Contracts Flashcards
Offer - define
Manifestation of intention to be bound.
Applicable law?
Sale of goods: UCC Art 2
Lease of goods:
MBE: CL
NY UCC Art 2A
Other (real property etc): CL
Ad - offer?
Only if quantity specified.
No price stated - indefinite or offer?
Reasonable price applied EXC real property.
Quantity specified as “buyer’s requirement”?
OK. Minor fluctuations OK, not surprising/major fluctuations.
Offer termination - 2 forms
Lapse - reasonable time or stated time
Revocation - direct when received by offeree, or indirect via conduct when offeree aware of conduct.
Irrevocability of offer - 4 types
Option
Firm offer
Foreseeable reliance on offer (eg. Subcontractor)
Performance of unilateral
Option - requirements?
Promise + payment
(No need for merchant)
MBE: Payment always required
NY Payment not required if signed writing
Firm offer - requirements?
Merchant + signed writing Max period - 3 months (even if agreement states longer period) (No consideration needed) (Fallback position) [Art.2]
Foreseeable reliance on offer
Eg. subcontractor’s offer as basis of contractor’s bid
Rare because reliance is usually after acceptance
Performance of unilateral contract
Only MBE - cannot revoke once performance has started (not incl “mere preparation”
NY - can revoke until performance is complete (=acceptance)
Rejection of offer - 3 types
Counteroffer (not incl mere bargaining) Conditional acceptance (=counteroffer) Acceptance varying offer
Acceptance varying offer - Cl/SoG?
CL: Mirror image rule
SoG: 3 conditions for acceptance:
- Both merchants
- No material change
- No objection w/in reasonable time
Acceptance varying offer - when not applied to agr?
Change causes hardship/surprise to offeror.
Improper performance - result?
Simultaneous acceptance and breach.
EXC Sog - goods sent as accommodation (not acceptance yet)
Mailbox rule?
Acceptance - when mailed (even if rejected verbally later.
EXC:
- offer states otherwise
- irrevocable offer - acceptance when received
- if rejection mailed then acceptance mailed - race whichever arrives first
Defenses against formation - 8 types
Lack of capacity Economic duress Mis-rep / nondisclosure material fact Ambiguity / misunderstanding Mistake re material fact No consideration Public policy Unconscionability
Lack of capacity - power to disaffirm/enforce
May disaffirm. (EXC: necessities to live - reasonable value).
May enforce.
Silence after capacity restored = implied affirmation
Economic duress
Rare.
Threat to breach existing contract if 2nd offer not accepted.
and
No reasonable alternative
Misrep
Material fact only.
Even honest.
Mistake re material fact - mutual/uni?
Mutual only!
EXC: Mistake re value.
Uni - no defense, EXC other party knew of mistake.
Consideration - past consideration defense?
MBE: No
NY Yes if signed writing and can be proven
(promise to pay for something already done)
Must consideration reflect value?
No.
Illusory promise?
“I will if I want…”
Unenforceable
Consideration for contract modification?
Art. 2: Not required if good faith reason exists.
CL: Required. EXC if 3rd party agrees to pay.
NY No consideration needed if signed writing
Agr to make partial payment and waive remainder
Due and undisputed:
MBE: Invalid.
NY: Valid if signed writing.
(reasoning: creditor waiving w/o consideration)
EXC: Time-barred (collection barred by state limits): written promise enforceable
Fallback when unenforceable due to lack of consideration?
Promissory estoppel (reliance)
Public policy defenses?
Non-compete (scope, need/uniqeness)
Exculpatory: For negligence OK, for gross negligence of intentional - invalid
Unconscionability - 2 types
Substantive - unfair
Procedural - eg. small print
Statute of frauds - 6 transactions requiring writing
Real property transfer of interest
Performance cannot be completed in 1y.
SoG $500 or more
LoG for $1000 or more (yearly) (Art.2A)
Suretyship (even when not needed for orig debt)
Contract modification (when “as modified” required)
When marriage is part of the transaction.
NY writing requirements
Assignment of insurance policy
Promise to pay discharged debt
Finders fee, broker commission (EXC attorney, auctioneer, licensed realty agent)
Agr cannot be completed in 1y - EXC; when does clock start?
Irrelevant how long it took
Agreement to work for >1y - always needed.
Agreement to work forever:
MBE - no writing. NY writing!
Clock starts when agr made, not when work starts
For “as modified” - EXC?
Agr specifies amendments are only in writing.
