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Contracts Flashcards

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1
Q

What is an offer?

A

An outward manifestation, signals the power of acceptance

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2
Q

Is an advertisement an offer?

A

No, they are invitations for offers, because the responses may exceed the available supple of goods or services.

Language that identifies who gets limited supply will turn an advertisement into an offer.

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3
Q

How is an offer terminated?

A
  1. Lapse of time
  2. Death or incapacity of either party
  3. Rejection by offeree
  4. Revocation by offeror - must be before acceptance and communicated to offeree
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4
Q

When is revocation of an offer prevented?

A
  1. Option contract
  2. UCC firm offer
  3. Detrimental reliance on offer
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5
Q

What is a firm offer?

A

UCC
- offer made my merchant
- writing signed by merchant
- offer expressly states it will be held open

Irrevocable for the time stated or reasonable time, but no longer than 3 months

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6
Q

How can an offeree reject an offer?

A
  1. Outright rejection
  2. Counteroffer (more than mere inquiry)
  3. Rejection via non-conforming acceptance
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7
Q

What is a unilateral contract?

A

Offer seeking performance in return.

Offeror cannot revoke once offeree begins performance - option contract created.

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8
Q

What is the common law mailbox rule?

A

Acceptance by mail is effective upon dispatch (not receipt). Doesn’t apply to any other communications.

Doesn’t apply if the rejection is mailed before acceptance - whichever arrives first will be effective.

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9
Q

How can a seller accept a buyers offer to purchase goods for shipment?

A
  1. Promise to ship goods
  2. Shipping conforming goods
  3. Shipping non-conforming goods

—> shipping non-conforming goods as an accommodation is a counterofffer

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10
Q

In a battle of the forms, the additional terms in an offeree’s acceptance become part of the contract, unless what?

A
  1. The offer expressly limits acceptance to its own terms
  2. The offeror objects to the additional terms within a reasonable time
  3. The additional terms would materially alter the contract
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11
Q

What is the knockout rule in UCC battle of the forms?

A

Different terms in the two contracts dealing with the same topic knock each other out.

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12
Q

When is a promise made in recognition of a past benefit enforceable? (Minority rule)

A

Minority rule.

  • promise conferred the benefit on the promissory
  • the benefit is material
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13
Q

What is promissory estoppel?

A

A gratuitous promise may be enforceable even without consideration, when the promise reasonably relies to their detriment.
1. A promise
2. Foreseeable reliance
3. Actual reliance (induced by he promise)
4. Injustice without enforcement

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14
Q

What contracts must be written for the statute of frauds?

A
  1. Marriage
  2. Can’t be performed within one year
  3. Sale of land
  4. Executor or administrator for a duty of a decedent
  5. Guarantee or surety ship
  6. Sale for goods over $500
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15
Q

When can an oral land sale contract be enforceable despite the statute of frauds?

A

At least two of three:
1. Payment of all or part of purchase price
2. Taking possession of land
3. Making substantial improvements to property

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16
Q

When is an oral contract over a year enforceable despite the statute of frauds?

A

When it’s fully performed.

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17
Q

When is a sale for goods over $500 enforceable even if not in writing?

A
  1. Merchants confirmation that hasn’t been objected to in 10 days
  2. Partial performance - payment or shipment received/accepted
  3. Specially manufactured goods
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18
Q

What are the UCC implied warranties?

A
  1. Warranty of title
  2. Warranty of merchantability
  3. Warranty of fitness for a particular purpose
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19
Q

What is the implied warranty of merchantability in the UCC?

A

Goods fit for the ordinary purpose for which those goods would be used.

Only applies if the seller is a merchant

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20
Q

When does the warranty of fitness for a particular purpose apply>

A

When, at the time of contracting, the seller has reason to know:
- the particular purpose for which the goods are required, and
- the buyer is relying on seller’s expertise to select reasonable goods

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21
Q

What are the general rules for interpreting ambiguous contract language?

A
  1. Objective trumps subjective
    • unless one party has reason to know of other party’s subjective understanding
  2. Ambiguous term construed against the drafter
  3. UCC - usage of trade, course of dealing, course of performance
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22
Q

What is the parole evidence rule?

A

Governs admissibility of oral and documentary evidence of negotiations and other communications between parties that took place prior to or contemporaneously with the execution of the contract.

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23
Q

When is parole evidence admissible?

A
  1. To explain or interpret terms of a written contract
  2. To supplement terms of a written contract, unless it’s completely integrated

—> not admissible to contradict terms of a fully integrated written contract

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24
Q

When does the parole evidence rule not apply?

