contracts Flashcards
mbe + distinctions
replevin vs. right of reclamation
partial payment made by buyer + seller is insolvent within 10 days
vs.
buyer is insolvent at time of purchase + seller demands return of goods within 10 days of receipt (or reasonable time) (unless misrepresent solvency in writing within 3 months before delivery) + buyer still has the goods
elements of misunderstanding (3)
*have a material term open to two or more reasonable interpretations
*each side attached a different meaning to the term
*neither party knows or should know of the confusion
types of incapacity (3)
*minors: under 18
*mentally ill: if can’t understand the nature and consequences of their actions OR if can’t act in a reasonable manner for the transaction + other side knows or should know of this
*very intoxicated: other side knows or should know
elements of mutual (3) and unilateral mistake (2)
mutual:
*mistake of fact at time contracting
*relates to a basic assumption that has a material impact
*the impacted party didn’t bear the risk of mistake
unilateral:
*same as above +
*mistake would make the contract unconscionable OR other side knew of, should have known of, or cause the mistake
under UCC 2-207, what are the rules for an additional term or different term?
an additional term is controlling when,
*both parties are merchants
*new term doesn’t materially alter the deal (surprise/hardship vs. reasonably limiting remedies)
*initial offer didn’t limit acceptance to its terms
*offeror doesn’t reject the term within a reasonable time
when an acceptance contains a different term from the offer, neither term controls (knockout rule)
when acceptance by silence is ok (4)
*unilateral reward offer/contest
*unilateral offer if geographically close
*past history of silence as acceptance
*offer requires silence + intent to accept by silence
mailbox rule applicability (rejection + acceptance sent)
*rejection then acceptance: not applicable; first received controls
*acceptance then rejection: acceptance controls unless the rejection is detrimentally relied upon
kinds of irrevocable offers (4)
*option contract: need consideration
*firm offer: written doc signed by merchant offeror, contains explicit promise not to revoke, for period stated or reasonable time not to exceed 90 days
*unilateral contract where performance has begun
*detrimental reliance: must be reasonable, detrimental, and foreseeable
ways to kill an offer (5)
*actual or constructive revocation
*offeree rejects the offer
*counteroffer provided
*offeror dies
*a reasonable time passes
requirements vs. output contract
requirements: buyer agrees to buy 100% of their needed supply from single seller
vs.
outputs: seller agrees to sell 100% of produced good to single buyer
three questions in evaluating a contracts question and components
was a contract formed?
*agreement
*consideration
*defenses: mistake, misunderstanding, misrepresentation, duress, illegality, unconconsionability
*statute of frauds
was the contract performed or excused?
*parol evidence rule
*warranties: express, merchantability, title, fitness for particular purpose
*conditions: express, implied
*excuses: impossibility/impracticability, death, modification, accord and satisfaction, frustration of purpose
what are the remedies for breach?
*money damages
*specific performance
steps to reject imperfect goods (3)
*notify of rejection within a reasonable time
*notify of particular defect
*hold onto goods for a reasonable time
how to have a security interest
rightfully reject goods + pay some or all of price
options if a seller fails to provide reasonable instructions upon rejection of goods (3)
*store goods in reasonable manner
*ship goods back
*resell the goods
what doesn’t count as consideration? (4)
*conditional gift / gift promise
*illusory promise
*past consideration
*preexisting duty
what is the preexisting duty and its exceptions (3)?
a promise to do something the offeror is already legally obligated to do
exceptions: a change in performance, 3rd party promise to pay, unforeseen difficulties (unanticipated circumstances) where modification is fair and equitable
promissory estoppel elements (3)
*a promise that reasonable induces reliance
*the party actually relies on the promise
*injustice only avoided through enforcement
quasi-contract elements (3)
*the party confers a measurable benefit
*the party could reasonably expect to get paid
*it would be unfair to let the other party keep the benefit without paying (opportunity to decline? good reason for not opportunity?)
misrepresentation elements (3)
*misrepresentation of present fact
*that is fraudulent or material
*under circumstances where justifiable to rely on the fact
when does the statute of frauds apply (5)?
*marriage
*suretyship
*one year: contract couldn’t possibly be completed within one year from its making (day after acceptance)
*UCC: goods over $500
*real property interest
how to satisfy the statute of frauds under common law
*signed writing: parties + elements
*complete performance by one party
*real property: possession, payment, improvement (need two of three)
how to satisfy the statute of frauds under UCC
*signed writing with quantity
*partial performance
*substantial beginning on custom goods
*judicial admission
*confirming memo: failure to object within 10 days
exceptions to the parol evidence rule (3)
*related to second, separate deal
*supports contract defense
*related to proving a condition precedent existed
*interpreting ambiguous term
*proving extent of integration
description of warranties
*express warranties: affirms/describes goods as part of deal
*implied warranty of merchantability: merchant says the goods are fit for ordinary commercial purposes
*implied warranty of fitness for a particular purpose: the buyer relies on the seller’s expertise that goods are fit for a special purpose
implied conditions under common law vs. UCC
common law: constructive condition of exchange, where doctrine of substantial performance says condition met as long as no material breach and any impairments not made willfully
vs.
