Contracts Flashcards
Quasi contract
An unenforceable contract results in unjust enrichment
Recover through restitution
Unilateral contracts
Payment upon completion of requested act
1) offeror clearly indicates that completion of performance is the only manner of acceptance (offer…only by)
2) offer to public - reward
Void, Voidable, Unenforceable
Void - can never be enforced
Voidable - may elect to avoid
Unenforceable - otherwise valid but unenforceable due to a defense
Merchant
one who regularly deals in goods of the kind sold or who otherwise by their profession holds themselves out as having special knowledge or skills as to the practices and goods involved
Must be acting in their mercantile capacity
Mutual assent
Offer and acceptance
did the words or conduct manifest a present intention to enter a contract
Elements of a contract
Mutual assent - offer and acceptance
consideration
no defenses
Offer
Communication from offeror to offeree that creates a reasonable expectation in the offeree that the offeror is willing to enter into a contract on the basis of the offered terms
Promise, undertaking, or commitment to enter into a contract
essential terms
Advertisement
Mere invitation for offers unless it contains a quantity term
Essential terms
Identification of offeree
Subject matter
- real estate: land and price
- sale of goods: quantity (article 2 supplies reasonable price at time of delivery if not specified)
- services: nature of the work
if material term is vague or ambiguous - not an offer
Requirement or output contracts
Promise to buy all goods required or promise to sell all good produced
implied good faith
cannot be unreasonably disproportionate to any stated estimate or any normal or comparable requirement/output
Termination of offer
By act of either party (effective when received or published) or operation of law
By offeree: lapse of time (stated or reasonable), rejection (express or counteroffer)
By offeror: revocation (direct, by publication of comparable means, indirect with correct information from a reliable sources of acts what would indication that the offeror no longer wishes to make the offer)
Operation of law: death or insanity of either party (unless irrevocable), destruction of subject matter, supervening illegality
Conditional Acceptance
cannot be accepted by performance
If perform: contract created BY THEIR CONDUCT, and the new terms are not included
Irrevocable offers
1) options - gives consideration for promise not to revoke
2) merchant’s firm offer - merchant offers to buy or sell goods in a signed writing and writing gives assurance that it will be held open (irrevocable for no more than 3 months)
3) detrimental reliance - reasonable expect to rely to detriment and does rely, treated as option for reasonable length of time
4) Beginning performance of unilateral contract offer
Acceptance
Manifestation of assent to the terms of the offer
offeree must know the the offer
Bilateral contract - beginning of performance or promise to perform
unilateral contract - completion of performance
Battle of the forms
Common law - mirror image rule
UCC - no mirror image, seasonable expression of acceptance unless acceptance is expressly made conditional on assent to additional terms
UCC contract with nonmerchant - terms of offer govern unless express agreement
UCC contract between merchants - additional terms included unless
- materially alter original terms
- offer expressly limits acceptance
- offeror objects in reasonable time
conflicting terms knocked out, some jurisdictions treat the same as additional terms
Effectiveness of acceptance and termination
Mailbox rule - acceptance generally effective when dispatched
Exceptions:
- option contract - when received
- offer stipulates when received
- rejection send first - whichever is received first
- rejection send after but received first - estopped from enforcing if offeror detrimentally relied
- unauthorized means - may be effective when received
termination effective when received
Auction contract
sale complete by call of hammer
with reserve (auctioneer may withdraw goods at any time until he announces completion of sale) unless explicitly say without reserve
Consideration
Bargain for exchange of legal value (promise induce benefit to promisor or detriment to promisee)
Past consideration not valid
- promise given in exchange for something already done
Preexisting duty not valid
-performing or promising to perform an existing duty
-exceptions: new or different consideration, ratify voidable obligation, owed to third party, honest dispute as to duty, unforeseen circumstances, modernly is fair and equitable in light of circumstances not anticipated
-UCC - only need good faith to modify
need mutuality - cannot be illusory
Promissory estoppel/detrimental reliance
Consideration not necessary - estopped from not performing