A
  1. Subsequent agreements
  2. Collateral agreements
  3. Attacks on the validity of the written agreement
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25
Q

What are attacks on the validity of the written agreement for which the parole evidence rule doesn’t apply?

A
  1. Failure of an oral condition precedent to the agreement
  2. Mistake or duress
  3. Fraud
  4. Reformation
    - antecedent valid agreement
    - agreement incorrectly reflected in the writing because of mistake or fraud
    - clear and convincing
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26
Q

When does risk of loss transfer in a common-carrier case?

A

Shipment contract - passes to buyer when goods are delivered to carrier (default rule)
- FOB seller

Destination contract - passes to buyer when goods are tended at destination specific in contract
- FOB buyer

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27
Q

When does risk of loss transfer in a non-carrier case?

A

If seller is not a merchant - passes to buyer as soon as goods are made available

If seller is a merchant - passes to buyer once goods are physically in buyer’s possession

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28
Q

What is the pre-existing duty rule for modifying a contract?

A

A promise to increase compensation for duties already owed is unenforceable because there is no consideration for modification.

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29
Q

Is consideration needed to modify an existing contract under the UCC?

A

No, but must be in good faith.

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30
Q

When does a unilateral mistake excuse contract performance?

A

The other party knew/had reason to know of the party’s mistake about present material facts

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31
Q

When does a mutual mistake make contract performance excusable?

A
  1. Mistaken assumption relates to material fact (not just value)
  2. Mistake made by both parties
    3 disadvantages party did not bear the risk of mistake
32
Q

When does impossibility excuse contract performance?

A
  1. Impossibility must be objective - literally impossible for anyone, outside control of parties
  2. Contingency that creates impossibility was not known by the parties at time of contracting - unanticipated, arose after contract formed
33
Q

When does impracticability excuse performance of a contract?

A
  • unforeseen contingency
  • increased cost of performance far beyond what either party anticipated

UCC - beyond market changes, like a war, crop failure, etc.

34
Q

When does frustration of purpose excuse contract performance?

A
  1. Principal purpose is frustrated
  2. Frustration was substantial
  3. Non-occurrence of the event that caused frustration was a basic assumption of the contract
35
Q

What can an aggrieved party do upon contract repudiation?

A
  1. Cancel contract and terminate all rights and obligations
  2. Bring action for damages or specific performance
  3. Ignore the repudiation and continue under the contract
36
Q

What can the buyer do under the perfect tender rule?

A
  1. Reject the goods and sue for damages
  2. Accept the goods
  3. Accept part and reject part
37
Q

What is the rule for contracts for necessaries with minors/mentally incompetent people?

A

Voidable, but merchant has quasi-contract right to recover reasonable value for goods/services.

38
Q

What happens when a minor disaffirms a contract?

A

Minor is obligated to return goods received, but not liable for any damages or reasonable value for use of any goods or services.

39
Q

What happens when a mentally incompetent person exercises their right to disaffirm a contract?

A

The mentally incompetent person is obligation to return goods received, and is liable for any damages or reasonable value for use of any goods or services.

Treated like a minor when the other party was aware of incompetence.

40
Q

What are the elements of fraudulent misrepresentation in contracting?

A
  1. Misrepresentation
  2. State of mind - knowing or reckless to truth with intent to mislead
  3. Material - objective or subjective
  4. Reasonable reliance
41
Q

What is required for negligent misrepresentation in contracting?

A
  1. Misrepresentation
  2. Defendant would have known was false if he exercised reasonable care
  3. Material
  4. Reasonable reliance on the misrepresentation
42
Q

What is required for fraudulent non-disclosure?

A
  1. Material nondisclosure
  2. Reasonable reliance
  3. Duty to disclose and failure to fulfill it
43
Q

What is duress to contract formation?

A
  1. A threat
  2. Wrongful in nature
  3. No reasonable choice but to succumb to the threat
44
Q

What is undue influence to contract formation?

A

Unfair persuasion on a party that was vulnerable to that persuasion

45
Q

When is a contract unconscionable?

A
  1. Procedural unconscionability - bargaining process created an absence of meaningful choice
  2. Substantive unconscionability - terms are unreasonably favorable to one party
46
Q

What are the public policy defenses to a contract?

A
  1. Subject of contract is prohibited by law
  2. Contract formed of purpose of committing a crime or tort
  3. Contract performance would violate certain values/freedoms designated by the state
47
Q

What are the types of damages in breach of contract?

A
  1. Expectation
  2. Reliance
  3. Restitution
48
Q

Under the UCC, what damages does a lost volume seller receive?

