Contracts Flashcards
Article 2 of the UCC
applies to transactions in goods.
Goods includes all things movable at the time of their identification to the contract for sale
UCC § 2-204(1) - k for the sale of goods may be made…
in any manner sufficient to show agreement, including conduct by both parties which recognizes the existence of such a contract
UCC Section 2-201(1)
a k for the sale of goods for the price of $500 or more is not enforceable by way of action or defense unless there is some writing sufficient to indicate that a contract for sale has been made between the parties and signed by the party against whom enforcement is sought.
where the k for goods is for a total price of $500 or more, it is subject to the writing requirement of UCC § 2- 201(1) unless an exception applies.
a k is not enforceable beyond the quantity of goods shown in the writing
When an contract will be enforceable against a supplier
under UCC § 2-201(1) the doc must be signed by the supplier
UCC § 2- 201(2) provides an exception that if the contract is between two merchants and within a reasonable time a writing in confirmation of the contract and sufficient against the sender is received and the party receiving it has reason to know its contents, it satisfies the requirements of subsection (1) against such party unless written notice of objection to its contents is given within 10 days after it is received.
UCC § 2-201(3)(a) causes a contract to remain enforceable if the goods are specially manufactured for the buyer and are not suitable for sale to others.
UCC §2-315 - Warranty of fitness for particular purpose
when a seller of goods has
1) reason to know both the buyer’s particular purpose for the goods and,
2) that the buyer is relying on the seller’s skill or judgment to select goods appropriate for that purpose,
the contract contains an implied warranty that the goods are fit for that purpose unless the warranty is excluded or modified as provided in UCC § 2-316
UCC § 2-316(2) - Instances where the implied warranty for fitness may be excluded
the implied warranty of fitness may be excluded by language that is sufficient for that purpose, so long as it is in writing and is conspicuous
conspicuous = so written, displayed, or presented that a reasonable person against which it is to operated ought to have noticed it
UCC § 2-316(3) - instances where the implied warranty for fitness may be excluded
unless the circumstances indicate otherwise, all implied warranties are disclaimed by expressions like “as is,” “with all faults,” or “other language which in common understanding calls the buyer’s attention to the exclusion of warranties and makes plain that there is no implied warranty.
Offer
when person communicates to another a statement of willingness to enter into a bargain, so made as to justify the other person in understanding that his assent to that bargain is invited and will conclude it
UCC § 2-606(1) - acceptance by buyer
when the buyer
(a) after reasonable opportunity to
inspect the goods, signifies to the seller that the goods conform to the contract or that the buyer will retain them despite nonconformity,
(b) after reasonable opportunity to inspect the goods, fails to reject them within a reasonable time, or
(c) does any act inconsistent with the seller’s ownership of the goods.
UCC § 2-608 - revocation of acceptance
1) revocation must occur w/in a reasonable time after the buyer discovers or should have discovered the ground for it.
2) the goods must fail to conform to the contract and that nonconformity must substantially impair the value of the goods to the buyer.
3) if the buyer accepted the goods without discovery of their nonconformity, the acceptance must have been reasonably induced either by the difficulty of discovery before acceptance or by the seller’s assurances.
Common law revocation of acceptance
an offer may be revoked by the offeror at any time before acceptance unless an option contract is created limiting the power of revocation.
An offer is revoked when the offeree “receives from the offeror a manifestation of an intention not to enter into the proposed contract.”
Rightful revocation triggers entitlement to damages under UCC §2-711
recover the purchase price + the buyer is entitled to the difference between the k price of the goods for which he contracted and their market price.
Consequential damages for losses arising from the nonbreaching party’s special circumstances only if the breaching party:
knew about the nonbreaching party’s special circumstances, or
could have reasonably forseen the harm, in light of the nonbreaching party’s special circumstances, that would result from a breach
Duty to mitigate when claiming damages
a party cannot recover damages for loss that the party could have by reasonable efforts
Affirmative steps to avoid loss are not required, however, if they would involve undue risk, burden, or humiliation.
