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Isabella Bar Study > Contracts > Flashcards

Contracts Flashcards

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1
Q

When is there a novation?

A

There is a novation when a new contract substitutes a new party to receive benefits and assume duties that had originally belonged to one of the original parties under the terms of the old contract

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2
Q

Promissory Estoppel

A

When theres no consideration BUT can still possibly claim if:

promise + reasonable and detrimental reliance

To be enforced, the promise must be clear and unambiguous, and the plaintiff’s reliance must be reasonable and foreseeable

There can be damages awarded

Promisor should have expected promissee would change positio in reliance on position
Promisee reasonably and foreseeably relied to his detriment on the promise and
Enforcing the promise is the only way to avoid injustice

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3
Q

Types of contracts

A
  1. Express
    -formed by language (oral/written)
    -breached when buyer was induced by seller’s false assurances
  2. Implied in fact
    -manifestations of assent by conduct
  3. Quasi/Implied in Law Contract
    -Not contracts at all. But they are constructed by courts to avoid unjust enrichment by permitting P to bring an action in restitution to recover amount of the benefit conferred on D
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4
Q

Bilateral contracts

A

Exchange of mutual promises (most contracts are bilateral)

acceptance by promise or start of performance

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5
Q

Unilateral contracts

A

acceptance by performance
Offeror requests performance rather than a promise. Promise to pay upon COMPLETION, once act is completed, a contract is formed

Limited to two circumstances:
1. where the offeror clearly indicates that completion of performance is the only manner of acceptance
2. when there is an offer to the public

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6
Q

Void contract

A

without any legal effect from the beginning (e.g. an agreement to commit a crime. It can’t be enforced by either party

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7
Q

Voidable contract

A

one or both parties may elect to avoid (infancy, mental illness, etc.)

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8
Q

Unenforceable contract

A

an agreement that is otherwise valid but which may not be enforceable due to various defenses extraneous to contract formation, such as the statute of limitations or statute of frauds

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9
Q

Three basic questions to ask to determine if a contract has been created

A
  1. was there mutual assent
  2. was there consideration
  3. are there any defenses to creation of the contract
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10
Q

Are ads and the like offers?

A

no they are mere invitations for offers

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11
Q

Requirements for real estate transactions

A

land and price terms requird

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12
Q

Requirements for sale of goods contracts

A

quantity term required

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13
Q

Requirements and outputs contract

A

R: a buyer promises to buy from a certain seller all the goods the buyer requires, and the seller agrees to sell that amount to the buyer

O: a seller promises to sell a certain buyer all of the goods the seller produces, and the buyer agrees to buy that amount from the seller.

-quantity can’t be unreasonably disproportionate

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14
Q

Requirements for employment and other services contracts

A

If duration of the employment is not specified, it is a contract terminable at the will of either party.

For other services the nature of the work to be performed must be included in the offer.

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15
Q

What happens if there are one or more terms left open in a contract?

A

DOes not prevent the formation of a contract if it appears the parties intended to make a contract and there is a reasonably certain basis.

Some jurisdictions and Article 2 can supply reasonable terms, including the normal price but not for real property contracts

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16
Q

Termination by Offeror-Revocation

A

a revocation is the retraction of an offer by the offeror but has to be before the offer is accepted. UNLESS there has been consideration for a promise not to revoke an outstanding offer.

  1. Revocation by direct communication
  2. revocation by publication: through comparable means (an offer published in NYT can only be revoked in NYT not readers digest)
  3. Revocation by indirect communication
    -offeree must receive
    -correct info from a reliable source of acts of the offeror that would indicate to a reasonable person that the offeror no longer wishes to make the offer
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17
Q

When is a revocation effective?

A

When received by the offeree, where it is by publication, when published.

