Contracts Flashcards
UCC firm offer definition of merchant
- One who regularly deals in goods of the kind involved
- one who, by occupation, holds out as having knowledge or skill peculiar to the practices or goods involved, AND
- any businessperson when the transaction is of a commercial nature
Firm offers, options, & other irrevocable offers - When is acceptance effective?
Acceptance effective when it is received by offeror (before expiration of offer)
Mailbox Rule - acceptance effective upon dispatch (for all other/revocable offers)
When is nonoccurrence of condition excused?
- waiver - party who would benefit from condition waives condition by words or conduct
- wrongful interference - when party whose duty to perform is subject to the condition wrongfully prevents or interferes with condition’s occurrence
- party indicates condition will not enforced
AND
- estoppel - other party reasonably & detrimentally relies on belief condition has been waived
- disproportionate forfeiture - party substantially performed & will be significantly harmed if condition is enforced
Modifying Contracts - is consideration needed?
UCC - consideration not needed
CL services - separate & adequate consideration required
Factors considered to determine material breach
- extent to which nonbreaching party will suffer loss
- extent to which nonbreaching party can be adequately compensated for loss
- extent to which breaching party will suffer forfeiture
- likelihood of cure by breaching party
- absence of good faith or fair dealing by breaching party
substantial performance (while imperfect) does not typically constitute material breach
Did the nonbreaching party receive substantial benefit of its bargain? If so, not material breach.
Promissory Estoppel
Offer is binding as an option contract and is irrevocable if:
- the offeror should have reasonably expected to induce reliance on the offer before acceptance
- offeree reasonably relied on the offer through action or forbearance
- offeree suffered substantial detriment as result of such reliance, AND
- injustice can be avoided only be enforcing the offer
If such offer is revoked before a reasonable period of time has passed, remedy = reliance damages
Even if there is a lack of consideration (i.e. gift promises) it can be enforceable under the doctrine of promissory estoppel.
Ways an offer can be terminated before acceptance
Offeror’s revocation
- offeror communicates revocation directly to offeree
- offeree learns information from reliable source that reasonably indicates offer was revoked (constructive revocation)
Offeree’s rejection
- Offeree communicates rejection directly to offeror
- Offeree’s counteroffer serves as rejection & new offer*
*counteroffer does not terminate offer if offeree manifests intent to take offer under advisement
Lapse
- time period specified in offer expires
- After reasonable time if no time period specified in offer
By law
- either party dies or is adjudicated insane
- subject matter of offer is destroyed or becomes illegal
UCC Battle of the Forms
Acceptance of offers with new terms
If one of the parties is not a merchant:
- offer accepted unless reply expresssly requires assent to new/revised terms
- new/revised terms are treated as proposed additions to the contract
If all parties are merchants:
- offer accepted unless the reply to the offer expressly required assent to the new/revised terms
- new terms become part of the contract UNLESS
* * offer expressly required assent to new terms
* * new terms materially alter contract, OR
* * offeror objects within reasonable time
- revised terms are treated as either:
* * cancelled out under knockout rule (majority view) OR
* * treated as new terms (minority view)
Exceptions to Parol Evidence Rule
PE rule - prior/contemp. agreements that contradict = inadmissible
Evidence of prior or contemporaneous oral/written agreement is admissible to establish:
- whether writing is integrated, and, if so, completely or partially
- meaning of ambiguous term
- defense to formation or enforcement (fraud, duress, mistake)
- ground for granting or denying remedy (recision, reformation)
- subsequent contract modifications
- condition precedent to effectiveness
*even when the contract is completely integrated
Evidence of the following can be admissible to explain/supplement terms even if terms are unambiguous: (in order of priority)
1. course of performance: sequence of conduct under contract involving repeated occasions for performance (and other party accepted perf without objection and with knowledge of course of perf)
2. course of dealing: sequence of conduct pertaining to previous contracts
3. trade usage: regular practice or method of dealing in that particular business/industry
Parol Evidence Rule
Prior/contemporaneous extrinsic evidence that contradicts terms of a written contract are inadmissible; applies when parties intended their writing to be their final agreement = total integration
Partial integration - supplementary extrinsic evidence of other terms that are consistent with writing is admissible (cannot contradict!)
**UCC presumes all sale of goods contracts are partially integrated **= extrinsic evidence of additional consistent terms is admissible (can’t contradict!)
HOWEVER, this presmption goes away if the writing contains a merger clause – it will be deemed completely integrated.
Implied-in-fact contracts
formed when party manifests assent by conduct rather than spoken or written words (e.g. contractor mistakenly paves driveway and owner does not object)
Implied-in-law / quasi contracts
Constructed by court to prevent unjust enrichment when party receives benefit from another who reasoanbly expects compensation (e.g. physician treats unconscious person)
*not a true contract because it lacks mutual assent
A plaintiff can recover in quasi-contract with the defendant if the plaintiff conferred a non-gratuitious and measurable benefit on the defendant that resulted in unjust enrichment because:
- defendant had opportunity to decline benefit but knowingly accepted OR
- plaintiff had a reasonable excuse for not giving the defendant an opportunity to decline
Implied Warranty of Merchantability
1. what is the promise?