Parole evidence rule
Whether the terms of an oral agreement that predates a written agreement are part of the resulting k is determined by application of the “parol evidence rule.”
parol evidence rule applies if a k has been reduced to a writing that is integrated
- completely integrated agreement is adopted by the parties as a complete and exclusive statement of the terms of the agreement, discharges prior agreements to the extent that they are within its
scope. - If the writing is only partially integrated (i.e., integrated but not completely integrated), it
discharges prior agreements only to the extent that the written agreement is inconsistent with the prior agreement
complete integration
writing = parties final agreement about all terms
no terms will be admitted into evidence
partial integration
writing = parties final agreement about some terms
consistent additional terms will be admitted to supplement (not contradict)
parol evidence rule does not apply to
1) formation defenses,
2) interpretation of a term,
3) failure of a cond precedent,
4) a clerical error, or
5) a later modification
FICCL
Common law contract modification
generally must be supported by consideration
exception: Restatement (Second) Section 89(a) consideration is not required if the modification is fair and equitable in view of circumstances not anticipated by the parties when the k was made.
Essential terms of a k under common law
parties
subject matter
price or other consideration
quantity
duration of k
time for each party’s performance
terms must be sufficently certain and definite for the court to determine the existence of a breach and give an apprpriate remedy
salary if employment k
A k is voidable for undue influence when…
assent stems from unfair or excessive persusasion by someone who dominates or holds a special relationship of trust and confidence with the assenting party
Under the doctrine of promissory estoppel, an offer is irrevocable for a reasonable period of time if:
1) the offeror reasonably expected to induce reliance on the offer before acceptance,
2_ the offeree reasonably relied on the offer, and
3) that reliance caused the offeree to suffer substanital detriment
Anticipatory repudiation occurs when…
a party clearly and unequivocally communicates (through words or conduct) that it does not intend to perform.
mere insecurity about a party’s ability to perform is not a repudiation, but it allows the other party to demand assurance of performance.
can be express or implied
Modifying existing contracts - traditional common law view
parties agreement
new consideration
modyifying existing contracts - modern common law view
parties agreement
new consideration unless modification is fair and equitable due to unanticipated circumstnaces
modifying existing contracts under UCC
parties agreement
good faith (honesty & observance of reasonable commerical standards of fair dealing)
new consideration not required
If a party whose duty to perform is subject to a condition precedent wrongfully prevents that condition from occuring (viol of implied duty of good faith/fair dealing) then the condition will be…
excused and the party must perform
if a debt is disputed in good faith then the debtor can…
offer to satisfy the debt by giving the creditor a check w/ a conspicuous “payment in full” notation.
if the debt is liquidated (certain and undisputed in amount) then it cannot be satisfied by a check for a lesser amount even if creditor cashes the check
Non-occurence of a condition precedent may be excused if…
the party who benefits from the cond waives it by words or conduct.
waiving party cannot retract waiver if the other party has detrimentally relied on it
Substantial impairment rule
applies to installement ks
allows a buyer to reject tender of nonconforming goods when the non conformity substanitlly impairs the value of that shipment and cannot be cured
expectation damages
normal measure of damages for breach of k
loss of value of breaching party’s performance plus incidential damages plus consequential damages minus any expenses saved as a result of the breach
mitigation is required.
incidental damages
those related to avoiding the loss from the breach
(storing goods after a breach)
compensatory damages
a sum of money that would put that party in the same position as if the k had been performed
UCC formulas for breach - seller breaches and buyer has goods
buyer gets value of goods as contracted for minus the value of the goods as delivered plus incidential and consequential damages
UCC formulas for breach - seller breaches and seller has goods
buyer gets difference between mkt price (or replacement price) and k price plus incdiental and consequential damages minus expenses saved
UCC formulas for breach - buyer breaches and buyer has goods
seller gets k price
UCC formulas for breach - breaches and seller has goods
seller gets differnece between k price and mkt price plus incidential damages minus expenses saved
UCC formulas for breach - lost volume seller
seller gets lost profits plus incdientials
when an employer breaches an employment agreement, the employee can recover
the unpaid salary under the k
that recovery is reduced by the compensation the employee earned or could’ve earned by making reasonable efforts to secure comparable employment
rescission is available due to a mutual mistake if
