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Contracts Flashcards

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1
Q

Whether common law or UCC applies

A

Is contract for “sale of goods”? (goods = moveable at time of identification to the contract)

UCC = sale of goods

Common law = anything OTHER than sale of goods

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2
Q

Contract formation

A

(1) offer, (2) acceptance, (3) consideration

1/2 combined called “manifestation of assent”

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3
Q

Bilateral v Unilateral K

A

Bilateral = exchange of promises to perform

Uniliteral = promise in exchange for performance
- NOTE: performance without knowledge of the unilateral K offer is NOT a K
– (ie someone posts sign saying find my cat for 200 dollars, person unknowingly returns cat, later finds out about 200 reward and asks for 200 dollars, no K was formed because P must know of the unilateral K offer)
- NOTE: if performance can only be completed over time, then beginning performance creates option K that D cannot revoke while P performs over time

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4
Q

Offer

A

Offeror’s manifestation of assent of willingness to enter bargain on specified terms

(1) reasonably certain, (2) communicated to offeree, (3) not terminated prior to acceptance

  • NOTE not offers: (a) joke, (b) offers to negotiate, (c) advertisements unless specific terms
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5
Q

Acceptance

A

Manifestation of assent to the offer

(a) offeree’s return promise, or (b) return performance

Effectiveness: objective “reasonable person” standard = would reasonable person in offeror’s shoes understood offerees words/conduct to be an acceptance?

COMMON LAW: “mirror-image rule = acceptance must be on identical terms to the offer

UCC: contract is formed even if acceptance contains additional/different terms from those in offer UNLESS acceptance expressly conditioned on assent to new/different terms
- NOTE: new/additional terms considers if the terms are already implied in the jurisdiction, if they are, then technically not new/additional terms and therefore acceptance

Mailbox rule: Acceptance is effective when dispatched
- UNLESS offer provides a different time when acceptance will be effective
- NOTE: if acceptance is delayed/never received:
– IF acceptance properly dispatched = effective upon dispatch even if D never receives
- IF acceptance NOT properly dispatched = ONLY effective if D ultimately receives it within the time which a properly dispatched acceptance would have been received

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6
Q

Counteroffer

A

Rejection of offer, and issuance of new offer by original offeree

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7
Q

Termination

A

Once offer is terminated, contract can no longer form

(a) rejection, (b) lapse of time, (c) revocation, (d) offeror’s death/incapacity, (e) destruction of offer’s subject matter

NOTE:
- revocation can come from alternative reliable source (ie friend telling buyer the item is sold already)

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8
Q

Consideration

A

(1) Bargained-for (2) exchange of promises/performances

  • Bargained-for = induces others promise/performance
  • Promise = act/refrain from something have legal right to do

EXCEPTION: Illusory promise = if one party can decide whether to perform at all, not valid consideration, must be binding

Types of consideration: (a) affirmative act, (b) refraining from doing something legal right to do, (c) creating/modifying legal relationship

EXCEPTIONS:
- promise for past benefit/moral obligation = not consideration
- pre-existing duty rule: promise to refrain/do something party already obligated to do = not consideration

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9
Q

Promissory Estoppel even if no consideration

A

Enforce contract even if no consideration if: (1) promisor should have reasonably excepted promisee would change position, (2) promisee did change position, (3) promisee position harmed, (4) injustice avoided only by enforcing promise

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10
Q

UCC additional/different terms part of contract?

A

(step 1) Parties merchants? ((a) business of selling these goods, or (b) holds out as having specialized knowledge these goods)

(step 2) If 1 party not merchant: K contains terms only if offeror expressly agrees

(step 2) All parties merchants and terms in ADDITION:
Part of K unless (1) exception (i) offer expressly limits to its terms (ii) additional terms materially alter those in offer (undue surprise/hardship) (iii) original offeror objects within reasonable time, and if exception then original offeror needs to (2) expressly agree

(step 2) All parties merchants and terms DIFFERENT: “knockout rule” all different terms knocked out of contract
- All gaps left from removal of differing terms filled by: (a) fact (evidence of trade useage, or (b) law, UCC gap fillers

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11
Q

UCC gap fillers

A

THESE RULES APPLY IF (1) UCC applies because sale of goods, (2) both parties merchants, (3) different terms were knocked out/left silent
- THEN: what are the UCC gap fillers?

