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Contracts Flashcards

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1
Q

What is consideration?

A

A bargained for exchange of something of legal value

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2
Q

What are the substitutes for consideration?

A

Detrimental reliance, promissory estoppel, or good faith modification

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3
Q

UCC SALE OF GOODS CONTRACT IS STILL VALID IF THERE IS A MISSING PRICE TERM

A

Reasonable terms will be supplied by the COURT if those terms are consistent with the parties INTENT

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4
Q

Death or incapacity of either party will also terminate an offer. If you die or don’t have legal capacity to enter into a contract. What are the exceptions?

A

1) Options contracts. If someone paid for the option… and the person on the other side dies… sorry… we paid for the option, OFFER IS STILL ALIVE; AND
2) Part performance of an offer when entering into a unilateral contract.

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5
Q

Option Contract

A

The offeror promises to keep the offer open and the offeree pays for the privilege of the offer being kept open (if no consideration is paid, the offer can be revoked at any time)

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6
Q

Firm offer rule

A

Must be UCC sale of goods
Offeror must be a merchant (someone who REGULARLY deals in goods of a certain kind or someone with specialized knowledge of the business practices involved); AND
A written and signed offer that PROMISES to keep an offer open for a certain period of time
If these elements are met, the offer cannot be revoked for up to 3 months… and there is no need for consideration to make this offer firm.

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7
Q

Detrimental reliance

A

An offer cannot be revoked if there has been detrimental reliance by the offeree

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8
Q

Part performance of a unilateral contract

A

It won’t be revocable for a reasonable time in which the offeree could complete performance

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9
Q

Conditional acceptances are essentially counteroffers

A

Under BOTH the common law and the UCC this terminates the offer and then becomes a new offer.

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10
Q

Mirror Image Rule

A

Acceptance to create a valid, enforceable contract, it must exactly match the terms of the offer.

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11
Q

For merchants, if a material (important) term is added that alters the original bargain

A

It is not incorporated unless it is agreed to

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12
Q

For merchants, if it is NOT a material term

A

it is incorporated unless it is objected to

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13
Q

Accommodation for goods

A

(1) accept the shipment and pay the list price, or (2) reject it with no remedy.
Accommodation is treated as a counteroffer with no breach.

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14
Q

Mailbox rule for option contracts

A

Acceptances are not effective until they are received by the offeror

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15
Q

If the offer says “acceptance is only to be effective when RECEIVED”

A

The mailbox rule does not apply.

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16
Q

The Double Mailbox -> Acceptance and then Rejection

A

whichever arrives first wins.

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17
Q

When we send an acceptance first… then a rejection next… A contract will be formed.

A

UNLESS the rejection arrives FIRST and is relied upon by the offeror.

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18
Q

OFFER GIVEN -> ACCEPTANCE MAILED -> REJECTION MAILED -> OFFEROR RECEIVES REJECTION FIRST & RELIES ON IT -> THEN OFFEROR RECEIVES ACCEPTANCE =

A

NO CONTRACT

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19
Q

Rejection and THEN acceptance

A

whichever arrives first controls

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20
Q

An offeror’s revocation of an offer is not effective until the offeree RECEIVES it.

A
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21
Q

The contract price is not the measure of recovery in quasi-contracts.

A

You will get the reasonable value of the benefits conferred ONLY.
Restitution or “quasi-contract” is only available for TOTAL breach, not partial breach.

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22
Q

Missing Terms UCC

A

Gap fillers for price, time of shipment, place of delivery, time of payment

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23
Q

Missing Terms Common Law

A

so long as the parties have shown a willingness to enter into a contract… the court will try to fill any holes with reasonable terms.

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24
Q

Promissory Estoppel

A

(1) A Promise, (2) Reasonable, Foreseeable and Detrimental Reliance, and (3) Enforcement Necessary to Avoid Injustice

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25
Q

Common Law Modification

A

Requires consideration to be valid

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26
Q

Accord

A

New agreement by the parties to an already existing obligation to accept a DIFFERENT promise instead of the original promise, with consideration on both sides

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27
Q

An accord suspends the other party’s right to enforce and must be supported by different consideration.

A

The performance of the accord results in satisfaction - which discharges BOTH the accord and the ORIGINAL contract!!!

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28
Q

Defenses to Enforceability

A

Incapacity to Contract, Infants (under 18), Mentally incompetent, Intoxication,

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29
Q

When a mistake of both parties at the time the contract was made as to a BASIC ASSUMPTION on which the contract was made has a material effect on the agreed exchange of performances, the contract is ________

A

VOIDABLE by the party that got screwed

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30
Q

If the parties use a material term that is open to at least two reasonable interpretations… and EACH party attaches a different meaning to the term… and NEITHER party has reason to know the meaning attached by the other

A

There is no contract, it is VOIDABLE

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31
Q

In UCC contracts, words prevail over NUMBERS.

