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justice > contracts > Flashcards

contracts Flashcards

1
Q

what are the three foundational qs of contract law?

A
  1. has an enforceable contract been formed?
  2. has the contract been performed (or, has performance been excused)?
  3. what are the remedies for breach?
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2
Q

define contract

A

a contract is a legally enforceable agreement

agreement + bargained-for exchange (consideration)

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3
Q

what universe are you in if the contract has elements of both services and goods?

A
  1. all-or-nothing rule
  2. predominant purpose

exception: divisible contracts

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4
Q

formation

what should you evaluate to determine if an enforceable contract has been formed?

A
  1. Agreement (offer + acceptance)
  2. Consideration (and substitutes)
  3. Defenses to formation
  4. Statute of Frauds
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5
Q

formation

define offer

A

an offer is a manifestation of a willingness to enter into an agreement (by the offeror) that creates a power of acceptance (in the offeree)

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6
Q

formation

are offer and acceptance governed by the objective or subjective test?

what does that mean?

A

objective

means that the key question is whether the offeror displays an objectively serious intent to be bound

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7
Q

formation

towards whom must an offer be directed?

A

an offer must usually be directed to a specific offeree. you cannot accept an offer unless it is directed at you

exception: rewards, contest offers that promise something to anyone who accomplishes a task

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8
Q

formation

what terms should a contract contain to be enforceable?

A

common law: all essential terms. this means parties, subject, price, and quantity

UCC: only essential term is quantity (UCC will gap-fill)

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9
Q

formation

what is a requirements contract?

A

B promises to buy 100% of whatever amount is needed from this individual S (often for a given time period)

specific enough under UCC: no quantity term but formula for calculation of such term

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10
Q

formation

what is an output contract?

A

S offers to sell 100% of whatever amount is produced to an individual B

specific enough under UCC: no quantity term but formula for calculation of such term

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11
Q

formation

why is an invitation to deal not a valid offer?

A

it does not convey the power of acceptance to the other side. it reserves the final right of approval (acceptance) with the original speaker

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12
Q

formation

is an advertisement an offer? why or why not?

A

no. usually understood as an invitation to deal

exceptions: reward ads; ads that are very specific and leave nothing open to negotiation, including how acceptance can occur

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13
Q

termination and revocability

how many ways to revoke an offer? what are they?

A
  1. express communication to offeree
  2. constructive revocation (offeree learns that offeror has taken an action inconsistent with a continuing ability to contract)
  3. rejection by offeree
  4. counteroffer by offeree
  5. offeror dies before K is formed
  6. reasonable amt of time passes
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14
Q

termination and revocability

what are the four kinds of irrevocable offers?

A
  1. option contract –remember that the option needs consideration for the offer to be irrevocable for that period of time
  2. firm offer –UCC only; offeror must be a merchant (any businessperson when transaction is commercial in nature)
  3. unilateral K after offeree has started performance –bc unilateral contract can only be accepted by performance. but remember that offeree is not required to complete performance
  4. detrimental reliance –offeree reasonably and detrimentally relies on the offer in a foreseeable manner
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15
Q

acceptance

define acceptance

A

acceptance is a manifestation of a willingness to enter into the agreement by the offeree

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16
Q

acceptance

how must the offeree accept the offer?

A

the offeror is the master of the offer, and therefore dictates its terms.

the offeree must accept the offer according to the rules of the offer

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17
Q

acceptance

what if B says “please ship me 500 blue beads by next week for $5 each.”

S sends 500 green beads the next day, instead.

is there a contract?

A

yes – a court would treat this as both acceptance and breach by S

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18
Q

acceptance

in the case of an open-to-all offer (e.g. reward) what is required of the person who performs in order for the offeror to be bound?

A

the person who performs must have known about the offer prior to their performance (intent to enter into agreement) in order to “accept” it.

without that prior knowledge, there is no K

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19
Q

acceptance

acceptance must be X to the other party in order for it to become effective

A

communicated

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20
Q

acceptance

when is an acceptance normally effective?

A

mailbox rule: usually effective at the moment it is sent by the offeree

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21
Q

acceptance

what are the exceptions to the mailbox rule?

A

mailbox rule does not apply:
1. if offeree sends something else first (rejection, counteroffer) and then changes their mind and sends an acceptance. then whichever reaches the offeror first will prevail
2. to other types of communications (revocations, rejections, etc.)
3. to option contracts

unclear to what degree this applies to other media like fax or email

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22
Q

acceptance

when is acceptance by silence allowed?

A
  • unilateral reward offers or contests
  • unilateral offers in which parties are so geographically close that the offeror will see that performance has occurred
  • past history of silence serving as acceptance (such that offeree should reasonably notify offeror if they do NOT accept the offer; e.g. when parties have a regular business relationship)
  • offer says acceptance must come by silence AND the offeree intends to accept the offer by silence
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23
Q

acceptance

what is an implied-in-fact contract?

A

this is when an action is communicated by gestures or actions (without writing or speaking)

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24
Q

counteroffers and UCC §2-207

what common-law rule is implicated when the terms of an acceptance do not exactly match the terms of the offer?

