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Law School - Second Semester > Contracts > Flashcards

Contracts Flashcards

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1
Q

implied terms

A

when the contract doesn’t specify gap fillers are used

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2
Q

What is the gap filler when no specific amount of time is in the contract

A

reasonable amount time

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3
Q

Can either party terminate the contract whenever they want?

A

UNLESS the contract specifies otherwise, yes

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4
Q

Is notice required to terminate a contract?

A

Yes, reasonable notice is required UNLESS on the happening of an agreed upon event

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5
Q

Is there a required amount of effort a party must give when performing a contract?

A

best efforts to supply goods/promote sales

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6
Q

If an agreement dispensing notification for termination is unconscionable, is the clause valid?

A

If it is unconscionable it is invalid

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7
Q

What is the obligation of good faith and fair dealing?

A

honesty in fact, observance of reasonable commercial standards of fair dealing, consistent with the parties expectations and the purpose of the contract

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8
Q

What is needed for a breach of good faith and fair dealing?

A

no business efficacy, pretext termination, or abuse discretion AND bad faith = breach

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9
Q

What are the “satisfaction” abuse of discretion types?

A

objective: practicable to determine when a reasonable person would be satisfied (at issue are: commercial quality, operative fitness, mechanical utility)
honest: contract has a non-standard clause and requires good faith and honesty (personal fancy or aesthetics are at issue)

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10
Q

What is a warranty?

A

promise guaranteed by one of the parties (usually regarding the quality of a product)

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11
Q

Express Warranty

A

promise of goods that becomes part of the basis of the bargain. (shall conform to the description and sample/model; does not need specific words; mere puffery not a warranty)

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12
Q

Implied Warranty of Merchantability

A

implied in contract that goods shall be merchantable if the seller is a merchant of goods of that kind UNLESS EXCLUDED OR MODIFIED

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13
Q

Requirements for Implied Warranty of Merchantability

A

(a) pass w/ out obj. in the trade under the contract description; (b) fungible goods-fair average quality w/ in the description; (c) fit for the ordinary purpose which the goods are used; (d) run w/ in variations permitted by agreement, of even kind, quality, quantity w/ in each unit and among all units involved; (e) adequately contained, packaged, labeled as agreement may require; and (f) conform to promises or affirmations of fact made on contained/label

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14
Q

Implied Warranty of Fitness for a Particular Purpose

A

when buyers purpose for the goods is different than the average purchase. It is implied when (a) the seller has reason to know the buyer is relying on the particular purchase; and (b) buyer is relying on seller’s skill or judgment

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15
Q

What are the defenses to enforcement of a contract?

A

Incapacity, Duress, Undue Influence, Misrepresentation, Unconscionability, Public Policy

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16
Q

Traditional minor incapacity defense

A

unfair contract=void
fair contract=valid
unclear=voidable

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17
Q

Evolved minor incapacity defense

A

reaching age of majority, can affirm or disaffirm contract & return remaining consideration w/ in a reasonable time

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18
Q

Benefit minor incapacity defense

A

(minority) value returned to the minor should be reduced by the value of use received by the minor

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19
Q

Oregon (depreciation) minor incapacity defense

A

(minority) value returned to minor is reduced by deduction for use, depreciation and willful or neglectful damage to the property while in the hands of the minor

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20
Q

Traditional/cognitive test for mental incapacity

A

when a person is incapable of understanding the transaction/contract

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21
Q

Modern/volitional test for mental incapacity

A

when a person is unable to act reasonably AND the other party knows of the condition/inability (controlling consideration is whether the transaction is one which reasonably competent person might have made)

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22
Q

Duress defense

A

improper threat (voidable) or physical threat (void): (a) assent induced by improper threat; (b) leaves victim w/ no reasonable alternative (if induced by 3d party and other party to contract gives value or relies materially on transaction in good faith and w/ out reason to know of duress=not voidable)

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23
Q

When is a threat improper?

