Contracts Flashcards
(38 cards)
Applicable Law
Art. 2 of the UCC governs Ks for the sale of goods. The Common Law governs all other Ks. Goods are defined as all things that are movable.
Contract Formation
A valid K is formed when there is (1) offer, (2) acceptance, and (3) consideration on both sides of the contracting party.
Offer
An offer is a manifestation of intent to enter into a K with definite and reasonably certain terms communicated to an identified offeree.
Acceptance
- An acceptance is a manifestation of assent to the terms of the offer.
- For bilateral Ks, the start of performance manifests acceptance. For unilateral Ks, offer is accepted only when performance is complete.
Biateral: Both parties make promises to perform.（あなたが車をくれたら、私は100万円払います。）
Unilateral: The offeror’s promise for the offeree’s actual performance of the requested act.（猫を見つけてくれた人に1万円払います。）
Termination of Offer
- Offers can be terminated before acceptance by:
(a) revocation by the offeror,
(b) rejection or counteroffer by the offeree, or
(c) lapse of time, or
(d) death/incapacity of either party. - An offeror may revoke his offer through unambiguous words or conduct.
Option Contract
An offer for an option K is irrevocable when consideration is given for a promise to keep an offer open.
Advertisements
- Ads are usually a mere invitation for offers, not an offer.
- However, an ad may be an offer if it includes sufficiently clear and definite terms.
Timing of Acceptance/Revocation (Mailbox Rule)
- Acceptance of an offer is deemed effective once the acceptance is dispatched (mailbox rule).
- Revocation of an offer is deemed effective when received by the offerree.
Mirror Image Rule & UCC Exception
- The Common Law mirror image rule holds that an acceptance must exactly mirror the offer; any variations constitute a counteroffer.
-
Under the UCC, the mirror image rule does not apply, and additional or different terms are included only if:
1. both parties are merchants;
2. the term is not a material change;
3. the offer does not expressly limit acceptance to the exact terms; and
4. no objection was made within a reasonable time.
Output Contract vs. Requirement Contracts
- In an output K, a seller promises to sell all of the output of the particular goods to the buyer.
- In a requirement K, a buyer promises to purchase all of the particular goods that the buyer requires from the seller.
Consideration
- Consideration is something of legal value bargained for exchange and can be a promise to do an act, or forbearance from doing an act.
Promissory Estoppel
Ks that lack consideration may be enforced when:
1. a party made a promise that the other party detrimentally relied upon,
2. the promisee’s reliance was reasonable and foreseeable, and
3. enforcement of the promise is necessary to avoid injustice.
Defenses to Enforceability
Unconscionability
- Unconscionability occurs when a K contains terms that are obviously unfair and one-sided in favor of the party with the superior bargaining power.
- If a K/term is found unconscionable, a court may refuse to enforce the term or entire K.
Defenses to Enforceability
Mutual Mistake vs. Unilateral Mistake
- A K is voidable by mutual mistake if:
1. the mistake concerns a basic assumption;
2. the mistake is material; and
3. the person asserting the mistake did not bear the risk of the mistake. - A mistake by one party that is unknown to the other party, concerning a basic assumtion that has a material effect, is generally not a valid defense to formation of a K.
Defenses to Enforceability
Statute of Frauds (SOF)
- Land Ks,
- Ks that cannot be fully performed within 1 year,
- sale of goods for $500 or more,
- marriage Ks, and
- promise to pay debt of another,
are subject to the SOF.
To be enforceable, a K must:
1. be in writing,
2. be signed by the party to be charged, and
3. contain all essential terms (parties, quantity, price, the description of the property etc.).
SOF Exception (Performance)
Under the Common Law, a contract that violates the SOF may be enforceable if it is fully performed.
SOF Exception (Land Contracts)
A land sale K is enforceable if a party has done at least two of the following:
1. payment (in whole or part),
2. took possession, and/or
3. made valuable improvements.
SOF Exception (Promissory Estoppel)
Under the Common Law, some jurisdictions allow the promissory estoppel to be used in order to circumvent the SOF.
SOF Exception under the UCC (Merchant’s Confirmatory Memorandum)
In a sale of goods K between two merchants, the signature of the party to be charged is not required, if:
1. a writing that confirms an agreement is signed by the party enforcing it, and
2. the other party did not object within 10 days after receipt.
SOF Exception under the UCC (Goods Accepted or Paid For)
A seller may enforce the K price of any goods accepted or paid for by the buyer (only applies for those goods, not the whole K).
SOF Exception under the UCC (Custom Made Goods)
A seller may enforce the K price for custom made goods, if:
1. the seller has made a substantial start, and
2. the goods are not suitable for sale to others.
Modification of Contracts
- Under the Common Law, K modification must be supported by consideration.
- Past performance or performance of a pre-existing duty is not adequate consideration (pre-existing duty rule).
- Under the UCC, there is no consideration requirement for K modifications made in good faith.
Parol Evidence Rule
- Evidence of a prior or contemporaneous negotiation or agreement is inadmissible to contradict or supplement a later witten K.
- Merger clause is evidence that the writing is complete on its face.
- Exceptions to the rules are:
1. to correct a clerical error/typo,
2. to establish a defense against formation,
3. to interpret vague or ambiguous terms, and
4. to supplement a partially integrated writing.
Condition Precedent
- A condition precedent in a K makes performance contingent upon the completion of the condition.
- If a condition fails, no obligation of performance arises, and thus no breach has occurred.
