party to the original contract, but is the recipient of the assignment.
An assignee succeeds to a contract as the contract stands at the time of ________
The assignment
Who is an obligor?
The other party to the original contract who owed performance to the assignor
Writing is not required for assignment except for:
- Wage assignments
- Interest in land
- > $5,000
- Security interests under Article 9 of UCC
Since an assignment is a present transfer, _______ is not required for a valid assignment
consideration
Since there is no consideration requirement, ________ assignments are valid and enforceable.
Gratuitous
Because there is no consideration in a gratuitous assignment, it is ______ revocable.
Freely
A gratuitous assignment is automatically revoked:
- If the assignor dies
- The assignor makes a subsequent assignment OR
- If the assignor gives notice to the assignee or the obligor that the assignment has been revoked
Gratuitous assignments may become irrevocable if:
- The assignee relies to her detriment on the assignment
- The obligor pays or performs for the assignee
- The assignor puts the assignment in writing
- The assignor delivers a symbolic document to the assignee
For an assignment to be valid, there must be present _____________.
Assignment language
Language of prohibition does not invalidate assignment unless __________.
The assignee knew of the prohibition
_________ that invalidates any assignment will render any assignment ineffective
Language
If assigned, assignee cannot enforce __________, and assignor will be liable for _______.
Assignment against obligor
Breach of contract
Even if there is no restriction on assignment in the contract, common law will invalidate assignments that __________.
Substantially change the duty of the obligor
The assignment of _________ is always assignable because it does not substantially change the duty of the obligor.
The right to payment
Assignment is invalid where the contract is for ________ services.
Unique personal services
Requirement and output contracts are not assignable if ___________.
Assignment alters the quantity required in an unreasonably disproportionate manner
Upon an assignment, the assignor’s rights are ________ and ___________,
Extinguished
Transferred to the assignee
What defenses may an obligor assert against an assignee?
Any defense that the obligor could have asserted against the assignor
Payment by the obligor to the assignor is legally effective until __________.
The obligor is notified of the assignment
An assignor cannot recover from the obligor after __________.
Assignment for consideration
If an assignment was gratuitous, then ____
The assignee will not be able to recover from the assignor
If the assignment was made for value, the assignor is held to have made a series of ________.
Implied warranties to the assignee
There is an implied warranty of assignment that the right assigned actually ______.
Exists
There is an implied warranty of assignment that the right assigned is not subject to _______.
Any defenses by the obligor
There is an implied warranty that any documents delivered to the assignee by the assignor are ______.
Genuine
There is an implied warranty of assignment that the assignor will not take any action that will ___________.
Impair the value of the assignment
If the assignor assigns to multiple assignees, which assignment prevails?
The last assignment
If the assignor assigns to multiple assignees for consideration, which assignee prevails?
The first assignee who pays any consideration, unless the later assignee didn’t know of earlier assignment and does one of the following:
1. Obtains payment/judgment first
2. Obtains new contract from the obligor by novation
3. Possesses some indicia of ownership
What is delegation?
One party to a contract transfers the duty to perform under the contract to a third party
Delegations are valid unless:
- Contract prohibits delegations or assignments
- Contract calls for special skills or reputation of delegator
Who is a delegator?
The party who transfers the obligation to perform
Who is a delegatee?
The third party who agrees to perform under the contract in place of the delegator
Who is the obligee?
The other party to the contract
If there is non-performance by the delegatee, the delegating party is always liable unless:
- Consent by obligee
- Performance by delegatee
If there is delegation without consideration, then ___________.
Obligee cannot sue the delegatee
If there is delegation for consideration, then _________.
The obligee can sue the delegatee