PRICE: “reasonable price at time of delivery”
- applies if valid K but missing price, BUT doesn’t apply if parties didn’t intend to form K until price established

DELIVERY LOCATION: “sellers place of business” or “seller’s residence of no place of business”

DELIVERY TIME: “reasonable time”

FULL DELIVERY: “must deliver all goods in single delivery, payment only due upon full delivery”

PAYMENT: “when buyer receives goods”

AMOUNT IF UNSPECIFIED: “quantity good faith proportionate to previous orders”

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12
Q

K modifications: Common law pre-existing duty rule

A

Modification to existing contract not enforceable without new consideration on both sides

UNLESS: modification “fair and equitable” in light of new developments parties didn’t foresee

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13
Q

K modification: UCC pre-existing duty rule

A

Agreed-upon modification, made in good faith, IS enforceable without new consideration

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14
Q

Option contract

A

Offeror’s promise to keep offer open for certain period of time

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15
Q

Common Law Option Contracts

A

“Option” (time limit) must have SEPARATE consideration from the underlying contract itself to be valid option contract

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16
Q

UCC Option Contracts

A

“Firm Offers”, valid without separate consideration, if:

(1) offer made by “merchant”
- ((((a) in business of selling these goods, (b) holds themself out having specialized knowledge in good involved)))

(2) offer in signed writing

(3) no longer than 3 months

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17
Q

Contract un-enforceability concepts

A

(i) statute of frauds, (ii) misrepresentation, (iii) mistake, (iv) illegality, (v) unconscionability, (vi) contrary to public policy, (vii) incapacity, (viii) duress, (viiii) undue influence

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18
Q

Statute of Frauds

A

(1) contract in writing, (2) signed by party to be charged

ONLY APPLIES IN: (a) suretyship/guaranty contracts (party promises to answer for 3rd party’s liability), (b) transfer interest in land, (c) can’t be performed fully in under 1 year, (d) sale of good $500 or more, (e) estate executor-administrator agrees to answer for decedent’s (dead person’s) liability (f) contract where part of consideration is marriage MYLEGS

Exceptions:
- UCC “confirmatory memo”: (1) both merchants, (2) receive confirmatory writing within reasonable time, (3) binds sending party, (4) receiving merchant has reason to know writing’s contents, UNLESS written objection within 10 days
- “part performance”: (1) receiving party takes clear and continuous possession with apparent intent to carry out contract (2) pay purchase price or make improvements to land

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19
Q

Common Law contract identification/writing requirements to be enforceable

A

Contract identifies: (1) parties, (2) subject matter, (3) consideration, (4) nature and time of performance

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20
Q

UCC contract identification/writing requirements to be enforceable

A

(1) furnish basis to believe contract was made, (2) state quantity of goods

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21
Q

Un-enforceablity: Misrepresentation

A

Assertion not in accord with the facts

(1) relates to material fact (substantially contributes to decision to enter contract), (2) injured party relied on misrepresentation, (3) reliance justifiable

Can be fraudulent or negligent, affirmative misstatement or conduct to conceal a fact

Injured party can chose to void or not

Duty to disclose if (1) business transaction, and (2) (a) fiduciary relationship, (b) likely to be misled by prior statement, or (c) D aware P mistaken and can be reasonably expected to disclose

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22
Q

Un-enforceability: Mistake

A

Belief not in accordance with the facts

Can be mutual (both parties) or unilateral (one party)

Mutual: (1) basic assumption on which contract formed, (2) material effect on the exchange, (3) party avoiding K must not have been implicitly given risk in K

Unilateral: (1) basic assumption on which contract formed, (2) material effect on the exchange, (3) party avoiding K must not have been implicitly given risk in K, AND (4) unconscionable or non-mistaken party knew/should have known or caused
- BUT: court may still enforce if (a) mistake isn’t non-mistaken parties fault, (b) non-mistaken party didn’t know, (c) non-mistaken party materially and detrimentally changed position

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23
Q

Un-enforceability: Illegality

A

Neither party can enforce illegal contract

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24
Q

Un-enforceability: Unconscionable/public policy

A

(a) unfair terms coupled with unfair bargaining process, or (b) so unfair that as matter of judicial policy it shouldn’t be enforced

Public policy: don’t want parties to exempt themselves from intentional/knowing/reckless misconduct