promisor should reasonably expect to induct action or forbearance and action or forbearance is in fact induced
usually reliance damages
Defense: Lack of Capacity
Minors: can disaffirm any time before or shortly after reaching age of majority, unless necessity then liable for restitution of reasonable value
mental incapacity: so deficient that incapable of understanding the nature and significance of a contract - voidable, unless under guardianship, then void
intoxication: so intoxicated, cannot understand nature and significance of their promise - voidable if other party had reason to know
duress and undue influence: voidable
- economic duress is not duress unless party threatens to commit a wrongful act that would seriously threaten the other party’s property or finances, and there are no adequate means to prevent the loss
Defense: Absence of mutual assent
misunderstanding/ambiguous contract:
- neither or both parties aware - no contract unless both had same meaning
- one party aware - contract based on unaware party’s understanding
mutual mistake: voidable if mistake of material fact and moving party did not assume the risk (usually not mistake of value)
Unilateral mistake: not a defense unless the other part knew or had reason to know
Misrepresentation: voidable if justified reliance on a material fact
Defense: Illegality
Illegality of consideration or subject matter - void
Exception: P does not know of illegality and it is a failure to obtain a license required revenue raising purposes
if only purpose is illegal, voidable by party unaware of the purpose or was aware but did not facilitate the purpose and the purpose does not involve serious moral turpitude
Defense: Unconsiounability
Unfair surprise or oppressive terms at the time the contract was formed
Defense: Statute of Frauds
Must be evidenced by writing signed by the party sought to be bound: MY LEGS
Marriage as consideration
Year - more than a year
Land: Interest in land
- equal dignity rule, iif underlying deal is under SoF, most be in writing (authorization of agent to sell ranch must be in writing)
Executor: promise to personally pat estate debts
Goods: $500 or more
-Exceptions: SWAP
-specially manufactured goods- substantial beginning
-Written confirmation between merchants
-admission
-performance
Suretyship: promise to pay debt of another, unless serves pecuniary interest of his own
Defense: promissory estoppel
Oral modification prohibition
Common law - can still orally modify
UCC - clause given effect and cannot be oral
Land: Performance taking it out of SOF
Sellers conveys property - buyer promise to pay enforceable
Buyer part performance: 2 of the 3
- payment
- possession
- improvement
exception - installment contract: possession and payment looks like a lease
Merchant confirmatory memo
contract between merchants
if one party within a reasonable time after an oral agreement has been made, sends to the other party a written confirmation of the understanding that is sufficient under the the SoF to bring the sender, it also binds the recipient
Unless object in writing within 10 days
Parol evidence rule
when agreement in writing with intent that it is the final expression, any other expression made prior or contemporaneous with the writing is inadmissible to very the terms
complete integration: writing cannot be contradicted or supplemented - merger clause
partial integration: cannot be contradicted by can be supplemented by proving consistent additional terms
Admission of parol evidence
partial integration
defense against formation
explain vague terms
correct clerical errors
UCC parol evidence
can explain or supplement written contract by evidence of course of performance, course of dealing, and usage of trade, regardless of whether the writing is ambiguous
1) course of performance - prior installments of current deal
2) course of dealing - prior contracts
3) usage of trade - industry norms parties should be aware of
Warranties
Express warranties - statement of fact or description
-a statement of value or opinion is not a warranty
implied warranty of merchantability - every contract by a merchant who deals in goods of the kinds sold - fit for the ordinary purpose for which such goods are used
Implied warranty of fitness for a particular purpose - any seller has reason to know the particular purpose for which the goods are to be used and that the buyer is relying on the seller’s skill and judgment, and buyer does rely
Can disclaim implied, not express
can limit damages unless unconscionable - limitation on personal injury caused by breach of warranty is prima facie unconscionable
Risk of loss
defective goods - seller until defects are cured or buyer accepts
Noncarrier cases:
If seller is merchant: risk of loss passes to buyer when they take physical possession
If seller is not a merchant: risk passes to buyer upon tender of delivery (tell where it is and how to get it)
Carrier cases:
