Contracts Flashcards
Substantial Performance
A party who substantially performs can recover on the contract even though full performance has not been tendered.
Substantial performance is negated if the incomplete performance amounted to a material breach of contract.
If the failure of a constructive condition of exchange is minor, however, it will not negate substantial performance.
Installment Contracts
A divisible or installment contract is one in which the various units of performance are divisible into distinct parts. Recovery is limited to the amount promised for the segment of the contract performed.
Unjust Enrichment
When a plaintiff confers a benefit on a defendant and the plaintiff has a reasonable expectation of compensation, allowing the defendant to receive the benefit without compensating the plaintiff would be unjust.
This type of action does not depend on the existence of a contract (although sometimes called a “quasi-contract”)
Repudiation
Parties to a contract are entitled to expect due performance of contractual obligations and are permitted to take steps to protect that expectation.
Anticipatory repudiation occurs when there has been an unequivocal refusal of the buyer or seller to perform, or when a party creating reasonable grounds for insecurity fails to provide adequate assurances within 30 days of demand for such assurances.
Repudiation allows the non-repudiating party to resort to any remedy given by the contract or applicable law. But until the repudiating party’s next performance is due, he may retract the repudiation unless the aggrieved party has since accepted the repudiation, acted in reliance on the repudiation, or brought an action for breach.
Retraction of a repudiation must include any assurances of performance that the other party has justifiably demanded about whether the retracting party will perform. A proper retraction reinstates the repudiating party’s contract rights
Damages for Breach of Contract
The baseline damages in breach-of-contract suits are expectancy damages, which are intended to put the injured party in the same position as he would have had the contract been performed.
If the non-breaching party avoids specific costs because a breach has occurred, those are subtracted from any damage award.
Contract damages are recoverable only if they were foreseeable and reasonably certain.
Reasonable certainty: courts are hesitant to award damages for lost profits- especially in the case of new businesses- because profits are often speculative.
A nonbreaching party also has the obligation to mitigate damages by taking steps that do not result in undue risk, expense, or burden. The amount of damages that the nonbreaching party could have mitigated, but failed to mitigate, should be offset against the total damage award.
Required Terms of a Contract
Under the UCC, a contract is formed if both parties intend to contract and there is a reasonably certain basis for giving a remedy. The only essential term is quantity, and as long as the parties intend to create a contract, the UCC “fills the gap” if other terms are missing, such as the time or place for delivery.
At Common Law, all essential terms must be covered in the agreement, including the parties, subject, price, & quantity.
NOTE: Both Requirements & Output Contracts are considered specific enough under the UCC even though they don’t have a specific quantity term
Mode of Acceptance
Any reasonable method will be allowed, but silence is only allowed if expressly provided in the contract.
Creation of a Valid Offer
An offer is an objective manifestation of a willingness by the offeror to enter into an agreement that creates the power of acceptance in the offeree. A valid offer requires the offeror to display an objectively serious intent to be bound
An offer can only be accepted while it remains open.
Termination of an Offer
An offer can’t be accepted after it has been terminated. An offer may be terminated by an act of either party or by operation of law.
TERMINATION BY ACTS OF PARTIES
Lapse of time (the offeree’s failure to accept within the time specified by the offer or, if no deadline was specified, within a reasonable period.)
Rejection (effective when received)
- Express Rejection
- Counteroffers and conditional acceptances (but not a mere inquiry)
Revocation (effective when received)
In general, an offer can be revoked by the offeror at any time prior to acceptance.
- Revocation by directly communicating the revocation to the offeree
- An offer made by publication can be directly revoked only by publication through comparable means
- An offer may be revoked indirectly if the offeree receives: (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.
Termination by Operation of Law
- Death or insanity of either party (unless the offer is irrevocable). Death or insanity need not be communicated to the other party
- Destruction of the proposed contract’s subject matter
- Supervening illegality
When is an offer irrevocable?
1) The offeree reasonably and detrimentally relies on the offeror’s promise prior to acceptance. It must have been reasonably foreseeable that such detrimental reliance would occur in order to imply the existence of an option contract.
2) An enforceable option will render the offer irrevocable. An option is an independent promise to keep an offer open for a specified period of time. Such a promise limits the offeror’s power to revoke the offer until after the period has expired, while also preserving the offeree’s power to accept. Under the common law, the offeree must generally give separate consideration for the option to be enforceable.
3) Merchant’s Firm Offer (UCC)
If a merchant offers to buy or sell goods in a signed writing, and the writing gives assurances that the offer will be held open, the offer is not revocable for lack of consideration during the time stated, or if no time is stated, for a reasonable time not exceeding 3 months.
4) Beginning Performance on a Unilateral Contract
An offer for a true unilateral contract becomes irrevocable once performance has begun. The offeror must give the offeree a reasonable time to complete performance. Mere preparation to perform under a unilateral contract do not make the offer irrevocable
UCC Merchants Definition
A merchant is one who regularly deals in goods of the kind sold or who otherwise by their profession holds themselves out as having special knowledge or skills as to the practices or goods involved.
Acceptance (CL)
An acceptance is a manifestation of assent to the terms of an offer. Unless otherwise provided, an offer is construed as inviting acceptance in any reasonable manner and by any medium reasonable under the circumstances.
Bilateral Contracts may be accepted either by a promise to perform or by the beginning of performance.
Unilateral Contracts may only be accepted by performance.
CL: Mirror Image Rule
Acceptance (UCC)
An offer to buy goods for current or prompt shipment is construed as inviting acceptance either by a promise to ship or by current or prompt shipment of conforming or nonconforming goods.
The shipment of nonconforming goods is an acceptance creating a bilateral contract 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 accommodation. The buyer is not required to accept accommodation goods and may reject them. If the buyer rejects, the shipper isn’t in breach and may reclaim the accommodation goods, because the tender does not constitute an acceptance of the buyer’s original offer.
SoF EXCEPTION
In contracts of $500 or more between merchants, if a memorandum sufficient against one party is sent to the other party, who has reason to know its contents, and the receiving party does not object in writing within 10 days, then the contract is enforceable against the receiving party even though he has not signed it.
At common law, the acceptance must be a mirror image of the offer
If at least one of the parties is not a merchant, additional or different terms are considered to be mere proposals to modify the contract that do not become part of the contract unless the offeror expressly agrees.
If BOTH parties are merchants, additional terms do come in with the acceptance UNLESS, those additions terms are material changes, the terms of the original agreement say that no changes can come in, or if the offeror objects before or after receiving the new terms
What does not count as valid consideration
Gifts are not exchanged for a bargain, so there is NO consideration for gifts and they are thus hard to enforce
Pre-existing duty rule: if someone already has to do something, there’s no new consideration
Past consideration—CL says it’s a no go, the modern trend says that if someone provided a very specific, meaningful benefit to somebody and that person then promises back, that MAY be considered consideration
Promissory Estoppel: may be enforceable as a consideration substitute if the person making that promise reasonable expected the promise to induce action or forbearance, the promise actually induces action or forbearance, and injustice can only be avoided by enforcement of the promise. NOTE: typically only reliance damages are available for promissory estoppel.
