Contracts Flashcards
when does article 2 apply?
- Article 2 of the UCC applies to transactions in goods
- goods are things moveable at the time of contracting
What are the requirements for a contract formation?
Contract = Mutual Assent (Offer+Acceptance) + Consideration – Defenses
Predominant Purpose Rule
- When a transaction involves the sale of goods + services the rule is to apply all common law or all UCC depending on the more important part of the transaction.
- If the contract divides payment between the sales and service portion, then Article 2 of the UCC applies to sales portion and Common Law applies to the service portion
Requirements for an offer
- Communication of willingness to enter into a bargain.
- Must be reasonably certain as to parties, subject matter, and price.
definite and certain term requiremtens
Land Sale Offers Must Include – (i) Price and (ii) Description of the Land.
Sale of Goods Must Include – Quantity Terms (UCC Gap filler fills in the blank for price)
Employment Contracts – If the duration of the employment is not specified then the acceptance of the contract creates a contract that is terminable at will.
termination of an offer
Offers are generally revocable prior to acceptance.
Offers may be revoked through:
* lapse of reasonable time
* explicit rejection
* counteroffer
* conditional acceptance
* additional terms
* revocation by seller
* revocation by operation law
revocation is effective upon receipt.
What kinds of offers are irrevocable?
Options Contracts – When an offeree gives consideration to the offeror to not revoke offer for period of time. A mere promise not to revoke an offer, without consideration is still revocable.
Merchants Firm Offer – Merchant promises, in signed writing, to keep an offer open for time stated or reasonable time (enforceable for up to 3 months.)
Unilateral Offer – When an offeree begins performance under a unilateral contract the offeror’s offer becomes irrevocable. Mere preparation to perform is not the same as starting performance.
Foreseeable Detrimental Reliance - makes an offer irrevocable.
is an advertisement/catalog an offer?
- Not an offer but an invitation to deal.
- However, advertisements can become an offer if it: (i) includes a promise (ii) the terms are definite/specific and (iii) the Offeree is identified
what is Acceptance
Acceptance is a manifestation of assent to the terms of an offer.
How may acceptance be made?
Types of acceptance
* Express acceptance
* Beginning performance (such as sending goods)
* Completing performance (unilateral contract)
Additional requirements
* Under the mailbox rule, an acceptance is effective when sent.
* If an offer is irrevocable, then acceptance must be received.
* Rejections Sent Before Acceptance defeats the mailbox rule. Whichever is received first controls.
acceptance/rejection of goods received under article 2
Under Article 2, a buyer accepts if they:
* Indicate goods conform to contract.
* Indicate they’ll keep nonconforming goods.
* Fail to reject within reasonable time.
* Fail to notify seller of rejection.
* Act inconsistent with seller’s ownership!
The buyer may revoke their acceptance if the goods have a defect that substantially impairs their value to the buyer and:
* They accepted the goods on the reasonable belief that the defect would be cured and it has not been, OR
* They accepted the goods because of the difficulty of discovering the defects or because of the seller’s assurance that the goods conformed to the contract
The common law mirror image rule
- Under common law an acceptance must mirror offer terms. If an offeree throws in additional terms, then it is considered a rejection and counteroffer.
What is “accomodation”?
- The shipment of nonconforming goods = Breach
- The shipment of nonconforming goods as an accommodation with notice of such = Counteroffer (No Breach)
UCC Article 2 – Battle of the forms
An offeree’s additional terms will be considered part of the contract if:
1. Both parties are merchants,
2. The additional terms are not material, and
3. The offeree doesn’t object to the non-material additional terms.
- If the additional terms are material there is a contract without the materially different terms.
- If term effects price, liability, or remedy, it is material. If change causes hardship or surprise to the adverse party it is material. If a change is customary in the industry, then it is not a material change.
- If the offeree makes acceptance conditional upon assent to an additional term, there is no acceptance, but instead a counteroffer.
What is consideration
Two elements are necessary to constitute consideration: (1) a bargained-for exchange between the parties; and (2) legal value (benefit or detriment)
- Past Consideration – is not consideration.
- Some states will recognize past consideration if a promise is made after reciept of a significant benefit (such as after an emergency)
- Possible future value - is consideration
- Adequacy of Consideration – Courts do not inquire about the adequacy of consideration.
common law prexisting duty rule (consideration for modification)
- New Consideration is required for Modifications under common law based on the preexisting duty.
- Consideration is usually found to exist where the obligations of both parties have been changed.
Modification for article 2 sale of goods
No consideration is needed to modify sale of goods contracts. As long as there is good faith reason to modify a deal it is enforceable.
Material Benefit Rule - Consideration Substitute
Under a modern trend, some courts will enforce a promise if:
(i) it is based on a material benefit that was previously conferred by the promisee on the promisor, and
(ii) the promisee did not intend to confer the benefit as a gift.
promissory estoppel - Consideration Substitute
- substitute for consideration
- requires 1) a promise 2) on which a party forseeability and reasonably relied 3) to their detriment 4) so that enforcement of the promise is necesssary to avoid injustice.
What kinds of Contracts are subject to the Statute of Frauds?
MYLEGS:
* Contracts in consideration of Marriage
* Contracts requiring performance more than one Year in the future.
* **Land **Sales Contracts
* Executor or Administrator Promises Personally to Pay Estate Debts
* Goods worth $500 or more
* Sureties (Guarantee) Contracts - unless guarantor benefits from underlying contract
What does the statute of frauds require?
The Statute requires a writing that
(1) reasonably identifies the subject matter of the contract,
(2) indicates that a contract has been made between the parties, and
(3) states with reasonable certainty the essential terms.
* Writings evidencing land sale contracts must contain a description of the land and the price
* Writings for employment contracts must state the length of employment
* Writings evidencing sales of goods contracts (UCC) must indicate that a contract has been made and specify the quantity term
* Only the party to be charged (the person to be sued) must sign.
What are the exceptions to the statute of frauds?
(1) Real estate contracts in which conveyance by the seller has already occurred
(2) Part Performance of real estate contracts – applicable if 2/3 are satisfied:
* Payment
* Possession
* Improvement
(3) Full performance of an oral contract for goods or services
(4) Sales of custom goods
(5) Judicial Admission – Agreements admitted in court (but only to the extent admitted).
(6) Merchant’s confirmatory memo
(7) Conditions precedent for a contract to come into force, even if the contract is required to be in writing under the statute of frauds.
Parol evidence (four corners) rule
- Excludes evidence of prior or contemporaneous agreements that contradict a final integrated writing.
- Intregration is determined by the totality of the circumstances.
parol evidence rule doesn’t apply to
* a determination of integration
* defenses against formation
* interprestation of vague terms
* conditions precedent to efficetiveness
* showing of consideration
* additional, consistent terms under article 2
* subsequent modifications.
Contract construction priority
- Express terms
- Course of Performance – Parties conduct under prior installments of current contract.
- Course of Dealings – Parties conduct in prior contracts.
- Custom and Trade Usage – Industry norms that parties are aware of.