2. when does it apply?
3. how can it be disclaimed
Promises that goods are fit for ordinary purpose & conform to the seller’s representations.
Implied whenever seller is a merchant with respect to the goods sold.
Can be disclaimed
- orally or conspicuous written statement specifically mentioning “merchantability”
- oral or written statement specifically mentioning “as is” or “with faults”
- Buyer’s inspection of goods/refusal to inspect (if customer’s inspection would have revealed defects; if it requires specialized inspection = not disclaimed)
- Course of dealing, course of performance, trade usage
Nondelegable Contractual Duties
Delegation not permitted when other contracting party has substantial interest in having delegating party perform (personal services contract involving taste or special skill) OR
Delegation is prohibited by contract
UCC Installment Contracts for the sale of goods
Under the UCC, installment contract is defined as a contract in which the goods are to be delivered in mulitple shipments and each shipment is to be separately accepted by the buyer. Payment by the buyer is due upon each delivery unless the price cannot be apportioned.
If the price can be easily apportioned between shipments = buyer is obligated to pay seller the apportioned price upon each conforming delivery (not all at once)
Under UCC, delegation of performance may be treated as creating:
reasonable grounds for insecurity
This allows other party to demand assurances from the delegatee.
Restitution Damages
1. Definition?
2. Purpose?
3. How is it measured?
Restitution damages are awarded to restore to the P the value of whatever benefit was conferred upon the recipient. (Breaching party can be entitled to recover restitutionary damages)
Purpose is to prevent unjust enrichment.
Measured:
Reasonable value of work performed/services rendered (cost of recipient obtaining comparale performance)
MINUS
(if applicable) any damages suffered by the nonbreaching party due to the breach.
Under UCC, when is a contract formed?
Under UCC, contract is formed ifi parties intended to contract and there is a reasonably certain basis for giving a remedy. The contract may be made in any manner sufficient to show agreement – even if the moment of formation is undetermined/unclear.
How does the duty of good faith and fair dealing apply in requirements contracts?
In a Requirements Contract, duty of good faith and fair dealing implied in every contract requires the buyer to purchase goods from the seller only.
Requirements contract creates an exclusive agreement between buyer and seller.
If buyer doesn’t require anymore - maybe ok?
But if the buyer still requires the goods but wants to buy it from diff source - violates implied duty of good faith and fair dealing = breach of contract
What is the buyer’s duty of good faith and fair dealing under a Requirements Contract?
- buyer must purchase goods from seller only (exclusive!)
- requirements must approximate reasonably foreseeable figure (quantity)
- reasonable elasticity in requirements permitted (so long as variations are in good faith)
Impracticability Defense to Enforcement
A contracting party’s duty to perform can be discharged by impracticability when:
- an unexpected or extraordinary event makes it impracticable for the party to perform
- the contract was formed under a basic assumption that the event would not occur, AND
- the party seeking discharge was not at fault in causing the event to occur
When is a contract divisible (an installment contract)?
- parties’ duties can be broken down into at least two corresponding pairs of performances, AND
- those pairs of performances can fairly be regarded as agreed equivalents.
Courts prefer to interpret contracts as divisible for fairness reasons but courts will not do so if the contract expressly states that it is **indivisible or that payment is due upon completion **of the entire contract.
Auction Contracts
(2 types)
(seller bidding issues)
(completion of sale)
Each lot of goods is sold in separate sale.
**Reserve auction (default) **- auctioneer may withdraw goods prior to completion of sale
**No-Reserve (special announcement required) **- goods cannot be withdrawn after auctioneer calls for bids unless no bid is received within reasonable time
*for both, bidder can retract until completion of sale but retraction does not revive any earlier bids.
When seller bids, winning bidder can avoid sale, or pay price of last good-faith bid, if auctioneer:
- knowingly accepts bid by or on behalf of seller OR
- procures seller’s bid to drive up price of goods
Exceptions (seller can bid):
- at forced sale OR
- if seller gives notice reserving right to bid
Completion of sale:
- when auctioneer announces end of sale (e.g, by fall of hammer)
- if bid is made contemporaneously with end of sale announcement, auctioneer has discretion to continue bidding
Under an accord & satisfaction, how can a party fulfill its contractual obligationby rendering different performance than the one initially promised?
Can be accomplished through a negotiable instrument (e.g., check) if three conditions are met:
- obligation is unliquidated (i.e. uncertain in amount) or otherwise in dispute
- the obligor, in good faith, tenders the negotiable instrument with a conspicuous statement that the instrument is tendered as full satisfaction of the obligation, AND
- the obligee obtains payment of the instrument (e.g, by cashing the check)
*absent a dispute, a check that is less than the amount owed could not have been offered in good faith.
