contracts Flashcards
Choice of Law
The UCC applies to contracts for the sale of goods. The common law applies to contracts for services and real property.
Merchant
A merchant is someone who regularly deals in goods of the kind involved
Predominant Purpose Test
For contracts where there is both a goods and services component, the predominant purpose of the contract determines which rules apply.
Valid Contract
A valid contract requires offer, acceptance, consideration, and terms.
Offer
An offer is a manifestation of a present intent to be bound that creates the power of acceptance in the offeree. An offer must be communicated to a specific offeree. The offer must contain definite and essential terms.
Essential terms
Common law: parties, subject matter, price, and quantity
UCC: just quantity
Bilateral v. Unilateral Offer
Bilateral: can accept by either return promise or performance
Unilateral: requires acceptance by performance
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Usually an invitation to deal rather than an offer
Termination of Offer
1) Revocation
2) Lapse
3) Death/Incapacity (except for option contract)
4) Counteroffer/rejection
5) Destruction/Illegality
Option contract
offeree gives consideration to keep the offer irrevocable
UCC firm offer
If offeror is a merchant, gives an assurance the offer will remain open, in writing, for a reasonable time not to exceed 3 months
Partial Performance of unilateral k
Partial performance of a unilateral contract makes the offer irrevocable
Partial performance of a bilateral contract operates as a promise to render complete performance
Acceptance
objective manifestation of intent to be bound by the terms of the offer
Means of acceptance
Unless the offeror specifies, the offeree can accept in any reasonable manner.
Silence is not acceptance unless the offeree has a reason to believe the offer could be accepted by silence or prior dealings make it reasonable
Shipment of Goods
A buyer’s request for goods to be shipped invites acceptance by promise or by shipment.
If nonconforming goods are shipped, both an acceptance and a breach unless the seller notifies the buyer that goods are an accomodation
Revocation of acceptance of goods
A buyer may revoke an acceptance of goods if the nonconformity substantially impairs their value to the buyer.
the buyer accepted the goods without discovery of the nonconformity or such acceptance was reasonably induced either by the difficulty of discovering the nonconformity or because the seller gave assurances that the goods were conforming.
The buyer must inform the seller of its decision to revoke within a reasonable time after the nonconformity is discovered or should have been discovered by the buyer.
Mailbox Rule
an acceptance is effective when sent
Rejection following acceptance: acceptance controls but if offeror detrimentally relies on rejection, the offeree is estopped from enforcing
Acceptance following rejection: first one received prevails
Revocations: effective upon receipt
Options/firm offers: mailbox rule doesn’t apply, acceptance must be received
UCC battle of the forms
acceptance with a change in terms is valid unless agreement to the changed terms is conditioned on acceptance. Otherwise, new terms are a proposal for change
Between merchants: new or differnt terms control unless the original offer limited acceptance to its terms, the terms materially alter the offer, or the offeror objects within a reasonable time.
Knock out rule: conflicting terms nullify each other
Common Law Mirror Image Rule
acceptance must mirror terms of offer or it is a rejection and counter offer, not an acceptance
Consideration
Consideration is bargained for exchange
A gift is not consideration but remember promissory estoppel
Past consideration is not consideration (consider material benefit rule)
Adequacy of consideration
Need not be equal in value
preexisting duty is not consideration
Modification
Common law: must be supported by consideration unless recission and new contract, unanticipated difficulties arise and modification is fair, or new obligations on both sides
UCC: requires only good faith, no consideration
Accord and satisfaction
one party agrees to accept a different performance to satisfy the existing duty and discharge the original contract.
A payment of a lower amount/lesser value is not allowed unless there is a dispute as to amount or it is made in a different type of payment (i.e. giving a car instead of money)
Illusory promise
not legally binding because it is vague or the promisor can choose whether to honor it
Requirement and output contract
requirement: seller agrees to provide all the goods a buyer requires
output: a buyer agrees to buy all that a seller produces
Promissory Estoppel
a promise is binding if the promisor should reasonably expect it to induce action, the promise does induce such action, and injustice can only be avoided by enforcement of the promise.
Parol Evidence Rule
PER bars extrinsic evidence of a prior or contemporaneous statements that contradict the written agreement if the agreement is integrated. an integrated writing is intended as a final expression of the prateis agreement.
Exception: attack formation, attack enforcement, show condition precedent, or explain ambiguities
Completely integrated agreement
parties cannot introduce extrinsic evidence
partial integration
cannot introduce extrinsic evidence that contradict the writing. UCC assumes contracts are partial integrations.