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18
Q

Merchant’s Firm Offer Under Article 2

A

Must be (1) In writing; (2) signed by offeror; AND (3) stating it will be held open. (NO REQUIREMENT of Consideration; unlike Option Contract

-no longer than three months

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19
Q

Detrimental Reliance on an offer

A

if the offeror could reasonably expect that the offeree would rely to her detriment on the offer, the offer will be held irrevocable as an option contract for a reasonable length of time.

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20
Q

When does a unilateral contract become irrevocable?

A

Once performance has begun but NOT when the offeree is only preparing to perform.

Substantial preparations to perform may constitute as detrimental reliance

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21
Q

When is a rejection by offeree effective?

A

When RECEIVED by the offeror

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22
Q

How may an offer to buy goods for current or prompt shipment be made?

A

by either a promise to ship or by a shipment of conformting or nonconforming goods

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23
Q

What happens if nonconforming goods are shipped out>

A

It is a breach unless the seller seasonably notifies the buyer that a shipment of nonconforming goods is offered only as an accomodation.

Buyer is not required to accept and may reject them. If he rejects then the shipper is not in breach and may reclaim the accommodation goods.

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24
Q

Battle of the Forms

A

Article 2
The proposal of additional or different terms by the offeree in a definite and timely acceptance does NOT constitute a rejection and counteroffer, but rather is effective as an acceptance. Unless the acceptance is expressly made conditional on assent to the new terms.

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25
Q

Battle of the Forms
Contracts involving a nonmerchant

A

If any party to the contract is not a merchant, the additional or different terms are considered to be mere proposals to modify the contract that do
not become part of the contract unless the offeror expressly agrees.

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26
Q

Battle of the Forms-Contracts involving a merchant

A

If both parties to the contract are merchants, additional terms in the acceptance will be included in the contract unless:
-They materially alter the original terms of the offer;
-The offer expressly limits acceptance
to the terms of the offer; or
-The offeror has already objected
to the particular terms, or
objects within a reasonable time
after notice of them is received.

*A merchant’s memo confirming an oral agreement that contains different terms is subject to this unless an objection is recieved in 10 days

27
Q

What is the preexisting duty rule?

A

CL: if a modification is done when there is a preexisting duty to perform there needs to be new consideration.

28
Q

When has a third party beneficiary rights vested?

A

Vesting occurs when the third party
(i) manifests assent to the promise;
(ii) brings suit to enforce the promise; or
(iii) materially changes its position in reliance on the promise.

Prior to vesting, the original parties are free to modify or rescind the third-party beneficiary’s rights.

29
Q

When is specific performance available?

A

Never for personal services even if the services are unique

available only where the legal remedy (i.e., money damages) is inadequate

30
Q

Consideration

A

two tests (only one needs to be satisfied)
bargained for exchanged
-when one party’s promise or performance induces the other party’s promise or performance

benefit/detriment theory
-there has to be a benefit to the person making the promise or a detriment to the person accepting the promise

no past acts or gifts generally (but modern courts have created exceptions. will enforce promise if (1) it is based on a material benefit that was perviously conferred by the promise on the promisor and (2) promisee did not intend to confer the benefit as a gift.)

31
Q

when will a court enforce a promise without consideration?

A

Promissory Estoppel
1. promisor should have expected the promisee to change his position in reliance on the promise

  1. promisee did change his position; and
  2. the change in position was to the promisee’s detriment
32
Q

How can an offer be terminated

A

(a) rejection or counter-offer by the offeree;
(b) lapse of time;
(c) revocation by the offeror; or
(d) death or incapacity of either party.

33
Q

Under the mailbox rule, when is acceptance effective?

A

As soon as the letter is dispatched, if the offeror mails a letter to the offeree revoking the offer, but the offeree sends a letter to the offeror accepting the offer before receiving the revocation letter, a valid contract has been created.