A

mirror-image rule

in this case the “acceptance” is a counteroffer

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25
Q

counteroffers and UCC §2-207

what is a conditional acceptance?

A

a conditional acceptance is an acceptance that is based on the occurrence of a specified event. e.g. I accept IF …

a conditional acceptance is another form of counteroffer

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26
Q

counteroffers and UCC §2-207

what is UCC §2-207

A

replaces the mirror-image rule

a purported acceptance that does not match the terms of the offer exactly can still count as a legal acceptance (maybe not all of its terms, though)

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27
Q

counteroffers and UCC §2-207

what is the text of UCC §2-207(1)

A

“a definite and seasonable expression of acceptance [or a written confirmation] which is sent within a reasonable time operates as an acceptance even though it states terms additional to or different from those offered or agreed upon, unless acceptance is expressly made conditional upon assent to the additional or different terms”

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28
Q

counteroffers and UCC §2-207

when can an additional term in an acceptance control?

under which provision of the UCC?

A
  1. both parties are merchants
  2. new term does not materially alter the deal
  3. intial offer did not expressly limit acceptance to its terms **AND **
  4. the offeror did not reject or object within a reasonable time to the new term
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29
Q

counteroffers and UCC §2-207

what are the majority and minority rules for acceptances with different terms from the initial offer?

A

majority: KNOCK-OUT RULE. “Knocks out” both the different terms from the contract. Neither will govern and instead, the general gap-filling provisions of the UCC will apply

minority: when different term does not govern under UCC §2-207(2) (i.e. when it is not an “additional” term), the initial offer controls the term

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30
Q

counteroffers and UCC §2-207

what is an acceptance based on conduct?

to what provision of the UCC does it correspond?

A

when parties fail to make a K but still act as though there is an agreement, then under UCC §2-207(3) only the terms that both writings agree on become part of the contract, with all other terms supplied by the UCC default rules

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31
Q

counteroffers and UCC §2-207

what is a confirming memo?

A

when parties have a K (usually oral agreement) and one party sends a confirming memo with additional terms.

UCC §2-207(1): “…a written confirmation which is sent within a reasonable time operates as an acceptance…”

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32
Q

consideration

what is consideration?

A

a bargained-for deal in which the parties exchange promises involving a legal detriment or benefit

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33
Q

consideration

what is an example of something that does not count as consideration?

A

gifts

also look out for conditional gifts – are they really bargaining for the person to accept?

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34
Q

consideration

when is consideration adequate (rather than nominal)?

A

as long as there is subjective value to the person receiving it, consideration will be adequate

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35
Q

consideration

what is an illusory proimse?

A

promisor does not clearly commit to the deal –there must be a way for them to breach

in this case there is no consideration and therefore this is an illusory promise.

e.g. “I can sell you my jeep for $5000.” “Ok, i will buy the jeep for $5000 if i feel like it”

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36
Q

consideration

what are some examples of real contracts that could be mistaken for illusory contracts?

A

satisfaction contracts. these are still real contracts with consideration.
* the usual standard of satisfaction for these Ks is objective (“would a reasonable person be satisfied?”)
* for Ks involving aesthetic satisfaction (art, tutoring services), use a subjective standard of satisfaction

output & requirements contracts –there is still a way for the parties to breach here

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37
Q

consideration

when is settling a legal claim / promising not to sue sufficent consideration?

A
  1. P has good faith belief in the validity of the claim OR
  2. there is reason to doubt the validity of the claim due to uncertain law
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38
Q

consideration

preexisting duty rule

(common law)

A

a promise to do something you are already legally obligated to do is not consideration

this is why contract modifications need new consideration

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39
Q

consideration

exceptions to the rule that contract modification needs new consideration

A
  1. change in performance (e.g. renewing lease for an additional year, at lower rent)
  2. third party promising to pay OR
  3. unforeseen difficulties that would excuse performance
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40
Q

consideration

what is the general rule at common law with respect to modifying contracts?

A

need new consideration

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41
Q

consideration

if a creditor promises to release a debtor from a debt obligation if they render partial payment, is this modification binding?

A

if the debt is currently due and undisputed, then the modification is NOT binding

but if the debtor is paying part of their debt early in order to be released from the debt obligation, or the debt is disputed, then the modification is likely binding

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42
Q

modification

what standard governs when there is a modification under the UCC?

A

good faith

if the modification is made in good faith, then it is binding even without new consideration

hold-ups, for example, are not binding bc they are not modifications made in good faith

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43
Q

promissory estoppel (PE)

when might promissory estoppel arise?

A

when one party makes a promise, and the othe party relies on that promise to take some action

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44
Q

PE

what are the elements for a claim under PE / reliance?

A
  1. promise made that would be reasonably expected to induce reliance
  2. promisee does indeed take detrimental action in reliance on that promise AND
  3. injustice can only be avoided by enforcement of the promise
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45
Q

PE

when does a quasi-contract arise?

what is it also known as?

A

arises when party would have made K if they could have, but could not
OR
when one party has conferred a benefit on another party and it would be fair to pay for that benefit

also known as a contract “implied-in-law”

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46
Q

PE

what are the elements of a quasi-contract?