if both parties are mistaken about a basic assumption of fact that materially affects the agreed upon exchange and neither bears the risk, the k is voidable
shipping non-conforming goods serves as both a
- sending an accomodation letter w/ defective goods = counteroffer
- sending defective goods w/ no letter = acceptance and breach
a party who anticipatorily repudiates a k may retract the repudiation if the non-repudiating party is…
notified of the retraction before
1) cancelling the k,
2) materially changing position in reliance on repudiation, or
3) indicating she considers the repudiation final
Under the UCC, a breaching buyer is entitled to restitution damages for…
the value of any advance payments it made to seller minus the amount of the seller’s damages
a party who fails to substnitally perform (material breach) can only recover restitution damages
unilateral mistake is not grounds to avoid a k unless
1) the mistake would make enforcement of the k unconscionable, or
2) the non-mistaken party caused or knew or had reason to know of the mistake
Duress
need to fill in
defense of impracticability is avail when…
1) an unanticipaited or extraordinary event makes it impracticable for a party to perform,
2) k was formed under a basic assumption that the event wouldnt occur, and
3) party seeking discharge wasnt at fault in causing the event to occur
Under the UCC, when a buyer fails to pay for goods, the seller can recover the k price of the goods under 3 circumstances
1) where buyer accepts the goods,
2) where goods were lost/damaged within a commericially reasonable time after risk of loss passed to buyer,
3) where buyer returned/rejected goods and seller unable to resell after reasonable efforts
preexisting duty rule
a promise of perforamnce of a legal duty already owed to a promisor which is neither doubtful nor the subject of honest dispute is not consideration
if the duty is altered in any way there is consideration ad the agreement will provide an effective defense in suit
A k is voidable for economic duress if
party’s manifestation of assent is induced by an improper threat that leaves the party no reasonable alternative.
elements:
1) party made threat,
2) threat was improper or wrongful,
3) threat induced other party’s manfiestation of assent to the modification, and
4) threat was sufficently grave to justify the conversatory’s assent
UCC 2-609 - when reasonable grounds for insecurity arise w/ respect to performance of either party, the other may
in writing demand assurance of due performance
SOF can be satisifed in a k b/t merchants if the party seeking enforcement of the k has…
sent the other party a confirmation of the k that would itself satisfy the SOF against enforcing partial
a k that doesnt satisy sOF is nonetheless enforceable as to…
goods for which payment has been made and acceptance of which have been received and accepted
courts will construct an implied in law (quasi) k where…
P has conferred a measurable benefit on the D,
P acted without gratuitious intent, and
it would be unfair to let the D retain the benefit without compensation P
unfair retention of a benefit arises when (1) D had an opportunity to decline the benefit but knowingly accepted it, or (2) P had a reasonable excuse for not giving the D such opportunity (emergency)
a difference in economic value between items exchanged isnt grounds for finding that a k didnt exist due to
inadequate consideration
under the UCC, a k formation can occur through…
any manner sufficent to show the parties agreement even if the parties negotiate in an unsual way that makes the moment of acceptance uncertain
what type of damages are not generally recoverable as an element of damages in a breach of k action?
punitive damages
unless the conduct constituting the breach is also a tort for which punitive damages can be recovered
UCC will enforce a “no oral modification” clause even if…
mod wouldnt otherwise need to be in a writing that satifies SOF.
NOM clauses can be wavied through parties words/conduct and the waiver cannot be retracted if a party has materially changed position in reasonable reliance on the waiver
substantial performance is present when…
a party completes its contratual obligations with no uncured material failure
whether failure to perform is material depends on…
1) the extent to which the injured party will be deprived of the benefit he reasonably expected,
2) the extent to which the injured party can be adequtately compensated,
3) extent to which other party failing to perform or to offer to perform will suffer forfeiture,
4) the likelihood that the party failing to perform will cure his failure, and
5) extent to which the behavior of the party failing to perform comports w/ good faith and fair dealings
A new k requires consideration to be valid and that consideration can only be worth less than what was agreed to in the og k if…
1) there’s a good faith dipsute as to the amount owed, or
2) the new consideartion is of a diff type than what is owed under the og k
An assignee
one to whom rights under a k are transferred and takes all of the assignor’s rights as the k stands at the time of the assignment
condition precedent
delays performance until a specified event occurs
requires P to prove that the event occured to prevail
condition subsequent
excuses performance once a specified event occurs
requires D to prove that the even occurred to avoid liab
an offer to form an option k is revocable before option is accepted.