Express warranties
promise, description (not an opinion) that is a basi sof the bargain. A general disclaimer for an express warranty is not valid
Implied warranty of merchantability
if the seller is a merchant, implied warranty that the product is fit for its ordinary purpose. a waiver must use the term merchantability or “as is”, and if in writing, it must be conspicuous
Implied warranty of fitness for a particular purpose
if seller knows of the purpose and buyer relies on the sellers representation, any waiver must be in writing and conspicuous
Defenses to formation
Incapacity, Mistake, Duress, Undue Influence, Misunderstanding, Misrepresentation
[IM DUMM]
Mutual Mistake
Both parties are mistaken about a fact that:
existed at the time of formation
went to a basic assumption of the contract
caused a material impact on the transaction
Did not assume the risk
Neither party can avoid if reformation is possible
Unilateral Mistake
One party is mistake and can void if did not assume risk and mistake would make the contract unconscionable or the non mistaken party caused the mistake, had a duty to disclose/failed to disclose the mistake, or knew/should have known the other party was mistaken
Misunderstanding
Both parties believe they are agreeing to same material terms but in fact agree to different ones
Neither party knows: no contract
one party knows: contract formed on basis of meaning as understood by the other parties
both parties knew of ambiguity: no contract
can be waived
Misrepresentation
untrue representation of fact. Requires
the misrepresentation was made
1) knowingly or recklessly with the
2) intent to mislead
3) the misrepresentation induced assent
4) the other party justifiably relied on the misrepresentation
Cure of misrepresentation
a contract is not voidable if the facts are cured before the deceived party has avoided the contract.
Undue Influence
unfair persuasion to induce assent
occurs where there are confidential relationships, third party undue influence, etc.
Duress
improper threat that deprives a party of meaningful choices
Capacity
Infancy: voidable by infant except for reasonable value of necessities
mental illness: void for those adjudicated to be incompetent
intoxication voidable by intoxicated person only if other party knew of intoxication
Illegality
contract is unenforceable if ocnsideration/performance is illegal
one party can recover if they are justifiably ignorant of facts
restitution: the less guilty party may be able to recover
Unconscionability
if a contract is so unfair to one party that no reasonble person would agree, the contract is not enforceable
Procedural unconscionability
Substantive unconscionability
Public policy
a contract that violates significant public policy is unenforceable
Statute of Frauds
A contract is required to be in writing and signed against the person it is to be enforced against. Only applies to contracts for goods more than $500, contracts that will take longer than a year, real property contracts, contracts in consideration of marriage, and suretyship.
exception: partial performance, specially manufactured goods
Third Party Beneficiary
intended TPB can sue, but incidental cannot
modification is fine until the TPB’s rights best, then need TPB consent
vesting: detrimentally relies, manifests assent at a party’s request, files a lawsuit
Assignment
assignee takes all rights of assignor but subjec tto any defense that can be raised against assignor
Delegation
generally allowed unless other party has substantial interest in a specific individual’s performance
delegator is not released from liability
Impracticality
defense available if
an unforeseeable event has occured,
the non occurence of which was a basic assumption on which the contract was made, and
the party seeking discharge is not at fault (and did not assume the risk).
Examples: performance becomes illegal, subject matter is destroyed
Frustration of purpose
unexpected events arise that destroy one party’s purpose in entering into the contract, even if the performance i not impossible
Impossibility
performance can be discharged due to death, incapacity, illegality, or destruction of subject matter
Order of performance
one party’s performance requires a period of time: that party goes first
both can render performance at same time: both must
Condition
a condition is a future event that must take place before rights or obligations are created. a failure of a condiiton releives a party of the obligation to perform
Is there a breach
Common law:
Material breach: did not receive substantial beenfit of the bargain, non breaching party may sue and suspend performance
Minor: receive substantial beenfit of the bargain, must still perform
UCC:
perfect tender rule, if goods or delivery are defective in any way, buyer can sue for breach. If a buyer rejects nonconforming goods, seller can cure if time remanining
installment contracts are an exception, apply substantial performance
Anticipatory repudiation
express and unequivocal repudication before performance is due.
nonbreaching party can treat it as a breach and sue, can wait and see, but if date of performance has not passed and only performance left is payment, must wait for actual breach to sue
Retraction of repudiation
can be retracted until the promisee acts in reliance of the repudiation, accepts the repudiation, or commences an action
UCC demand for reasonable assurances
If reasonable grounds for insecurity arise, a party can make a written demand for assurances. If the other party fails to give assurances within a reasonable time (not to exceed 30 days), there is an anticipatory repudiation.
Expectation Damages
puts the nonbreaching praty in as good a position as they would have been if the contract had been performed properly, plus reasonably foreseeable incidental and consequential damages, minus mitigation. Must be calcualted with reasonable certainty.
Liquidated Damages
allowed if the amount is reasonableand damages would be difficult to ascertain
Reliance damages
put the non breaching praty in the position as if the contract were never formed
restitution damages
put nonbreaching praty in position as if the contract were never formed
restores the benefit conferred on the otehr party
cannot get restitution if they have fully performed and only remaining performance is payment of definite sum
Specific Performance
(i) the contract terms are definite and certain;
(ii) the conditions for the defendant’s performance must be satisfied (mutuality);
(iii) there is an inadequate relief at law; and
(iv) enforceability of the specific performance is feasible.