34
Q

Material Benefit Rule

A

(past consideration)

A promise made in recognition of a benefit previously received by the promisor or past consideration is binding as far as is necessary to prevent injustice
Limitations
Damages may be limited if value of the promise is disproportionate to the benefit conferred
Not for a gift

35
Q

Exceptions for when there is no consideration

A
  1. Material Benefit Rule
  2. Promissory Estoppel
  3. Merchant’s Firm Offer
36
Q

Requirements of contract formation

A

Offer
◦ Revocation
* Acceptance
◦ Counteroffer
* Consideration
◦ Merchant’s firm offer
◦ Promissory Estoppel
◦ Material benefit rule
* Modification

37
Q

Defenses

A

Making Mistakes IIS dun

Misrepresentation
Mistake
Incapacity
Illegal
Statute of Frauds
Duress
Unconscionability
Non-disclosure

38
Q

When is consideration not available?

A
  1. gift
  2. past consideration
39
Q

When are the exceptions for the Parol Evidence Rule?

A
  1. Introduced to correct a clerical/typo error
  2. Back up a defense
  3. Interpret vague or ambiguous terms
    -but plain meaning is generally used first
  4. ## Supplement a partially integrated writing
40
Q

What is the Parol Evidence Rule?

A

A party cannot introduce a prior or contemporaneous agreement, written or oral, that contradicts a later written contract. Unless exceptions exist

41
Q

Anticipatory Repudiation

A

Anticipatory repudiation occurs when a party unequivocally communicates that they are unable or unwilling to perform under the contract.

HAS TO BE REASONABLE GROUNDS
demand for adequate assurances need to be reasonable
demand NEEDS to be in writing
if adequate assurances aren’t given after, then party may

  1. treat as a breach and sue
  2. act as if contract has been terminated and walk away
  3. wait to see if it gets performed and then sue
  4. urge party to perform
42
Q

Statute of Frauds

A

Has to be in writing and has to be signed by the person being charged (person being sued)
MYLEGS

marriage
year (contract that will take longer than a year)
land
executor (paying anothers debts out of their own pocket)
goods over 500+
surety (third party promising to pay a debt of another)

43
Q

Exceptions for statute of frauds

A

Even if the contract is not signed courts will generally enforce for full performance, judicial acknowledgement and promissory estoppel

44
Q

How do courts determine if a breach is material?

A
  1. Hardship done to breaching party
  2. Benefit for non breaching party
  3. Possibility of cure
  4. Good faith or bad
  5. Adequacy of compensation
45
Q

How are courts split on the effect of an intentional breach?

A

Some courts have held that substantial performance cannot occur if an intentional breach exists, regardless of the breach’s impact. Other courts have held that an intentional breach is just a factor to be considered and does not automatically defeat recovery

46
Q

What are the five types of damages?

A

expectation damages, consequential damages, reliance
damages, incidental damages, and restitution damages

47
Q

Expectation damages

A

Expectation damages arise directly from
the breach, and are an attempt to put the non-breaching party in the same position it would have been in but for the breach.

To recover, the damages must
1. caused by the defendant;
2. foreseeable;
3. certain – meaning that the damages cannot be speculative;
4. unavoidable – meaning that the plaintiff must take reasonable steps to mitigate his losses. An award of
damages must account and deduct for any costs the injured party avoided because of the breach.

48
Q

Consequential damages

A

Consequential damages arise indirectly from the breach, and are awarded because of the injured party’s special circumstances – for example, lost profits.
To recover, the damages must be:
1. reasonably foreseeable at the time of contract
formation;
2. arise from the plaintiff’s special circumstances that the
defendant knew or had reason to know of; and
3. reasonably certain.
-if not reasonably certain, no consequential damages because it would be hard to prove, they could possibly look at fair market value

49
Q

Options Contract

A

Needs consideration and writing unless UCC Merchants Firm Offer Rule or promissory estoppel

An option contract is a promise to keep an offer open for another party to accept within a period of time. With an option contract, the offeror is not permitted to revoke the offer within the stated period of time. Most option contracts require consideration and other contract formalities in order to be enforceable.