Shipment contract: passes to buyer when goods are delivered to the carrier (assumed)
Destination contracts: passes to buyer when the goods are tendered to the buyer at destination
FOB: risk passes to buyer at that location
- fob + seller city = shipment
- fob + anything else = destination
FAS: shipment buy boat - passes sto buyer at dock
Performance requirements
Common law - substantial performance (meet essential purpose of contract)
UCC - perfect tender (right goods, place, time)
Payment by check
generally ok unless stated otherwise
do not have to accept but have to give additional reasonable time to get cash
Condition
an event or state of the wold that must occur or fail to occur before a party has a duty to perform or that releases a party from their duty to perform
Anticipatory Repudiation
Prior to the time set for performance of their promise, party indicates that they will not perform
can be retracted before relied on
Treat as immediate breach and ca suspend performance
Prospective failure
not anticipatory repudiation
prospective inability or unwillingness to perform - raises doubt
innocent party can suspend further performance until they receive adequate assurance that performance will be forthcoming - if fail, treat as repudiation
- cannot rewrite deal or demand certain assurances, only get adequate assurances
can retract if regains ability of willingness to perform by communicating to innocent party
Divisible Contract
1) performance of each party is devideed into two or more parts
2) the number of parts due from each party is the same
3) the performance of each aprty by one party is agreed on as the equivalent of the corresponding party
Excuse of condition
Impossibility
Impracticability
Frustration of purpose
Discharge by occurrence of condition subsequent
Discharge by illegality
Rescission
Minor breach
obligee still gains the substantial benefit of their bargain
does not relieve party of their duty of performance, just gives them the right to damages
failure to perform by the time stated in the contract is generally a minor breach if rendered within a reasonable time
- unless expressly provides that time is of the essence
UCC when acceptance may be revoked
goods have a defect that substantially impairs their value to the buyer and:
- they accepted the goods on the reasonable belief that the defect would be cured and it has not been
OR
- they accepted the goods because of the difficulty of discovering the defects or because of the seller’s assurance that the goods conform
must occur within a reasonable time and before any substantial changes in the goods occurs
Seller right to cure
can cure by notice and new tender within time for performance - buyer must accept
beyond original contract time - only if seller reasonably believed that the nonconforming goods would be acceptable, has a further reasonable time to cure
-trade practice or prior dealings
-seller could not have known of the defect despite proper business conduct
UCC installment contract
An installment can be rejected only if the nonconformity substantially impairs the value of that installment and cannot be cured
Whole contract is breached only if the nonconformity substantially impairs the value of the entire contract
UCC Damages timing for calculation
Buyer damages - at the time they learn of the breach
Seller damages - at the time for delivery
Entrustment
Entrusting goods to a MERCHANT who deals in goods of that kind gives them the power to transfer all rights of the entruster to a buyer in the ordinary course of business
Third party beneficiaries
Intended beneficiaries have contractual rights
intended: identified in contract, receives performance directly, or has some relationship with the promisee to indicate intent to benefit
Can enforce when rights vest:
- manifest assent
- bring a suit to enforce
- materially change position in justified reliance
Assignment
All contractual rights can be assigned unless it would substantially change the obligor’s duty or risk, it is an assignment of future rights to arise from future contract, or the assignment is prohibited by law
must be a present transfer
assignments for value cannot be revoked
clause prohibiting assignment - assignee without knowledge can collect; invalidation clause - cannot collect
multiple assignments:
-last gratuitous assignee prevails
-first assignee for value and without notice prevails, unless other party gets judgement or money from the obligor first
Delegation
All duties are delegable unless duties involve personal judgment or skill
generally do not need consent
clause for no assignments means no delegations
Delegating party always liable to obligee
A delegate for consideration is liable
Novation
Substitutes new party for original
requires assent of all parties
completely releases original party
Doctrine of prevention
a party must refrain from conduct that prevents or hinders the occurance of a condition