Example: contract exempting party from intentional/knowing/reckless conduct

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25
Q

Un-enforceability: Capacity

A

Typical examples: (a) Minors, (b) mentally incompetent

Minor = hasn’t reached age of majority
- K are voidable at minors option
- BUT infant can’t avoid contracts for necessaries (such as food, clothing, shelter, medical care)

Mental incompetent = (a) doesn’t understand K, or (b) understands but acts irrationally

26
Q

Un-enforceability: Duress

A

(1) Party’s free will overcome by (2) improper threat, that (3) leaves party with no reasonable alternative but to agree
- improper = criminal, tortious, bad-faith use of civil litigation process, breach of duty of good faith and fair dealing
- Can be express or implied threat, and can be physical or economic harm

27
Q

Un-enforceability: Undue Influence

A

(1) Special relationship (2) dominant position over victim (3) persuades V to enter K
- Typical examples: (a) parents/child, (b) attorneys/clients
- BUT: if (1) good faith, (2) without knowledge, (3) relies on K, then can’t avoid K

28
Q

Contract interpretation main concepts

A

(a) knock-out rule (UCC) (b) Parol-evidence rule (common law)

29
Q

K interpretation: Parol-Evidence rule (common law)

A

NOTE: RULE ONLY APPLIES IF NO AMBIGUITY IN K TERMS, IF AMBIGUITY, RULE DOESN’T APPLY SINCE PAROL EVIDENCE ADMISSIBLE TO CLARIFY AMBIGUOUS TERMS

Court may not consider extrinsic evidence to change/contradict/add to the (1) unambiguous terms of an (2) fully integrated, written agreement
- Integrated: (1) writing/series writings forming one transaction, and (2) expression of parties final intent
- extrinsic evidence = any evidence from outside the 4 corners of the K
- ambiguous = subject to multiple reasonable interpretations
- BUT: if partially integrated (final but incomplete statement of parties intent), then court can consider extrinsic evidence to supplement terms but NOT to change/contradict them

BUT: evidence arising AFTER contract formation does not implicate Parol-Evidence rule and can be used

Only evidence from prior or contemporaneously with contract is barred by the rule

30
Q

Extrinsic evidence permissible uses

A

(1) determine if K integrated (2) clarify ambiguous term (3) decide valid defense to enforceability, (4) determine if K was formed at all, (5) grant/deny remedy for breach of K, (6) establish modification to K

31
Q

K interpretation: Parol evidence rule (UCC version)

A

(i) if parties writings agree on a term, or integrated with respect to a term, extrinsic evidence NOT admissible to CONTRADICT the term

(ii) extrinsic evidence IS admissible to CLARIFY term

(iii) if partially integrated, extrinsic evidence admissible to supplement agreement with consistent additional terms

Types of extrinsic evidence under UCC: (a) course of performance, (b) course of dealing, (c) trade usages

32
Q

UCC types of extrinsic evidence

A

(i) course of performance, (ii) course of dealing, (iii) trade usages

(note: course of performance highest weight, then dealing, then trade usage)

33
Q

K breach

A

failure to render full performance when due

34
Q

K breach - remedy

A

(1) ready and willing to perform, (2) entitled to damages

35
Q

Common Law: Minor breach

A

breach that leaves non-breaching party with (1) “essential benefit of the bargain”

Remedy: non-breaching party MUST still PERFORM, but is entitled to damages
- Delayed performance: (1) wait reasonable time, UNLESS, (a) time of essence, (b) cure impossible, (c) repudiates

36
Q

Common Law: Material Breach

A

breach (1) so fundamental it (2) thwarts purpose of contract

Remedy: non-breaching party MAY SUSPEND performance

37
Q

UCC perfect tender rule

A

If goods fail to conform in any way, seller has breached

Remedy: (1) reject, (2) accept, (3) accept some, but also entitled to damages

  • BUT: installment K’s: must ACCEPT non-conforming goods, UNLESS (a) nonconformity substantially impairs value of that shipment and cannot be cured, or (b) cancel entire K if nonconformity substantially impairs value of entire K
38
Q

UCC: Express warranty

A

Arise from (a) affirmation, (b) promise, (c) description, (d) sample
- Affirmation/promise = goods will conform to that affirmation or promise
- Description = goods will conform to the description
- Sample = goods will conform to the quality of the sample

Requires: (1) Warranty “forms basis of bargain” (some jx: buyer relied on representation to make purchase) (some jx: buyer aware of representation when purchased)

