Contracts Flashcards
Mirror Image Rule (Common Law)
Terms of acceptance must exactly match terms of offer - otherwise, it is a counteroffer
UCC 2-207(1)
If at least 1 non-merchant - an acceptance with different terms will function as an acceptance unless the offeree makes the acceptance expressly conditioned on the different terms (so valid acceptance unless the acceptor says that the acceptance is only functional with the different terms).
New terms do not get in unless offeror agrees
UCC 2-207(2)
If both parties are merchants, additional terms may still be valid acceptance and new terms will be part of contract unless (1) offeror objects, (2) they materially alter deal, or (3) the offer expressly limited condition to the terms of the offer
When there are different terms - majority of jurisdictions apply the knockout rule
Promissory estoppel
A promise may be enforceable even when there is no consideration if (1) the promisor knew or should have know the promise would reasonably induce action or forbearance, (2) the promise did induce action or forbearance, (3) it would be unjust to not enforce promise
Damages - usually limited to reliance damages (money spent on reliance of promise)
Misunderstanding - Defense to Formation
Elements:
Each party assigns different meanings to a material term that is ambiguous, and neither party has reason to know of the other’s misunderstanding
Mutual mistake - Defense to Formation
If both parties are mistaken, can void or reform
Elements:
(1) A mistake of fact that existed when contract was formed (2) as to a basic assumption of the contract, (3) that is material, (4) where the impacted party did not assume the risk of the mistake
Other type of mutual mistake (forgot to include term):
If a writing that purports to reflect the parties’ prior agreement does not in fact do so, then that writing may be reformed to conform to the intended prior agreement if both parties were unaware of the mistake.
Unilateral mistake - Defense to Formation
Same elements as above except - with two additions:
(1) mistake of fact, (2) as to a basic assumption of the contract, (3) that is material, and (4) where the impacted party did not assume the risk of the mistake, and
(5) mistake makes enforcement of contract unconscionable, OR (6) other party knew or caused mistake
Fraud/Intentional Misrepresentation - Defense to Formation
Fraudulent - D (1) intentionally misrepresented a material fact (2) with the intent of inducing P’s reliance, (3) and P did rely.
Fraud in the factum - fraudulent misrepresentation prevents party from knowing the essential terms of transaction; renders contract void
Fraud in the inducement - fraudulent misrepresentation induces another into contract; contract is voidable
Non-Fraudulent - an unintentional misrepresentation of material fact that the innocent party justifiably relies on and induces the innocent party’s agreement - renders contract voidable.
Undue Influence - Defense to Formation
One party exerts undue pressure or persuasion on the other party, esp. in circumstances where innocent party is susceptible to persuasion
Duress - Defense to Formation
When a party is improperly threatened and has no meaningful choice but to agree to the
contract. This is a subjective test, so the defendant must actually feel like s/he has no choice
but to agree.
Illegality - Defense to Enforcement
When performance becomes illegal or when consideration is illegal
Unconscionability - Defense to Enforcement
When contract is SO unfair, a reasonable person would not agree to it. Can either refuse to enforce entire contract, or just strike provision
Procedural - imbalance in bargaining process
Substantive - imbalance in actual terms
Statute of Frauds - Defense to Enforcement
Note - writing does not have to be a formal contract (can be letters or receipts). Also, writing does not need to exist at time of promise. Can be created after promise is made.
Exceptions
- UCC - full performance by one party, part performance (to the extent of that performance), substantial beginning towards manufacturing of special goods, confirmatory memo (failure to object to a confirming within 10 days)
- Service Contracts (CL) - full performance by either side
- Sale of Land (part performance - 2 of the following: payment of part or all of the purchase price, possession, substantial improvement to the land)
Estoppel - Defense to Enforcement
If a party reasonably and detrimentally relies on a promise made by the party to be charged, a court may enforce the contract despite the failure to meet the SOF requirement.
Modifications
Under the common law, a provision requiring a modification to be in writing even though the modification would not otherwise fall within the Statute of Frauds is not enforceable