Brainscape's Knowledge GenomeTM

Browse over 1 million classes created by top students, professors, publishers, and experts.


See full index

Essay Rules > Contracts > Flashcards

Contracts Flashcards

1
Q

Where do we ALWAYS start with a contracts question?

A

Applicable Law
Article 2 of the Uniform Commercial Code (UCC) governs contracts for the sale of goods. The common law governs all other contracts.

Merchants [if applicable]
The UCC has special rules for merchants. Merchants are those who regularly deal in the goods involved in the contract. For purposes of the firm offer rule and the Statute of Frauds, a merchant also includes any business person when the transaction is commercial in nature.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
2
Q

Mixed Contracts

A

When a contract includes both goods and the provision of services, courts will apply the predominant purpose test to determine the applicable law by looking at the main reason for entering into the contract.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
3
Q

Contract Formation

A

A valid contract requires an offer, acceptance, and consideration.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
4
Q

Offer

A

An offer is a manifestation of intent to enter into a contract and requires definite and certain terms and must be communicated to the offeree.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
5
Q

Essential Terms

A

Under common law, all essential terms must be provided, which are the parties, subject matter, price, and quantity.

The essential terms required by the UCC are the parties, subject matter, and quantity. A court will “gap fill” any other missing terms, including price.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
6
Q

Acceptance

A

Acceptance requires a manifestation of assent to the terms of the offer. Acceptance can be communicated by words (oral or written) or conduct creating an implied-in-fact contract.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
7
Q

Bilateral Contracts

A

A bilateral contract is one where both parties make promises to perform.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
8
Q

Unilateral Contracts

A

A unilateral contract is one where the offeror’s promise is exchanged for the offeree’s performance.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
9
Q

Termination of an Offer

A

An offer may be terminated through a rejection, counteroffer, or revocation.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
10
Q

Rejection

A

An offeree may outright reject the offer by the offeror.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
11
Q

Counteroffer

A

A counteroffer is an offer made by the offeree that contains the same subject matter as the original offer but containing different terms. It is a rejection and a new offer.

Remember to distinguish between counterofferes and mere inquiries

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
12
Q

Revocation

A

An offeror can revoke an ordinary offer at any time before acceptance. The revocation must be communicated to the offeree. A revocation can be effected through unambiguous words or conduct that is inconsistent with the intent to contract, so long as the offeree is aware of the words or conduct that indicate the offer was revoked.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
13
Q

UCC Firm Offers

A

UCC firm offers are irrevocable even without consideration. To be a firm offer, it must be made by a merchant, in a signed writing, and gives assurance it will be held open for the specified time. No offer can be irrevocable for more than three months without consideration.

Note: the offer is not automatically revoked after three months; the offeror can revoke after three months, but if he does not the offer remains open

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
14
Q

Option Contract

A

An option contract is one where the offeror grants the offeree an “option” to enter into a contract for a specified period of time (or reasonable amount of time if not stated) in exchange for consideration.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
15
Q

Detrimental Reliance and Part Performance

A

An offer will be temporarily irrevocable if the offeree has made preparations to perform in reasonable reliance on the offer or has performed in part.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
16
Q

Illusory Contract

A

An illusory contract is an attempt to contract, but is not legally binding.

(i.e., “I will buy your car next week if I feel like it.”)

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
17
Q

Implied-in-Fact Contract

A

An implied-in-fact contract is based on a tacit promise, inferred when conduct creates a contract, a benefit was received that could have been refused, and it would be fair to expect payment.

Examples - eating at a restaurant, getting a haircut without actually saying “please cut my hair”

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
18
Q

Mailbox Rule

A

The mailbox rule provides an acceptance is effective upon dispatch.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
19
Q

Mailbox Rule Exceptions

A
  1. When the offer itself provides otherwise, the offer controls.
  2. An option contract is effective upon receipt.
  3. If both an acceptance and a rejection are sent, it depends which one was dispatched first. If the rejection was dispatched first, the acceptance will only become effective if it is received first. If the acceptance was dispatched first, it is effective upon dispatch consistent with the normal rule.
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
20
Q

Output Contract

A

In an output contract, the buyer agrees to buy all of the seller’s output of a particular item for a specified period of time.

Note - be sure to analyze why it’s not illusory using the facts

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
21
Q

Requirements Contract

A

In a requirements contract, the parties agree the seller will be the exclusive source of all the buyer’s requirements of a particular item for a specifified period of time.

