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Rules > Contracts > Flashcards

Contracts Flashcards

1
Q

Mixed UCC/Common Law Contract

A

Predominant purpose of the contract determines whether common law or UCC governs

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2
Q

Valid Contract

A

Mutual assent (offer and acceptance), consideration, and no defenses to formation

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3
Q

Offer

A

Offeror must manifest an objective willingness to enter into an agreement and create a power of acceptance in the offeree

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4
Q

Advertisements

A

Usually considered to be an invitation to deal rather than an offer, because advertisements usually fail to confer a power of acceptance to the other side

Specific, and leave nothing open to negotiation = potential offer

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5
Q

terms required in contract under common law

A

all essential terms: (1) parties (2) subject (3) quantity and (4) price

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6
Q

terms required in UCC contract

A

(1) parties (2) subject (3) quantity. Price not required.

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7
Q

offer termination

A

(1) offeror revokes; (2) offeree learns offeror has taken action constituting a constructive revocation; (3) offeree rejects the offer; (4) offeree communicates a counteroffer; (5) offeror dies or otherwise becomes incapacitated; (6) lapse of time; (7) subject matter destroyed

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8
Q

Irrevocable offers

A

(1) option contracts; (2) firm offers; (3) offeree has started performance of unilateral contract; (4) detrimental reliance

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9
Q

UCC firm offers

A

A merchant can make a firm offer to buy or sell goods. Offer will either last as long as stated in the offer or for a reasonable time period not to exceed 90 days. MUST: (1) be in writing; (2) contain explicit promise not to revoke; AND (3) be signed by the merchant

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10
Q

Acceptance

A

Manifestation of a willingness to enter into the agreement by the offeree (silence does not do this unless there is a past history of silence serving as acceptance)

Governed by objective test, no hidden intentions (e.g., a person accepts an offer with his fingers crossed behind his back)

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11
Q

Acceptance of bilateral/unilateral

A

bilateral = start of performance manifests acceptance; unilateral = offer accepted once performance is complete

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12
Q

Mailbox Rule

A

Acceptance sent by mail is valid at the moment of dispatch unless:

(1) offeree sends the wrong address or has improper postage
(2) offeror expressly stipulates that the acceptance is valid upon receipt
(3) An option contract is involved
(4) the offeree-sender sends a termination letter BEFORE the acceptance letter OR the offeror detrimentally relies on a termination before he receives the acceptance letter

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13
Q

Mirror Image Rule

A

Under the common law, the terms in the acceptance MUST match the terms of the offer exactly, otherwise it is not an acceptance.

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14
Q

UCC Acceptance Merchants

A

contract formed with additional terms unless either: (1) additional terms materially change the offer; (2) offer expressly limits acceptance to the offer’s terms, or (3) offeror objects within reasonable time

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15
Q

Consideration

A

transfer of legal value in bargained for exchange

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16
Q

Legal detriment

A

usually consists of: (1) promising not to do something the party has no prior legal duty to do; (2) performing an action that the party is not otherwise obligated to undertake; or (3) refraining from or promising to refrain from exercising a legal right which the party is otherwise entitled to exercise

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17
Q

What is NOT consideration

A

(1) gift promises; (2) conditional gift promises; (3) preexisting legal duties; (4) past consideration; (5) pretense of consideration (someone selling car for $1 solely to meet the consideration requirement); (6) illusory promise (promising to buy car if “i feel like it”)

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18
Q

Common law modification

A

Must be supported by consideration. Promise to do something the party is already legally obligated to do is NOT consideration:

Alex rents an apartment from Slumlord for one year at 1500/month. Later they both agree to modify rent to 1k/month. Under common law, Slum can sue Alex at end of month for extra 500, because no consideration for the modification because Alex had a preexisting legal duty to pay the full 1500).

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19
Q

UCC modification

A

No consideration requirement. Valid if made in good faith 💕

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20
Q

Promissory Estoppel

A

Alternative theory of enforcement when consideration not found. May still be enforced if:

(1) the promisor should reasonably expect the promise to induce action or forbearance from the promisee;

(2) the promise does induce such action to the promisee’s detriment; AND

(3) Injustice can be avoided ONLY be enforcement of the promise.

