Contracts Flashcards
What is a bilateral contract?
Basics
A bilateral contract is one consisting of the exchange of mutual promises. That is, a promise for a promise. Each party is both a promisor and a promisee.
What is a unilateral contract?
Basics
A unilateral contract is one in which the offeror requests performance than a promise. Here, the offeror-promisor promises to pay upon the completeion of the requested act by the promisee. Look for “offer… only by” or a reward offer.
What is the defintion of “goods” under the UCC?
Basics
All things movable at the time they are identifeid as item to be sold under the contract
What is the UCC defintion of “merchant”?
Basics
Article 2 defines “merchant” as one who regularly deals in goods of the kind sold or who otherwise by their profession holds themselves out as having special knowledge or skilss as to the practices or goods involved.
For a communication to be an offer, it must create a ____________ in the offeree that the offeror is willing to enter into a contract on the basis of the terms.
Mutual Assent - Offer and Acceptance
reasonable expectation
What terms must be included in a real estate transaction?
Mutual Assent - Offer and Acceptance
Must identify the land and the price terms. Land must be identified with some particularity.
What terms must be included in a sale of goods contract?
Mutual Assent - Offer and Acceptance
Must include a quantity
When may an offer be revoked indirectly?
Mutual Assent - Offer and Acceptance
An offer may be revoked indirectly if the offerree recieves:
1. Correct information
2. From a reliable source
3. Of acts of the offeror that would indicate to a reasonable person that the offeror no longer wishes to make the offer.
When is rejection effective?
Mutual Assent - Offer and Acceptance
Upon **reciept **by the offerer
When can an offer not be revoked?
Mutual Assent - Offer and Acceptance
- Option Contracts
- Merchant’s Firm Offer
- Detrimental Reliance
- Beginning Performance in Response to True Unilater Contract offer
(See other flashcards for defs)
What is an option contract?
Mutual Assent - Offer and Acceptance
An option is a distinct contract in which the offeree gives consideration for a promise by the offeror not to revoke an outside offer.
What is the Merchant’s Firm Offer Rule?
Mutual Assent - Offer and Acceptance
Under Article 2:
1. if a merchant
2. Offers to buy or sell goods in a signed writing
3. the writing gives assurances that it will be held open
then, the offer is not revocable for lack of consideration during the time stated, or if no time is stated, for a reasonable time (but in no event may such period exceed ** 3 months**)
What is detrimental reliance in the context of revocability?
Mutual Assent - Offer and Acceptance
When the offeror could reasonably expect that the offeree would rely to their detriment on the offer, and the offeree does so rely, the offer will be held irevocable as an option contract for a reasonable length of time
When may silence be viewed as an acceptance?
Mutual Assent - Offer and Acceptance
A court may find silence works as acceptance if, because of prior dealings or trade practices, it would be commercially reasonable for the offeror to consider silence an acceptance.
What is the mirror image rule?
Mutual Assent - Offer and Acceptance
Under the common law, when you say “yes” to an offer, that becomes the basis for a contract, so you’re accepting that offer exactly as it is – with no changes or modifications. Therefore, the acceptance must be a mirror image of the offer. If it isn’t, there’s no contract.
What is the Battle of the Forms?
Mutual Assent - Offer and Acceptance
Article 2 provides that inclusion of additional or different terms by the offeree in a definite and timely acceptance does not constitute a rejection and counterofferor, but rather is effective as an acceptance.
When do are additonal terms in a UCC contract for goods not an acceptance?
Mutual Assent - Offer and Acceptance
- Limits acceptance to its term; Conditional acceptance
- Materially alter the contract
- The offeror objects to the new terms
If any of these, then contract is still formed, but additonal terms are not included.
What is the accomadation shipment rule?
Mutual Assent - Offer and Acceptance
The shipment of nonconforming goods is an acceptance creating a bilateralcontract as well as a breach of the contract unless the seller seasonably notifies the buyer that a shipment of nonconforming goods is offered only as an accomadation. The buyer is not required to accept accomadation goods and may reject them.
What is the mailbox rule?
Mutual Assent - Offer and Acceptance
Acceptance by mail or similar means is effective at the moment of dispatch, provided that the mail is properly addressed and stamped.