CL: not enforceable [applies only to LoG on MBE]
Satisfactory writing - Sale of goods (Art.2)
Quantity term
Signed by defendant
Satisfactory writing - Lease of goods (Art.2A) NY
State it is a lease
Quantity + Duration + Rental payments
Signed by defendant
Satisfactory writing - other contracts
All material terms
Signed by defendant
Exceptions to writing requirement in real property
Short term lease and Part performance - 2 of 3: * buyer in possession * buyer made some payment * buyer made improvements
Exception to writing requirement in 1y performance contract
Performance completed.
Fallback: restitution
Exceptions to writing requirement in SoG $500+: Goods accepted and paid for
If divisible: only those goods paid for, not entire contract.
If indivisible: entire contract exempted.
Other exceptions to writing requirement in SoG $500+:
Custom-made
Judicial admission
Mechant’s (plaintiff’s!!) confirmatory memo, if:
Both are merchants
Writing claims agreement or names quantity
No written objection within 10 days
Exception to writing requirement for suretyship (assume another’s debt)
Main purpose of surety is to benefit promisor’s econimic purpose. (“main purpose rule”) (eg. to get a transaction done)
MBE ONLY
NY no exception!
Parol Evidence Rule?
Excludes prior or contemporaneous agreements that contradict “later writing”.
(If later oral - check Statute of Frauds)
(Does not relate to post-signing events, which can be admitted)
Exclusions to Parol Evidence Rule?
Correct typos
Defense against formation (mistake/duress)
Interpretation of vague/ambiguous term
Supplement “partially integrated writing”
EXC: “merger clause” - limited to terms herein…
Conduct as evidence of contractual terms
[In descending importance:]
Course of performance
Course of dealing (prev. engagements)
Usage of trade (others in similar circumstances)
Express warranties - what constitutes?
Statements, samples, models.
Must be “basis of the bargain”
Not mere expression of opinion.
Cannot be disclaimed
Implied warranty - 2 types
.. of merchantability
.. for particular purpose
Implied warranty of mechantability
Only by merchant dealing in goods of kind.
Fit for ordinary purpose.
Implies warranty for particular purpose
By anyone (not just merchant)
For buyer’s particular purpose
When seller knows about special use
and about reliance on seller to select suitable goods
Warranty by lessor of goods
NY only!
Same as SoG.
EXC: finance lease - any lease by bank
Limitation on implies warranty - form
“as is” “with all faults”
Conspicuous typeface
Use the word “merchantability”
(No disclaimer for express w!)
Limitation of remedies for breach of warranty - when permissible?
“Not unconscionable”
Personal injury limitation is assumed unconscionable.
“Does not fail its essential purpose”
Risk of loss - hierarchy?
Agreement (incoterms?)
Breach (breaching party liable even for unrelated loss)
Delivery by common carrier
Non-carrier / pickup
Risk of loss - delivery by common carrier
Seller’s risk until he completes his delivery obligation:
- Shipment contract (FOB seller location): gets goods to carrier, makes arrangements, notifies buyer
- Destination contract (FOB buyer location): when carrier delivers to buyer
Risk of loss - non-carrier / pickup
Mechant seller: until buyer takes possession
Non-merchant: when tendered to buyer (made available)
Risk of loss in LoG NY
On lessor
EXC: finance lease - on lessee
Imperfect performance - option to cure?
When time for performance has not expired.
EXC: In prior dealings accepted imperfect.
EXC: Installment contract - only substantial impairment (in order - reject order; in entire agr - revoke)
CL: Perfection not required
Implied acceptance of goods
Buyer keeps goods after having opportunity to inspect.
Consequence: Cannot reject, can claim damages
Later revocation of acceptance?
No.
EXC: Substantially impairs value AND difficult to discover
Consequence of rejection / revocation:
Return or Refund or Damages
Payment obligation - if seller refuses check
Buyer given reasonable time to obtain cash.
CL: Imperfection?
Only substantial performance, not perfection.
Lateness usually not material unless “of essence”
[Applies to: real property everywhere, LoG on MBE)
Anticipatory repudiation / retraction
Only when terminating party is “ready, willing, able to perform”
Can retract repudiation if breaching party decides to perform, EXC reliance on repudiation.
[unlike termination for breach which is permanent]
Right to adequate assurance
Can be demanded if:
Reasonable grounds
for being insecure
about performance.
No adequate reply w/in reasonable time up to 30d –> anticipatory repudiation.