Note - be sure to analyze why it’s not illusory using the facts

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
22
Q

Mirror Image Rule

A

Under the common law, the mirror image rule provides that an acceptance must “mirror” the offer. If the acceptance conflicts with the terms of the offer or adds new terms, it is a rejection and counteroffer.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
23
Q

UCC 2-207

A

Under UCC 2-207, acceptance of an offer may be valid even if the terms are additional to or different from those contained in the offer, unless acceptance is expressly conditioned on assent to the additional or different terms.

NOTE: Follow this by an analysis of whether the terms are additional or different and whether the parties are merchants.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
24
Q

Additional Terms (UCC)

A

If any party is a non-merchant, any additional terms are a proposal and will not become part of the contract unless the other party consents. If both parties are merchants, additional terms automatically become part of the contract unless the offer expressly limits acceptance to its terms, the additional term materially alters the contract (e.g., warranty disclaimer), or the offeror objects to the additional term within a reasonable time.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
25
Q

Different Terms (UCC)

A

The majority of jurisdictions apply the “knock out” rule, which provides that conflicting terms will cancel each other out, leaving the contract only with the agreed upon terms, and the court will “gap fill” if needed. A minority of jurisdictions will either treat the different terms as additional terms or allow the offeror’s terms to control.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
26
Q

Acceptance by Shipping Goods

A

Unless the offer specifies otherwise, an offer to buy goods may be accepted by shipping conforming goods. If the seller ships non-conforming goods without acknowledging the non-conformity, the offer has been accepted and breached simultaneously. If the seller ships non-conforming goods as an accommodation, there is no acceptance and rather a counteroffer the buyer can choose to accept or reject.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
27
Q

Consideration

A

Consideration is a bargained for exchange of a legal detriment. A court will not inquire into the adequacy of the consideration. However, some types of promises, such as gifts, past consideration, and a pre-existing duty are not valid consideration.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
28
Q

Statute of Frauds

A

The Statute of Frauds (SOF) provides that certain types of contracts are unenforceable unless they are in writing, signed by the party to be charged, and contain the essential terms of the deal. Five categories of contracts fall within the SOF: marriage, real property, contracts that cannot be performed within one year, contracts for the sale of goods exceeding $500, and suretyship contracts.

Mnemonic - MSOUR

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
29
Q

SOF Exceptions

A
  • Made in consideration of marriage (e.g., although a prenup must be in writing, an agreement to enter into one need not be)
  • Part performance in real estate contract (payment, improvements, possession - 2 of 3 generally required)
  • Paying the debt of another when the main purpose is the promisor’s own economic benefit
  • Sale of goods - goods are accepted and paid for or specially manufactured
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
30
Q

Approach for SOF

A
  1. Determine whether SOF applies
  2. If SOF, determine if requirements are met (written and signed by party to be charged)
  3. If requirements are not met, discuss exceptions
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
31
Q

Mutual Mistake

A

If both parties are mistaken as to a basic assumption of the contract and the mistake has a material effect on the deal, the contract is voidable so long as the adversely affected party did not assume the risk of the mistake.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
32
Q

Unilateral Mistake

A

When one party is mistaken as to an essential element of the contract and the mistake has a material impact on the deal, the mistaken party can avoid the contract if the mistake would make enforcement unconscionable or the one party knew or had reason to know the other party was mistaken.

33
Q

Misrepresentation

A

Misrepresentation may serve as a defense to formation if the defendant misrepresents a material fact fraudulently or negligently. The plaintiff must suffer a pecuniary loss to recover damages.

34
Q

Undue Influence

A

Undue influence occurs when a party unfairly persuades another party to assent to a contract. This can occur in certain relationships where the innocent party is susceptible to persuasion.

35
Q

Duress

A

Duress arises when a party is improperly threatened and has no meaningful choice but to agree to the contract. This is a subjective test, meaning the defendant must have actually felt as though they had no choice.

36
Q

Lack of Capacity

A

Certain parties are considered to be incompetent to enter a contract, including minors, the mentally ill, and intoxicated.

37
Q

Fraudulent Misrepresentation

A

Fraudulent misrepresentation is an intentional misrepresentation of a fact that the innocent party reasonably relies upon. If a fraudulent misrepresentation prevents a party from knowing the character or essential terms of the transaction (fraud in the factum), the contract is void. If a fraudulent misrepresentation is used to induce another to enter into a contract, the contract is voidable by the adversely affected party so long as their reliance was reasonable.

38
Q

Negligent Misrepresentation

A

An unintentional misrepresentation of a material fact that the innocent party justifiably relies upon is voidable by the adversely affected party.

39
Q

Unconscionability

A

A court may decline to enforce a contract or strike portions of a contract that is so unfair no reasonable person would have agreed to it. Procedural unconscionability occurs when the bargaining process itself was unfair (i.e., unequal bargaining power). Substantive unconscionability occurs when the actual terms of the contract themselves are unfair.