A

(1)(a) what is threatened is crime/tort; (b) threat is crim. prosecution; (c) bad faith threat of use of civil service; (d) threaten breach of duty of good faith/fair dealing; (2) if resulting exchange is not on fair terms and threatened act would harm recipient and not significantly benefit party making the threat; OR effectiveness of threat inducing manifestation of assent is significantly increased by prior unfair dealing; OR what is threatened is a use of power for illegitimate ends

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24
Q

Undue Influence defense

A

unfair persuasion of party w/ less power than persuader and is justified in assuming person persuading will not act in manner inconsistent w/ welfare
(a) if manifestation of assent induced by undue influence=voidable
(b) if manifestation of assent induced by 3d party but other party gave value or relied and acted in good faith and w/ out reason to know, not voidable

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25
Q

Undue susceptibility/weakness

A

excessive pressure; discussion of the transaction at an unusual or inappropriate time; transaction in an unusual place; demand that the business be finished at once; extreme emphasis on consequences of delay; multiple persuaders against single servient party; absence of third-party advisers; “no time to consult financial advisers/atty”

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26
Q

Concealment

A

intended or know to be likely to prevent another from learning a fac

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27
Q

Nondisclosure

A

only if: (a) knows that disclosure of fact is necessary to prevent previous assertion from being misrep. or fraudulent or material; OR
(b) knows that disclosure would correct mistake of other party as to basic assumption which party is making the contract and non-disclosure amounts to failure to act in good faith/in accordance w/ fair dealing; OR
(c) knows that disclosure of fact would correct mistake of party as to contents or effect of a writing; OR
(d) other party is entitled to know of the fact b/c of relationship of trust and confidence between them

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28
Q

Fraud in execution

A

misrepresentation of character or essential terms = void

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29
Q

Fraud in inducement

A

induced by fraudulent or material misrepresentation that recipient is justified in relying on = voidable

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30
Q

When disclosure is fradulent

A

maker intends his assertion to induce party to manifest assent; AND knows or believes assertion is not in accord w/ the facts; OR does not have confidence that her states/implies in truth of assertion; OR knows he does not have basis he states or implied for assertion

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31
Q

When disclosure is material

A

likely to induce reasonable person to manifest assent OR knows that it would be likely to induce the recipients intent

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32
Q

Unconscionability in process

A

(1) lack of choice by one party or (2) defect in bargaining process @ time contract was made

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33
Q

Unconscionability in substance

A

relates to fairness of terms of resulting bargain

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34
Q

How does the court remedy unconscionability?

A

Court may refuse enforcement of contract OR enforce contract w/ out unconscionable term OR limit application of unconscionable clause

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35
Q

What is a contract of adhesion?

A

drafter has superior bargaining strength

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36
Q

Public Policy defense

A

contract unenforceable if legislation says so OR interest in the public is clearly outweighed by the parties interest in freedom to contract

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37
Q

What is considered when weighing the freedom to contract?

A

parties justified expectations; forfeiture that would result if enforcement were denied; special pub. Interest in enforcement of term

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38
Q

What is considered when weighing the public’s interest

A

strength of policy as manifested by legislation/judicial decisions; likelihood that refusal to enforce the term will further the policy; seriousness of misconduct involved and extent to which it was deliberate; and directness of connection between misconduct and termination

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39
Q

What is a restriction of free trade?

A

if promise would limit competition or restrict promiser in exercise of gainful occupation

40
Q

When is a promise ancillary to a valid transaction unenforceable?

A

if restraint is greater than needed (type, place, time) to protect promisee’s legitimate interests OR promisee’s need is outweighed by hardship to promisor and injury to public

41
Q

What are ancillary promises?

A

promise by seller to not compete w/ buyer in a way to injure the value of the business sold; promise by employee not to compete w/ employer; promise by partner not to compete w/ partnership

42
Q

What are the justifications for none performance?

A

Mistake, Impossibility, Impracticability, Frustration of Purpose, and Modification

43
Q

What justifications fall w/ in an issue at the time of the contract?

A

Mistake

44
Q

What justifications fall w/ in issue at the time for performance?

A

impossibility, impracticability, and frustration

45
Q

What are the prerequisites of issue at the time for performance?

A

(1) supervening event arises after formation; (2) supervening event occurs without the fault of the party seeking relief; (3) non-occurrence of supervening event was a basic assumption on which contract was made; (4) party seeking relief does not bear the risk of the supervening event

46
Q

What justifications fall w/ in issue at the time for or during performance?

A

modification

47
Q

What is a mistake?

