Contracts Flashcards
Offer
offeror’s manifestation of willingness to enter a bargain on specified terms
What must an offer be to be valid
reasonably certain, must be communicated to the offeree, and must not have terminated prior to acceptance
What must an offer generally include
- identify the parties
- describe the subject of the agreement
- include some type of price
Termination by lapse
An offer terminates if not accepted
1. by any specified deadline or
2. within a reasonable amount of time
What affect does the offeror’s death have on an offer
Terminates the offer, unless it was a valid option offer
Acceptance
the offeree’s manifestation of assent to the offer
How can someone accept an offer?
Unless otherwise stated in the offer, an offer can be accepted through any reasonable method
Mailbox Rule
a mailed acceptance is effective when it is properly dispatched (mailed with the correct address and postage)
Common law mirror image rule
to be effective, an acceptance must be on terms identical to those contained in the offer
Acceptance containing different terms; Non merchant
terms do not become part of the contract unless the offeror expressly agrees to them
Acceptance containing additional terms; merchants
the additional terms become part of the contract unless
1. the offer expressly limits acceptance to the offer’s terms
2. the additional terms materially alter the contract
3. the offeror objects to the additional terms within a reasonable time
Acceptance containing different terms; merchants
Apply the knock-out rule and neither terms become part of the contract and UCC Gapfillers will apply
Contract essential terms
subject matter, quantity, duration
Consideration
bargained-for exchange of promises, performances, or both
Promissory estoppel
- the promisor, when making the promise, should have reasonably expected that the promisee would change position in reliance on the promise
- the promisee actually changed position in reliance on the promise
- the change in position must have been to the promisee’s detriment
- injustice can be avoided only by enforcing the promise
Preexisting duty rule
a promise to do something a party is already legally obligated to do is not consideration
UCC modification rule
an agreed upon modification made in good faith is enforceable without consideration
UCC Firm offer
- offer is made by a merchant
- in a signed writing
- and help open no longer than 3 months
Is a promise to pay an existing debt consideration?
Yes if the amount is in question. If the debt is a specific uncontested amount, then it is not consideration
Contracts under the SoF
- Marriage
- Year
- Land
- Executor
- Goods $500 or more
- Suretyship
SoF signature requirement
any mark placed on the writing that identifies the signer and manifests intent to adopt the writing
Confirmatory memos between merchants
exception to SoF
1. receiving merchant must receive the writing within a reasonable time
2. the writing must be sufficient to bind the sending party
3. the receiving merchant must have reason to know the writing’s contents
If these three are met, then SoF is satisfied unless the receiving merchant objects within 10 days after receipt
Part Performance exception
traditionally applies to real estate contracts
1. party takes clear, definite, visible, and reasonably continuous possession over property AND
2. either makes improvements to the land OR pays all or part of the purchase price
Specially manufactured goods exception
SoF does not apply if
1. the goods are not suitable for sale to others and
2. the seller has begun manufacturing the goods or made a commitment to procure the goods
3. before the buyer backs out
Misrepresentation
an assertion not in accord with the facts
Misrepresentation makes a contract VOIDABLE if
1. the party’s assent is induced by the untrue assertion
2. the assertion is fraudulent or material and
3. the party’s reliance on the fraud was justified
mutual mistake renders a contract unenforceable if?
- the mistake involves a basic assumption
- the mistake has a material effect on the agreed upon exchange of performances
- the mistake does not involve a risk that was assumed under the contract
A contract is unenforceable as illegal if
- performance would constitute an illegal act
- any promised consideration is illegal
- a party’s duty to perform hinges on an illegal condition
- the contracts object or purpose is illegal
- or the promise itself is unenforceable under applicable law
unconscionability
unfair terms coupled with an unfair bargaining process
Contract condition
an event that if it occurs or fails to occur, triggers a party’s duty to perform
constructive condition
a condition that is implied based on the facts and circumstances of the transaction or from the law
oral conditions exception to the parol evidence rule
parties may use extrinsic evidence to prove the existence of an oral condition
Doctrine of prevention
excuses the non occurrence of a condition if a party’s conduct prevented the condition for occurring
Express warranty
a seller’s overt representation that goods will conform to certain specifications. MUST FOR PART OF THE BASIS FOR THE BARGAIN
Implied Warranty of Merchantability
applies to all merchants selling goods and requires goods to be fit for their ordinary purpose
Implied Warranty of Fitness for a Particular Purpose
- seller knew or had reason to know that the buyer wanted the goods for a specific purpose
- buyer relied on the seller to provide a suitable good
How to waive the IWM
- the warranty must specifically mention merchantability
- does not have to be in writing, but if it is, it must be conspicuous
How to waive IWFPP
- must be in writing
- must be conspicuous
Changed circumstances excuse performance if
- An event occurs that makes the contract impossible, impracticable, or substantially frustrates the contracts purpose
- the event is one that, if the party would have known would occur the party never would have entered into the contract
- the event must not be the party’s fault
- the party must not have assumed the risk that the event would occur
(Perfect example, Bull breeder buys a bull and the bull turns out to be sterile)
When does risk of loss pass from seller to buyer?
- For shipment contracts, when seller delivers the goods to a third party shipping company
- For destination contracts, when the seller delivers the products to the buyer at the destination
Accord
an agreement to satisfy and discharge an obligation in a manner different from the original contract. REQUIRES NEW CONSIDERATION
Anticipatory Repudiation
one party unequivocally communicates, before performance is due, that he party is unwilling or unable to perform
Retraction of repudiation
repudiating party puts the non-repudiating party on notice that they intend to perform
when is a repudiation final and unable to be retracted
- if the non repudiating party materially changes position in reliance on the repudiation
- or if the party considers the repudiation to be final
Demand for adequate assurances
allows a party to suspend performance and demand adequate assurances that the other party will perform if
1. the party has reasonable grounds to believe the other party will not perform
2. and the breach would substantially impair the value of the contract
breach
any failure to render full performance when due
when is a non-breaching party’s duty to perform discharged
- the breaching party fails to cure the breach within a reasonable time after performance is due
- time is of the essence
- cure is impossible or apparently not forthcoming
- repudiation
material breach factors
- loss of the non breaching party
- the extent to which the non breaching party could be compensated for any detriment
- any disproportionate forfeiture by the breaching party
- likelihood of cure
- any absence of good faith or fair dealing by the breaching party
perfect tender rule
goods that fail to conform to the contract in anyway, no matter how minor, results in a breach
Buyers options if a seller breaches
- reject all goods
- accept all goods
- reject some and accept others
incidental damages
costs or losses that the breaching party should reasonably have foreseen would arise from their breach
consequential damages
costs and losses that arise from special circumstances the breaching party knew or should have known of
Buyer’s remedies under the UCC
- recover damages for non delivery
- cover by acquiring substitute goods
- recover any specifically identified goods
- if appropriate, obtain specific performance or replevin
seller’s remedies under the UCC
- recover damages for non acceptance
- resell and recover damages
- withhold or stop delivery of goods
- cancel the contract
reliance damages
damages that seek to return the injured party to the position he would have been in had he not relied on the promises of the breaching party
third party beneficiary
not a party to the contract but receives some benefit from the contract
intended beneficiary’s rights?
right to enforce the contract as if they were a party
Can parties modify or terminate an intended beneficiary’s rights?
Yes, but cannot do so without the beneficiary’s consent if they have
1. reasonably changed position in reliance on the contract
2. sued to enforce performance
3. OR manifested assent to the promised performance