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21
Q

Quasi Contract and Unjust Enrichment

A

Contracts that lack consideration may be enforced to avoid unfair results it: (1) the plaintiff confers a measurable benefit on the defendant; (2) the plaintiff reasonably expected to get paid AND (3) it would be unfair to let the defendant benefit without paying

**recovery limited to restitution

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22
Q

Defenses to Contract Formation

A

MIMI DUSU

Mistake, Incapacity, Misrepresentation, Illegality

Duress, Undue influence, SOF, Unconscionability

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23
Q

Incapacity

A

Infancy, mental illness, intoxication

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24
Q

Infancy

A

Under 18. If a minor enters in a contract with an adult, the minor may choose to either: (1) disaffirm the contract and avoid liability under it OR (2) affirm the contract after turning 18 and hold the adult party liable to it.

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25
Q

Mental Illness

A

A person incurs voidable contractual duties by entering into a transaction if by reason of mental illness or defect, the individual is unable to:

(1) Understand in a reasonable manner the nature and consequences of the transaction AND the other party has reason to know of his condition

If the mentally ill party wishes to avoid liability under the contract, he may disaffirm the contract when lucid or by his legal representative.

However, a party to a contract who is mentally ill CANNOT disaffirm the contract if: (1) the contract was made on fair terms; AND (2) the other party doesn’t know about mental illness

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26
Q

Intoxication

A

A person incurs only voidable contractual duties by entering into a transaction if the other party has reason to know that due to intoxication, the individual is unable to: (1) understand in a reasonable manner the nature and consequences of the transaction; OR (2) act in a reasonable manner in relation to the transaction

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27
Q

Necessaries Doctrine

A

When necessaries are furnished to a party who lacks capacity, the party who lacks capacity is liable for the reasonable value of the services or goods under a quasi-contract theory of restitutionary recovery

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28
Q

Mutual Mistake

A

Both parties are mistaken as to a basic assumption on which agreement is made. Adversely affected party may rescind deal if: (1) there is a mistake of fact at time deal is made; (2) relating to a basic assumption of the contract; (3) the mistake has a material impact on the deal, and (4) the impacted party did not assume the risk of the mistake

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29
Q

When does an impacted party assume the risk of mistake?

A

(1) he is aware, at the time the contract is made, that he has only limited knowledge regarding the facts to which the mistake relates but treats his limited knowledge as sufficient; OR (2) the risk is allocated to him by agreement of the parties.

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30
Q

Unilateral Mistake

A

mistake made by one party unknown to the other party. Adversely affected party may rescind the deal if: (1) mistake of fact at time deal is made; (2) relating to a basic assumption of the contract; (3) mistake has a material impact on the deal; (4) impacted party did not assume the risk of mistake; and (5) the mistake would make the contract unconscionable OR the other side knew of, or had reason to know of, or caused the mistake

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31
Q

Misrepresentation

A

Statement at the time of contracting that is not true. It can be intentional or accidental. To assert this defense, the party must show: (1) a misrepresentation of a present fact; (2) that is material or fraudulent; AND (3) that is made under circumstances in which it is justifiable to rely on the representation.

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32
Q

Duress and Undue Influence

A

A contract is void if a party to the contract is compelled by physical duress, such as the threat to inflict physical harm. Otherwise, a contract is VOIDABLE by the adversely affected party if the adversely affected party’s assent is induced by an improper threat that leaves the adversely affected party no reasonable alternative.

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33
Q

When is a threat improper

A

(1) what is threatened is a crime or tort;

(2) what is threatened is criminal prosecution;

(3) what is threatened is the use of civil process and the threat is made in bad faith;

(4) the threat is a breach of the duty of good faith and fair dealing under a contract with the recipient; or

(5) the resulting exchange is not on fair terms and (i) the threatened act would harm the recipient and would not significant benefit the party making the threat; (ii) the effectiveness of the threat in inducing the manifestation of assent is significant increased by prior unfair dealing by the party making the threat; OR (iii) what is threatened is otherwise a use of power for illegitimate ends.