A

something not in accord w/ the facts
(1) mistake as to basic assumption on which contract was made; (2) had a material effect on agreed exchange of performances; (3) party seeking relief does not bear the risk of loss

48
Q

Mutual Mistake

A

when both parties are mistaken regarding the facts

49
Q

Unilateral Mistake

A

(1) one party is mistaken AND (2) enforcement of the contract would be unconscionable OR mistake is known by or the fault of the other party

50
Q

Who bears the risk of loss?

A

(1) allocated by agreement; (2) knows he has limited knowledge, treats that as sufficient; or (3) allocated to him by the court

51
Q

Impossibility

A

no one could do it (objective) destruction of a thing or death

52
Q

Impracticability

A

extremely and unreasonably difficult, expensive or will result in extreme injury or loss; performance is so vitally different from originally understood that it alters the essential nature of performance
(market price change not impracticability)

53
Q

Frustration of Purpose

A

must thwart the parties’ purpose in making the contract to such a degree that one party’s performance becomes virtually worthless to the other

54
Q

Modification

A

(1) modification was voluntary; (2) promise of modification happens before either side has performed in full; (3) underlying circumstances prompting modification were unanticipated; (4) modification is fair and equitable (restatement requires new consideration)

55
Q

Preexisting Duty Doctrine

A

promising to perform existing obligation not valid consideration for additional compensation from the other party; small or modest addition to or alteration of performance can suffice to satisfy the rule

56
Q

Express Condition

A

a promise that performance is not due unless and until specified event happens excused before performance

57
Q

What is the effect of the non-occurrence of a condition?

A

performance of a duty subject to condition cannot be due unless that condition occurs; discharges duty when condition can no longer occur; NOT a breach unless under a duty that the condition occur

58
Q

Can the non-occurrence of a condition be excused?

A

Yes - (1) waiver (non-occurrence allowed if by word or conduct if not material part of performance and not material part of risk assumed); (2) modification; (3) prevention/bad faith (if obligor wrongfully hinders/prevents condition from occurring); (4) disproportionate forfeiture

59
Q

What is a partial breach?

A

minor deviation from an obligation; substantial performance has occurred, NBP damages is the loss in value

60
Q

What is a material breach?

A

a significant deviation from obligation; suspends NBP performance so BP can cure breach; NBP entitled to damages

61
Q

What is a total breach?

A

a material breach that went uncured; NBP can move on and find new transaction; NBP has no obligations under contract; NBP entitled to damages

62
Q

What is anticipatory repudiation?

A

unequivocal & direct statement to other party OR conduct rendering inability to perform

63
Q

What can the NBP do if the other party repudiates?

A

suspend performance; terminate and sue for breach; treat contract as valid, see if other party performs, then bring suit

64
Q

Is the repudiating party able to retract their repudiation?

A

Yes UNLESS NBP accepts repudiation and will treat the contract as terminated; NBP treats as anticipatory repudiation by bringing a breach of contract claim; NBP materially changes their position in reliance on repudiation

65
Q

If a party believes there will be breach, are they entitled to do anything?

A

Yes - if reasonable grounds arise to believe obligor will commit a breach, party may demand adequate assurance and, if reasonable, suspend performance until receipt of assurance (failure to provide assurance w/ in reasonable time=repudiation)

66
Q

Expectation Damages (Restatement)

A

puts the NBP in the position they would have been if the contract was fully performed (loss in value + other losses - costs avoided - loss avoided = total damages)

67
Q

What is loss in value?

A

difference between what NBP has received and was supposed to receive

68
Q

What are other losses?

A

incidental: reasonable costs incurred in effort to mitigate losses associated with breach
consequential: reasonable and natural consequence of the breach (3d party contract)

69
Q

What are costs avoided?

A

only for total breach: did NBP avoid costs as a result of being excused from performance?

70
Q

What are losses avoided?

A

only for total breach; was NBP able to recover any losses

71
Q

How do you determine loss in value?

A

cost of obtaining replacement services; difference between contract price and value of property on date of breach; cost to complete promised performance; diminution in value based on breach; when payment is the only duty of defendant, whatever payment was not made (specific performance)

72
Q

What are the limitations on damages?