Revocation occurs when
1) offeror directly communicates the revocation to the offeree, or
2) offeree obtains reliable information that reasonably indciates the offer was revoked
UCC parol evid rule allows the usage of trade usage evid to
explain or supplement the terms of a final, written k so long as the evid is reasonably consistent with, not negated by those terms
an intended beneficiary’s contractual rights vest when the beneficiary
1) detrimentally relies on the rights created,
2) manifests assent to the k, or
3) sues to enforce it.
once vesting occurs, the contracting parties cannot modify the beneficary’s rights wihtout B’s consent
Predominate purpose test
applies when k is mixed w/ goods and services
Eval:
The language of the contract
The nature of the business of the supplier
The intrinsic worth of the materials
additional terms if k involves non-merchant
if any party to the k is not a merchant, the additional or different terms are considered to be mere propsals to modify the k that do not become part of the k unless the offeror expressly agrees
additional terms in k where both parties are merchants
if both parties are merchants, addditional terms in the accpetance will be included in the k unless
1) they materially alter the og terms of the offer,
2) the offer expressly limits accpetance to the terms of the offer,
3) the offerors has already objected to the particular terms or objects within a reasonable time after notie ofthem is recieved
if an offeree mails a rejection and then mails an acceptance, the mailbox rule does not apply
whichever one is received first is effective
illusory promise
one that essentially pledges nothing because it is vague or because the promising party can choose whether to honor it.
if so then no k
fraudulent misrepresentation
a false assertion of fact used with the intent to induce a party to enter into a k and the maker knows or believes the assertion is false or knwos that he doesnt have a basis for what he states or implied with the assertion
a fraudulent or material misrepresenation can be cured and the k is no longer voidable by the adversely affected party if…
the circumstances change in such a way that the misrep becomes true before the adversly affected party avoids the k
power of acceptance may be terminated by
rejection or counteroffer by the offeree
lapse of time
revocation by offeror
or death/incapacity of either party
in interpreting contract’s terms
express terms prevail over all others
course of performance prevails over course of dealing and trade usage
course of dealing prevails over trade usage
where a seller fails to deliver the promied goods or buyer rightfulyl rejects them, the buyer is entitled to
the return of any payment made on the goods as restitution
a party who substantially performed an illegal k and lacked an illegal purpose may recover even if he knew of the other party’s illegal purpose unless
1) the performing party took actions to further that illegal purpose, or
2) the purpose involves grave social harm
charitable subscriptions
promises to contribute money or property to a charitable institution are enfroceable on promissory estoppel grounds wihtout proof of detrimental reliance. All that’s needed is proof that the promisor reasonably expected to induce reliance on the promise
material benefit (moral consideration) rules
a promise not supported by consideration may be enforceable if it is made in recognition of a benefit previously recieved by the promisor from the promisee
- doesnt apply if the promisee conferred the benefit as a gift
UCC 2-205 firm offer rule
a merchant’s written and signed assurance that his offer will be kept open for a period of time
An offer by a merchant to buy or sell goods in a signed writing which by its terms gives assurance that it will be held open is not revocable, for lack of consideration, during the time stated or if no time is stated for a reasonable time, but in no event may such period of irrevocability exceed three months; but any such term of assurance on a form supplied by the offeree must be separately signed by the offeror.
requirement k
promises to buy all that i will require
output k
promises to sell all that i manfacture
UCC §2-206 offer
an offer to make a contract shall be construed as inviting acceptance in any manner and by any medium reasonable in the circumstances
delegation
transfer of contractual duties
not allowed if k prohibits it or if the k involve s special skill, judgment, or trust
after a delegation, the delegating party
remains liable under the k unless the other party agreed to release the delegating party and substitute a new one (agreed to a novation)
implied duty of good faith and fair dealing is imposed on each party in the performance and enforcement of any k
good faith = honesty in fact and the observance of reasonable commercial standards of fair dealings
divisble k
when a party performs one party of a divisble k, that party is generally entitled to the agreed equivalent for that part.