40
Q

Illegality

A

A court will not enforce a contract that involves illegal consideration or performance.

41
Q

Impracticability

A

Impracticability occurs when the occurrence of an event the parties assumed would not occur makes performance of the contract extremely and unreasonably difficult to perform. The event must concern a basic assumption of the contract and the parties must not have allocated the risk of that event.

42
Q

Impossibility

A

Impossibility discharges performance when it would be objectively impossible due to a supervening, unforeseeable event that neither party assumed the risk of.

This is rare, can include illegality, death, incapacity, or destruction of the subject matter

43
Q

Frustration of Purpose

A

Frustration of purpose occurs when a party’s purpose for entering into a contract is destroyed by supervening events. It requires that both parties were aware of the purpose, the event was reasonably foreseeable, and the frustration must be total.

44
Q

Promissory Estoppel

A

A promise that foreseeably induces reliance and is actually relied upon may be enforceable to prevent injustice, even without consideration. Recovery is limited to reliance damages.

45
Q

Conditions

A

A condition is an event that must occur before performance of the other party is due. If the condition does not occur, performance of the other party is excused. Conditions can be express or implied. An express condition is created by the language of the parties demonstrating intent to have a condition and must be strictly complied with. An implied condition is one supplied by the court for fairness and only requires substantial performance.

46
Q

Waiver of Condition

A

The party the condition is intended to benefit may waive the condition. Waiver can occur by words or conduct or wrongful interference with the occurrence of the condition. A waiver can be retracted absent detrimental reliance by the other party.

47
Q

Parol Evidence Rule

A

Evidence of a prior or contemporaneous agreement may not be introduced if it contradicts the terms of the contract.

48
Q

Integration (PER)

A

A court will first determine if the writing was intended to be the final agreement between the parties, known as a total integration. The existence of a merger clause, though not dispositive, is likely to demonstrate total integration. If the court finds a total integration, no parol evidence is admissible.

If the writing contains only some terms of the agreement, it is a partial integration and parol evidence is permitted to supplement, but not contradict, the agreement.

49
Q

Exceptions to the PER

A

The PER will not bar evidence of modifications or statements made after the contract, contract defects (i.e., formation defects or enforcement defenses), conditions precedent to the contract’s effectiveness, to clarify ambiguous terms (e.g., trade usage), or show a course of performance/dealing between the parties.

50
Q

Contract Modification

A

Under common law, contract modifications require consideration unless there are changed circumstances and the contract has not been fully performed. Under the UCC, no consideration is required as long as the modification is made in good faith. Oral modifications are generally allowed, unless the contract being modified falls within the SOF.

51
Q

Assignment of Rights

A

An assignment is when a party to an existing contract transfers her rights under the contract to a third party. The assignor assigns to the assignee the performance due under the contract from the obligor.

52
Q

Delegation of Duties

A

A delegation is a transfer of duties. It generally consists of a situation where the obligor/delegator promises to perform for the obligee but then delegates that duty to a third party. Generally, all duties may be delegated except when the duty involves special skill or judgment. The delegator remains liable for the contract.

53
Q

Novation

A

A novation occurs when all parties to a contract agree to release one of the parties and replace them with a third party. The party released is no longer liable on the contract.

54
Q

Express Warranty

A

An express warranty is any promise or description that is part of the basis of the bargain, unless it is merely the seller’s opinion. A disclaimer that causes conflict with an express warranty is usually ignored.

55
Q

Implied Warranty of Merchantability

A

An implied warranty of merchantability applies when the seller is a merchant and warrants the goods will be fit for the ordinary purpose of such goods. The warranty can be disclaimed through a clear written statement (i.e., “as is).

56
Q

Implied warranty of fitness for a particular purpose

A

The implied warranty of fitness for a particular purpose only applies when a buyer relies on the seller’s judgment to select appropriate goods for a stated purpose and the seller has reason to know of this purpose. The seller need not be a merchant for this warranty to apply. This warranty may be disclaimed by general language like “as is,” but the disclaimer must be in writing and conspicuous.

57
Q

Implied Covenant of Good Faith and Fair Dealing

A

The implied covenant of good faith and fair dealing is inherent in every contract.

58
Q

Accord and Satisfaction

A

An accord is an agreement where one party promises to render substitute performance and the other party promises to accept that substitute in discharge of the existing duty. Consideration is required.

Satisfaction is the performance of the accord, which then discharges the original agreement and the accord. If the accord is breached, the party can sue on the original contract or the accord.