What are the exceptions to the mailbox rule?
Mutual Assent - Offer and Acceptance
- The offer stipulates that acceptance is not effective until recieved
- An option contract is involved
- The offeree sends a rejection and then sends and acceptance, in which case whichever is first to arrive
What are the two elements necessary to constitute consideration?
Consideration
- Legal Value
- Bargained-for-exchange
What is a bargained-for-exchange?
Consideration
When the promise induces the detriment and the detriment induces the promise. There is no bargain involved when one part gives a gift to another
What is the pre-existing duty rule?
Consideration
Traditionally, performing or promising to perform an existing legal duty is** insufficient** consideration.
What are some exceptions to the pre-existing duty rule?
Consideration
- New or different consideration is promised;
- The promise is to ratify a voidable obligation (a promise to ratify a minor’s k after reaching majority or a promise to go through with a k despite the other party’s fraud)
- The preexisting duty is owed to a third person rather than to the promisor
- There is an honest dispute as to the duty; OR
- There are unforseen circumstances sufficient to discharge the party (impracticability) or, if the modification is fair and equitable in view of cirumstances not anticipated when the contract was made
What is the traditional view on contract modification?
Consideration
A contract can’t be modified unless the modification is supported by new consideration
What is the modern view on contract modification?
Consideration
The modern view permits modification without consideration if: (1) the modification is due to circumstances that were unanticiapted by the parties when the contract was made; (2) it is fair and equitable
What is the UCC view on contract modification?
Consideration
Under the UCC, consideration isn’t necessary to modify; all the parties need are good faith promises of new and different terms.
What is the legal age of capacity (to enter contracts) in GA?
Defenses
In GA, the recognized age of maj. is 18 years old. However, a minor be emancipated by court order.
GA also recognizes certain statutory exceptions that do not allow an infant ot avoid the contracts he enters into, such as student loans and business and professional contracts.
What is dissaffirmance? (in context of minority contracts)
Defenses
An infant (minor) may choose to disaffirm a contract any time before (or shortl after) reaching the age of minority.
The contract must be disaffirmed as a whole it can’t be affirmed in part and disaffirmed in part.
If an infant chooses to disaffirm, they must return anything that they recieved under the contract that still remains at the time of disaffirmance.
What is affirmance? (in context of minority contracts)
Defenses
A minor may affirm, that is, choose to be bound by the contract in whole, upon reaching majority. A minor affirms either expressly or by conduct, such as by failing to disaffirm the contract within a reasonable time after reaching majority
What are some defenses to contract formation?
Defenses
- Incapacity
- Duress or Undue Influence
- Misunderstanding
- Mistake
- Misrepresentation
- Illegality
- Unconscionability
- Statute of Frauds
What occurs if neither party was aware of an ambiguity in a contract?
Defenses
No contract unles both parties intentded the same meaning
What occurs if both parties were aware of an ambiguity in a contract?
Defenses
No contract unless both parties intended the same meaning
What occurs if only one party was aware of an ambiguity in the contract?
Defenses
Binding contract based on what the ignorant party reasonably believed to be the meaning of the ambiguous words.
When may a mutual mistake to **existing facts ** create a voidable contract? 3 things.
Defenses
- The mistake concerns a basic assumption on which the contract was made (ie the parties think they are contracting for the sale of a diamond but in reality the stone is a cubic zirconia)
- The mistake has a material effect on the agreed-upon exchange (the cubic zirconia is worth only a hundreth of what a diamond is worth)
- The party seeking avoidance did not assume the risk of the mistake (commonly occurs when one party is in a position to better know the risks than the other party)
When is unilateral mistake a defense to contract formation?
Defenses
If the non-mistaken party knew or had reason to know of the mistake made by the other party, the contract is voidable by the mistaken party.
What is fraud in the inducement?
Defenses
If a party induces another to enter into a contract by using fradulent misrepresentation (asserting info they know is untrue), the contract is voidable by the innocent party if they justifiably relied on the fradulent misrep.
What is material misrepresentation?
Defenses
Whether or not a misrepresentation is fraudulent, the contract is voidable by the innocent party if the innocent party justifiably relied on the misrepresentation and the misrepresentation was material.
