Contracts Flashcards
True or False: an incidental beneficiary has the right to enforce a contract?
FALSE!!!
Define Intended Beneficiary
He is an intended beneficiary if the contracting parties clearly intended for him to benefit from the contract
Can an intended beneficiary enforce a contract?
Yes, an intended beneficiaries can enforce once there rights have vested.
When do intended beneficiaries rights vest?
rights vest 1) when the beneficiary reasonably and detrimentally relies on the rights created, 2) consents to the contract at a parties request, or 3) sues to enforce the contract.
Define Earnest Money
A deposit paid by a buyer to show a good faith intent to complete the transaction
Once accepted the seller cannot recover other damages for breach
Define Earnest Money
A deposit paid by a buyer to show a good faith intent to complete the transaction
Once accepted the seller cannot recover other damages for breach
Does earnest money constitute liquidated damages? 
Yes
Define liquidated damages
Liquidated damages is an amount agreed-upon during good faith negotiations to reasonably compensate the injured party. These damages are recoverable unless they constitute a penalty then the seller can only recover actual damages.
True or false a contract entered into by someone under the age of 18 is voidable by the minor but not voidable by the other contracting party
True
Once a minor has reached the age of 18 they can ratify the contract by
Ratify the contract by failing to timely void the contract or otherwise agreeing to be bound
An intended beneficiary will not be able to recover under a contract when the original contracting parties each make a promise to each other because
Each parties performance of its own promise is a constructive condition precedent to the original parties duty to perform, and if either party fails to substantially, perform the other parties duty as excused.
NOTE: in contrast - express conditions (ones appearing in the contract) require strict compliance
Is a difference in economic value between the items exchanged grounds for finding that a contract did not exist due to inadequate consideration?
No
A contract is divisible if
1) the parties’ duties can be broken down into at least two corresponding pairs of performance
AND
2) those pairs of performances can fairly be regarded as agreed equivalents (bargained-for)
NOTE: Although courts prefer to interpret contracts as divisible for fairness reasons, they will not do so in contradiction of the express terms of the contract
Consequential damages are appropriate against the breaching party if
1) the breaching party KNEW about the special circumstances
OR
2) could have reasonably foreseen the harm, in light of the special circumstances, that would result from from a breach
When is acceptance by mail permitted?
1) permitted if mail is reasonable method of communicating acceptance (offer was communicated by mail)
and
2) would be effective upon dispatch (when the acceptance is properly addressed and placed with the postal service with paid postage)
Contracts for exclusive dealing (output and requirement contracts) carry with them an implied obligation. What is the obligation?
Contracts for exclusive dealing in the types of goods concerned carry with them an implied obligation by the SELLER to use its best efforts to supply the good and by the BUYER to promote their sale.
True or False: Letterhead or Logos on a written offer can count as a signature.
True.
Generally, a contract for the comission of a tort is unenforceable as against public policy. When can a party to the contract for the tort still recover under the contract?
when the party was unaware of the facts that make the performance of the contract tortious.
(Example: landowner contracts with tree service to cut down tree on neighbors yard. Tree service did not know the tree was not landowners property. Tree service can recover)
Can parol evidence be used to prove a condition precedent?
Yup, as long is it does not contradict the terms of the contract.
Must expectation damages be foreseeable?
Yes
Under the UCC, a buyer of goods obtains an insurable interest in the goods as soon as
the goods are identified to the contract
When are good indentified if not explicitly stated in the agreement?
Indentification occurs:
1) for goods already existing and identified, when the contract is made, or
2) for goods that are not already existing and identified, at the earliest of when the good are shipped, marked, or otherwise designated by the seller
What are the eight ways to discharge contractual obligations?
Mnemonic: FIRM SCAN
Full performance of contractual obligations
Impossibility, Impracticability, or frustration of purpose
Release (In writing)
Mutual recission
Substituted Contract
Contract or covenant not to sue
Acord and Satisfaction
Novation
If a contractual duty is discharged due to impracticability and a party have partially performed may the party seek damages?
Yes, the party may seek restitution damages
The one-year provision of the statute of frauds applies to a contract whose terms make it impossible for any party to fully perform within one year. When does the one year period start?
the day after the offer is accepted
Are construction contracts typically divisible contracts?
NO
Can you recovery expectancy damages if you materially breach a contract?
NO
A party who substantially but not fully performed his/her contraction obligations can recovery what kind of damages?
expectancy or reliance
Cannot recover expectancy damages if you breach the contract
If someone partially performs and then breaches a contract what kind of damages can they recover?
restitution damages
Can recover the reasonable value of the benefit conferred less any damages suffered by the nonbreaching party due to the breach.
Generally a surety agreement to pay debt of a principal must be in writing, unless
the surety has their own economic advantage rather than the principal’s benefit
If a breach of contract is willful - will the Court award diminution or the total cost of reconstruction?
The total cost of reconstruction
T/F: The mailbox rule does not apply if the offer requires receipt of acceptence by a certain date. (Does example implicate the mailbox rule)
Example: Offer says “acceptence must be received by June 25th.”
True.
No, this does not implicate the mailbox rule.
Define Accord and Satisfaction
Accord is when one party agrees to accept a different performance from the other party to satisfy the other party’s existing duty
Satisfaction is performance of the accord agreement will dischange both the original contract and the accord contract
Define Promissory Estoppel
when an offeree reasonably and detrimentally relies on an offier it may become irrevocable
Define
Promisory Estoppel Doctrine
a promise is binding if (1) the promisor should reasonably expect it to induce action or forbearance on the part of the promisee or third person, (2) the promise does induce such action or forbearance, and (3) injustice can be avoided only by enforcement of the promise
This is literally just detrimental reliance
When a nonbreaching party has partially performed a contract at a below-market-price - what form of damages are they entitled too?
restitution damages
Under UCC section 2-509(1), a contract that requires the seller to ship goods to the buyer by a third-party carrier is either a shipment or a destination contract. If the contract does not specify which or there is not trade usage, what is the presumption?
That there is a shipment contract when the the contract requires shipment by a third-party carrier
When one party to a contract knows or has reason to know that the other party attaches a different meaning to a material term, whose interpretation controls?
the unknowing party’s meaning of the term will control
Is a party’s promis to pay money recieved pursuant to a contract to a third party an assignment?
No, it is a future promise
that means it is not an intended beneficiary with ability to enforce
Define
a release
is a writing that manifests an intent to discharge another party from an existing duty
Under the UCC, a release must also be signed but new consideration is not required
Under common law, the release must be supported by consideration or a consideration substitute (detrimental reliance)
Under the UCC, for an installment contract, if the shipment is nonconforming when must the buyer accept the nonconforming tender?
if the seller gives adequate assurance that they will cure the nonconformity
Under an installment contract, can a buyer cancel a contract if one of the installments was nonconforming?
No, unless the nonconforming shipment substantially impairs the value of the whole contract
When does a party who benefits from a condition waive the nonoccurence of the condition?
can be indicated by words or condcut that the condition is no longer needs to occur
Is Promissory estoppel for reasonable and detrimental reliance before or after acceptance?
BEFORE
A misunderstanding arises when the parties to a contract assign different meanings to the same term.
When the misunderstanding is a material term and neither party new or had reason to know of the misunderstanding there is ordinarily no contract.
Can the parties waive the misunderstanding?
yes, either party can waive the misunderstanding and choose to enforce the contract as to the other party’s understanding