59
Q

Common Law Breach

A

Under common law, a contract breach is material where there was not substantial performance on the contract and will excuse performance of the non-breaching party. In analyzing substantial performance, a court will consider whether a party did not receive the substantial benefit of the bargain, the willfulness of the breach, whether time was of the essence, and if the contract was divisible.

A minor breach occurs when the breaching party has substantially performed, but not fully performed. The non-breaching party is entitled to pursue remedies for breach, but is not excused from their own performance.

60
Q

Anticipatory Repudiation

A

Anticipatory repudiation occurs when a party unequivocally expresses that they will not perform under the contract before the performance has come due. The aggrieved party may either treat the repudiation as a breach and sue for damages immediately, suspend their own performance and wait until performance is due, treat the repudiation as an offer to rescind and contract as discharged, or urge performance.

61
Q

Right to Demand Adequate Assurances

A

When a party has reasonable grounds for insecurity on a contract, they may request adequate assurances in writing. The other party must respond within a reasonable time, not to exceed 30 days.

62
Q

Anticipatory Repudiation - Retraction

A

A repudiation can be retracted unless the aggrieved party has accepted the repudiation, materially changed their position, or filed an action for breach of contract.

63
Q

UCC Breach

A

Under the UCC, the parties must strictly perform all duties, or they will be in breach.

64
Q

Perfect Tender Rule

A

The perfect tender rule applies to contracts for a single delivery and provides that if the goods tendered fail to conform to the contract in any respect, the buyer may reject some or all the shipment within a reasonable time.

Note - does NOT apply to installment contracts, those rights to reject look at whether the nonperfect tender substantially affects the contract (buyer can’t reject if seller can cure)

65
Q

Right to Cure

A

If a buyer rejects goods as non-performing and time still remains to perform under the contract, the seller has a right to cure and tender conforming goods.

66
Q

Shipment Contract

A

If the contract is a shipment contract (“FOB seller’s place of business”), the seller must i) deliver the goods to the carrier, ii) make proper arrangements for their shipment, and iii) give the buyer notice the goods have been shipped. The risk of loss is borne by the seller until they have satisfied their contractual delivery obligations.

67
Q

Destination Contract

A

If the contract is a destination contract (“FOB buyer’s place of business), the seller must i) deliver the goods to a specified place and ii) tender them there by holding the goods at the buyer’s disposition and giving the buyer notice. The risk of loss is borne by the seller until they have satisfied their contractual delivery obligations.

68
Q

Expectation Damages

A

Expectation damages are intended to put the injured party in the same position they would be had the contract been performed. They must be foreseeable and proven with reasonable certainty.

69
Q

Consequential Damages

A

Consequential damages compensate for damages that are a direct and foreseeable consequence of the breach.

Notes - also called compensatory damages and are unique to each plaintiff (e.g., if you get hit by a car you’ll probably have to go to the hospital, if someone breaches a K you may lose profits)

70
Q

Reliance Damages

A

Reliance damages are intended to put the non-breaching party in the position they would be had the contract never been formed.

Remember - you can’t have both expectation and reliance damages, but analyze both

71
Q

Incidental Damages

A

Incidental damages are for smaller, reasonable expenses incurred by the non-breaching party as a direct result of a breach.

Note - these are also apparently called compensatory damages and are things like the cost of storage or reselling items)

72
Q

Duty to Mitigate

A

A non-breaching party has a duty to mitigate their damages. If they fail to do so, the amount of their recovery may be reduced accordingly.

73
Q

Restitution

A

Restitution allows both the breaching and non-breaching parties to recover damages under a theory of unjust enrichment.

74
Q

Nominal Damages

A

Nominal damages are awarded when the plaintiff’s rights have been violated but no financial losses have been sustained.

75
Q

Punitive Damages

A

Punitive damages are generally not awarded for a standard breach of contract.

76
Q

Liquidated Damages

A

Liquidated damages are those specified in the contract and are permitted when actual damages are difficult to calculate and the amount of damages and the amount provided is reasonable (i.e., not a penalty).

77
Q

Specific Performance

A

In order for a party to request specific performance, the following elements must be satisfied.

  1. There must be a valid contract with definite and certain terms;
  2. Any conditions imposed on the plaintiff must be satisfied;
  3. Monetary damages are inadequate; and
  4. It is feasible for a court to oversee enforcement
78
Q

Defenses to Specific Performance

A

A court will not grant specific performance if the breaching party can assert the defenses of laches (unreasonably delay) or unclean hands.

Essay Rules (13 decks)

Brainscape helps you reach your goals faster, through stronger study habits.
© 2024 Bold Learning Solutions. Terms and Conditions