Material if: it would induce a reasonable person to agree, or the maker knows that for some special reason it is likely to induce the particular person to agree, even if a reasonable person would not.
What agreements are covered by the statute of frauds? MY LEGS
Defenses
- Promises in Consideration of Marriage (pre-nup)
- Performance Not Within One Year from Date of Contract
- Interest in Land
- Executors or Administratros Promises to Personally Pay Estate Debts
- Goods Priced at $500 or More
- Promises to Pay Debt of Another (Suretyship Promises)
Is a promise to “employ until I die” or “work until I die” within the Statute of Frauds?
Defenses
No, because it is capable of performance within one year… that’s dark.
When is a writing signed by the party to be charge not required for a sale of goods, even if it is $500 or more? SWAP
Defenses
- Specially made goods
- Writen Confirmation by a merchant
- Admission in court
- ** Performance**
In GA, perfomance sufficent to take a contract for the sale of land out of the Statute of Frauds requires:
Defenses
- Full payment accepted by the vendor;
- Possession of the property plus partial payment; OR
- Possession of the property plus valuable improvements
What is the Merchant Confirmatory Memo Rule?
Defenses
In contracts between** merchants, if one party, within reasonable time after an oral agreement has been made, sends to the other a written confirmation of the understanding, that is sufficiend under the Statute of Frauds to bind the recipent if: (1) they have reason to know of the confirmation’s contents; and (2) they do not object to is writing whith 10 days of reciept** (Think telephone calls hypos)
What is the Parol Evidence Rule?
Determing the Terms of the Contracts
When the parties to a contract express their agreement in a writing with the intent that it embody the final expression of their bargain (aka integration), any other expressions, written or oral, made prior to the writing, as well as any oral expression **contemporaneous with ** the writing, are inadmissible to vary the terms of the writing.
What is the effect of merger clause?
Determing the Terms of the Contracts
A merger clause recites that the agreement is the complete agreement betwen the parties. The presence of a merger claue is usually determinative in large commercial contracts.
When is the Parol Evidence rule innapplicable?
Determing the Terms of the Contracts
Other forms of extrinisc evidence may be admitted if they do not seek to vary, contradict, or add to an integration. Some examples:
* Challenging the validty of contract (formation defects)
* For interperpretation of uncertain or ambiguous terms
* Showing of “True Consideration”
* Reformation
* Subsequent Modifaction
* Additional Terms under Article 2
What is an express warranty?
Determing the Terms of the Contracts
Any affirmation of fact or promise made by the seller to the buyer, any description of the goods, and any sample or model creates an express warranty if the statement, description, sample, or model is part of the basis of the bargain (buyer could have relied on it)
What is the implied warranty of Merchantability?
Determing the Terms of the Contracts
Implied in every contract for sale by ** a merchant who deals in goods of the kind sold, there is a warranty that the goods are merchantable. To be merchantable, goods must at least be ** “fit for the ordinary purpose for which such goods are used”
What is the implied warranty of fitness for a particular purpose?
Determing the Terms of the Contracts
A warranty will be implied in a contract for a sale of goods whenever:
1. any seller, merchant or not, has reason to know the particular purpose for which the goods are to be used and that buyer is relying on the seller’s skill and judgment to select suitable goods; and (2) the buyer in fact relies on the seller’s skill or judgment.
Can the Warranty of Merchantability be disclaimed?
Deteriming the Terms of the Contracts
Yes, the warranty of merchantability can be specifically disclaimed or modified by mentioning merchantability. If the sales contract is in writing, the disclaimer must be conspicuous
Can the warranty of fitness for a particular purpose be disclaimed?
Deterining the Terms of the Contracts
Yes, the warranty of fitness for a particular purpose can be specifically disclaimed only a conspicuous writing. A written disclaimer is sufficient if it say, for example,” there are no warranties which extend beyond the description on the face hereof.”
Who carries the risk of loss in a non-carrier case?
Determing the Terms of the Contracts
If the seller is a merchant, risk of loss passes to the buyer only wen they take physical possession. If the seller is not a merchant, risk of loss passes to the buyer upon tender of delivery
Who carries the risk of loss in a shipment contract?