34
Q

Undue Influence

A

A contract is voidable by the adversely affected party if the adversely affected party’s assent is induce (1) due to the adversely affected party’s susceptibility to pressure; and (2) the other side’s application of excessive pressure

35
Q

Illegality

A

contract void if the consideration of performance of the contract is illegal or contrary to public policy but will be enforced if contract was entered into in furtherance of an illegal purpose (hiring an unsuspecting taxi driver to get somewhere in order to commit a murder).

Also: performance will be discharged if a contract that was legal when formed subsequently becomes illegal

36
Q

Unconscionability

A

Shocks the conscience. Procedural unconscionability occurs when there is a defect in the bargaining process, while substantive occurs when the terms of the deal are grossly unfair and one-sided in one party’s favor.

37
Q

SOF

A

MYLEGS

38
Q

Satisfying SOF by Writing

A

(1) signed by the party against whom enforcement is sought; (2) shows that a contract was formed, and (3) includes the requisite terms

39
Q

Satisfying SOF by performance of common law contracts

A

(1) full performance of a service contract; (2) possession, payment, or improvement to land in real estate contracts

40
Q

Satisfying SOF by performance under the UCC

A

(1) SOF satisfied for the quantity of goods for which payment has been made and accepted or which had been received and accepted (2) admission in court; (3) merchant’s confirmatory memo; (4) when a seller makes a “substantial beginning” toward manufacture of custom goods that are to be specially made for the buyer and not suitable for sale to others in the ordinary court of business

41
Q

Merchant confirmatory memo

A

(1) after an oral agreement between merchants; (2) each party sends a signed, written confirmation of the oral contract (must be signed by the sender); AND (3) the written confirmation is received by the other merchant to the agreement, UNLESS (1) the party receiving the written confirmation gives a written notice of objection within ten days after receipt

42
Q

Parol Evidence Rule

A

When the parties to a contract express their agreement in a writing with the intent that it embody the final expression of their bargain, the writing is an integration. Any other expressions–written or oral–made prior to the writing, as well as any oral expressions contemporaneous with the writing, are inadmissible to vary the terms of the writing

43
Q

Complete Integration

A

If the writing completely expresses all of the terms of the parties’ agreement, then it is a complete integration. ALL other expressions or statements, written or oral, made prior to the writing, as well as any oral expressions made contemporaneously with the writing, are inadmissible.

44
Q

Partial Integration

A

If the writing sets forth the parties’ agreement about some terms, but not all the terms, then it is a partial integration. Other expressions or statements, written or oral, made prior to the writing, as well as any oral expressions made contemporaneously with the writing, are admissible to supplement the writing so long as the evidence does NOT contract the terms of the writing.

45
Q

PER does not apply:

A

(1) establishing a defense to formation; (2) condition precedents (extrinsic evidence may be offered if a party asserts that there was an oral agreement that the written contract would not become effective until a condition occurred) (3) to clarify an ambiguity in the agreement

46
Q

Implied warranty of merchantability

A

Under UCC, merchants make an implied warranty (unless disclaimed) that the goods being sold are fit for their ordinary commercial purposes. Can be disclaimed with conspicuous language. If buyer inspects before entering the contract, there is no implied warranty of merchantability with respect to defects that an examination ought to have revealed

47
Q

Implied warranty of fitness for a particular purpose

A

Implied whenever the seller: (1) has reason to know that the buyer has a particular use for the goods; and (2) that the buyer is relying on the seller’s skill to select the goods. Seller need not be merchant for this one, can again be disclaimed

48
Q

Good Faith and Fair Dealing

A

All contracts contain an implied obligation which requires the parties to contract to act in good faith and deal fairly with one another without (1) breaking their word; (2) using deceptive means to avoid obligations; or (3) denying what the other party obviously understood

49
Q

Substantial Performance

A

Under the common law, substantial performance means that performance will be satisfied so long as there is not a material breach of the contract.