A

If the contract is for “two hundred thousand dollars ($2,000)” it will be for $200,000 because WORDS will win out over numbers in the UCC contracts.

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32
Q

Statute of Frauds - Sales of goods worth $500 or more exceptions

A

Mnemonic: SWAP

Specially manufactured goods

Written confirmation of oral agreement between merchants (we want merchants to go fast… and if one sends a confirmation memo and the other merchant doesn’t object… that’s good enough for us. Battle of the forms lifestyle. No writing needed)

Admission in a pleading that a contract for goods existed

Partial payment or delivery that has been made and accepted

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33
Q

A writing is not needed for a simple promise to pay… it is needed when someone promises to pay if someone else does NOT

A

EXCEPTION:
If guaranteeing the loan PRIMARILY BENEFITS the promisor… we are not worried about the Statute of Frauds and no writing is required.

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34
Q

If 2 merchants have an oral understanding… and one of them sends a signed written confirmation, this will be enough to satisfy the statute of frauds… EVEN IF the recipient didn’t sign.

A

So long as the recipient doesn’t object within 10 days

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35
Q

In a real estate transfer contract, partial performance by the buyer of real estate can satisfy the statute of frauds

A

If we have 2/3
Partial payment;
Possession;
Buyer’s improvements of real estate.

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36
Q

Partial Integration

A

The parties agree on everything in the writing itself, but the writing does not reflect EVERYTHING they ACTUALLY agreed to.

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37
Q

Full or Total Integration

A

The writing is BOTH (a) final as to ALL the terms it recites on the sheet of paper, and (b) COMPLETE (any and every term they agreed on is included here)

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38
Q

If the bar exam says there is no merger clause it is a ____________

A

this is partial integration

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39
Q

Exceptions to parol evidence rule

A

1) Conditions precedent exception
2) Collateral agreement exception
3) Sale of goods (course of performance, trade usage, or course of dealing)

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40
Q

Even if a contract is COMPLETELY INTEGRATED

A

parol evidence can still get in to interpret, clarify or explain a term in the contract

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41
Q

Parol evidence DOES not apply to subsequent modifications or agreements (either oral or written) made AFTER THE CONTRACT AT ISSUE!

A

It only applies to evidence before or during the making of the contract, not after.

42
Q

UCC - Express terms, Course of dealing, and Trade usage should all be used together when they don’t contradict each other.

A

When they DO contradict each other - we need orders of priority.
Express terms (but specific terms are given greater weight than general terms)
Boilerplate express terms
Course of performance (same people, same contract)
Course of dealing (same parties, different/similar contract)
Custom & usage of trade (different people, in the same industry, with the same type of contracts)

43
Q

Shipment Contract

A

Risk transfers when the goods are put on the truck

44
Q

Destination Contract

A

Risk of loss does not transfer until the goods reach the buyer

45
Q

FOB + Seller City =

A

Shipment Contract

46
Q

FOB + Any other city besides sellers city =

A

Destination Contract

47
Q

Express conditions

A

Can only be satisfied by FULL and STRICT compliance with the terms of the condition - failure to comply with a condition is an EXCUSE, NOT a BREACH

48
Q

Failure of an express condition is a BREACH of contract IF

A

There is no reasonable effort made to satisfy the condition in the first case

49
Q

Condition precedent (“provided that,” “on the condition that,” “if,” “subject to”)

A

Condition must occur before performance is due

49
Q

Failure of an express condition is a BREACH of contract IF

A

there is no reasonable effort made to satisfy the condition in the first case

49
Q

When one party’s performance requires a period of time

A

The party who has to do the thing that takes time must complete it before they get paid

50
Q

Express condition

A

Mutually agreed upon term that says a party doesn’t have to perform if an event occurs OR fails to occur.

51
Q

Condition concurrent

A

when a condition runs alongside performance

52
Q

Condition subsequent

A

when a contract is enforceable unless something happens (condition cuts off already existing duty)

53
Q

Waiver

A

Based on a statement (not just silence) that occurs AFTER a condition is supposed to occur

54
Q

Estoppel

A

Based on a statement that a protected party gives BEFORE a condition was supposed to occur that excuses it

55
Q

Perfect tender (UCC)

A

A seller is obligated to make timely delivery of perfectly conforming goods.

56
Q

When a seller promptly ships non-conforming goods……It is acceptance & a contract is created

A

BUT it is also breach UNLESS the seller notifies buyer within a reasonable amount of time that the non-conforming shipment is offered only as an accommodation - then it will not be breach, it will be a counter-offer

57
Q

What can the buyer do after imperfect tender?