A
  1. P confers measurable benefit on D
  2. P reasonably expected to get paid AND
  3. it would be unfair to let D keep the benefit without paying

*REMEMBER TO ASK: did P give D an opportunity to decline? If not, is there a good reason why there was no opportunity to decline (e.g. emergency)?

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47
Q

PE

how are quasi-contract damages measured?

A

limited as justice required to the fair value of the benefit conferred

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48
Q

PE

what is the “half theory”?

A

half theory = moral obligation + subsequent promise to pay

some jxdns have case law suggesting that a moral obligation plus a subsequent promise to pay can be binding

but usually this would be past consideration and is thus not binding

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49
Q

defenses

what are the defenses to K formation?

A
  1. misunderstanding
  2. incapacity
  3. mistake
  4. fraud (incl. misrepresentation or nondisclosure)
  5. duress
  6. illegality (+ contracts against public policy)
  7. unconscionability
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50
Q

defenses

misunderstanding defense:
when does this arise?

what must the party show?

A

arises when each party attaches a different meaning to the same words

must show:
1. the parties use a material term that is open to two or more reasonable interpretations (the objective test cannot apply)
2. each side attaches a different meaning to the term, AND
3. neither party knows, or should know, of the ocnfusion

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51
Q

defenses

incapacity defense: who lacks the capacity to make a K?

A
  1. infants (minors)
  2. people who are mentally ill either (A) the person cannot understand the nature and consequences of their axns OR **(B) **the person cannot act in a reasonable manner in relation to the transaction AND the other side knows or has a reason to know this
  3. very intoxicated persons (if the other side knows or has reason to know this)
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52
Q

defenses

incapacity defense: what happens to a K if it is made w someone who lacks capacity?

A

it is VOIDABLE
the incapacitated party can disaffirm

exceptions:
* in a K for necessities (food, clothing, shelter) the party without capacity must still pay
* party w/o capacity might stil ratify the deal by keeping the benefits of the K after capacity is obtained. e.g. this is why the minor cannot disaffirm after reaching the age of majority

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53
Q

defenses

mistake defense: what is a “mistake” in this context?

A

a mistake is a belief that is not in accord with a present fact

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54
Q

defenses

mistake defense: when there is a mutual mistake, when may the adversely affected party rescind?

A

when there’s a mutual mistake, the adversely affected party may rescind if:
1. there is a mistake of fact that existed at the time the deal was made;
2. the mistake relates to a basic assumption of the K and has a material impact on the deal; AND
3. the impacted party did not bear the risk of mistake

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55
Q

defenses

mistake defense: when there is a unilateral mistake, when may the adversely affected party rescind?

A

when there’s a unilateral mistake, the adversely affected party may rescind if:
1. they can prove all the elements of mutual mistake AND
2. either: (A) the mistake would make the K unconscionable OR (B) the other side knew of, or had reason to know of, or caused, the mistake

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56
Q

defenses

what is misrepresentation?

what must a party show to assert misrepresentation?

A

an intentional (fraudulent) or accidental statement at the time of contracting that is not true

  1. misrepresentation of a present fact (not opinion)
  2. that is material or fraudulent (intentional) AND
  3. that is made under circumstances in which it is justifiable to rely on the misrepresentation
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57
Q

defenses

what is fraud in the factum?

A

intentional misrepresentation of a present fact

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58
Q

defenses

what is fraud in the execution?

A

one party tricks the other into signing something that they do not even know is a K

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59
Q

defenses

what is nondisclosure?

A

one party does not learn the truth about something but now you just remain quiet*

*normally, you do not need to tell the other side about all material facts related to the deal

*LOOK FOR a special (fiduciary) relationship between the parties OR active concealment

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60
Q

defenses

what is duress?

relatedly, describe undue influence

A

duress: an improper threat that deprives a party from making a meaningful choice to contract
* economic duress: arises when one party makes threats to induce another party to contract (or modify a contract)

undue influence: arises when one party puts very intense sales pressure on another party, who often seems weak-minded or susceptible to high-pressure sales tactics

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61
Q

defenses

which of the defenses are defenses to contract formation?

A
  • misunderstanding
  • incapacity
  • mistake
  • fraud (incl. misrepresentation & nondisclosure)
  • duress
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62
Q

defenses

which of the defenses are defenses to contract enforcement? (i.e. won’t prevent formation of a contract, but cannot be enforced by one party against the other)

why are these not defenses to K formation?

A
  • illegality (including Ks against public policy)
  • unconscionability

these are not defenses to K formation bc they don’t impact the requirement that the contracting parties have a “meeting of the minds.”

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63
Q

defenses

when is a K containing elements of illegality be unenforceable?

A

an illegal K is unenforceable

but a contract entered in furtherance of an illegal act (that is not in itself illegal) will still be enforced

e.g. Party A hires Party B, a cab driver, to drive him to the place where Party A is planning to commit a crime. Party A cannot assert the illegality defense to avoid paying the cab driver

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64
Q

defenses

what is a contract against public policy?

A

a contracting situation that is not formally illegal but present some other policy concern (e.g. a broad exculpatory agreement)

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65
Q

defenses

unconscionability

A

shocks the conscience of a reasonable person
two kinds:
* procedural unconscionability: defect in the bargaining process itself (hidden term; absence of meaningful choice)
* substantive unconscionability: rip-off

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66
Q

defenses

how do jxdns handle unconscionability defenses? what must the party asserting the defense show?

