Contracts Flashcards

1
Q

Mirror Image Rule (Common Law)

A

Terms of acceptance must exactly match terms of offer - otherwise, it is a counteroffer

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1
Q

UCC 2-207(1)

A

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

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2
Q

UCC 2-207(2)

A

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

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3
Q

Promissory estoppel

A

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)

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4
Q

Misunderstanding - Defense to Formation

A

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

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5
Q

Mutual mistake - Defense to Formation

A

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.

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6
Q

Unilateral mistake - Defense to Formation

A

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

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7
Q

Fraud/Intentional Misrepresentation - Defense to Formation

A

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.

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8
Q

Undue Influence - Defense to Formation

A

One party exerts undue pressure or persuasion on the other party, esp. in circumstances where innocent party is susceptible to persuasion

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9
Q

Duress - Defense to Formation

A

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.

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10
Q

Illegality - Defense to Enforcement

A

When performance becomes illegal or when consideration is illegal

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11
Q

Unconscionability - Defense to Enforcement

A

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

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12
Q

Statute of Frauds - Defense to Enforcement

A

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)
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13
Q

Estoppel - Defense to Enforcement

A

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.

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14
Q

Modifications

A

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

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15
Q

Accord and Satisfaction

A

if there is a dispute over the validity of the contract or the amount owed, a
party can agree to accept a different performance than what was agreed upon in the contract.

The “accord” is the new agreement where a party agrees to accept a different performance
than what was agreed upon.

The “satisfaction” occurs when the different performance is completed by the other party,
which discharges the original contract duties and the accord agreement duties.

Consideration is found to support this type of agreement as follows: The party performing the different performance is incurring a legal detriment. The party that is agreeing to accept the different performance is giving up the right to dispute the original contract and sue for breach.

16
Q

PER/Integration

A

The court will look at the words in the contract to determine if the parties intended for
it to be a total/partial integration.

Merger clause: If the contract has a “merger” clause stating that the contract is the
final and complete understanding of the parties, it is likely to be a total integration.

Exceptions:
(1) defense to formation,
(2) defense to formation
(3) ambiguity
(4) condition precedent
(5) collateral deal
(6) Course of performance, course of dealing, trade usage

17
Q

Impraticability

A

Discharges duty to perform. Elements:
An unforeseeeable event occurs, the nonoccurence which was a basic assumption of the contract, which renders performance impracticable + party seeking discharge was not at fault

18
Q

Impossibility

A

An unforeseeable event occurs making performance impossible

19
Q

Frustration of Purpose

A

An unforseeable event occurs that destroy’s a party’s performance for entering into the contract. The nonoccurence of the event had to be a basic assumption of the contract and the party seeking discharge may not be at fault.

20
Q

Express warranty

A

Any promise or description that is part of the basis of the bargain is an express warranty, unless it is merely the seller’s opinion or commendation of the value of the goods.

Disclaimer clauses that conflict with express warranties are ignored

21
Q

Implied Warranty of Merchantability

A

Applies when the seller is a merchant. To be
merchantable, goods must be fit for their ordinary purpose.

Can be disclaimed through written as is statement, or through oral/written statement that uses the term “merchantability”

22
Q

Anticipatory Repudiation

A

One party unequivocally indicates through words or conduct that it will not perform.

Non-breaching party can either:
(1) rescind contract
(2) wait until performance is due and sue
(3) sue immediately
(4) demand performance

Retraction OK so long as non-breaching party has not detrimentally relied on repudiation, accepted the repudiation, or filed a breach of contract action is response to repudiation

23
Q

Implied warranty of fitness for a particular purpose

A

A warranty that the goods are fit for a particular purpose is implied when the seller has reason to know that the buyer has a particular use for the goods, and the buyer is relying upon the seller’s skill to select the goods. Seller need not be merchant to apply

Can be disclaimed with “as is” language if conspicuous.

24
Q

Adequate assurance of performance

A

A party with REASONABLE grounds for insecurity may request, in writing, an adequate assurance of performance from the other party. If the other party fails to reply in 30 days, it is treated as a repudiation.

25
Q

Common Law

A

Material Breach - when a party fails to substantially perform, and/or the non-breaching fails to receive the substantial benefit of the bargain.

Minor breach - non-breaching party still receives substantial benefit of bargain, and thus is still obligated to perform

26
Q

UCC Breach

A

Perfect Tender Rule

Non-conforming Tender:
-Buyer may inspect goods, and once he accepts them, has an obligation to pay
-Under UCC, if tender or goods are nonconforming, buyer has the right to accept or reject all or party of the goods

  • if a buyer rejects goods as nonconforming but there is still time to perform OR seller reasonably thought buyer would accept goods, seller may cure
  • buyer may revoke acceptance if goods seemed OK when delivered but a defect is discovered within a reasonable time
27
Q

Shipment contract (FOB seller’s place of business)

A

seller must (1) deliver goods to a common carrier, (2) make arrangements for delivery, and (3) notify buyer that goods have been shipped. Risk of loss during delivery rests with buyer

28
Q

Destination contract (FOP buyer’s place of business)

A

seller must get the goods to the buyer and notify the buyer. Risk of loss during delivery rests with buyer

29
Q

Quasi-contract

A
  1. The plaintiff must confer a measurable benefit on the defendant;
  2. The plaintiff acted without gratuitous intent (s/he intended to be paid); and
  3. It would be unfair to let the defendant retain the benefit because the defendant had an
    opportunity to decline the benefit but did not do so, or the plaintiff had a reasonable
    excuse for not giving the defendant such an opportunity (example, an emergency arose
    and plaintiff could not consult with defendant).
30
Q

Limits on Remedies (UCC)

A

Limits on consequential damages are fine in UCC contracts unless unconscionable

31
Q

Ambiguous term/trade usage

A

If a term is ambiguous, evidence of trade usage or even local custom may be used to show that a particular word or phrase had a particular meaning.

32
Q

Nondisclosure

A

In order for non-disclosure to be the basis for rescission, there must be a duty to disclose and the seller must have failed to disclose.

Can apply when a seller fails to disclose all know material latent defects to a buyer.

33
Q

UCC Counter-Offer

A

Under the UCC, a counter-offer arises, per 2-207(1), when a party’s acceptance expressly conditions acceptance on the offeror’s assent to new terms contained in the acceptance