Contracts Flashcards
Formation
Offer, Acceptance, and Consideration
Offer
In specific terms, can be revoked or rejected
Revoking is done by
The party making the offer
Rejection is done by
The party with the power of acceptance (the party who received the offer)
Offers are revocable, unless (6)
The party accepts the offer or it is an option contract, a firm offer, a unilateral contract, there is a direct revocation, or an indirect revocation
An option contract is
a promise to keep an offer open for a period of time for additional consideration.
Option contracts are between
non-merchants
A firm offer is a
Promise to keep an offer open for a period of time, no additional consideration required
Firm offers are between
1 or more merchants
Firm offers must be
in writing
A unilateral contract is a
Promise for performance
A unilateral contract is irrevocable
Once performance begins
Once performance begins, a unilateral contract is irrevocable, BUT
A party cannot demand money if the job is not complete
A Direct revocation happens when
One party tells the other party that they have changed their mind
A direct revocation is effective ___
immediately
An indirect revocation happens when
one of the parties makes a deal with someone else
If there is an indirect revocation, once you find out about it ____
you lose power of acceptance
Acceptance is a
manifestation of intent to accept
How to accept
Any reasonable means that you chose, as long as you express intent to accept
How to accept, exception
Any reasonable means, unless manner of acceptance is specified by offering party
Mailbox rule
Acceptance is effective when sent
Mailbox rule only applies to
parties that are communicating by mail
Exception to the mailbox rule
If a rejection was sent prior to a letter of acceptance, whatever letter arrives first is the response to the offer
If acceptance letter was sent before rejection letter, ___
Mailbox rule applies and acceptance is effective when sent
Consideration is a
bargained-for exchange
Consideration does not have to
Match value
Consideration in gift hypos
The promise to give a gift is unenforceable consideration
Exception to non-enforceability of gift in hypos
If the gift is given, it is enforceable and the gifting party cannot take it back
Past/Moral hypo
After you do a good deed, someone offers consideration for it
Past/Moral consideration is
Not enforceable
Past/moral enforceability exception
If someone asks you to do something, it is enforceable
Third Party Beneficiary occurs when
Two people make a contract and someone else benefits
Types of 3rd party beneficiaries
Intended and incidental
Intended 3PBs are those who
the original parties intended to benefit
For intended 3PB, the original parties will usually
talk about the person they are indenting to benefit
To sue, the intended 3PB rights
have to have vested
How do rights vest for 3PBs?
When the 3PB is told that they will benefit, or they find out about it and rely on it
If rights have not vested for 3BP, ___
original parties can change they minds
An incidental 3PB is a person
who is claiming benefit, even though the original parties did not intend to benefit
Incidental 3BPs have
no rights
Assignment is when
one party assigns their rights in the contract to someone else
Delegation is when
One party delegates their duties under the contract to someone else
You may freely ____ or ____ to whomever you choose
assign; delegate
If one party assigns or delegates, the other party must ___
allow the performance
If the assignee breaches the contract, the non-breaching party can ___
sue both the assignor and the assignee
If assignee breaches, non-breaching party can sue both assignor and assignee, unless
the parties have signed a novation
What is a novation?
A novation is an agreement between parties that the non-assigning party will only sue the assignee in the occurrence of a breach
If there is an assignment or delegation, the assignee cannot
unilaterally change the contract
When can you not assign or delegate? Even if ____
When the nature of the contract is unique or for personal services, even if the new person would be better
If parties agree that neither can assign, but one of the parties does so anyway, ___
the assignment is valid and effective, but the assignor owes the non-breaching party damages
If both parties agree not to delegate, ____
They cannot delegate
If there is “void” language, _____
there can be no assignment and no delegation
Statute of frauds
Certain types of agreements must be evidenced in writing
SOF agreements acronym
MYLEGS
M stands for
Marriage
Y stands for
contracts which cannot be performed in less than one year
L stands for
Land (any conveyance of land)
E stands for
Executor agreement of an estate
G stands for (BUT)
Guarantor (surety contract), but only when you are guaranteeing debt of someone else. If you are doing it for your own benefit, then no writing required.