A

depends on the jxdn. in some jxdns, both procedural AND substantive unconscionability must be present for the deal to be struck down. in other jxdns, only one variety need be present

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67
Q

SOF

what is the Statute of Frauds?

A

SOF is a barrier that some Ks must meet in order to become legally binding

these Ks must satisfy a higher standard of proof, usually in the form of a writing

68
Q

SOF

why does the SOF exist?

A

the goal of the SOF is to prevent false assertions about a K that never was really created

69
Q

SOF

what is the SOF-relevant inquiry to contracts (i.e. what should be asked at this stage of determining whether an enforceable contract has been formed?)

A
  1. does SOF apply to this transaction?
  2. if so has the SOF been satisfied?
70
Q

SOF

what kinds of contracts are in SOF world?

A

M. SOUR
* marriage (incl. prenups, etc.)
* suretyship (K promising to guarantee the debt of another)
* one year (K that by its terms CANNOT POSSIBLY be performed within one year from its making)
* UCC of $500 or more
* real estate (if K is transferring an interest in real property)

71
Q

SOF

what is the main-purpose exception?

A

the main-purpose exception applies to suretyship contracts.

if the main purpose in agreeing to pay the debt of another is for the surety’s own economic advantage, then we are NOT in SOF world

72
Q

SOF

what are the exceptions to the SOF rule for real estate Ks?

A
  • leases of less than one year are usually not in SOF world
  • transactions related to real estate that are not transferring an interest in real property
73
Q

SOF

how is the SOF satisifed?

A

two ways to satisfy the SOF:
1. performance
2. writing

74
Q

SOF

how does one satisfy the SOF for a K that cannot be performed within a year?

(i.e. what must be done so as to render the SOF defense unassertable?)

A

for a service K that cannot be performed within a year, the SOF defense can no longer be asserted if EITHER side fully performs

NOTE: past performance of a services K does not satisfy the SOF

75
Q

SOF

how do you know if a writing satisfies the SOF?

A

doesn’t have to be a formal K, but the writing must cover the fundamental facts:
* show that a K has been made
* identify the parties AND
* contain the essential elements of the deal

it also must be signed by the person against whom it is being asserted

76
Q

SOF

how might a real estate K satisfy the SOF?

A

a signed writing related to the real estate transaction will satisfy the SOF

PART performance of a real estate contract can satisfy SOF if any TWO of the following three elements are met (even in the absence of a signed writing):
1. possession
2. payment
3. improvements to the land

77
Q

SOF

how can the SOF be satisfied in UCC world?

A
  • signed writing can satisfy SOF for UCC (needs quantity but not necessarily price). K is only enforceable under the SOF for the quantity specified within the signed writing
  • Part performance of the K will satisfy the UCC but only for the quantity delivered and accepted
  • judicial admission – a statment in a pleading or during testimony can satisfy SOF for UCC
  • failure to object to a conirming memo within 10 days will satisfy SOF, but only if BOTH parties are merchants
  • custom-made goods are exempted from the SOF. the maker can thus satisfy SOF as soon as it makes a substantial beginning toward the manufacturing of the goods
78
Q

SOF

what is required to authorize an agent to form a K that is in SOF world?

A

a signed writing

this is known as the “equal dignity rule”

79
Q

SOF

when must a modification to an SOF K also satisfy the SOF?

A

ASK: would the deal, with the alleged modification, be in SOF world?

if so, then SOF requirements must be met for the modification

if not, then there is no SOF req even if the initial deal was in SOF world

don’t look at the modification alone

80
Q

performance & PER

what should you evaluate to determine if a contract has been performed?

A

PWCE –pizza with crawling escargot
* Parol evidence rule
* Warranties
* Conditions
* Excuse of performance obligations (impracticability, frustration of purpose, etc.)

81
Q

performance & PER

what is the parol evidence rule?

A

The parol evidence rule generally prevents a party to a written contract from presenting extrinsic evidence of a prior or contemporaneous agreement that contradicts the terms of the contract as written

82
Q

performance & PER

what kinds of oral or written statements does PER apply to?

A

if parties have reduced their K to a comprehensive writing, then earlier statements or writings related to this agreement are not part of the deal under PER

meaning earlier statements or writings are excluded as evidence

83
Q

performance & PER

does the PER apply to later written or verbal statements about the deal?

why or why not?

A

no, PER does not apply to later written or verbal statements about the deal

those are modifications

84
Q

performance & PER

what is complete / total integration?

A

the final written K expresses ALL terms of the agreement

85
Q

performance & PER

what is partial integration?

A

there is a final writing, but some terms are not included

86
Q

performance & PER

how to distinguish an agreement that is not integrated from one that is completely or partially integrated?

A
  • look for a merger clause (evidence of complete integration). merger clause does NOT mean that an agreement cannot be modified later
  • courts may also ask whether, under the circumstances, an extrinsic term of the agreement would be naturally omitted from the writing (if so, then the term might not violate PER and may be introduced as evidence if it does not contradict the writing
87
Q

performance & PER

name some exceptions to the PER. When might the PER not apply to bar earlier evidence?

