Contracts Flashcards
What does every contract modification require under common law?
New consideration
What is consideration?
A bargained for exchange of something of legal value
What is the preexisting legal duty rule?
The promise to perform a legal duty already owed to a promisor is not consideration
When do courts allow modification without new consideration?
If the modification is fair and equitable, in view of circumstances not anticipated when the contract was made
What does the UCC require for contract modification?
Contract modifications sought in good faith are binding without consideration
What is good faith for ucc contract modification purposes?
Honesty in fact and the observance of reasonable commercial standards
What is economic duress?
- a party threatens to perform a wrongful act that would seriously threaten the other party’s property or finances and
- there are no adequate means to prevent the threatened loss.
What is sufficient to allow enforcement of an oral contract for the sale of real property
Seller conveys property to the buyer. Some jurisdictions require 2/3 payment, possession, and/or valuable consideration
In a contract for a sale of goods worth $500 or more, what behavior will enforce a contract without writing?
If the goods are received and accepted by the buyer and paid for
Define Specially manufactured goods
Goods not suitable for resale in the ordinary course of the sellers business, and the seller has made a substantial beginning of their manufacture, or commits for their procurement
Under the UCC a contract is enforceable, despite the absence of writing…
To the extent of the goods accepted
In a single delivery contract, if a seller cures in the proper amount of time, must a buyer accept the cured goods?
Yes, after a cure within the proper time, the buyer must accept the goods
When can a seller get extra time to cure nonconforming goods?
When prior dealings with the buyer, make the seller believe that the goods would be acceptable. The seller can notify the buyer and provide the goods within a reasonable time
Do courts allow specific performance for service contracts?
No, courts view such remedies as tantamount to slavery and the assumption is that the person wouldnt do a good job if they were forced to do a job.
What type of special relief can a court grant a non breaching party for a rare or unique service?
Injunctive relief, they can prevent the breaching party from doing something for someone else (ex. basketball contracts).
What is the equitable defense of sale to a bona fide purchaser?
If a subject matter involved in a goods or land contract is sold to another in good faith and for value, specific performance is cut off.
What is one way a buyer can obtain specific performance for goods?
If the goods are unique or in short supply.
Define Merchant
One who regularly deals in the type of goods sold in the subject transaction or otherwise holds themself out to have special knowledge or expertise as to the goods involved
Requirements for a real estate contract
A real estate contract must include
1. An identification of the land
2. The price
Requirement for a sale of goods contract
The quantity
Requirement for an employment contract
Duration of employment
What is required for an indirect revocation of an offer?
Offeree recieves:
1. Correct information
2. From a reliable person
3. Of acts of offeror that would indicate to a reasonable person that the offeror no longer wants to make the offer
Define Merchant’s firm offer
Under UCC:
1. A merchant
2. Offers to buy or sell goods in a signed writing.
3. Writing gives assurances that it will be held open during the time stated, but if no time is stated, not to exceed 3 months
When does a unilateral contract become irrevocable?
When the offeree begins performance. Substantial preparations to perform do not make it irrevocable.
What is the UCC rule for battle of the forms if both parties are merchants?
Additional terms in the acceptance will be included in the contract unless:
1. They materially alter the original terms (ex changing risk or remedy),
2. Offer expressly limits acceptance to the terms of the offer, OR
3. The offeror has already objected to the terms or objects in a reasonable time
What is the UCC battle of the forms rule if only one or no merchants are negotiating?
To add new terms, the offeror must expressly agree
According to the mailbox rule, when is an acceptance effective?
Upon dispatch, unless:
1. The offer stipulates something different,
2. An option contract is involved (acceptance effective upon only upon reciept), or
3. The offeree sends a rejection then an acceptance (whichever arrives first is effective)
Define promissory estoppel/detrimental reliance
A promise is enforceable if necessary to prevent injustice where:
- Promisor should reasonably expect to induce action or forbearance, and
- Such action or forbearance is in fact induced
Define Mutual mistake
If both parties are mistaken about existing facts the contract may be voidable by the adversely affected party if:
- Mistake concerns a basic assumption on which the contract is made for,
- Mistake has a material effect on the agreed upon exchange, AND
- The party seeking avoidance did not assume the risk of the mistake
Mistakes in value are not usually defenses
Define unilateral mistake
If only one party is mistaken about the facts, a contract will still be enforceable, unless the non mistaken party knew or had reason to know of the other party’s mistake
List the types of contracts which must be written and signed by the party to be bound (sued) to satisfy the statute of frauds.
Marriage
Year
Land
Executor
Goods over $500
Suretyship
What is the confirmatory memo rule?
In contracts between merchants if one sends the other a written confirmation of the understanding, an agreement will satisfy the statute of frauds if:
- They have reason to know of the confirmation’s contents and
- They do not object to it in writing within 10 days of reciept
What must a contract include to satisfy the statute of frauds?
