Contracts Flashcards
When a transaction involves BOTH the sale of goods and services, what test applies to determine which law governs?
The Predominate Purpose Test.
What is the predominate purpose test?
The test used to determine whether the UCC or Common Law (services) applies.
What is required for a valid offer?
- ) Offer: objective manifestation of a willingness by the offeror to enter into an agreement that creates the power of acceptance in the offeree.
- ) Acceptance:
What are the requirements of the UCC Firm Offer Rule?
i) The offeror is a merchant;
ii) There is an assurance that the offer is to remain open; and
iii) The assurance is contained in a signed writing from the offeror.
What is the definition of a merchant?
a merchant includes not only a person who regularly deals in the type of goods involved in the transaction or otherwise by his occupation holds himself out as having knowledge or skill peculiar to the practices or goods involved in the transaction, but also any businessperson when the transaction is of a commercial nature
What is required for an Acceptance?
An acceptance is an objective manifestation by the offeree to be bound by the terms of the offer. Only a party to whom an offer is extended may accept or, if the offer is extended to a class, a party who is a member of the class may accept.
What is a bilateral contract?
one in which a promise by one party is exchanged for a promise by the other. The exchange of promises is enough to render them both enforceable. An offer requiring a promise to accept can be accepted either with a return promise or by starting performance. Commencement of performance of a bilateral contract operates as a promise to render complete performance.
What is a unilateral contract?
one in which one party promises to do something in return for an act of the other party (e.g., a monetary reward for finding a lost dog). Unlike in a bilateral contract, in a unilateral contract, the offeree’s promise to perform is insufficient to constitute acceptance. Acceptance of an offer for a unilateral contract requires complete performance
Once performance has begun, the offer is irrevocable for a reasonable period of time to allow for complete performance unless there is a manifestation of a contrary intent. However, the offeree is not bound to complete performance. In addition, while the offeror may terminate the offer before the offeree begins to perform, expenses incurred by the offeree in preparing to perform may be recoverable as reliance damages
What evidence does the parol evidence rule allow, and what does it disallow?
The parole evidence rule applies to contracts that are “partial integration” (no merger clauses). If the evidence supplements the writing, it is allowed in. But if it contradicts the writing, it is not allowed.
So it can be for something additional, but not something contrary to what is in the writing.
Under an installment contract, what is the standard used for a buyer’s ability to reject an installment shipment?
The Substantial Impairment Standard.
If the non-conforming shipment under the k substantial impairs whatever it is the buyer is trying to accomplish.
For a new business to recover “lost profit” damages, what is the new business required to show?
The amount of damages with reasonable certainty.
What is the first thing to discuss on a Contracts Essay?
The applicable law in the jurisdiction
What contracts does the UCC govern?
All contracts involving the sale of GOODS
What contracts does Common Law Govern?
All contracts involving the sale of SERVICES
What is a Mixed Contract?
A contract that includes both goods and services, whichever one predominates will determine the governing law.
What is a Merchant under the UCC?
1.) A merchant includes not only a person who regularly deals in the type of goods involved in the transaction or otherwise by his occupation holds himself out as having knowledge or skill particular to the practices or goods involved in the transaction, but also in some instances any businessperson when the transaction is of a commercial nature.
When does the “Battle of the Forms” apply?
When both parties are merchants?
Which warranty does a merchant grant solely because they are a merchant?
Warranty of Merchantability.
What is required for a contract to be valid?
- ) Offer
- ) Acceptance
- ) Consideration
What is required of an offer?
- ) A promise
- ) Terms
- ) Communication to the offeree
What terms must be present in a Common Law Contract?
All essential Terms:
- ) Parties
- ) Subject Matter
- ) Price
- ) Quantity
What terms must be present in a UCC Contract?
Quantity is the most important, a court will gap fill other missing terms.
Are advertisements offers? Generally
Advertisements are generally not offers, unless they are specific and limit who may accept the offer. If an ad is presented in the facts, you must discuss it as a potential offer
After you discuss the “Offer,” what comes next?
Is it a bilateral or unilateral offer?
What is a bilateral contract?
One in which parties exchange promises; it can be accepted by a promise OR by the beginning of performance.
What is a unilateral contract?
One in which the offeror makes a promise and the offer must perform; it can only be accepted by complete performance.
Are offers generally revocable?
Yes, but there are some circumstances in which they are not revocable.
What two situations are offers not revocable? (Irrevocable(
- ) Common Law Option Contract: An offer where the offeror promise to hold the offer open for a certain period of time. The offer must pay consideration to the offeror to hold the offer open.
- ) UCC Firm Offer: An offer in WRITING, where the offeror is a merchant and promises to hold the offer open for certain period of time. (Max 90 days). No consideration required. Must be SIGNED.
What 5 ways can an offer be terminated?