50
Q

What types of warranties are there?

A
  1. Express
    -explicity stated in sales process or contract
  2. Implied
    -Implied Warranty of Merchantability
    *ensures that the goods are of average acceptable quality and are generally fit for the purpose for which such goods are used.

–Implied Warranty of Fitness for a Particular Purpose
*applies when a buyer relies on the seller’s expertise to select goods for a specific, intended purpose.

DISCLAIMERS NEED TO BE CLEAR AND NOTICEABLE

51
Q

UCC Revocation of Agreement

A

Can revoke if:
1. Goods dont conform to the contract
2. substantially impairs values of goods to the buyer and
3. Thought seller would cure or latent defect

Conditions:
1. Must be reasonable and timely for return
2. Must notify seller
3. Goods must be in the same condition

Effects:
1. Refund/replacement
2. return
3. incidental damages

52
Q

UCC Seller Obligations for Delivery

A

When they have to send the goods to buyer unless otherwise agreed:
-Responsible for putting goods in possession of a carrier and make a reasonable contract for their transportation
-Obtain and promptly deliver any documents the buyer needs to obtain possession
-Promptly notify buyer of shipment

53
Q

UCC Risk of Loss

A

No breach: typically on buyer once:
Deliver to carrier
Delivery at particular destination once goods are there
If held by a bailee then On receipt of goods,

Basically once the buyer has possession or its where its supposed to be, the buyer bares the burden, if not it is the seller

54
Q

UCC Exclusion or Modification of Warranties

A

allows parties to exclude or modify warranties, meaning they can agree on whether or not certain promises about the goods being sold are legally binding. So, if a seller doesn’t want to guarantee something about the product, they can specify that in the contract, and the buyer agrees to it by signing.

Unless unconscionability, violates public policy, or doesnt achieve what it is supposed to

55
Q

Perfect tender rule

A

can revoke goods if they don’t conform

ucc

56
Q

Accord and satisfaction

A

UCC

reaching an agreement to settle a dispute for less than what was originally owed.

Here’s a simple breakdown:

Accord: This is an agreement between two parties to accept something different than what was originally promised. For example, if you owe someone $100, you might reach an accord with them to pay $80 instead.

Satisfaction: Once the accord is fulfilled, meaning the agreed-upon alternative is carried out (like paying $80 instead of $100), the original obligation is considered satisfied, or settled.

57
Q

Third Party Delegation

A

Refers to parties not rights

When performance is delegated, delagator is still liable for the duty UNLESS the obligee expressly agrees to accept the delegate’s performance as a substitute for the delegator’s liability and release the delegator. This will be called a novation and it releases the delegator from liability entirely.

58
Q

What does a third party have to do to be an intended beneficiary who can enforce his interest in a contract, thus allowing them to sue?

A

Must fall in one of these categories

  1. If the promise is performed, it will satisfy some obligation of money owed to the third party;
  2. circumstantial facts indicate that one of the parties intends to give the 3rd party the benefit of a promised performance
59
Q

When is a beneficiary intended?

A

Whether:
1. reasonable reliance on the fact that the purpose of a contract was to confer a right to them;
2. performance is supposed to run directly from a contracting party to the 3rd party
-the third party can’t just indirectly benefit from it

60
Q

Accord and satisfaction

A

When parties to an earlier contract decide that performance will be satisfied by the completion of a different performance

61
Q

Impracticability

A

an argument that it would cost too much or burden is too high to perform and that it was a basic assumption when making the contract that the cost or burden would not occur.

Under UCC
1. An unanticipated circumstance.
2. That the circumstance was not foreseeable.
3. The non-performing party did not contribute to the circumstance
4. The non-performing party tried all practical alternatives

62
Q

Frustration of purpose

A

Unforeseen event has destroyed the PURPOSE of the contract. Performance can still be done but the purpose won’t be the same

63
Q

Impossibility

A

Unforseen event occurs

CL

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