A

the profit of the lost sale

49
Q

Under the UCC, what damages does the seller receive when the goods are not delivered and not resold?

A

the difference between the contract price and market price

50
Q

Under the UCC, what damages does the seller receive when the goods are not delivered and resold?

A

the difference between the contract price and resale price

51
Q

Under the UCC, what damages does the seller receive when the goods are delivered and accepted?

A

Contract price

52
Q

What are consequential damages for a contract breach under the UCC?

A

Damages that are reasonably foreseeable by seller

53
Q

What are incidental damages under the UCC?

A

Costs for the buyer in transporting/storing/securing non-conforming goods and covering

54
Q

Under the UCC, what damages does the buyer receive when the buyer receives and accepts non-conforming goods?

A

the difference in value between the goods contracted for and the goods received.

55
Q

Under the UCC, what damages does the buyer receive when the buyer doesn’t cover?

A

the difference between the contract price and the market price

56
Q

Under the UCC, what damages does the buyer receive when the buyer covers?

A

the difference between the contract price and the cover price

57
Q

When is specific performance generally available?

A
  • unique objects
  • real property
58
Q

What is a negative injunction in contract performance?

A

Mid-term relief, allowed to prevent competing if employee’s services are unique or extraordinary.

59
Q

Who can 3rd party beneficiaries sue under a contract?

A

Intended beneficiary —> The promisor who directly promised to provide them a benefit, but not the promisee (but can sue them under a prior obligation, if they have any)

Incidental beneficiary —> incidental beneficiaries cannot sure anyone to enforce the contract

60
Q

When are 3rd party beneficiary rights in a contract vested?

A
  1. Beneficiary brings suit
  2. Beneficiary changes position in justifiable reliance
  3. Beneficiary manifests assent to the contract at the request of promisor or promisee
  4. Rights have vested under express contract terms
61
Q

What is an assignment of a contract?

A

A transfer of a right to receive a contract performance.

62
Q

What type of rights are not assignable?

A
  1. When assignment would materially change the duties of another party
  2. When the obligor has a personal interest in rendering performance to the obligee and not a 3rd party
  3. When it would violate law or public police
  4. Assignment prohibited by the contract (most courts treat as a beach, but don’t nullify the assignee’s rights, unless contract says its void)
63
Q

What are the legal effects of a gratuitous assignment?

A

Assignment is valid against obligor, who cannot claim lack of consideration as a defense

Assignment is revocable by assignor, unless executed - intention with actual/symbolic delivery

64
Q

What rights does an assignee of a contract recieve?

A

Whatever rights the assignor had, subject to whatever defenses the assignee is entitled to.
—> payment to assignor is a defense of obligor, unless he had been notified that payment’s are now due to the assignee

65
Q

What is a delegation of a contract?

A

When a 3rd party agrees to satisfy a performance obligation owed by one of the parties to a contract.

Not a transfer of duties - delegator still has obligations under contract, unless there’s a novation.

66
Q

Who can bring action against a delegatee of a contract?

A

The delegator can sue for breach of contract if the delegation was for consideration.

The obligee can sue delegatee as an intended 3rd party beneficiary of the delegation if it was for consideration.

67
Q

What contractual duties are not delegable?

A

Personal services
If contracts prohibits

68
Q

What is a novation in the delegation of a contract?

A

Releases the delegator of obligations.

Requires a clear promise by the obligee to release the delegator in return for the liability of the delegatee. Must be super explicit about delegator’s obligations.

69
Q

When does a seller have a time to cure under the UCC?

A
  1. the seller had reasonable grounds to believe non-conforming shipment would be acceptable
  2. Upon rejection, notifies buyer that they intend to cure.
70
Q

Who bears the risk of loss in a construction contract?

A

Remodeling - homeowner bears risk.
New construction - builder bears loss.

71
Q

Does the mailbox rule apply to revocations of offers?

A

No - they are effective once received.

72
Q

Under the UCC, where is the default place of delivery?

A

Seller’s place of business.
Buyer has risk of loss in transit.

73
Q

Is a promise to pay a pre-existing debt enforceable?

A

Yes, if the statute of limitations bars suit over the debt. But only to the extent of the promise.

74
Q

If a contract does not specify the form of payment, what is appropriate?

A

At common law, the court will allow payment by cash or check, unless a different course of dealing has been established.

75
Q

When is a liquidated damages clause enforceable?

A

(1) the injury caused by the breach is one that was difficult or incapable of accurate estimation at the time the contract was made; and
(2) the liquidated damages are a reasonable forecast of the harm caused by the breach

–> will not enforce penalties

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