Contracts Flashcards
Contracts Analysis Steps
- What law applies?
- Was k formed?
- Was k enforceable?
- What does k mean?
- Excused performance?
- Breach of k?
- Remedies
- Liquidated damages?
- Third-party beneficiaries?
Contract Formula
K = MA (O+A) + C - D
Contract = Mutual Assent (Offer+Acceptance) + Consideration - Defenses
Express K
promises are communicated by language
Implied K
parties’ conduct indicates they assented to be bound
Quasi-K
NOT a K at all; one party is unjustly enriched at expense of other party, so that the enriched party must pay restitution to other party equal to unjust enrichment
Bilateral K
Exchange of mutual promises - a promise for a promise; Bilateral K offer can be accepted in any rx way. Unless expressly indicated otherwise, assume bilateral.
Unilateral K
Offeror requests performance rather than promise. Offeror (promisor) promises to pay upon completion of requested act by promisee.
Once act is completed –> K formed
Unilateral K requires full performance occurs only in (2) situations:
- Offeror clearly indicates completion of performance is the only manner of acceptance; and
- Offer to the public such as a reward offer.
Magic words = “offer… only by” or a reward offer
Void / Voidable / Unenforceable
Void = K w/o legal effect; cannnot be enforced by either party
Voidable = one or both parties may elect to avoid w/ defenses
Unenforceable = valid K but not enforceable due to defense
Common Law vs. UCC
- UCC governs sale of most tangible goods
- CL governs everything else
Merchant vs. Non-Merchants
Merchant is 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/goods involved.
Article 2 provisions dealing w/ general business practices (SoF, confirmatory memos, firm offers, modification) –> almost anyone in business can be deemed a merchant
Some Article 2 provisions (implied warranty of merchantability) –> narrower and require a person to be a merchant w/ respect to goods of the kind involved in the subject transaction
Non-Merchant if sales are solely personal
K involving goods and nongoods
Determine which aspect is dominant and apply the law governing that aspects.
But if K divides payment b/w goods and services, apply Article 2 to sale portion and CL to service portion
`
Good Faith Fair Dealing (GFFD)
Every k within ucc imposes obligation of gffd in performance and enforcement. It means honesty in fact and observance of rx commercial standards.
CL also imposes gffd - breach of duty usually involves exercising discretion in way that deprives other party the fruits of K
Offer
An offer is a communication to the 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. Its terms should be certain and definite. Under the UCC, the key term for an offer to be sufficiently definitie is the quantity term, and all other terms may usually be filled by the court. Under Common Law, description of the land and price must be included.
Notably, adverisements are usually construed as invitations for offers.
Offer - Standard
Objective reasonable person POV, not subjective
Advertisements (Offer & Exception to Rule)
Not an offer; Mere invitation for offers
Advertisements can be an offer if contains:
COP
(1) Certain or definite terms;
(2) Offeree is identified; and
(3) Promise.
Preliminary Negotiations
Not an offer
Price Quotations
Not offers, but can be if given in response to an inquiry that contains a quantity term
Factors considered for intent to enter into a K
- Language;
- Surrounding circumstances;
- Prior practice and relationship of parties.
Offer - definite & certain terms
Inquiry is whether enough of essential terms have been provided so that a K including them is capable of being enforced
- Identification of offeree
- Definiteness of subject matter
Definiteness of subject matter - requirement for specific types of K’s
- Real estate transactions - Must identify land and price terms, courts will not supply missing price term
- Sale of goods - Quantity term must be included (courts cure other info by gap filler)
- Employment and other services - If duration not specified in offer of employment K, can be terminable at will of either party. For other services, nature of work to be performed must be included in offer.
Requirements & Output K
- Requirements K - Buyer promises to buy from a certain seller all goods buyer requires and seller agrees to sell that amount to buyer
- Output K - Seller promises to sell to a certain buyer all of goods that seller produces, and buyer agrees to buy that amount from seller
- Assumed that parties will act in good faith so there can’t be a tender or demand for a quantity unrx disproporionate to:
(1) Any stated estimate; OR
(2) In absence of a stated estimate, any normal or otherwise comparable prior output or requirement. - On exam, watch out for words = require, need, produce, all, only exclusively, solely.
Missing Terms (Price, Time, Vague Terms)
The fact that one or more terms are left open does not prevent formation of K if it appears that parties intended to make a K and there is a rx certain basis for giving a remedy. Majority jx and article 2 hold that court can supply rx terms for those that are missing :
1. Price = except for K for real property, failure to state price doesn’t prevent formation of K if parties intended to form K w/o price being settled. For sale of goods, A2 provides that price will be a reasonable price at time of delivery
2. Time = if agreement doesn’t specify time in which act is to be performed, law implies it is to be performed within rx time
3. Vague Terms = presumption is parties’ intent was to include rx term goes to supplying missing terms. Presumption cannot be made if parties have included a term that makes K too vague to be enforced. But uncertainty can be cured by part performance that clarifies vague term or by acceptance by full performance.
4. Terms to be agreed on later = if term is material, offer is too uncertain
Material Term is Vague or Ambiguous = Offer?
NO valid offer. Neither under UCC or CL.
Watch for terms: appropriate, fair, reasonable… all signal a possible vague problem
Communication to Offeree
To have power to accept an offer, offeree must have knowledge of offer; proposal needs to be communicated to them