Contracts Flashcards

Question

# Contract Formation: Acceptance **COMMON LAW**: Effect of acceptance with ADDITIONAL, OMITTED, or CHANGED terms? ## Footnote Terms of an Acceptance

Answer 1

statement = **COUNTEROFFER**...NOT an acceptance --> terminates OG offer and becomes new offer ## Footnote NOTE: bargaining or requests for information are not counteroffers

Answer 2

K is formed with additional terms UNLESS : 1. additional terms materially change offer 2. offer expressly limits acceptance to the offer's terms, or 3. offeror objects within a reasonable time ## Footnote Under majority rule, a different term is knocked out and replaced with gap fillers!

Answer 3

K is formed, but without additional terms.

Answer 4

accepted by: 1. a promise to perform *or* 2. beginning performance - offeree must make offeror aware of acceptance

Answer 5

can only be accepted by COMPLETE PERFORMANCE * notice required upon completion - offeree not required to give notice upon strt of performance, but must notify offeror within a reasonable time upon completion

Answer 6

offeree's clear expression of assent to terms of offor

Answer 7

that offeror controls method of acceptance and can dictate manner by which an offer is accepted

Answer 8

a merchant may accept an offer to buy goods by either: 1. promise to ship goods (usually by written confirmation) 2. promptly shipping goods

Answer 9

* if seller ships non-conforming goods ***WITH*** an **accomodation letter** --> shipment = **counteroffer** * if seller ships non-conforming goods ***WITHOUT*** an **accomodation letter** --> shipment = **acceptance AND breach**

Answer 10

acceptance = effective upon DISPATCH

Answer 11

1. **offeror opts out of mailbox rule** (*i.e.*, offer stipulates acceptance is not effective until received) --> terms of offer control 2. **offeree sends both a rejection & acceptance** --> first to arrive controls 3. **option Ks** --> acceptance effective upon *receipt*

Answer 12

offer requiring acceptance by promise may still be accepted by performance if: 1. offeree begins to perform; and 2. offeror knows offeree has begun performance and acquieses

Answer 13

transfer of LEGAL VALUE in a BARGAINED-FOR-EXCHANGE

Answer 14

LEGAL DETRIMENT generally consists of: 1. promising 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

Answer 15

1. the promissee incurs a legal detriment **OR** the promisor receives a legal benefit; AND 2. the promise **INDUCES** the detriment **AND** the detriment **INDUCES** the promise (i.e., a "bargained-for-exchange"

Answer 16

1. **gratuitous promises** - promises of gifts or conditional gifts w/ no return consideration 2. **past consideration** - promise in exchange for something already given or performed 3. **pretenses of consideration** - nominal consideration 4. **illusory promises** - promises where only one party is bound to perform, leaves performance to discretion of other party

Answer 17

Alternative theories of enforcement for promises that lack consideration include: 1. **promissory estoppel** 2. **quasi-contract** (a.k.a. restitution / implied-in-law K) 3. **moral obligation + subsequent promise** [only in a minority of jdxs]

Answer 18

promises that lack ocnsideration may still be enforced if: 1. the promisor should **reasonably expect** the promise to induce reliance from the promisee (i.e., promise likely to induce action or forebearnce from promisee) 2. the promise **detrimentally relies on that promise** (i.e., promise DOES induce action or forebarance to promisee's detiment) and 3. **injustice** can be avoided **ONLY by enforcement of the promise**

Answer 19

QUASI-K = RESTUTION REMEDY Ks that lack consideration may nonetheless be enforced to avoid **unfair results** if: 1. P confers a **measurable benefit** on D 2. P **reasonably expected** to get paid; 3. D **knowingly accepted** the benefit; AND 4. D will be **unjustly enriched** if P is not compensated

Answer 20

promise to do something that you are already legally obligated to do (by prior K or some other legal reason) **does NOT constitute consideration** ## Footnote only applicable under COMMON LAW; NOT UCC! *note*: modern trend = allow modification if it is fair and due to circumstances unanticipated when K was made

Answer 21

EXCEPTIONS = CLUSTER: 1. **C** - **C***hanging the duty* on one side; 2. **L** - **L***awsuit settlement* or release (there is consideration for the settlement of a valid claim, or a claim for which there is a good faith belief for validity),; 3. **U** - **U***nforeseen* difficulties that would excuse performance (impracticability), 4. **S** - **S***ale of goods* under the UCC; 5. **T** - **T***ime-barred deb*t (written promise to pay a debt barred by the statute of limitations); 6. **E** - **E***xtra person* involved; and 7. **R** - **R***elease of pre-existing debts*.