- ) Revocation of the Offer
- ) Rejection by Offer
- ) Counter-Offer by Offer
- ) Lapse of time
- ) Death of the offeror
How can an offer by revoked?
An offer can be terminated if the offeror revokes the offer prior to acceptance.
Revocation is effected when RECEIVED.
How does a Counter Offer by the offer act as a revocation?
If the offer counter-offers with different terms, the original offer will be deemed to be terminated.
A “mere suggestion” of a different term, or a “mere inquiry” about changing the terms is not a counter-offer and will not terminate the original offer.
What is an Acceptance?
The objective manifestation by the offer to be bound by the terms of the offer.
What is the rule for Manner of Acceptance?
Any reasonable means of acceptance is allowed; unless the offer limits the means of acceptance
Silence is generally not acceptance, unless the offer has reason to believe that silence will constitute acceptance.
What is the (Common Law) Mirror Image Rule?
The acceptance must mirror the terms of the offer; any changes/additions to the terms constitute a rejection of the original offer and a counter offer.
Does the mirror image rule exist in the UCC?
NO.
What if both parties are merchants and the offer and acceptance contain different terms?
The contract WILL include the changes or additions unless (1) they materially alter the terms of the original offer; (2) the original offer limits acceptance to the terms of the offer, or (3) the offeror has previously objected, or objects to the changed or new terms.
What is the Mailbox Rule?
Under the Mailbox rule, an acceptance is valid when placed in the mail
Exception: if there is an option contract or firm offer, the acceptance is valid when received and must be received before the offer expires.
What is the “Special Issue” regarding the Mailbox Rule?
If a party mails a rejection of an offer and then mails an acceptance to the
offer, the first communication to be received is effective. The recipient of the
communication does not have to read the communication for it to be effective!
What does consideration require?
Consideration requires a bargained-for change in the legal position between parties.
Mostcourts find consideration if there is a detriment to the promisee, regardless of the benefit to the
promisor.
A minority of courts look to either a detriment or a benefit, not requiring both.
What is a Legal Detriment?
A legal detriment can take the form of a promise to do/not do something,
or performance/refraining from performance.
Does a court consider Adequacy of Consideration?
A court will not look at the adequacy of the consideration (e.g.,
the monetary value of the items being exchanged).
What is the pre-existing duty rule?
A promise to perform a preexisting legal duty will not qualify as consideration because the promisor is already required to perform (no additional legal
detriment is being incurred) by the promisor.
Exceptions:
* new or different consideration promised
* promise is to ratify a voidable obligation
* preexisting duty is owed to a third person rather than the promisor
* there is an honest dispute as to the duty
* unforeseen circumstances sufficient to discharge a party, or under modern view, if the modification is fair and equitable in view of circumstances not anticipated when the contract was made
How does the Common Law deal with Past Consideration?
Under the common law, a legal detriment incurred in the past does not constitute
consideration because it was not bargained for and it was not in exchange for a legal
detriment in return.
What is Moral Consideration?
Moral Consideration (modern trend): A promise not supported by consideration may be enforceable if it is made in recognition of a significant benefit previously received by the promisor from the promisee.
What is Promissory Estoppel? (Consideration Substitute)
If a promise is made by a party, but there is not consideration provided by both sides,
the promise will still be enforceable if certain conditions are met.
What conditions give rise to Promissory Estoppel?
- ) The promisor should reasonably expect the promise to induce action or forbearance;
- ) The promise actually induces action or forbearance; AND
- ) Injustice can be avoided only by enforcement of the promise.
What are the damages awarded under promissory estoppel usually limited to?
Reliance damages (money spent on reliance of the promise).
When a party asserts a defense to formation of a contract, what are they really asking?
The court to find that no contract was formed between the two parties at all.
What are the 5 Defenses to Formation
- ) Mistake
- ) Fraudulent Misrepresentation
- ) Undue Influence
- ) Duress
- ) Capacity
What is a Mutual Mistake? (Defense to Contract)
both parties are mistaken as to an essential element of the contract, the contract
may be voidable by the adversely affected party.
What are the two remedies to mutual mistake in contract?
- ) Reformation - if there was a PRIOR AGREEMENT, oral or written, by the parties. There was an agreement by parties to put that agreement into writing; and as a result of the mistake, there is a difference between the prior agreement and the writing.
- ) Recission: If reformation is available to cure the mutual mistake, neither party can void (rescind) the contract. If reformation is not available, the contract may be voidable if:
a.) A mistake of fact existing at the time the contract was formed
b.) the mistake relates too a basic assumption of the contract
c.) the mistake has a material impact on the transaction, AND
D.) the adversely affected party did not assume the risk of the mistake.
What is a unilateral Mistake?
When one party is mistaken as to an essential element of the contract.