Contracts Flashcards
If Article 2 of the UCC is at issue in the MEE:
Article 2 of the Uniform Commercial Code (UCC) applies to sales of goods. Goods are things moveable at the time of identification to the contract. A contract under Article 2 may be made in any manner sufficient to show agreement, including conduct by both parties which recognizes the existence of such a contract.
What is needed to form a contract?
Mutual assent (offer and acceptance) and consideration.
Offer
A person makes an offer when the person communicates to another a statement of willingness to enter into a bargain so that the other understands that his assent to the bargain is invited and will conclude it.
The terms of an offer need to be reasonably certain.
Counteroffer
Under common law, a statement is a counteroffer, rather than an acceptance, when the terms of the initial offer are changed—e.g., when a condition is added to the purported acceptance (mirror image rule).
Promise to hold offer open
Generally, an offer may be revoked before acceptance. A promise to hold an offer open requires consideration in order to be binding (unless the UCC firm offer exception applies).
What is an Acceptance?
When is an acceptance effective?
An acceptance is a manifestation of assent to the terms of an offer made in a manner invited by the offer.
It is effective upon dispatch (mailbox rule).
Rejection
What is a rejection?
When is a rejection effective?
Manifestation of intent to not accept the offer. Terminates the offeree’s power of acceptance.
Effective when received by the offeror.
What happens if a rejection is sent and then an acceptance is sent?
Whichever the recipient receives first is effective.
Consideration
What is consideration?
Is a promise to make a gift consideration?
A bargained-for exchange.
A promise to make a gift does not constitute consideration.
Pre-existing duty rule
What is it?
What are some exceptions?
Under common law, promising to perform a legal duty already owed to a promissor is not valid consideration.
Exceptions include if the duty is changed (even slightly), unforeseen circumstances, etc.
Under the UCC, only ___ is needed to modify a contract.
Good faith
Promissory estoppel
What is it?
What are the 3 requirements?
Substitute for consideration.
If there is (1) a promise, (2) reliance that is foreseeable and justifiable, and (3) enforcement is necessary to avoid injustice, the promise will be enforced.
In order to demand performance (usually payment) from the other party, what is needed?
A party must “substantially perform” its contractual obligations in order to demand performance (usually payment) from the other party.
When are you required to perform under Article 2?
What is an exception?
What are 2 requirements for this exception?
If you do not substantially complete the performance of your duties, can you collect payment?
Requires perfect tender for one-shot deals.
Exception: divisible contracts.
A contract is divisible so long as (1) it is apportionable and (2) the parties would have contracted for each part separately.
A party that performs one or more parts of the contract may collect payment for those parts even if he does not substantially complete the performance of his duties.
A buyer can reject goods when?
For any reason under the perfect-tender rule (exceptions—installment contracts, etc.).
If a buyer accepts the goods, can he reject them?
During what 4 circumstances can a buyer revoke acceptance of the goods?
A buyer who revokes acceptance of goods may recover what?
No.
A buyer can revoke his acceptance of the goods when:
- the nonconformity substantially impairs the value to him;
- he accepted the goods because he had a reasonable belief that the nonconformity would be cured and it was not, or he did not discover the nonconformity because it was difficult to discover or because of the seller’s assurances;
- he revokes within a reasonable time after he discovers or should have discovered the nonconformity; and
- he revokes before any substantial change in condition of the goods which is not caused by their own defect.
A buyer who revokes acceptance of goods may recover the purchase price that has been paid.
Anticipatory repudiation
Occurs when there is an unequivocal manifestation by one party to the other that the party cannot or will not perform its obligations under the contract (a mere expression of doubt is not enough) and this statement is made before the repudiating party’s performance is due.
The other party may wait for a reasonable time for performance or resort to any remedy for breach of contract.
Prospective inability to perform
This occurs when a party has reasonable grounds for insecurity that the other party is unable or unwilling to perform. This is merely doubt, it does not rise to the level of anticipatory repudiation. Under the UCC, the party may then, in writing, demand adequate assurance of performance, and until she receives such assurance, may suspend her performance. If such assurance is not given within a reasonable time, not exceeding 30 days, the other party may treat it as a repudiation.
Retracting a repudiation
The party who has repudiated can retract his repudiation unless the other party cancelled the contract, materially changed his position in reliance on the repudiation, or indicated that she considers the repudiation to be final.
Common law statute of frauds
A contract within the statute of frauds satisfies the statute and is enforceable if it is evidenced by a writing signed by the party to be charged, which (1) reasonably identifies the subject matter of the contract (2) is sufficient to indicate that a contract has been made, and (3) states with reasonable certainty the essential terms of the contract.
Contracts within the statute of frauds:
MYLEGS: contracts in consideration of Marriage; cannot be performed in a Year; sale of Land; Executors promise to pay debt of an estate out of his personal funds; Goods of $500 or more; and Suretyship contracts.
UCC statute of frauds
A contract for the sale of goods for a price of $500 or more is not enforceable unless there is a writing signed by the party against whom enforcement is sought that is sufficient to indicate that a contract for the sale of goods has been made between the parties. The writing need not contain all terms of the contract, but it is not enforceable beyond the quantity of the goods shown.
Exceptions: merchant’s confirmatory memo; part performance; specially manufactured goods; judicial admissions.
Duress
A contract is voidable when it is established that a party’s manifestation of assent is induced by an improper threat that leaves the party no reasonable alternative.
Breach of express warranty
Under Article 2, affirmations of fact relating to the goods that are part of the basis of the bargain create express warranties that the goods will conform to those affirmations and descriptions. This warranty is breached if they do not conform.