50
Q

Material/Non-Material Breaches

A

If there is a material breach (depriving party of the benefit of the bargain), the non-breaching party’s performance is excused. If the breach is not material, the non-breaching party’s performance is not excused.

51
Q

Perfect Tender

A

Under the UCC, perfect tender is required, which means that a seller must deliver conforming goods in accordance with the terms of the contract. The smallest nonconformity is a breach that allows the buyer to reject all or a portion of the goods.

52
Q

Exceptions to Perfect Tender

A

(1) Installment contracts do NOT have to satisfy; the buyer can reject a specific installment delivery when there is a substantial impairment in the installment that cannot be cured

(2) If the seller fails to tender perfect goods, the buyer MUST give the seller a chance to cute the nonconformity if: (1) the time for performance under the contract has not yet expire or (2) the seller has reasonable grounds to believe the buyer would accept a replacement for the nonconformity

53
Q

Revocation of Acceptance under UCC perfect tender

A

If a buyer fails to reject nonconforming goods after having had a reasonable opportunity to inspect the goods, the buyer is deemed to have accepted the goods.

The buyer may revoke his acceptance if: (1) the nonconformity substantially impairs the value of the goods;

(2) the revocation occurs within a reasonable time after the buyer discovers or should have discovered the ground for nonconformity and before any substantial change in condition of the goods was not caused by their own defects; AND

(3) the buyer accepted the goods (i) on the reasonable assumption that the nonconformity would be cured and it has not been OR (ii) without discovery of such nonconformity his acceptance was reasonably induced either by the difficulty of discovery before acceptance or by the seller’s assurances

54
Q

Impossibility/Impracticability

A

A party’s duty to perform under a contract is discharged if: (1) an unforeseeable event occurs that makes performance extremely and unreasonably difficult; (2) the nonoccurrence of the event was a basic assumption of the contract; AND (3) the party seeking discharge was not at fault.

55
Q

Frustration of Purpose

A

A party’s duty to perform under a contract is discharged if:

(1) unexpected events arise that destroy one party’s purpose in entering into the contract;
(2) the event that arises is NOT the fault of the frustrated party; and (3) the nonoccurence of the event was a basic assumption of the contract.

56
Q

Accord and Satisfaction

A

A party is excused from their obligations under a valid contract when there has been an accord and satisfaction:

(1) an accord is an agreement between two parties to accept alternate performance to discharge a preexisting duty between them

(2) the satisfaction is the subsequent performance of that accord. If satisfaction never occurs, the other side can sue on either the original obligation or the accord.

57
Q

Anticipatory Repudiation

A

Occurs when a promisor clearly and unequivocally repudiates a promise before the time of performance is due. Under common law, repudiation may be retracted until the promisee: (1) acts in reliance on the repudiation; (2) signifies acceptance of the repudiation; OR (3) commences an action for breach of contract. Non-repudiating party may treat the repudiation as a breach and sue immediately for damages.

58
Q

Expectation Damages

A

The goal of expectation damages is to put the non-breaching party in the same economic position that it would be in if the contract had been performed as promised. Expectation damages are measured by comparing the value of the performance without the breach to the value of the performance with the breach.

59
Q

Limitations on calculation of expectation damages

A
  1. Must be proven with reasonable certainty; (2) unforeseeable consequential damages are NOT recoverable UNLESS the breaching party had some reason to know about the possibility of these unforeseeable damages
60
Q

Reliance damages

A

Goal is to put the non-breaching party in the same economic position that it would be in if the contract had never been created.

**Party cannot recover both expectation and reliance damages!

61
Q

Restitution

A

Goal is to prevent unjust enrichment.