Answer 22

contract modificatiosn MUST be supported by new consideration (*see* pre-existing duty rule)

Answer 23

**M**aking **M**istakes **IIS DUM** * **Making** = Misrepresentation * **Mistakes** = Mistake * **I** = Incapacity * **I** = Illegality * **S** = Statute of Frauds * **D** = Duress * **U** = Unconscionability * **M** = Misunderstanding

Answer 24

To assert this defense, party must show: 1. there is a **MISREPRESENTAITON** of a **PRESENT FACT** (not opinion); 2. that is **MATERIAL** *or* **FRAUDULENT**; and 3. that is made under circumstance in which it is **REASONABLE to rely** on the representation. EFFECT: * K is voidable if party detrimentally relies on the misrepresenation ## Footnote misreprentation = statement at the time of contracting that is NOT TRUE can be made intentionally (fraudulent) or accidentally

Answer 25

1. Mutual Mistake 2. Unilateral Mistake

Answer 26

**MUTUAL MISTAKE** * both parties are mistaken as to basic assumption on which agreement was made K is **voidable** by **adversely affected party** if: 1. there is a mistake of **fact**, existing at the time the deal is made 2. the mistake relates to a **basic assumption** of the K 3. the mistake has a **material impact** on the deal; and 4. adversely affected party **did NOT assume risk** of mistake ## Footnote party assumes risk when: (1) he is aware at the time K is made that he only has limited knowledge re: facts to which mistake relates but treats limited knowledge as sufficent; *OR* (2) risk is allocated to him by agmt of the parties

Answer 27

**UNILATERAL MISTAKE** * one party makes a mistake concerning facts of agreement * generally does NOT prevent K formation EXCEPTION: mistaken party may VOID K if: 1. mistake is material; and 2. non-mistaken party knew/should have known of mistake

Answer 28

1. incapacity 2. duress 3. undue influense

Answer 29

INCAPCITY = lack capacity to contract; includes: * infants (ppl under 18 y/o ) * mentally incompetent people * intoxicated persons if the other party has reason to know of intoxication **Right to Disaffirm** = K may be rendered VOID by person who lacked capacity if such person DISAFFIRMS K

Answer 30

1. **implied affirmation (ratification) by minor** - requires: (a) agreement entereed into before capacity; (b) capacity has since been gained; and (c) beenfits have been retained 2. **K for necessities** - infants are legally obligated to pay for "Ks" necessities (food, clothing, shelter) (NOTE: liability is based on quasi-K, so infant cannot be sued for breach)

Answer 31

if one or both parties' purpose, formation, or performance of K is against the law --> K is **VOID** and will not be enforced; no remedy for breach

Answer 32

nonbreaching party may recover full value of lost performance if: * the nonbreaching party was justifiably ignorant of the facts that made the contract illegal * the nonbreaching party substantially performed and lacked an illegal purpose * the contract can be easily separated into legal and illegal parts *or* * the contract is illegal due to a violation of a licensing requirement designed only to raise revenue.

Answer 33

a party to an illegal party may recover reasonable value of benefit conferred on other party if such party : * was justifiably ignorant of the facts that made the contract illegal * was less culpable than other party *or* * withdrew before the contract's illegal purpose was achieved and did not engage in serious misconduct.

Answer 34

Ks subject to SoF that fail to meet SoF requirements are invalid ## Footnote An oral K is valid in many instances...HOWEVER, for Ks subject to SoF, they must satisfy SoF to be enforceable.

