Contracts Flashcards by Daisy An

When do a third party intended beneficiary’s enforceable rights under the K vest?

When 3rd party detrimentally relies on rights created
When 3rd party manifests assent to the K at one party’s request
When 3rd party files a lawsuit to enforce the K

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Can a materially breaching party recover restitution damages?

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Can a breaching party recover restitution damages?

Yes so long as it wasn’t a material breach

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What happens if both parties OR neither parties are aware of an ambiguous material term in a K? (misunderstanding)

The K is void unless both parties intend the same meaning

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What happens if one party is aware or has reason to know that the other party has a different understanding of an ambiguous material term for a K?

The K is formed based on meaning as understood by the unknowing party

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What happens if a seller sends a non-conforming good that they had reason to think would be an acceptable substitute, and the time for performance has passed?

Seller still may cure so long as they let the buyer know they plan to cure!

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What happens if time for performance has NOT yet expired, and seller sends a non-conforming item? Can buyer sue?

No not yet. Seller still has the right to notify buyer of intention to cure + make the conforming delivery

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What are the 4 kinds of irrevocable offers?

Option Ks, unilateral acceptance (for a reasonable time to complete performance), promissory estoppel, UCC firm offers by merchants (90 days max)

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What are two exceptions to the mailbox rule of acceptances being valid when sent?

Option Ks and firm offer acceptances are valid when received

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Has a K formed when there’s an offer and acceptance between two parties in the UCC but the acceptance states terms that don’t match the terms of the offer?

Yes

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Battle of the Forms - what happens with additional terms between merchants?

If both parties are merchants, additional terms automatically become part of the K unless the new term materially alters the deal, initial offer expressly limits acceptance to the terms of the offer, OR offeror rejects or objects to the terms within a reasonable timeframe

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Battle of the Forms - what happens with additional or different terms between one merchant and a non-merchant?

Additional/different terms are treated as proposed additions only

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Battle of the Forms - what happens with different terms between two merchants?

Knocked out by one another and court will use gap-filling provisions

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What happens when the offer and purported acceptance in a UCC differ too much to create a K but the parties begin to perform anyway?

The terms on which the writings agree become part of the K and any holes will be filled by gap-filling provisions

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Implied Warranty of Merchantability

When seller is a merchant dealing w/goods they normally sell, it’s an automatic promise that the goods will be fit for ordinary commercial purposes.

If buyer examines goods fully or refuses to examine goods, then no implied warranty w/r/t defects that an examination would have revealed themselves to the buyer

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Implied Warranty of Fitness for a Particular Purpose

Buyer relies on seller’s expertise that the select good will satisfy some special purpose

If buyer examines goods fully or refuses to examine goods, then no implied warranty w/r/t defects that an examination would have revealed themselves to the buyer

What happens if the contract prohibits assignments and the party still assigns?

Assigning party breaches the deal when they make the assignment but the assigned party can still recover

What happens if the contract invalidates assignments and the party still assigns?

The assigning party breaches the contract when they make the assignment and the assigned party has no rights

What happens if an assignment of the same right happens twice, which one holds?

If the rights are assigned with no consideration, the last assignment holds

If the rights are assigned and the assignee pays consideration, the first assignment to pay consideration will hold unless the second assignee does not know about the first assignment and they are the first to obtain judgment/payment on the rights

What happens if an assignment is made for consideration?

It is an irrevocable assignment

What happens if an assignment is not made for consideration?

It is revocable and automatically revoked upon the death, incapacity, or bankruptcy of the assignor, unless the assignee has already performed, received a written claim signifying a right to collect, or detrimental reliance

When can contracts not be assigned?

The K explicitly prohibits or invalidates it, the assignment materially increases the duty or risk of the obligor

What happens when a merchant sells an item to Party A who doesn’t actually pay, and Party A sells the item to Party B who is a BFP?

Party B gets to keep the item so long as they were a BFP

How long do you have to give adequate assurances in the UCC?

30 days

Risk of loss when a party has breached?

If buyer repudiates or breaches a K that deals with identified goods, risk of loss shifts to buyer. Seller can thus recover any deficiency between seller’s insurance coverage and the K price If seller breaches (i.e. delivery of non-conforming goods), risk of loss shifts to buyer if buyer accepts non-conforming goods or seller cures AND shifts back to seller if buyer rightfully revokes acceptance to extent buyer lacks insurance coverage

Risk of loss when there's no breach and the goods are being shipped

Risk of loss is with buyer in a shipment K Risk of loss is with seller in a destination K until goods are delivered at the named location

Risk of loss particular rules for when seller is a merchant?

Risk of loss stays with seller until buyer receives the goods (in which case they hold risk), unless buyer is in breach (in which case they hold risk).

When are liquidated damages OK?

Reasonable - 15% of purchase price or less When the liquidated damages is reasonable in relation to actual damages Actual damages of breach are uncertain in amount and difficult to prove

When does a buyer of goods obtain an insurable interest in the goods?

When the goods are identified AKA when the seller puts the shipping label on them/marks them or when the K specifically identifies the goods. If seller doesn’t mark them then they are identified when carrier picks them up for shipping With cattle to be born within 12 months or crops to be harvested within 12 months of contracting, cattle are identified when conceived and crops are identified when planted

When there’s a missing nonessential element in a valid K, how will the court treat that term?

Supply a reasonable term

When there’s an ambiguous term in a K, how will the court help resolve that term?

Consider who drafted the K and construe the term against them

What is the majority rule for seller’s duty to disclose in the sale of a residential property?

Duty to disclose all known material defects that buyer could not have discovered. Exception is if there’s an as is clause.

When is it OK to not have consideration for modification of a CL contract?

When parties experience unforeseen difficulties, when one party changes position in reliance on modification, when theres a tearing up of old K and entering into new one where one party needs to perform more in the new K

When does the one year period for the SoF requirement begin?

The day after the K was made/the day after the offer was accepted. So a 1 year employment K has the possibility of not falling within SoF; it must be one year and one day to fall within SoF and have that writing requirement

What is the principle of reasonable expectations?

That parties should not be bound by a term that they would not expect to find in the K unless the term was called to their attention

What is the difference between what a party can recover when they breach a non-divisible vs. when they fail to perform part of a divisible K?

Breaching non-divisible K - Restitution damages Failing to perform part of divisible K - Full price of performance of the divisible K that WAS performed

What happens if both parties have different meanings as to one term in the UCC?

Parol evidence may come in to explain parties' express terms through course of performance, course of dealing, trade usage

If two parties are in a services contract and one party substantially performs but there is some minor deficiency, must the other party still pay the full price of the service?

No. The other party is entitled to withhold that % incurred to correct the deficiency.

When can a party retract an anticipatory repudiation?

As long as other side has not commenced lawsuit, materially acted in reliance on retraction, or cancelled the K