S stands for
Sale of goods over $500
Exception to SOF is
Part performance
4 types of Part performance
Land, sale of goods, guarantor, and full performance
Land part performance
(1) Payment + (2) possession or (3) improvements
Sale of goods part performance
(1) paid for part of the goods and (2) shipped part of the goods
Guarantor part performance
Guarantor is doing it for his/her own benefit
Full performance
Full performance of verbal agreement will get rid of need for writing
Parol Evidence
After a contract is formed, one party tries to admit oral evidence into the contract
How to approach parol evidence
Is the contract integrated? If so, is it partial or final integration?
Final integration means that
The agreement that is in writing is the final agreement and parole evidence cannot come in
Exception in final integration agreements
parole evidence can come in to clear up an ambiguous term
Partial integration
Parole evidence is generally admissible, but it cannot contradict a material term of the agreement
____ integration is the default, never assume _____ integration
Partial; final
Parole evidence is always coming in ____ (3)
(1) to prevent fraud or duress, (2) to show there was a condition precedent to the contract, and (3) to show course of dealing and trade custom in a sale of goods
Condition
Something happens which relieves a party of duty to perform, or makes them have to do something
Condition language usually present itself as ___
“only if…”, “as long as…”, “on the condition that…”
Condition types
Condition precedent, condition concurrent, and condition subsequent
Condition precedent has to occur
before the date of performance
Condition concurrent has to occur
at the same time as the performance
Condition subsequent has to occur
after the performance
Waiver of condition happens when
there is a condition and one party tells the other that they do not have to worry about the condition
Modification
After negotiations are done and agreement has been finalized, one party wished to change the agreement
What type of modification is valid?
Oral and written modifications are both valid
At common law, modification requires ___
additional consideration
Under UCC, modification requires ____
no additional consideration, only good faith
Promissory Estoppel
No contract, but a promise is made which induces a party to rely to their detriment, so the promise becomes enforceable
Detrimental means ___
Some thing which you would not ordinarily have done otherwise
Non-conforming goods
Goods that are not what you specifically ordered
If a seller delivers non-conforming goods, buyer has __ options
4
If seller delivers non-conforming goods on the day of the contract, ____
buyer may reject, accept, or reject in par and accept in part
If seller delivers non-conforming goods prior to the date of the contract and can get the right goods, ____
buyer must allow seller the right to cure
If seller delivers non-conforming goods on the day of the contract, but seller had reasonable belief that buyer would accept anyway but buyer won’t, ______
buyer must allow seller the right to cure
In installment contracts, one non-conforming installment ____
will not be a full breach, unless the delivery substantially impairs the value of the whole contract
Remedies
Legal (money) or equitable remedies
Legal damages are
expectation damages and liquidated damages
Equitable remedies are
specific performance, injunction and rescission
Expectation damages
Put the non-breaching party in a position had the contract been performed. (Default)
Liquidated Damages
Clause within a contract that sets the amount of damages because if they wait until breach, damages would be too difficult to calculate
Liquidated damages are enforceable unless
they are acting like penalty or punishment, or are unreasonable
What is reasonable for liquidated damages?
10% of the contract price
Equitable remedies are awarded when
there is no adequate remedy at law
Specific performance
Someone has to perform (usually because contract is unique)
What types of contracts are always unique?
Land
Injuction
Stopping someone from doing something, done to prevent irreparable harm
Recission
Puts the parties in a position they were prior to the contract
Recission is granted when
there is no meeting of the minds (mistake or misrepresentation)
Anticipatory repudiation
Prior to the date of the contract, one party unequivocally refuses to perform
Non-breaching party in anticipatory repudiation can
hold the other in total breach, or wait to see if the other party performs
If there is not an absolute refusal to perform in anticipatory repudiation,
you have to wait because that does not constitute a repudiation
If you have to wait in anticipatory repudiation, you can
request assurances
If you request assurances in anticipatory repudiation,
the other party must respond in a reasonable amount of time.
If there is no response to assurances in anticipatory repudiation,
you can sue
If there is no reason to doubt anticipatory repudiation,
you cannot unilaterally request assurances
Impossibility
When, objectively, no one can perform
If something is illegal, it is
impossible
Impracticability
I can technically do it, but due to unforeseen circumstances, it would be impractical because it would be unfair
Mistakes can be
unilateral or mutual
Unilateral mistake
Is not a defense to performance, unless the other party knew of the mistake
Mutual miskate
Both parties are mistaken as to a basic assumption of the contract
What is the remedy for a mutual mistake?
Recission