Answer 35

MY LEGS: * **M** - Ks made in consideration of **MARRIAGE** * **Y** - Ks that cannot be performed within a **YEAR** * **L** - **LAND**-related Ks (transfers of property interests, including leases for terms greater than one year) * **E** - promises made by **EXECUTOR** to personally answer for debts of decedent's estate * **G** - Ks for **GOODS** over $500 * **S** - **SURETY** Ks - ie, Ks in which one party (surety) promises a second party (obligee) that the surety will answer for the debt of a third party (principal))

Answer 36

1. by writing 2. by performance

Answer 37

A writing will satisfy SoF if the writing: 1. is **signed** by the **party to be charged** (generally the D) 2. shows that a **K was formed**; *AND* 3. includes the **requisite terms** a. common law = parties, subject, quantity & price b. UCC = parties, subject, quantity

Answer 38

performance rquired to satisfy SoF depends on type of K involved

Answer 39

only **full** performance satisfies SoF; part performance does NOT

Answer 40

part performance by buyer satisfies SoF if buyer has done *two of the following three*: 1. takes **possession** of the property; 2. makes **payment** in full or part; and/or 3. makes **substantial improvement**s to the land

Answer 41

writing not required if **SWAP**: 1. **S** - specially manufactured goods 2. **W** - written confirmation b/t merchants 3. **A** - admission in court 4. **P** - partial performance

Answer 42

SoF satisfied 1. seller makes a "**subsantial beginning**" toward manufacture of 2. **custom goods** that are to be **specially made** for buyer and 3. are **not suitable for sale to others** in the ordinary course of seller's business

Answer 43

SoF is satisfied if: 1. after oral agmt b/t **merchants**; 2. either party sends a signed, **written confirmation** of oral K (must be signed by sender); AND 3. written confirmation is received by other merchant to oral agmt ***UNLESS*** party receiving written confirmation gives **written notice of objection within 10 days** after receitp of written confirmation

Answer 44

SoF satified if: * party against whom enforcement is sough admits in his pleading/testimony/otherwise in court that a K for sale was made *NOTE*: K is not enforceable beyond quantity of goods admitted

Answer 45

SoF satisfied for: 1. quantity of goods for which **payment has been made and accepted ***or* 2. quantity of goods that have been **received and accepted** *NOTE*: K is not enforceable beyond quantity of goods mentioned in above 2 circumstances

Answer 46

K is **VOID** if: * party is compelled by **phyiscal duress** (e.g., threat to inflict physical harm) K is **VOIDABLE** by adversely affected party if: * party's assent is induced by ab **improper threat** that left the party with no reasonable alternative but to assent

Answer 47

The following threats are ALWAYS improper: 1. threat to commit **crime or tort**; 2. threat of **criminal prosecution** [even when the threatened party actually committed the crime] 3. threat of **civil litigation made in bad faith** 4. threat that** breaches contractual duty of good faith & fair dealing**

Answer 48

K is VOIDABLE if follwing two elements met : 1. procedural unconscionability (an unfair bargaining process—e.g., hidden or incomprehensible terms) and 2. substantive unconscionability (grossly unfair terms). ## Footnote TIP: look for absence of meaningful choice by disadvantaged party

Answer 49

**MUTUAL MISUNDERSTANDING** there is no contract if: 1. both parties have a different understanding of a material term that is open to at least two reasonable interpretations and 2. neither party has any reason to know of the meaning attached by the other.

Answer 50

* seller's place of busines [GENERALLY THIS ONE] * seller's home * some other place if parties know goods are there

Answer 51

reasonable time

Answer 52

reasonable price at time for delivery

Answer 53

time & place buyer is to receive goods

Answer 54

1. **Express terms** 2. **Course of performance** - sequence of conduct relevant to understanding *current* transaction b/t parties if: 3. **Course of dealing** - sequence of conduct re: *previous* transactions b/t parties that establishes common basis of understanding for interpreting their conduct 4. **Trade usage** - any practice or method of dealing in the parties’ business or industry that is practiced with enough regularity to justify an expectation it will be practiced in this case

Answer 55

when one of the parties fails to substantially perform --> a breach of contract occurs TWO KINDS: 1. material breach 2. minor breach

Answer 56

a breach so serious that it defeats the contract's purpose or deprives the nonbreaching party of the substantial benefit of its bargain.