Contracts Flashcards
Offer
An objective manifestation of a willingness by the offeror to enter into an agreement that creates the power of acceptance in the offeree.
How is a unilateral offer accepted?
Complete performance - Once performance has begun, the unilateral offer is irrevocable for a reasonable period of time to all for complete performance unless there is a manifestation of a contrary intent.
What type of contracts are governed by the UCC?
Contracts involving the sale of goods.
Acceptance
An objective manifestation by the offeree to be bound by the terms of the offer.
Under the common law, what terms must be covered in order for a contract to be formed?
All essential terms - The parties, subject matter, price, and quantity.
What is the basic concept of legal detriment?
There must be something of substance, either an act or a promise, which is given in exchange for the promise that is to be enforced.
How is a bilateral offer accepted?
Either with a return promise or by starting performance.
What are 4 forms of consideration?
- A return promise to do something;
- A return promise to refrain from doing something legally permitted;
- The actual performance of some act; and
- Refraining from doing some act.
Under the common law, why is something given in the past not considered adequate consideration for a new contract?
It could not have been bargained for, nor could it have been done in reliance upon a promise.
-There is a modern trend toward enforcing such promises under the material benefit rule.
What 3 conditions must be met for the defense of impracticability to be available?
- An unforeseeable event has occurred;
- Nonoccurrence of the event was a basic assumption of which the contract was made; and
- The party seeking discharge is not at fault.
What types of contracts are governed by the common law?
Service and real estate contracts.
Under the UCC, what key terms(s) must typically be specified for a contract to be formed?
Quantity
-The UCC “fills the gaps” if other terms are missing.
Under the mailbox rule, when is acceptance effective?
An acceptance that is mailed properly within the allotted response time is effective when sent as opposed to on receipt, unless the offer provides otherwise.
What is the main difference between contract modification under the common law and contract modification under the UCC?
Common law: Modification requires consideration
UCC: Modification requires only good faith
Who lacks capacity to make a contract?
-Minors;
-People who are mentally ill;
-People who are intoxicated; and
-People whose property is under guardianship by reason of adjudication.
Define accord and satisfaction.
-Under an accord agreement, a party to a contract agrees to accept a performance from the other party that differs from the performance that was promised in the existing contract, in satisfaction of the other party’s existing duty.
-A “satisfaction” is the performance of the accord agreement, which will discharge both the original contract and the accord contract.
What is a requirements contract?
A contract under which a buyer agrees to buy all that is required of a product from the other party.
-There is consideration in these agreements because the promisor suffers a legal detriment.
Under the UCC, what 3 requirements must be met for an offer to buy or sell goods to be an irrevocable firm offer?
- The offeror is a merchant;
- There is an assurance that the offer is to remain open; and
- The assurance is contained in a signed writing from the offeror.
What is an output contract?
A contract under which a seller agrees to sell all that they manufacture of a product to the buyer.
-There is consideration in these agreements because the promisor suffers a legal detriment.
Define the material benefit rule.
When a party performs an unrequested service for another party that constitutes a material benefit, the modern trend permits the performing party to enforce a promise of payment made by the other party after the service is rendered, even though, at common law, such a promise would be unenforceable due to lack of consideration.
Under the UCC, when both parties are merchants, an additional term in the acceptance is automatically included in the contract unless:
-The term materially alters the original contract;
-The offer expressly limits acceptance to the term of the offer; or
The offeror has already objected to the additional terms, or objects within a reasonable time after notice of them was received.
What is the difference between void and voidable contract?
Void: A void contract results in the entire transaction being regarded as a nullity, as if no contract existed between the parties, making the contract unenforceable.
Voidable: A voidable contract operates as a valid contract unless and until one of the parties takes steps to avoid it.
Define fraud in the inducement, and state its effect on a contract.
Fraud in the inducement occurs when a fraudulent misrepresentation is used to induce another the enter into a contract.
-Contract is voidable by the adversely affected party if they justifiably relied on the misrepresentation in entering into the agreement.
Define incidental benefit.
One who benefits from the contract even though there is no contractual intent to benefit that person.
What 3 factors does a court use to determine if restitutionary recovery is available in a quasi-contract situation?
- Whether the plaintiff has conferred a measurable benefit on the defendant;
- Whether the plaintiff acted without gratuitous intent; and
- Whether it would be unfair to let the defendant retain the benefit because either (i) the defendant had the opportunity to decline the benefit but knowingly accepted it, or (ii) the plaintiff had a reasonable excuse for not giving the defendant such an opportunity.
Define fraud in the factum and state its effects on a contract.
Fraud in the factum occurs when the fraudulent misrepresentation prevents a party from knowing the character or essential terms of the transaction.
-Makes the contract void.
When is the implied warranty of merchantability implied, and how is it disclaimed?
It is implied whenever the seller is a merchant.
Disclaimer:
-Oral: Must contain the term “merchantability.”
-Writing: Must be conspicuous.
-Language indicating there is no implied warranty is sufficient.
What is the warranty of fitness for a particular purpose, and how is it disclaimed?
It is implied whenever the seller has reason to know that (i) the buyer has a particular use for the goods, and (ii) the buyer is relying upon the seller’s skill to select the goods.
Disclaimer: Must be in writing and be conspicuous.
What doctrine comes into play when an unexpected event arises that destroys a party’s purpose in entering into the contract, but performance on the contract is not rendered impossible?
Frustration of Purpose - The frustrated party is entitled to rescind the contract without paying damages.
What is an implied-in-fact contract?
A contract that results when a person’s assent to an offer is inferred solely from the person’s conduct.
-To be contractually bound, the person must not only intend the conduct but also know or have reason to know that the conduct may cause the offeror to believe the offer was accepted.