A
  1. will not bar evidence relevant to a DEFENSE against contract formation
  2. even if a writing is completely integrated, a party can introduce evidence of a SECOND, SEPARATE deal
  3. even if a writing is completely integrated, a party may be able to introduce evidence of a prior communication that is designed to interpret an AMBIGUOUS TERM in the final agreement
88
Q

warranties

what is a warranty?

A

a warranty is a promise about a term in the K that explicitly shifts risk to the party MAKING the promise

89
Q

warranties

what is the purpose of a warranty?

A

a warranty is designed to ensure the other party that they have some protection without having to use traditional K defenses

e.g. if i sell you a jeep and we only discuss price, but no other terms, and the wheel falls off as you are driving away, can you get out of the deal? only if you can successfully employ a traditional defense like mistake, duty to disclose, etc. a warranty would allow you to get out of it without doing so (e.g. warranty that the jeep will run fine for the first 1000 miles)

90
Q

warranties

what are the three types of warranties that might arise, and in which universe (CL vs UCC) is each warranty?

A
  1. express warranty, UCC
  2. implied warranty of merchantability, UCC
  3. implied warranty of fitness for a particular purpose, UCC
91
Q

warranties

what is an express warranty?

A

an express warranty is a promise that affirms or describes the goods and is part of the basis of the bargain–UNLESS the statement is merely the seller’s opinion

this includes the use of a sample or model – that creates an express warranty that the good(s) sold will be like the sample

92
Q

warranties

when is the implied warranty of merchantability triggered?

what does it warrant?

A

the implied warranty of merchantability is triggered ONLY when the seller is a merchant dealing in the goods at issue

it warrants that the goods are fit for ordinary commercial purpose / use.

93
Q

warranties

can a seller disclaim the implied warranty of merchantability?

A

yes, a merchant seller can disclaim the implied warranty of merchantability but only if it is very clearly done:

  • look for VERY conspicuous language if in writing
  • look for the term “merchantability” (including in oral statements)

other methods of disclaim:
* buyer’s inspection of the goods or refusal to do so (but only for defects that inspection would reveal)
* expressions like “as is” or “with all faults”
* course of dealing, course of performance, and trade usage

94
Q

warranties

when is the implied warranty of fitness for a particular purpose triggered?

what does it warrant?

A

this is triggered when a buyer relies on a seller’s expertise to select a spl type of good that will be used for a spl purpose

it warrants that the goods will satisfy the spl purpose

seller does not need to be a merchant

95
Q

warranties

can the implied warranty of fitntess for a particular purpose be disclaimed?

A

yes. the seller can disclaim the implied warranty of fitness for a particular purpose but the disclaimer must be
* conspicuous
* in writing

96
Q

conditions

what is a condition?

A

a condition is another way to shift risk by stating that one party’s contractual obligation will only kick in if some future event takes place

97
Q

conditions

what are the two kinds of conditions?

provide an example of the each type

A
  1. express conditions –an example of an express condition is a satisfaction contract
  2. implied conditions –most important implied condition is the constructive condition of exchange
98
Q

conditions

how are express conditions created and what is the standard to fulfill them?

A

express conditions are created by language in the K

an express condition must be strictly satisfied

99
Q

conditions

when and how may a condition be waived?

A

a party receiving the protection of a condition may waive the condition by words or conduct.

the condition may also be waived it the other party wrongfully interferes with or hinders the occurence of the condition. judged by good faith standard

the rest of the K would still be valid!

100
Q

conditions

what is the constructive condition of exchange?

A

the CCE is when one party’s performance is conditioned on the other side’s performance

101
Q

conditions

under common law, when is the CCE satisfied?

A

under common law, the doctrine of substantial performance satisfies CCE if:
* there is not a material breach AND
* if the failure is not willful

102
Q

conditions

if the nonbreaching party recovers damages for deficiencies, when they must pay for substantial performance?

how are these damages measured and/or limited?

A

yes –if payment is required because the other party substantially performed and the deficiency is minor, the nonbreaching party can recover damages for the deficiency.

  • usually measured as the cost to complete the performance
  • sometimes limited to the diminution in market value
103
Q

conditions

when a party fails to meet CCE due to a material breach, can they get paid anything?

A

not in K

but maybe in quasi-contract

104
Q

conditions

can a party who performs but fails to satisfy an express condition get paid?

why or why not?

A

no, not in K and usually not in quasi-contract

usually express conditions must be strictly satisfied

105
Q

performance in UCC

what is the standard for performance under the UCC?

A

perfect tender

106
Q

performance in UCC

what does perfect tender require?

A
  1. perfect goods
  2. perfect delivery
107
Q

performance in UCC

buyer’s right to revoke:
when may a buyer revoke acceptance of goods?

A

a buyer may revoke an acceptance of the goods if the goods seem OK when delivered but a defect is discovered within a reasonable time

108
Q

performance in UCC

seller’s right to cure:
when does the seller have this right?

A

if S fails to tender perfect goods AND there is time left on the contract OR the S had reasonable grounds to believe that B would accept a replacement, then B must give S a chance to cure the imperfect tender

109
Q

performance in UCC

what is the default method of delivery under UCC?

