Contracts Flashcards
What is the predominant purpose test?
The predominant purpose controls whether an indivisible contract for goods and services is governed under common law or the UCC. The issue turns to the predominant purpose of the contract.
What is a contract?
A legally enforceable agreement
What is required for contract formation?
Mutual assent (typically offer and acceptance) and consideration.
The test for contract intent is?
Objective–Would a reasonable person believe there was assent
What terms are required for a contract?
Under the common law, a contract must contain essential terms.
Under he UCC, the onnnnnly essential term is price, other terms may be supplied by the court.
Missing contract term
Under the common law, the court may supply a missing contract term consistent with the parties wishes if there was clear intent to form a contract.
Under the UCC, the court may supply any term other than quantity.
What is an invitation to deal
An invitation to deal stops short of a true offer, it may be in inquiry or other more ambiguous language. typically includes advertisements.
What terminates an offer
- Death or offeror
- Reasonable amount of time
- Revocation
- Rejection
- Counteroffer
- Illegality
What is required for an option contract
At common law, an option contract must be supported by independent consideration
Requirements for UCC firm offer
- Offorer is a merchant
- There is assurance the offer will remain open
- A signed writing (signature is not a precise requirement in this case, ie initials or letter head).
- Maximum of three months, or reasonable time if not specified
Who is a UCC Merchant
A merchant is a person who regularly deals in the goods in question.
Elements of Promissory Estoppel
- Promise, which is likely to induce action or forbearance.
- The promise does induce such action
- injustice requires enforcement
How can you accept an offer
By the means specified in the offer. The offeror is the master of the offer.
When can you revoke a unilateral offer
prior to partial performance
What is the mailbox rule?
An acceptance is valid when mailed. Does not apply to revocations, or options contracts
What is the mirror image rule
At common law, the acceptance must mirror the offer in terms. Any change of terms is considered a counter offer
UCC mirror imager rule?
No, under the UCC additional or conflicting terms may still be an acceptance unless the offer was specific in requiring the initial terms.
What is the battle of the forms
Under the UCC< if both parties are merchants, than an additional term in the acceptance is automatically included unless:
- the term materially alters the contract
- the offer expressly limits additional terms
- the offeror objects to the additional term within a reasonable period of time.
When does a term “materially alter” a contract
When the term results in surprise or hardship or otherwise seriously changes the nature of the agreement.
When is an auction sale made into a contract?
An auction sale closes at the fall of the hammer.
When can goods be withdrawn from an auction?
In a no reserve sale, only if there is no bid in a reasonable period of time.
In a reserve sale, until it is closed.
When can a seller bid at an auction?
When it is a forced sale or when the seller specifically reserves the right to bid and gives notice.
What qualifies as consideration
A legal determine
1. A return promise
2. Refraining from something legally permitted
3. Performance
What is the test for a gift?
Did the offeroee reasonably believe that the offeror intended to induce action?
What is past consideration
Past consideration is something that the promisor already did or promised to do and it is not consideration.
What is required for contract modification?
At common law, new consideration, recension, or a good faith adaptation to unforeseen circumstances.
Under the UCC just good faith.
What is an illusory promise?
A promise which does not actualy require performance
What is special about charities and promissory estoppel?
No need to show reliance.
Defenses to formation
- Mistake
- Misrepresentation
- Fruad
- Nondisclosure
- Undue Influence
- Duress
- Capacity
Elements of mistake
Mutual Mistake:
1. Mistake about facts when formed
2. relates to a basic assumption of the contract
3. material impact
4. adversely affected party did not assume the risk of mistake
Unilateral Mistake:
Only enforceable where the mistake would make the contract unconscionable or the opposing party caused the mistake.
When does a party assume the risk of a mistake?
- Conscious ignorance
- negligence
Elements of Undue influence
- Unfair persuasion
- the person is in a position of trust or power over the party
- Traditionally required some type of infirmity
When is a contract voidable for infancy?
Typically all contracts are voidable for infancy except those for nesesities.
When is a term ambiguous?
A term is ambiguous where it is subject to more than one reasonable interpretation.
What is the first rule for contract interpretation?
Plain Meaning
What is the Parole Evidence Rule?
The PER prevents a party from introducing evidence of prior or contemporaneous negotiations if that evidence contradicts a term of the contract.
What is the Parole Evidence Rule under the UCC?
The UCC essentially assumes partial integration.
It allows external evidence unless the parties certainly would have included it.
The parole evidence rule does not apply to:
- Defenses
- Separate Deals
- Condition Precedent
- Ambiguity and Interpretation
- Subsequent Agreement
- Trade Usage or course of dealing
What is Anticipatory Repudiation?
A party makes a clear and unequivocal statement (or actions) that they will not perform when due.
Options for anticipatory repudiation?
- May treat it as a breach and sue for damages
- May ignore the repudiation and demand performance if doing so will not increase damages.
When is a contract breached?
When a party fails to perform under the contract.
What is the effect of a breach?
Common Law: Material breach excuses performance and allows the non-breaching party to sue for damages. Minor breach allows damages only.
UCC: requires strict performance.
What is unclean hands?
An equitable defense if the opposing party has committed serious misconduct related to the claim.
What is the statute of frauds?
Certain transactions are only enforceable where they are in writing. The writing must:
- contain the essential terms and
- be signed by the party against whom enforcement it sought.
When does the statute of frauds apply?
- Marriage
- Suretyship
- A contract that cannot be completed in one year
- Under the UCC, sale of goods over $500
- A contract for the sale of an interest in real property
What are the elements of Fraudulent Misrepresentation?
- A false assertion of fact was made knowingly or with reckless disregard of the truth
- With the intent to mislead the other party
- it induced assent
- Adversely affected party was justified in relying on the statement
Elements of non-disclosure
Concealing a fact is equivolant to asserting it does not exists. There is a duty to disclose where:
- It will prevent an assertion from being a misrepresentation
- to correct a basic assumption of the other party
- to correct an interpretation in the writing
- the other party is entitled to know
Elements of Duress
An improper threat that deprives a party of a meaningful choice.
Defenses to enforcement
- Illegality
- Unconscionability
- Public Policy
- Impracticality
- Frustration of purpose
- Mutual Agreement
- Release
- Destruction of specific goods
What is required for Impracticality?
- Unforeseen event
- The nonoccurance of which was a basic assumption of the contract
- The party seeking discharge was not at fault
What is Latches
An equitable defense where the plaintiff’s failure to bring a claim in a reasonable period of time was unfair to the defendant