Determining the Terms of the Contracts
If the contract authorizes or requires the seller to ship the goods by carrier but does not require them to deliver the goods at a particular destination, risk of loss passes to the buyer when goods are delivered to the carrier
FOB: Carrier
Who carries the risk of loss in a destination contract?
Determining the Terms of the Contracts
If the contract requires the seller to deliver the goods at a particular destination, the risk of loss passes to the buyer when the goods are tendered to the buyer at the destination.
FOB: Buyer’s address
Is failure of a condition a breach?
Performance and Excuse of NonPerformance
A failure of a contractual provision that is only a condition is not a breach of contract, but it discharges the liability of the promisor whose obligations on the conditional premise never mature.
What is a condition?
Performance and Excuse of NonPerformance
Condition normally means either: (1) an event or state of the world that must occur or fail to occur before a party has a duty to perform; or (2) an event or state of the world, the occurrence of nonoccurence of whic h releases a party from their duty to perform.
What options does a non-repudiating party have to an anticipatory repudiation?
Performance and Excuse of NonPerformance
- Treat the anticipatory repudiation as a total repudiation and sue immediately
- Suspend their own performance and wait to sue until the performance date
- Treat the repudiation as an offer to rescind and treat the contract as discharged OR
- Ignore the repudiation and urge the promisor to perform (can still sue for breach if doesnt perform)
Can a repudiating party retract their repudiation?
Performance and Excuse of NonPerformance
Yes, a repudiating party may at any time before their next performance is due withdraw their repudiation unless the other party has **canceled, materially changed their position in reliance of the repudiation, ** or otherwise indicated that they consider the repudiation final
What are some factors to consider when determining the Materiality of a breach?
Breach
- The** amount of benefit recieved** by the nonbreaching party
- The adequacy of compensation for damages to the injured party
- **The extent of part performance ** by the breaching party
- Hardship to the breaching party
- Negligent or willful behavior of the breaching party
- ** The likelihood that the breaching party** will perform the remainder of the contract
What is a minor breach? What effect does it have?
Breach
A breach of contract is minor if the obligee gain the substantial benefit of their bargain despite the obligors defective performance. A minor does not relieve the aggrevied party of their duty of performance under the contract; it merely give them a right to damages for the minor breach.
What is the perfect tender rule?
Breach
Under Article 2, if goods or their delivery fail to conform to the contract in any way, the buyer may reject all, accept all, or accept in part and reject the rest.
When does a buyer accept goods under Article 2? (Perfect tender rule) 3 ways
Breach
- After a reasonable opp. to inspect the goods, they indicate to the seller that the goods conform to requirements or that they will kepp the goods even though they fail to conform;
- They fail to reject within a reasonable time after tender or delivery of goods or fail to seasonably notify the seller of their rejection: OR
- . They do any act inconsistent with the seller’s ownerhsip.
When may acceptance be revoked? (perfect tender rule)
Breach
- They accepted the goods on the reasonable belief that the defect would be cured and it has not been OR
- They accepted the goods because of the difficulty of discovering the defects or because the** seller’s assurances that the goods conformed** to the contract
What is GA lemon law?
Breach
Under GA’s lemon law, if within the first 2 years of 24,000 miles, a consumer informs the manufacturer that a new car is nonconforming, the manufacturer or its dealer is entitled to a reasonable # of attempts to repair the nonconformity.
After a reasonable # of failed attempts, the consumer may notify the manufacturer, who is given one final repair attempt. If that attempt fails, the consumer is eligible for a refund of the purcase price of replacement of the vehicle
What is the seller’s right to cure?
Breach
If the buyer has rejected the goods b/c of defects, the sellermay within the tim originally provided by performance “cure” by giving reasonable notice of their intention to do so and making a new tender of conforming goods that the buyer must then accept
When is specific performace appropriate?
Remedies
If the legal remedy (that is, money damages) is inadequate, the nonbreaching party may seek specific performance, which is an order for the court to the breaching party to perform or face contempt of court charges.
When will a court enforce a covenant not to compete?