A

one delivery of the goods

110
Q

performance in UCC

in UCC, when might the requirement of one, single delivery of goods be excepted?

does B have any rights to reject delivery under this exception?

A

the UCC allows for installment contracts, where B and S agree to a series of deliveries in separate lots)

B can reject a specific delivery that is not perfect ONLY when there is substantial impairment in the installment that CANNOT be cured
(e.g. a 15-min delay for a delivery probably does not qualify)

111
Q

performance in UCC

what are the three main kinds of tender / delivery?

A
  1. tender at S’s place of business
  2. shipment K
  3. destination K
112
Q

performance in UCC

what is required of the parties when tender is at the seller’s place of business?

A

S just needs to give the goods to B

113
Q

performance in UCC

what are the requirements for a shipment contract?

A

[F.O.B. Seller’s place of business]
S must:
1. get goods to a common carrier
2. make arrangements for the delivery AND
3. notify B

risk of loss during delivery rests w B

114
Q

performance in UCC

what are the requirements for a destination K?

who bears the risk of loss (typically)?

A

[F.O.B. Buyer’s place of business]
S must:
1. get the goods to B’s business
2. notify B

risk of loss during delivery rests w S

115
Q

performance in UCC

what are the steps required to determine which party bears the risk of loss at a given moment?

A
  1. have the parties already dealt with risk problem in K? if so, K controls
  2. has either party breached the K? If so, breaching party bears risk of loss, even if the breach is totally unrelated to delivery damage
  3. what kind of delivery K was it? (shipment v. destination)
  4. in all other cases –was the seller a merchant? if YES, then risk of loss stays with S until B receives the goods. if NO, then risk of loss moves to B when S tenders the goods
116
Q

excuses

what are the 4 main reasons why performance may be excused?

A
  1. impracticability and impossibility
  2. death after K (usually not)
  3. frustration of purpose
  4. performance is excused bc initial K was modified or canceled
117
Q

excuses

when does the impracticability excuse arise?

A

impracticability arises when an unforeseen event in which the non-occurrence of the event was a basic assumption of the K, AND the party seeking discharge was not at fault
look for something that hinders ABILITY to perform, not just COST to perform

  • e.g. performance becomes illegal after K is formed
  • e.g. subject matter of K is destroyed
  • e.g. in a services K with a spl person, the performing party dies or is incapacitated
118
Q

excuses

what happens if a person dies before executing their contractual promise?

A

dying usually does not excuse liability – estate will be on the hook

but if there was something special about the person performing on the K, such that it makes no sense to continue if they die, then maybe performance is excused

119
Q

excuses

when does frustration of purpose arise?

A

frustration of purpose arises when performance can occur but the something happened that undermined the entire reason for the creation of the K

120
Q

excuses

when can both parties just walk away from a K and say forget it?

A

as long as there is some performance remaining undone from each side, parties can walk away by mutual agreement

if there is no performance remaining from one side or another, then there is no consideration for this modification

121
Q

accord & satisfaction

what is accord and satisfaction?

A

this arises when the parties to an earlier K agree that performance will be satisfied instead by the completion of a different performance

accord is the new performance
satisfaction is the excusal of the initial performance obligationy

122
Q

accord & satisfaction

how might a nonbreaching party seek remedy if an accord is not performed?

why?

A

nonbreaching party can sue EITHER on the original K OR the new promise

this is bc usually, the breaching party would have had the OPTION of satisfying the K by doing the original performance or the new performance (by contrast, a K modification is more absolute and non-elective)

123
Q

novation

when does a novation arise?

A

a novation arises when BOTH parties agree that a substitute person will take over contractual obligations

original promisor is excused from performance – only new substitute person can be sued in breach

124
Q

remedy

remedy at common law:
CCE

A

if one party fails to substantially perform, other side may withhold their own performance

cannot withhold payment if other side has substantially performed, but may be able to get recover for the deficiency

125
Q

remedy

remedy at UCC:
CCE

A

UCC requires perfect tender. otherwise, S is in breach

material breach doctrine applies in installment sales, though

126
Q

remedy

what is anticipatory repudiation?

A

anticipatory repudiation is when one side says, CLEARLY AND UNEQUIVOCALLY, before performance is due, that they are not going to perform on the K?

127
Q

remedy

what are the remedial options for the other party if one party clearly & unequivocally repudiates?

A
  1. treat the repudiation as a breach and sue immediately for damages UNLESS you’ve completed your performance and are just waiting for payment. then, cannot sue early
  2. ignore the repudiation, demand performance, and see what happens
128
Q

remedy

can a party retract its repudiation?

A

yes

UNLESS the other side has:
* commenced a lawsuit OR
* acted in reliance on the repudiation (by materially changing their position)
*

129
Q

remedy

what happens if a party is equivocal about their intent to perform?

A

at both CL and under UCC, if a party has reasonable grounds for insecurity about the other side’s intent to perform, the party can demand assurances and suspend their own performance until such assurances are provided. failure to render assurances within a reasonable period of time may be treated as a repudiation

under the UCC, the demand must be in writing and the “reasonable time” to render assurances is limited to 30 days.