A

Causation, Certainty, Foreseeability, Mitigation

73
Q

Causation limitation

A

limited to damages based on his actual loss caused by the breach

74
Q

Certainty limitation

A

damages not recoverable for loss beyond amount that cannot be established with reasonable certainty

75
Q

Foreseeability limitation

A

not recoverable for loss the party in breach did not have reason to foresee as a probable result of the breach when the contract was made
general: generally foreseeable based on common experience of ordinary people
specific: unique circumstances of NBP

76
Q

Mitigation limitation

A

not recoverable for loss that the injured party could have avoided without undue risk, burden or humiliation

77
Q

Reliance Damages (Restatement)

A

returns NBP to position they were in prior to contract by compensating for expenses incurred by NBP (expenditures made in preparation for, start of performance and in reliance) (when expectations indeterminable, reduced by clear expected loss of NBP)

78
Q

Restitution Damages (Restatement)

A

returns BP to position they were in prior to the contract by returning benefit conferred
(reasonable value of performance)
measured by cost to other party of what it would have cost them to obtain the benefit from a 3d party OR increase in value to other party’s property/interests

79
Q

Liquidated Damages (Restatement)

A

agreed to damages at the time of the contract
(1) difficult to determine likely loss @ time of contract; (2) amount has reasonable relationship to potential loss; (3) not intended as penalty

80
Q

Specific Performance (Restatement)

A

(1) $ damages inadequate (no reasonable certainty, no substitute (unique); (2) contract terms certain & definite; (3) court supervision is feasible; (4) fairness (enforcement unfair b/c of mistake, unreasonable hardship to BP, gross unfairness of contract terms or inconsistency with public policy); unclean hands (party seeking breach acted unfairly); laches (when party seeking relief delayed to the detriment of BP)

81
Q

Negative Injunction

A

duty of forbearance OR duty to act but specific performance has supervision challenges (harm w/ out injunction is greater than burden, not contrary to public interest)

82
Q

Buyer’s Remedies when: seller breaches by repudiating or non-delivery of goods or buyer rejects non-conforming goods

A

cover, incidental, consequential

83
Q

Buyer’s Remedies when: seller breaches by delivering non-conforming goods & buyer accepts

A

warranty

84
Q

Seller’s Remedies when: Buyer refuses to accept conforming goods and then

A

resale, no re-sale, market differential, OR lost profits, incidental, NO CONSEQUENTIAL

85
Q

Seller’s Remedies when: buyer refuses to pay for accepted foods, accepting risk of loss, or when goods cannot be resold w/ reasonable efforts

A

action for price

86
Q

Cover Damages (UCC)

A

contract price v. actual price (1) good faith; (2) w/ out reasonable delay; (3) reasonable substitute; no cover/market §2-713 MP v. contract price if no alternative goods received

87
Q

Warranty Damages (UCC)

A

value of goods accepted v. value they expected (contract price); must notify seller of claim of non-conformance to give seller a chance to fix it (no damages if same value)

88
Q

Resale Damages (UCC)

A

in good faith, must notify BP of resale (difference between resale price v. contract price)

89
Q

Market Differential Damages if no resale (UCC)

A

difference between MP v. contract price

90
Q

Lost Profits

A

seller is lost volume seller, goods partially manufactured, or seller not acquired goods yet (profit seller would have made from full performance + costs reduced by resale proceeds)

91
Q

Action for Price (UCC)

A

entire contract price,
seller may withhold goods; (reduced by expenses saved as consequence of buyer’s breach)

92
Q

Intended Beneficiary

A

effectuates intent of the parties AND (a) performance satisfies obligation of promise to pay $ to beneficiary (creditor); or (b) promise intends to give beneficiary benefit of promised performance (donee)

93
Q

Incidental Beneficiary

A

anyone not intended

94
Q

Assignment of Rights

A

(passing football): transfers right of contract to assignee, extinguishes right in assignor
generally acceptable UNLESS prohibited by statute/public policy, materially changes burden or risk to non-transferring party, or precluded by contract terms

95
Q

Delegation of Rights

A

(passing cold): obligee delegates duties to another while still holding a duty to perform UNLESS oblige releases the delegate from duties
(limited by public policy, contract terms, and the degree in which individual performance was called upon by the contract (personal services))

Law School - Second Semester (1 decks)

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