UCC: perfect tender (perfect goods + delivery)
when does a seller have the right to cure imperfect goods(2)?
*time left on the contract OR
*seller had reasonable grounds to believe the buyer would accept replacement
methods of delivery (3)
*tendered at seller’s place of business
*shipment contract: ship to seller’s place of business
*destination contract: ship to buyer’s place of business
who bears the risk of loss?
*does the contract speak to this issue?
*was the contract breached? if yes, the breaching party bears the risk (insurance coverage)
*is it a shipment or destination contract? shipment=buyer bears risk / destination=seller bears risk
*is the seller a merchant? if yes, seller bears risk until goods received / if no, buyer bears risk once goods tendered
common fact patterns for impossibility/impracticability (3)
*special offeror dies
*performance becomes illegal
*subject matter is destroyed
what are expectation damages?
*place party in same position as if the contract was fully performed
*look at the value of actual performance compared to the contract price, including incidental and consequential damages
*limits: mitigation, economic waste, unforeseen consequential damages
what are reliance damages?
place party in same position as if the contract was never formed
what are restitution damages?
provide damages equivalent to the benefit conferred on the other party
what are liquidated damages?
*set by contract
*are actual damages uncertain? is the contracted amount reasonable?
when is specific performance allowed?
*monetary damages are inadequate for some reason
*real estate
*unique goods
what conditions prevent revocation of a beneficiary (3)?
*detrimental reliance
*manifest assent
*begin lawsuit
what are the effects of prohibiting vs. invalidating an assignment?
prohibit: breach but can sue
vs.
invalidate: breach and can’t sue
if multiple assignments are made, what controls?
*without consideration, last in time
*with consideration, first in time
what is required for an accord and satisfaction if the new consideration is worth less than the original (2)?
*a good faith dispute over what is owed OR
*different type of consideration
conditions for impracticability (3)
*unforeseen event
*its nonoccurrence was a basic assumption of the contract
*the event was not caused by party seeking discharge
define installment contract
a contract that consists of multiple shipments with corresponding payments and requires substantial impairment of one installment for breach to occur (or nonreceipt of a substantial benefit)
define implied-in-fact contract
where assent to an offer is inferred from conduct, with a required intent to act and knowledge of the conduct’s effect
define accord and satisfaction
accord: agreement to accept performance other than contracted for in satisfaction of the contract
satisfaction: full performance
what is the material benefit rule?
when one party performs an unrequested service that is a material benefit, the performing party can enforce a promise of payment after
define constructive condition of exchange
each party’s performance is conditioned on the other’s performance, with each occurring concurrently
expectation damages formula
(contract price - value with actual performance) + other losses (incidental/consequential) - cost/losses avoided
when is anticipatory repudiation irrevocable?
after the non-breaching party’s
*reliance
*acceptance
*lawsuit
what makes an assignment irrevocable?
*consideration provided by the assignee
*delivery of a representative document (e.g., insurance policy) of the assignment
*delivery of signed writing documenting the assignment
when does a party have to wait to file suit for anticipatory repudiation?
*the other party’s performance is not yet due AND
*the party has fully performed
when is a revocable assignment automatically revoked?
upon the death, incapacity, or bankruptcy of the assignor
assignment of rights is not allowed when
the assignment
*materially increases the duty or risk of the obligor
*materially reduces the chance of the obligor obtaining performance
*is void
delegation of duties is not allowed when
*the contracting party has a substantial interest in having the delegating party perform
*delegation is prohibited by contract
what gaps may the UCC fill?
*time of payment
*price
*place of delivery
*time of delivery
if a party is not a merchant, what happens when additional terms to a UCC contract are provided in an acceptance?
*treated as proposed terms if the acceptance is not conditioned on acceptance of the new terms (counteroffer)
*offer terms control
essential terms per UCC
*identity of parties
*subject matter
*quantity
essential terms per common law for services
*identity of parties
*description of service
*quantity
*price
*time of performance
*duration
what may party who breaches a contract recover?
*minor breach: expectation or reliance damages
*material breach: restitution for the benefit conferred
essential terms per common law for real property transfer
*identity of parties
*description of property
*price
*terms of payment
how can a bilateral contract be accepted?
by promise or beginning performance, if the offer is silent on how to accept