a k is divisble if
1) the parties duties can be broken down into at least two corresponding pairs of performance, and
2) those pairs of performance can be fairly regarded as agreed equivalents
reliance damages
damages based on out of pocket expenses
an injured party cannot recover both ___ damages and __ damages
reliance and expectation
doctrine of promissory estoppel allows a party to recover damages stemming from another’s promise if:
1) the promisor reasonably expected to induce reliance on the promise,
2) the enforcing party reasonably relied on the promise,
3) reliance on the promise caused the enforcing party to suffer subtinal detriment, and
4) injustice can only be avoided by enforcing the promise
UCC’s perfect tender rule
a seller must tender goods conforming to the warranty obligations in the contracts
under the ucc, shipping nonconforming goods serves as both a rejection and counteroffer if…
if the seller notifies the buyer that the shipment was merely an accommodation, and
made no prior promise to ship conforming goods
buyer may accept the shipemnt (creating a k for the nonconforming goods) or reject the shipment (creating no contract)
if a lender breaches a loan agreement, the borrower can recover…
expectation damages equal to the difference between the interest cost of the original loan (k price) and the interest cost of a substitute loan (mkt price)
Contracts analysis
1) the k is for…(goods/services)
2) which body of law applies…(common law/UCC)
UCC § 2-713 - Buyer’s Damages for Non-delivery or Repudiation
buyer is entitled to the difference between the contract price of the goods for which he contracted and their market price
a contract is not assignable if the assignment
1) would materially change the duty of the obligor,
2) would materially increase the burden or risk imposed on the obligor,
3) would materially impair the obligor’s chance of obtaining return performance or materially reduce the value of that return performance to the obligor,
4) is forbidden by statute or precluded by public policy, or
5) is validly precluded by contract
an effective assignment requires
a) that the assignor manfiests his intent to transfer the right to the assignee without reserving any right to confirm or nullify the transfer, and
b) that the assignee manifest assent to the assignment
*no action or manifestation is required from the obiglor
*no particular form is required for the assignment - may be oral or written
factors to determine if a third party beneficiary is intended
1) is the TPB expressly designated in the k?
2) is performance directly to the TPB?
3) does the TPB have any rights?
4) what is the relationship between the TPB and the promisee?
duress is a defense to a contract enforceability if k was agreed to based on
- phsyical compulsion,
- improper threat by contracting party,
- improper threat by third party
nondisclosure of a known fact is tantamount to an assertion that it doesnt exist if, among other things, the party not disclosing the fact knows that
disclosure would correct the other party’s mistake about a basic assumption of the k, and
the failure to disclose would violate the duty of good faith and fair dealing
consequential damages
those that are foreseen at the time the k is entered into
implied in fact contract arises when
parties conduct (or failure to act) demonstrates their mutual intent to contract.
the plain meaning rule of contract interpretation instructs courts to rely on
the ordinary meaning of the words if the k’s language is clear and unambiguous
accord and satisifcation
method of discharging contractual obligations
accord is creating when the parties to contract agree to give and accept something diff in satisfaction of their existing contractual obligations.
since its a new k, must be supported by consideration
where the new consideration is worth less than what was agreed to in the og k, it will only be sufficient if:
1) there is a good faith dispute as to the amount owed, or
2) the new consideration is of a different type than what was owed under the og k
under ucc, the assignment of an entire k is construed as
an assignment of rights and a delegation of duties to a nonparty
the deglatee’s acc of the assignment constitutes a promise to perform the delegator’s duties and the promisee must accept that performance
a k can be rescinded after an unexpected event if
1) the event frustrates the purpose of the k,
2) the k was formed under a basic assumption that the event would not occur, and
3) neither party was at fault in causing the event to occur
frustrating event must be so severe that it cannot fairly be regarded as within the risks that the parties assumed under the k
breach by nonperformance coupled w/ repudiation typically gives rise to a claim for total breach
but where the only duty that remains that the time of the breach is for the breaching party to pay installements, the failure to do so gives rise to a claim for partial breach only
a promise to guarantee a debt is supported by consideration if
1) the guarantor is compensated,
2) the loan is conditioned on obtaining a guarantee, or
3) the promise is made before or at the same time as the loan
ks that fall into the SOF
1) marriage,
2) k that cannot be performed within a year,
3) land,
4) pomises made by an executor to pay a debt from his own estate,
5) k for the sale of goods for $500 or more, and
6) surety ks
MY LEGS
exceptions to SOF writing requirement
Land: part performance (buyer takes poss, improves land signifcantly, or pays a substantial amount of purchase price)
sale of goods:
- merchants confirmatory memo exception,
- when seller has started making specially manufacutred goods
- judicial admissions,
- part performance
surety: promsie to pay debt of another if other doesnt pay unless man purpose of the surety promise is to serve a pecuinary interest if pthe person making the promise,
cannot be performed within a year