Remedies
Most courts will grant an order of specific performanc to enforce a contract not to compete if :
1. the services to be performed are unique; and
2. the covenant is reasonable
What makes a covenant non compete reasonable?
Remedies
- The covenant must be reasonably necessary to protect a legitimate interest of the person benefited by the covenant
- The covenant must be reasonable to its geographic scope and duration (not broader than customer base and no longer than 1-2 yrs)
- The covenant must not harm the public
What is the goal of damages for a breach of contract
Remedies
Put the non breaching party in the position they would have had the promise been performed
What are incidental damages?
Remedies
Incidental damages are the cost of covering the breach, inspecting the goods, or rejecting the goods
What must one show to recieve consequential damages?
Remedies
At the time the contract was made, a reasonable person could have forseen the damages as a result of the braeach. The breaching party must have known or had reason to know of the special circumstances giveing rise to damages.
Under UCC, only buyer, not seller, may recover consequential damages.
What are the requirements for the enforcement of a liquidated damages clause?
Remedies
- Damages for contractual breach are difficult to estimate or ascertain at the time the contract is formed; and
- The amount agreed on is a reasonable forecast of compensatory damages in case of breach (no penalty for breach)
What are the buyer’s damages if the seller does not deliver or buyer rejects/revokes?
Remedies
Difference between the Contract price and either:
* The Market Price: OR
* the cost of cover, plus incidental and consequential damages, minus expenses saved
How must a buyer cover?
Remedies
The buyer must have made a reasonable contract for substitute goods in good faith and without unreasonable delay
What are buyers damages for a seller who delivers non conforming goods that the Buyer accepts
Remedies
(Value goods would have had if they had been according to contract - Value of goods delivered) + Incidental & consequential damages
What are buyers damages for seller’s anticipatory breach of the contract?
Remedies
Market price at the time the buyer learned of breach - contract price
What are seller’s damages when a buyer repudiates or refuses to accept conforming goods?
Remedies
- Resell the goods and recover the **difference between the contract price and the resale price **
- **Market price **(at the time and place of delivery) - the contract price
- For lost volume - Lost profits
What are the standard damages for breach for sale of land?
Remedies
Difference between contract price and fair market value of land
What are the standard damages for a breach by an employer?
Remedies
Full contract price (may be reduced if employee fails to mitigate)
What are the standard damages for breach by an employee?
Remedies
Cost of replacing the employee (the wages the employer must pay to a replacement - the breaching employees wages)
Does Ga require mitigation of damages in lease contracts?
Remedies
no.
What is restitution?
Remedies
Restitution is based on preventing unjust enrichment when one has conffered a benefit on another wihtou gratutious intent. Used when a contract does exist, or isnt enforceable
What factors are considered when determining if a beneficiary was “intended”?
Rights and Duties of Third Parties to the Contract
- Are they identified in the contract?
- Do they recieve performance difectly from the promisor; or
- Do they have some relationship with the promisee to indicate intent to benefit
When do the right of the beneficiary vest?
Rights and Duties of Third Parties to the Contract
- When they manifest assent to the promise in the manner requested by the parties;
- bring suit to enforce the promise; or
- materially change position in justifiable reliance on the promise.
What is the signifigance of vesting?
Rights and Duties of Third Parties to the Contract
Before the intended ben rights vest, the promisor and promisse are free to modify the contract (including removing TPB all together) without consulting the TPB. Once the rights vest, cannot alter contract without consent of TPB
What rights may not be assigned?
Rights and Duties of Third Parties to the Contract
- An assignment that would substantially change the obligor duty or risk
- An assignment of future right to arise from future contracts
- An assignment prohibited by law
What is the effect of an assignment?
Once the obligor has knowledge of the assingmnet, they must render performance to or pay the assignee.
Is a gratuitous assignment revocable?
Generally yes
What are the right and liabliates of assignee vs. obligor?
Rights and Duties of Third Parties to the Contract
The assignee can sue the obligor
What duties may not be delegated?
Rights and Duties of Third Parties to the Contract
- Duties involving personal judgment and skill
- Delegation would change the obligee’s expectancy (requirement and output contracts)
- A special trust was repsoed int he delegator by the other party to the contract
- There was a contractual restriction on delegation