Warranties CAN be disclaimed, but must be “conspicuous” in the writing

39
Q

UCC: Implied warranty of merchantability

A

(1) D merchant, (2) goods fit for ordinary purposes, and (3) fair average quality

40
Q

UCC: Implied warranty of goods fit for particular purpose

A

(1) D knows buyer needs for particular purpose, (2) P relying on D’s expertise or judgment to provide goods that meet P’s particular purpose

NOTE: NO MERCHANT REQUIREMENT

41
Q

UCC risk of loss

A

Risk of loss transfers from seller to buyer upon delivery, or if delivered by 3rd party, upon delivery to the carrier

42
Q

Anticipatory repudiation

A

(1) unequivocally communicates, (2) won’t perform

Remedy: immediate breach claim

43
Q

Potential anticipatory repudiation

A

Circumstances show (1) reasonable grounds (2) other party will breach

Remedy: Suspend and demand (1) assurance other party will perform, receive response in (2) reasonable time, IF FAILED, anticipatory repudiation has occurred

44
Q

Discharge performance: changed cirumstances

A

Changed circumstance make performance (1) (a) impossible, (b) impracticable, (c) substantially frustrate K’s purpose, and (2) go to “basic underlying assumption of K, (3) no fault of discharging party, (4) discharging party didn’t assume risk

45
Q

Discharge performance: accord

A

agreement to change performance obligation to one different than original obligation

NOTE:
- is a new K, that must meet the K formation requirements
- if breach, can enforce accord or old contract terms

46
Q

Discharge performance: novation

A

agreement replaces one party to K with new party who agrees to substitution

47
Q

Discharge performance: substituted K

A

dissolves original K for new K

Liability only arises under new K

48
Q

Discharge performance: Release

A

Agreement to discharge one parties duties owed under K
- MUST have: (a) consideration, (b) consideration substitute, or (c) signed writing

49
Q

Conditions

A

Event that, if it occurs, triggers party’s K obligation to perform

Express = Condition must occur exactly as provided for performance to be due

Implied = Only requires “substantial compliance” with the condition for performance to be due

NOTE:
- Interpretation issues: Parol-evidence rule exception for conditions means courts can use extrinsic evidence to prove a condition’s existence
- Doctrine of prevention: Party must make reasonable efforts to make condition occur, if fail to make reasonable efforts, then performance still due
- Doctrine of Disproportionate Forfeiture: If (1) condition doesn’t occur, (2) condition occurring wasn’t material part of K, (3) disproportionate forfeiture occurs (one party gets big benefit other suffers big loss), THEN court will excuse condition
- Doctrine of waiver: Parties can waive conditions and still perform BUT waiver can be retracted if (1) no consideration for waiver, (2) other party hasn’t detrimentally relied on waiver

50
Q

Third party beneficiaries of Ks

A

Intended beneficiary: Reasonable person in 3rd parties position would believe the K parties intended for 3rd party to have enforceable rights
- Can enforce the K as if primary party
- Cannot have their rights removed if (a) detrimentally changed position based on K, (b) sued to enforce K, (c) manifested assent in manner invited by K parties

Incidental beneficiary: Receives some indirect unintended benefit from K
- CANNOT enforce the K

51
Q

Expectation damages

A

Put nonbreaching party in same economic position if K would’ve been performed

Calculation: value of performance + incidental/consequential damages - costs saved or could’ve save with reasonable effort

52
Q

Incidental damages

A

damages D should reasonably foresee from breach

53
Q

Consequential damages

A

damages from P’s particular situation

Note: Generally not recoverable UNLESS D had reason to know of them

54
Q

Duty to mitigate

A

P must reasonably mitigate, but if not successful, can recover full damages, and damages from attempting to mitigate

55
Q

Reliance damages

A

return P to position if he had not relied on promises of D

calculated: cost to injured party NOT benefit to D

56
Q

Restitution damages

A

(aka unjust enrichment) return to P benefit conferred to D by breach

57
Q

liquidated damages

A

damages written specifically in the K

Note: generally enforceable UNLESS they are “penalties”

58
Q

nominal damages

A

small fixed sum without regard to actual harm suffered by P

Example: K breach but no damages provable, nominal damages can be applied

59
Q

specific performance

A

D must perform under the K

Note: P must prove money damages not adequate

60
Q

UCC damages

A

(a) recover damages for nondelivery, (b) “cover” acquire substitute goods, (c) recover specifically identified goods, (d) specific performance

Bar Exam (17 decks)

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