Contracts Flashcards
A new promise to pay a debt after the statute of limitations has run is
enforceable without any new consideration
The nonoccurence of a condition may be excused if
the party who benefits from the condition waives it by words or conduct
(once excused / waived the condition cannot be later raised in a defense)
A material breach of a contract allows for
the non-breaching party to withhold any promised performance and to pursue remedies for the breach, including damages
When the parties expressly agree to a condition precedent (or a concurrent condition) they are generally strictly liable to that condition, meaning
a party must fully comply with that condition before the other party’s performance is due
Under the UCC parole evidence rule, express terms of a written contract can be
(1) explained or (2) supplemented by the following evidence (in order of priority): course of performance (current k), course of dealing (prior k), and trade usage (based on industry)
The non-breaching party’s failure to mitigate
doesn’t give the breaching party a right to sue the non-breaching party for such failure, it only reduces the non-breaching party’s damages recovery
In construction contracts, the general measure of damages for a contractor’s failure to begin or to complete a building project is
the difference between the K price and the cost of construction by another builder, plus any progress payments made to the breaching builder and compensation for the delay in completing the construction
In order for a contract to be voidable for duress, there must be
force or an improper threat that deprives a party of a meaningful choice (generally, threat of civil litigation is not improper unless it is made in bad faith)
Induced by Force = VOID
Induced by Improper Threat = VOIDABLE
There is no substantial performance if
the incomplete performance was a material breach of contract (frustrated the significant purpose of the K)
Substantial performance is less likely to be found when
a party intentionally furnishes services that are materially different from what was promised
Actual damages can be either
direct or consequential
Total (material) breach of an installment contract requires
Nonperformance accompanied by repudiation
Economic waste occurs when
the cost to fix or complete the construction is clearly disproportional to any economic benefit or utility gained as a result
If a party breaches yet substantially performs
the non-breaching party is required to pay whatever remains on the contract price (or perform) but may bring suit later for damages
Requirements contracts satisfy UCC contract formation requirements even without naming specific quantities because
A duty of good faith and fair dealing is imposed in all contracts, whether governed by the UCC or common law
E.g. this means best efforts to supply the goods (for seller) and best efforts to promote their sales (buyer)
A party to an illegal contract may recover restitution damages if that party conferred a benefit on the other party and
(1) was justifiably ignorant of the facts that made the contract illegal
(2) was less culpable than the other party, OR
(3) withdrew before the conduct’s illegal purpose was achieved and did not engage in serious misconduct
A party to a contract must avoid or mitigate damages to the extent possible by
Taking steps that do not involve undue risk, expense, or inconvenience
When a party is suing a third-party beneficiary of a contract, the promisor can
raise any defense against the third party-beneficiary that the promisor had against the original promisee
Compensatory damages are meant to compensate the non-breaching party for
Actual economic losses
Expectation damages are intended to put the non-breaching party
In the same position as if the contract had been performed (must be calculated with reasonable certainty)
Compensatory damages consist of
(1) expectation, (2) consequential, and (3) incidental damages
Note: In real-estate contracts requiring delivery of possession of property, late delivery is a breach that entitles the buyer to expectation damages measured by FMV of the property for the time buyer was denied possession
Consequential damages are a direct result of breach but
need not be the usual result of the breaching party’s conduct (but are otherwise reasonably foreseeable in the event of a breach)
The primary test of whether a communication is an offer is whether an individual receiving the communication
would reasonably believe that he could enter into an enforceable deal by satisfying the condition
Damages are foreseeable if they were
(1) A natural and probable consequence of breach
(2) If they were “in the contemplation of the parties at the time the contract was made” OR
(3) If they were otherwise reasonably foreseeable
Non-performance of an installment constitutes a partial breach when
the only remaining duty at the time of the breach (1) is held by the breaching party and (2) is for the payment of money in further (unrelated) installments
Under the UCC parole evidence rule, express contract terms can be
(1) supplemented or (2) explained but NOT contradicted
The Warranty of Merchantability may be disclaimed for defects that an examination would have revealed if, before entering the contract, the buyer
Examined the goods as fully as desired or refused to examine them
Under the pre-existing duty rule, a promise to perform a duty that a party is already legally bound to perform is
void of consideration
When the owner breaches a construction contract before or during construction, the builder can recover
lost profits (expectation damages) plus any reasonably incurred costs
An illusory promise
cannot supply the necessary consideration for contract formation, and may be exhibited when a party essentially pledges nothing because the promisor can choose whether to honor it
No oral modification clauses can be waived through
parties’ words or conduct, and cannot be retracted if a party has materially changed position in reasonable reliance on the waiver
To accept an offer, the offeree must
manifest an objective intent to be bound by the terms of the offer AND follow ANY specifications in the offer as to the time, place, and manner of acceptance (overrides mailbox rule)
Non-disclosure is equivalent to
an assertion that a fact does not exist if the party not disclosing the fact knows the disclosure is necessary to prevent a previous assertion from being fraudulent
To satisfy the SoF, the writing need
not be formal but must be signed by the party to be charged and contain the essential elements of the deal
Under the SoF a writing is not required for
(1) specially manufactured goods
(2) goods for which payment has been made and accepted,
(3) goods which are received and accepted, or
(4) when a merchant fails to object to a confirming memorandum from another merchant within 10 days of receipt of the memorandum.
How do K modifications differ under the UCC and Common Law
Common Law requires consideration for modification
UCC only requires Good Faith
Elements of Mutual Mistake (which warrant rescission of K)
(1) Mistake of fact existed at the time of K formation
(2) Mistake goes to a basic assumption of fact
(3) Mistake has a material effect on the K
(4) Adversely effected party did not assume the risk of the mistake
Note: Compare with REFORMATION of a K which happens if
(1) both parties are mistaken,
(2) there was a prior agreement put to writing, and
(3) that writing differed from the prior agreement BECAUSE of the mistake, the K may be reformed
The implied warranty of merchantability can be disclaimed
Orally if including the word “merchantability” OR in writing if conspicuous (e.g. either explicit disclaimer or language such as “as is”)
What is the doctrine of anticipatory repudiation and when/how is it effective
The doctrine of anticipatory repudiation is applicable when a promisor repudiates a promise BEFORE the time for performance is due.
The repudiation must be clear and unequivocal, may be by conduct or words, and, if a statement, must be made to the promisee or a third-party beneficiary or assignee of the promise.
Calculation of Expectation Damages
Loss in K value + other losses - costs avoided - losses avoided
If the new consideration of an accord is worth less than what was originally promised, then it is sufficient only if
(1) there is a good-faith dispute as to the amount owed or
(2) it is of a different type than what was originally owed.
Essential terms in a land-sales contract are
Price and subject matter