Later agreement to rescind
Only when both have some performance remaining!
Otherwise - no consideration and void.
Modification
Immediately replaces prev agreement which is voided.
Check Statute of Frauds
Accord & satisfaction
Agree to accept performance
as future satisfaction
of existing duty.
OK if prev/existing is unpaid.
Novation
Substitute new party.
Old party is no longer liable.
Impossibility (=impracticality Art2)
6 examples
Destruction of necessary object Death/incapacitation Supervening gov regulation Increase in cost of performance Frustration of buyer's primary purpose - when known Failure of express condition
Impossibility:
Destruction of necessary object - CL/SoG
CL: Good excuse.
SoG: 2 conditions:
Seller bore RoL when destroyed + goods ID’d in contract.
Impossibility:
Increase in performance costs - MBE/NY
MBE: Usually unavailable, seller assumes risk.
NY - more flexible
Impossibility:
Failure of express condition
Strict compliance - “if” “when” “provided that”.
“Satisfaction” requirement interpreted broadly - reasonable/objective.
EXC: protected party frustrates fulfillment
Impossibility:
Failure of express condition - voluntary waiver of term
Waiver can be retracted.
EXC relied upon
Remedies - non-monetary - when?
When monetary inadequate:
Real Property: usual remedy
SoG: when goods “unique”
Service contracts: No (only injunction against working for 3rd party)
Remedies - non-monetary - right of seller to reclaim goods
Art 2 - No.
EXC: Buyer insolvent when goods received + seller demand w/in 10d
EXC: buyer misrep’d solvency + seller demand w/in 3m
Remedies - liq.damages
Conditions:
Damages difficult to estimate
Liq. are reasonable forecast of probable damages
Not penalty
Remedies - liq.damages - if wasn’t reasonably probably when contract signed, but becomes actual
Art 2: Either/or is OK
CL: Must be reasonably probable when contract signed.
Expectation damages - CL
ACTUAL COST/PROFIT less CONTRACT COST/PROFIT
Buyer’s expectation damages - Art.2
Cover damages - good faith purchase of alternative:
COST (cover price) less CONTRACTUAL
Market damages - no good faith or no purchase at all:
MARKET PRICE less CONTRACTUAL
Loss in value - buyer keeps defective goods:
VALUE PROMISED less VALUE DELIVERED
Seller’s expectation damages - Art 2
Resale damages - good faith sale:
CONTRACTUAL less RESALE
Market damages - no good faith or no sale:
CONTRACTUAL less MARKET PRICE
Lost profit - when seller is volume dealer:
PROFIT ON SALE (regardless whether sold to someone else)
Contract price - when goods are not resaleable (custom made) - FULL CONTRACT PRICE.
Incidental damages are?
Costs of transporting, insuring, caring for goods.
Arranging for substitute transaction
Consequential damages are?
Damages special to P
Foreseeable by D at time of contract
Art 2 - No.
CL - Yes
Avoidable damages
No recovery if P could mitigate with reasonable effort.
Punitive damages in remedy for breach?
Nope.
Right to take back from bona fide purchaser?
תקנת שוק
Entrustment of goods to merchant dealing with goods of same kind –> no right to take back.
3rd party beneficiary - rescission requires TPB consent?
Only after “vested” = known or relied on by TPB
TPB - liabilities
Promisor to TPB: always.
Promisee to TPB for default: only to creditor beneficiary
Promisor to Promisee: always for all types of creditor (but small damages for donee TPB)
Consent for delegation of duties?
[Obligor appoints delegate to perform for Obligeei
Not needed.
EXC: contrary language.
EXC: special skill / reputation
EXC: [MBE] if assignment prohibited
Delegate liable - only if he received consideration (then obligee = TPB).
Assignment of rights - different from TPB?
Obligor’s debt to Assignor assigned to Assignee
TPB exists in orig. agreement.
Assigneee enters picture later.
Assignment of rights - future transfer?
No, only present transfer.
No “promise to transfer later”
Assignment of rights - Consideration required?
No.
But without consideration the assignment is a revocable gift.
Assignment of rights - contractual limitation?
“Not assignable” - Ineffective?
“Assignments are void” - Effective!
Multiple assignments - who prevails?
Gratuitous - last one (since revocable).
EXC NY - signed writing irrevocable
W/consideration - first (since irrevocable)
EXC - later who doesn’t know of earlier AND first to get consideration or judgment against Obligor