One or more writings that:
1. Reasonably identify the subject matter of the contract,
2. Indicate that a contract has been made between the parties, and
3. State with reasonable certainty the essential terms
Define the parol evidence rule
After the parties express their agreement in a final integration, any other expressions made prior to or contemporaneously with the writing are inadmissible to vary the terms of the writing.
elements of integration
- Whether the writing was intended as a final expression of the agreement
- Whether the integration was intended to be complete or partial
However, evidence is admissible to show the parties’ intent
Execptions to the parol evidence rule
- Interpretation: dispute as to meaning of terms
- Validity issues: formation defects or conditions precedent
- Collateral agreements: related but not conflicting
- True consideration
- Reformation
- Subsequent modifications
- UCC says parties cant contradict a written contraxt but can add consistent additional terms unless merger clause or writing was complete and exclusive statement of the agreement. Terms can be explained or supplemented by other evidence.
Define Implied Warranty of Merchantability
If a merchant deals in goods of the kind sold, goods must be fit for the ordinary purchase for which such goods are used
Define implied warranty of fitness for a particular purpose
- Any seller has reason to know the particular purpose for which goods are used and that buyer relies on seller’s skill and judgement to select suitable goods
- The buyer in fact relies on seller’s skills and judgement
How can the warranty of merchantability be disclaimed?
Must be mentioned and if in writing, conspicuous
Who bears the risk of loss in non carrier cases?
Merchant seller: risk of loss passes to buyer only when buyer takes physical possession of the goods
Non-Merchant seller: risk of loss passes to the buyer upon tender of delivery.
Who bears the risk of loss in a carrier shipment case?
Risk passes to buyer when the goods are delivered to the carrier.
FOB seller’s city
Who bears the risk of loss in a carrier destination case?
When the goods are tendered to the buyer at the destination
FOB buyer’s city
What is the common law duty of performance?
Substantial performance
What is the duty for performance under Article 2?
Perfect tender
Promisor’s satisfaction for regular stuff:
Reasonable person standard
Promisor’s satisfaction for personal taste or judgment:
Good faith honest personal satisfaction
What are a non breaching party’s alternatives if it is informed that there will be anticipatory repudiation?
- Treat as total repudiation and sue immediately
- Suspend performance and wait to sue at performance date
- Treat the contract as discharged
- Ignore and urge the other party to perform
What can a party do regarding prospective failure?
Suspend further performance until they receive adequate assurances that performance will be forthcoming.
What is discharge by impossibility?
If an unexpected even happens where:
1. the nonoccurrence was a basic assumption of the contract ,and
2. neither party expressly or impliedly assumed the risk
Usually raised by seller
Contractor’s duty to build:
Not discharged by the destruction of the work in progress because the Contractor can rebuild.
Discharge for impracticability
Extreme and unreasonable difficulty and/or expense and its nonoccurrence was a basic assumption of the parties
Usually raised by seller
Discharge by frustration:
1.supervening act or event leading to the frustration
2. At time of formation parties did not reasonably forsee the act occurring
3. Purpose for the contract has been completely or nearly completely destroyed by the act or event.
4. Purpose was realized by both parties at the time of making the contract.
Usually raised by the buyer
What is a minor breach?
Obligee gains the substantial benefit of the bargain, and does not relieve aggrieved party of performance.
Aggrieved party may seek setoff after performance.
Material breach:
Obligee did not receive the substantial benefit of the bargain.
Non-breaching party may: treat the contract as discharged and will have an immediate right to all damages resulting from breach including total damages.
What are a buyers options after receiving nonconforming goods under article 2?
Reject all, accept all, or accept some and reject some?
Define Compensatory damages:
Damages to put the nonbreaching party in a position as though the contract had been performed (benefit of the bargain).
Define reliance damages
Because a plaintiff relied on the contract, reliance damages put the aggrieved party in the same place as though they had never entered into an agreement.
Define incidental damages
Expenses incurred by buyer reasonably incident to seller’s breach (storage, shipping, custody, etc.)
Define consequential damages
Special damages over standard expectation damages. Available if at the time contract was made a reasonable person would have foreseen the damages and the breaching party knew or had reason to know of the special circumstances. (Usually lost profits)
What makes a liquidated damages clause enforceable?
- Damages are difficult to estimate or ascertain at the time of formation, and
- Amount agreed upon is a reasonable forecast of compensatory damages. NOT A PENALTY.
How do you calculate a buyers damages for a sale of goods?
market price or cost of buying replacement goods(cover) + incendental and consequential damages- savings due to breach
If choosing cover method buyer must choose reasonable contract in good faith and without unreasonable delay.
Elements of unjust enrichment/quasi contract
- Plaintiff conferred a benefit to defendant
- Plaintiff had reasonable expectation of being compensated
- Defendant knew or had reason to know of Plaintiff’s expectation, and
- Defendant would be unjustly enriched if they were allowed to keep the benefit without compesation.
When do the rights of a 3rd party beneficiary vest?
- Manifest assent to a promise in the manner requested under a contract,
- Bring suit to enforce the promise, Or
- Materially change position in reliance on the contract.
When may rights not be assigned?
- Assignment substantially changes the obligor’s duties or risks (personal service contract for unique services)
- An assignment of future rights to arise from future contracts, and
- Assignments prohibited by law
Types of assignments:
Assignment for value (Irrevocable): done for consideration or taken as security or for payment of a preexisting debt
Gratuitous assignments(generally revocable): anything else.
Who wins with multiple assignments?
First assignment usually prevails, unless:
Subsequent assignee pays value and takes without notice better if notifies other party of right first.