130
Q

remedy

what is the goal of expectation damages?

how are they measured?

A

goal is to put a party in the same economic position as it would be in had the contract been performed as promised

ASK: what would the party have earned if the K had been performed as promised? to what $ amount were they entitled under the K?

COMPARE: value of performance without breach to value of performance with breach

131
Q

remedy

what are the limits on expectation damages?

A
  1. inability to prove with reasonable certainty
  2. unforeseeable consequential damages
  3. failure by nonbreaching party to mitigate growth of damages
132
Q

remedy

what is the Hadley rule?

A

Hadley rule –unforeseeable consequential damages are not recoverable unless the breaching party had some reason to know about the possibility of these special damages at the time of contracting

133
Q

remedy

differentiate between general & consequential damages

A

general –type of loss that almost anyone would incur from the breach. this includes incidental damages (cost of storing rejected goods, finding a new B, finding a replacement vendor)

consequential damages –losses that are unique or spl to this particular P

134
Q

remedy

what does mitigation mean in the context of remedy?

what happens if a party fails or refuses to mitigate?

who bears the burden of proving a mitigation failure?

A

mitigation means that a breached-against party must take reasonable steps to reduce dmgs from breach

if a party fails/refuses to mitigate, law will calculate dmgs as if the party did mitigate

D bears the burden of proving a mitigation failure

135
Q

remedy

what are lost volume profits?

under what category of damages do they fall?

A

LVP may arise when:
1. the paying party breaches, and the selling party needs to mitigate by reselling the goods or services to another person AND
2. the S is a retailer who sells this type of product all the time

(because S could have sold an additional set of that product in the same time period - no set number of products to sell in that time)

136
Q

remedy

what is economic waste in the context of expectation damages?

how could it be fixed?

A

expectation damages are usually calculated by the cost to complete the job

but sometimes the cost of completing the job will dramatically overcompensate P. this is economic waste

so one solution is that damages would be calculated by diminution in market value (DMV)
* ASK: how much lower is the mkt value of the actual product v. the expected product? that would be the remedy
* breaching party must normally have acted in an innocent and unintentional manner for DMV damages

137
Q

remedy

what is the goal of reliance damages?

how are they measured?

A

the goal of reliance damages is to put a party in the same econoimc position that it would be in if the K had never been created in the first place

ASK: what loss has P incurred that would never have taken place but for the breached K?

NOTE: a party cannot recover both expectation and reliance damages

138
Q

remedy

what is the goal of restitution damages?

A

the goal of restitution damages is to give P an amount = to the economic benefit that P conferred on D

139
Q

remedy

what are liquidated damages?

when might courts award punitive liquidated damages?

A

liquidated damages are damages stated in K as an explicitly negotiated amount due upon breach

courts will only award punitive liquidated damages if:
1. the amount of liquidated damages was reasonable at the time of contracting AND
2. actual damages from breach would be uncertain in amount and difficult to prove

140
Q

remedy

when are punitive damages allowed in contract law?

A

almost never
maybe in the case of a breach that looks like a tort (fraud or something very extreme)

141
Q

remedy

what does equitable relief look like in contract law?

when might it be awarded?

A

equitable relief is the exception, not the norm, in K law

it might be awarded ONLY if monetary damages are considered inadequate for some reason

142
Q

remedy

what are two key presumptions relevant to specific performance being awarded as a remedy?

A

specific performance is presumptively available for real estate transactions (b/c each tract of land is considered unique in some sense)

specific performance is presumptively NOT avialable for Ks of personal service (risk of involuntary servitude, etc.)
* BUT a court might rarely grant an injunction prohbiting a breaching party from performing similar services for a competitor for a reasonable period of time (Lumley doctrine)

143
Q

remedy

what is the right of reclamation, and how would a seller assert this remedy?

A

the right of reclamation arises when an unpaid S tries to reclaim goods that were sold on credit when B is insolvent

following facts must be present for S to assert right of reclamation:
1. B is insolvent at the time of reciept of the goods
2. S must demand the return of the goods within 10 days of receipt (or within a reasonable period of time if B misrepresented their insolvency to S in writing within three months before delivery)
3. B still has the goods

144
Q

3d party beneficiaries

what are the two main types of 3d party beneficiaries and how do their rights differ?

A

intended beneficiaries have the right to sue

incidental beneficiaries do not

to differentiate, ASK: did the initial counterparties (promisor and promisee) intend to convey enforcement rights to the 3d party in the event of a breach?

145
Q

3d party beneficiaries

when does a creditor beneficiary arise?

A

a creditor beneficiary arises when the promisee strikes a deal with the promisor in order to repay some earlier debt TO the 3d party

146
Q

3d party beneficiaries

when does a donee beneficiary arise?

A

a donee beneficiary arises when there is no preexisting obligation, but the promisee clearly intends to confer a gift of enforcement on a 3d party

147
Q

3d party beneficiaries

what causes a 3d party’s rights to vest (and, by extension, what prevents the counterparties from revoking or modifying the 3d party’s right to enforce the K?)

