Contracts Flashcards
Applicable Law
Contracts are governed by the UCC or by Common Law. Contracts for the sale of goods are governed by the UCC. The Common Law governs every other kind of contract, like service contracts and contracts for real property.
Offer
An objective willingness to enter into a contract with the offeree, that creates a power of acceptance in the offeree.
Advertisements are not generally offers, unless they are (1) specifically directed at a person; (2) detail the terms of the contract; and (3) tell the person how they can accept it.
Termination: Offers can terminate with lapse of time, death of offeror, revocation (actual or constructive), rejection (including CL counteroffers).
Acceptance
An objective manifestation of assent to enter into the contract with the offeror.
Cannot usually be accepted by silence, but can be sometimes
CL Mirror Image: Under the CL, the acceptance must exactly mirror the offer, else, it is a rejection + counteroffer.
Mailbox Rule: Acceptance valid on delivery, Rejection valid on receipt.
Irrevocable Offers
UCC Firm Offers: Both parties merchants; signed writing; assurance to keep open for given time (period of irrevocability can’t be longer than 3 months)
Option Contracts: Options contracts require that consideration is paid for a promise to keep open
Unilateral Contracts: Unilateral contracts are irrevocable once the offeree party begins performance.
Consideration
Bargained for exchange of legal value
Consideration not valid for past consideration; pre-existing duty; or illusory
Promissory Estoppel can serve as a consideration substitute as can surrendering a claim.
Battle of the Forms
One Merchant: Additional/different terms are mere proposals and not part of K unless offferor agrees to modified terms
Both Merchants (Additional Terms)
* Acceptance is made conditional on offeror’s assent (counteroffer + rejection)
* Original expressly limits acceptance on offer terms; new terms materially alter original terms; offeror object w/in reasonable time -> terms dropped but K is formed.
Both Merchants (Different Terms)
* Knockout Rule (Majority) Conflicting terms are omitted, use gap fillers
* Alternatively, analyze as additional terms
Contract Defenses
Formation
* Unconscionability
* Undue Influence
* Mental Insantiy: Contract is void
* Age: Contract is voidable by the minor, minor can ratify once 18
* Illegality
* Duress: Must be a threat
* Capacity
* Misrepresentation: Knowingly; making a false representation; to induce reliance; it causes reliance; damages
* Mistake (Mutual + Unilateral)
* Mutual - Mistake existed at time of contract; relates to basic assumption of contract; has material fact; party didn’t assume the risk
* Unilateral - Party knows of mistake by the other party; doesn’t inform the other party; + mutual factors.
* Non Disclosure - Typically seller doesn’t need to disclose, unless knows of material latent defect.
Execution
* Impracticability: Performance would result in severe burden, cost, or risk (war, unforseen natural disasters, NOT increased costs)
* Impossibility: Literally impossible (death, destruction of good). Temporary impossibility merely suspends performance unless unreasonable burden
* Frustration of Purpose: Principal purpose of contract no longer can occur.
Statute of Frauds
Statute of Frauds requires certain contracts be in writing and signed by party to be charged.
Includes: Marriage, Suretyship, Contracts that can’t occur in one year, UCC Contracts for Sale of Goods > $500; and Real Property
Can be waived by fulle performance; real property if (2 out of 3) possession; payment; material improvement; Sale of Goods if Merchant confirmation (merchant sends written confirmation after oral agreement, binds recipient to content if no objection w/in 10 days).
Conditions
A condition is an event that must occur before performance. Can be express or implied. Express requires strict compliance, implied requires substantial performance
Waiver of conditions can occur: failure to insist on compliance, estopppel, or anticipatory repudiation.
Parole Evidence Rule
Limits evidence of discussions or writing made prior to or contemporaneous with the execution of the contract. If made subsequently, can come in.
- Partial or fully integrated? If full (merger clause) nothing comes in. If partial, PER can be used to supplement a term but NOT contradict.
- Exception?
* Contract Formation or Enforcement defenses
* Condition(s) Precedent
* Ambigious Terms: Use Course of Performance; Course of Dealing; trade Usage
Contract Modification
CL: Needs consideration
UCC: Needs good faith
Both need mutual asset
Oral modifications are allowed, unless modification falls under SoF
Third Party Beneficiary
Intended: 3rd Party who promisor intends to benefit. Prevents modification if rights have vested (they know they are beneficiary)
Incidental: A party who happens to benefit from the contract has no right to sue
Assignment/Delegation/Novation
Assignment: Existing party transfers rights under the contract. Generally okay. If contract says prohibited, still can do, but assignor will be in breach. If says void, can’t do
Delegation: Existing party appoints new party to perform. Generally okay. Can be prohibited and cannot be done if person wants party for specific purpose or special skill.
Novation: When the obligee expressly agrees to accept the performance of the new party and releases the delegator from liability
Anticipatory Repudiation
A party unequivocally expresses before the time for performance they will no longer perform
Non-breaching party can:
* sue immediatly
* suspend performance and wait until it is due to sue
* Treat the contract is discharged and the repudiation as an offer to rescind
* Urge performance and sue later
Adequate Assurances if not quite unequivocal but does give rise to reasonable insecurity, non-breaching party can demand adequate assurances IN WRITING
Breach (CL and UCC)
Substantial Performance
* Material: Party did not receive substantial benefit of the bargain. Performance excused.
* Minor: Party did receive substantial benefit of the bargain, performance not excused
Perfect Tender: Perfect tender applies to contracts for single delivery. Goods tendered must conform to contract with every respect. If not, buyer can:
* Reject the whole within reasonable time
* Accept in whole
* Accept in part and reject the rest
If seller tenders goods that are not in conformity,
But not for installment contracts, use substantial performance instead.
UCC Seller Right to Cure
A seller may cure defect any time before performance is due OR after performance if the seller has a reasonable belief that this would be acceptable to the buyer.