62
Q

Duty to Mitigate

A

The plaintiff has a duty to take reasonable steps to mitigate his losses. If the plaintiff fails to do so, the court will reduce the total damages by the amount that could have ben avoided had the plaintiff taken reasonable steps to mitigate his losses

63
Q

Intended third-party beneficiary

A

NOT a party to the contract, but has rights under the contract because the two contracting parties are aware that their respective performances are intended to benefit the identified third party

64
Q

Incidental third-party beneficiary

A

Not a party to the contract, but just so happens to benefit. No legal rights because the purpose of the contract was not intended to benefit them. Does NOT have the right to sue for breach

65
Q

Vested Rights

A

The original parties can revoke or modify away the third-party beneficiary’s right to enforce the contract up until the rights vest. Rights vest when the third-party beneficiary has: (1) detrimentally relied on the contract; (2) accepted the benefit under the contract; OR (3) brought suit to enforce the contract

66
Q

Assignment

A

A party can generally assign rights and benefits, in whole or in part, under a contract to a third party UNLESS the contract explicitly prohibits or invalidates assignments.

67
Q

Contract prohibits assignments

A

Assignor has breached the deal when he makes the assignment and is liable for damages; however, the assignment is still valid and enforceable by the assignee.

68
Q

Contract invalidates assignments

A

If the contract invalidates assignments, then the assignment is void and the assignee cannot enforce the assignment or recover

69
Q

Assignee right to sue

A

(1) the obligor for non-performance AND (2) the assignor for wrongful revocation of assignment or breach of implied warranty

70
Q

Consideration and assignment

A

Consideration is not required for an assignment, but if it is provided, the assignment becomes irrevocable

71
Q

Delegation

A

A delegation occurs when a party “outsources” duties under a contract to a third party. Acceptable provided that: (1) the contract does not prohibit delegation; and (2) the other party does not have some special interest in having a specific individual perform (an artist to paint a portrait)

72
Q

Delegatee liability for breach

A

Delegatee is not liable for breach unless she receives consideration from the delegating party (delegating party is NOT excused and remains liable for non-performance unless there is consideration).

73
Q

Divisible contract

A

(i) performance of each party must be divided into two or more parts under the contract; (ii) the number of parts due from each party must be the same; and (iii) the performance of each part by one party is agreed on as the equivalent of the corresponding part from the other party

If a contract is divisible, a party who has performed one or more parts is entitled to collect the contract price for those parts even if it breaches the other parts

74
Q

UCC Acceptance Non-merchants additional terms

A

Not both merchants: contract formed, but without additional terms

75
Q

UCC acceptance by shipment

A

Acceptance by shipment: A merchant may accept an offer to buy goods by either: (1) providing a promise to ship goods; or (2) promptly shipping conforming goods.

76
Q

Implied warranty of merchantability

A

To be merchantable, goods must be adequately contained, packaged, or labeled according to the contract and must conform to any promises or affirmations of fact made on the label.

77
Q

Restitution damages

A

in the absence of a contract, may recover if:

(1) the plaintiff conferred a benefit on the defendant

(2) the plaintiff conferred the benefit with a reasonable expectation of compensation

(3) the defendant knew or had reason to know the plaintiff expected compensation

(4) the defendant would be unjustly enriched if allowed to retain the benefit without paying the plaintiff

78
Q

Anticipatory repudiation

A

Unequivocal manifestation by one party to the other that the party cannot or will not perform its obligations under the contract (mere expression of doubt is not enough) and this statement is made before the repudiating party’s performance is due.

79
Q

Prospective inability to perform

A

Occurs when a party has reasonable grounds for insecurity that the other party is unable or unwilling to perform. Under the UCC, the party may then, in writing, demand adequate assurance of performance, and until she receives such assurance, may suspend her performance. If no assurances given in a reasonable time, not exceeding 30 days, the other party may treat it as a repudiation

80
Q

Retracting a repudiation

A

The party who has repudiated can retract his repudiation unless (1) the other party cancelled the contract, (2) materially changed his position in reliance on the repudiation, or (3) indicated that she considers the repudiation to be final

81
Q

Rescission

A

(1) mutual mistake; (2) unilateral mistake if the other party knew or should have known; (3) unilateral mistake if the hardship by the mistaken party is so extreme it outweighs the other party’s expectations under the contract; (4) misrepresentation of fact or law; (5) other grounds

82
Q

Misunderstanding - Ambiguous Contract

A

Neither party aware or both parties aware: no contract unless parties intended the same meaning. One party aware: binding contract based on what the ignorant party reasonably believed to be the meaning of the ambiguous words

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