A
  1. beneficiary has detrimentally relied on the rights;
  2. beneficiary manifests assent to the contract; OR
  3. beneficiary has filed a lawsuit to enforce the contract
148
Q

assignment and delegation

what is assignment

A

assignment is the transfer of RIGHTS under K

149
Q

assignment and delegation

what is delegation?

A

delegation is the transfer of duties under a contract –basically when a party to a contract “outsources” their duties under the K

150
Q

assignment and delegation

how would one distinguish between assignment and intended 3d party beneficiaries?

A

in an assignment, by contrast, you usually see two distinct steps:
1. formation of K
2. transfer of the benefits of K from an original counterparty to some 3d party (AFTER the formation of the initial K)

so assignees are incorporated into the contract AFTER its original formation, whereas intended 3d party beneficiaries are a part of the K from the beginning

151
Q

assignment and delegation

what is the practical difference between a K that prohibits assignments or invalidates assignments?

A
  • if a K prohibits assignments, the assigning party breached when they made the assignment—but 3d party assignee can still recover from the guarantor
  • if a K invalidates assignments, the 3d party cannot recover from the guarantor bc there is no power or right to assign
152
Q

assignment and delegation

what happens if someone assigns the same rights twice?

A

if the rights were assigned** WITHOUT consideration** [gratuitous assignment], the assignment is generally revocable and the LAST assignement controls.
* LIMITED EXCEPTION – gratuitous assignments are generally revocable. However, a gratuitous assignment cannot be revoked if (i) the obligor has already performed, (ii) promissory estoppel applies, or (iii) a document evidencing the assigned right or a written assignment signed by the assignor was delivered to the assignee

if the rights were assigned FOR consideration, then the first assignment for consideration is typically IRREVOCABLE and will hold
* LIMITED EXCEPTION –a later assignment will take priority if the second assignee does not know of the initial assignment and is the first to obtain payment or a judgment

153
Q

assignment and delegation

when might delegation of duties NOT be acceptable?

A

delegation is usually acceptable
UNLESS the K prohibits delegation
OR
the other party has a spl interest in having a specific individual perform (“special interest exception”)

can usually delegate without the other party’s consent

154
Q

assignment and delegation

when might a delegatee be liable for breach?

A

a delegatee may be liable for breach if they receive consideration from the delegator

QUESTION TO CLARIFY: in this situation are BOTH the delegator and the delegatee liable for breach or just the delegatee?

155
Q

CL v. UCC

promise to hold offer open, CL v. UCC

A

CL: must be supported by consideration (option K)

UCC: No consideration required when merchant gives written & signed assurance (ie, firm offer)

156
Q

CL v. UCC

K formation, CL v. UCC

A

CL: must have O + [A with knowledge of that O]

UCC: any manner sufficient to show agreement – parties intended to K + reasonably certain basis for giving remedy

157
Q

CL v. UCC

acceptance validity, CL v. UCC

A

CL: mirror-image rule, acceptance only valid if it exactly matches the terms of the offer

UCC: effective even w/ new or contradictory terms

158
Q

CL v. UCC

required / essential terms, CL v. UCC

A

CL: description of service or property; price; quantity; parties; time for performance

UCC: description of goods, quantity or certain formula for calculating quantity (in the case of req. or output K)

VERIFY

159
Q

CL v. UCC

bilateral modification, CL v. UCC

A

CL: must be supported by new consideraiton

UCC: no consideration required if made in good faith

160
Q

CL v. UCC

unilateral discharge, CL v. UCC

A

CL: death; destruction of subject matter

UCC: impracticability

??? this doesn’t seem right

161
Q

CL v. UCC

suing for breach, CL v. UCC

A

CL: must be in privity or intended beneficiary

UCC: no privity/beneficiary requirement

162
Q

how can a buyer accept goods under the UCC?

A

(i) expressly stating acceptance
(ii) using the goods
(iii) failing to reject the goods

if the tender was nonconforming, the buyer may reject all or part of the goods; but is required to pay for the value of the goods accepted

163
Q

what does mutual assent mean in the context of K law?

A

mutual assent refers to an agreement by all parties to the contract

if there is a misunderstanding as to an essential term of the contract, the parties are not in mutual assent because they each thought that they were agreeing to different things

164
Q

when can a repudiation of acceptance be retracted?

A

a repudiation of acceptance can be retracted when the other party has not canceled the contract or materially changed position

165
Q

what kinds of contracts (of $500 or more) are excused from SOF? (i.e. when is a writing NOT required?)

A
  • custom-made goods
  • goods are not suitable for sale to others in the seller’s ordinary course of business
  • the seller has made either a “substantial beginning of their manufacture or commitments for their procurement.”

if any of the above exist, the contract can be enforced in full, even if the disputed amount isn’t memorialized in the writing (which might reflect a lower amount)

166
Q

when is an act illegal for the purposes of contract law?

A

an act is illegal for contract law purposes if it contravenes a statute (or ordinance, etc.) OR a rule of law

167
Q

accord and satisfaction

if a claim is subject to dispute, how can it be discharged by the person against whom the claim is asserted?

A
  • person must tender a negotiable instrument (e.g. check)
  • accompanied by a conspiculous statement that the instrument was tendered in full satisfaction of the amount owed AND
  • the claimant obtains payment of that instrument

justice (6 decks)

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