A

1) Accept the whole shipment
2) Reject the whole shipment
3) Accept any units they want & reject the rest paying the contract price for the accepted units
BUT don’t forget there are exceptions

58
Q

Exceptions to Imperfect Tender Rule

A

Installment Contracts - buyer can only reject when there is substantial impairment (to that installment or entire contract)

59
Q

If buyer rejects goods, they are entitled to a refund of any payment, but if the seller doesn’t give them a refund, they must:

A

1) follow reasonable instructions from the seller about what to do with the goods; OR
2) if they don’t get any instructions on what to do with the goods; they have to make a reasonable effort to sell the goods & apply the proceeds to what is owed to the seller (minus expenses incurred while selling them)

60
Q

If buyer ACCEPTS non-conforming goods

A

They must pay the actual price of the non-conforming goods (minus any damages they suffered from not getting the full shipment)

61
Q

If you ordered 3 ostrich eggs for $300 and only one showed up (imperfect tender)

A

you still have to pay $100 (the bar exam sometimes tries to trick you by giving you a wrong answer choice saying you have to pay FMV - WRONG)

62
Q

Seller can cure imperfect tender by sending conforming goods, BUT

A

The seller can cure ONLY if the time for performance has NOT expired yet

63
Q

If the time for performance HAS expired, the seller cannot cure UNLESS

A

The seller would have some reason to believe that improper tender would be acceptable to this buyer (ex. buyer had accepted improper tender in the past)

64
Q

Installment contracts

A

Unless otherwise agreed, all goods in a contract are to be tendered in one lot.
If the contract either explicitly or implicitly requires installment in separate lots to be accepted separately, the contract will be subject to the rules of installment contracts

65
Q

Installment contract is an exception to the perfect tender rule

A

Buyer ONLY has the right to breach when there is a substantial impairment of the installment or whole contract

66
Q

If there is a substantial impairment,

A

accept & deduct from the contract price

67
Q

Revocation of goods after acceptance is limited circumstances

A

Proper revocation of acceptance will be considered a rejection.
The defect substantially impairs the value of the goods,
There was difficulty of discovering the defect,
There was revocation of acceptance within a reasonable time after the discovery of defect

68
Q

Common law contracts do not require performance

A

They only require substantial performance (so there is no material breach)

69
Q

Minor breaches will not excuse anyone from the contract

A

You can only be excused from a contract fully when there is material breach

70
Q

What can the breaching party get if they substantially perform?

A

Contract Price minus Cost to fix defect

71
Q

if “cost to fix the defect” standard does not work

A

Contract Price - Diminishment in Market Price

72
Q

Divisible Contract

A

one in which the different parts of the contract are unrelated and can be divided

73
Q

Anticipatory Repudiation = Total breach

A

If a party repudiates before performance through either words OR actions
Don’t have to wait until performance is due
May terminate the contract, bring an action for breach, and contract with another party

74
Q

If you don’t terminate the contract after someone anticipatory repudiates

A

the other party can retract their repudiation - remains in breach until the time runs.

75
Q

Make a demand for assurances (simple requests or proposals aren’t enough) IN WRITING - MUST BE CLEAR & UNEQUIVOCAL

(In NON-UCC contracts the courts allow it to be oral OR written)

A

Demanding party MUST have reasonable grounds for insecurity at the time of the demand that the other party WILL perform
The other party ONLY needs to respond if the demand is REASONABLE and JUSTIFIED.

(Under the UCC, an innocent party can SUSPEND their own performance until they receive ADEQUATE ASSURANCE of performance from the other side - if they don’t, they can treat it as a repudiation)

76
Q

All contracts - there is an implied promise of good faith & fair dealing where both parties promise not to do anything to injure the rights of the other party or block them from receiving the benefits of the contract.

A

If you deprive the non-breaching party of a benefit of the contract either 1) intentionally, or 2) by unintentionally acting in an unfair matter - you violate the covenant of good faith & fair dealing.

77
Q

Express warranties CANNOT be disclaimed

A

Implied warranties CAN be disclaimed (disclaimer must be conspicuous

78
Q

Implied warranty of merchantability

A

Says that goods are merchantable.
Applies only to merchants

79
Q

Implied warranty of fitness for a particular purpose

A

Seller has knowledge of the buyers purpose and buyer relies on sellers skill
Applies to merchants and non-merchants

80
Q

Non-carrier contract - if seller is NOT a merchant

A

Risk of loss passes to the buyer upon tender of delivery
Tender of delivery occurs when the seller makes the goods available to the buyer and notifies the buyer that the goods are ready for pickup

81
Q

Non-carrier contract - if seller is a merchant

A

Risk of loss passes to the buyer when the buyer actually takes physical possession of the goods
if seller is not a merchant, the risk of loss passes to the buyer upon tender of delivery

82
Q

If a seller delivers non-conforming goods, the risk of loss REMAINS on the seller until

A

the buyer either ACCEPTS or there is a cure

83
Q

Standard damages for breach of contract

A

Compensatory damages must be reasonably certain (and put the non-breaching party in AS GOOD of a position as if the contract had been performed without a breach)

84
Q

Expectation damages (benefit of the bargain)

A

simulate the economic situation that the non-breaching party would be in by awarding them the value of the other party’s performance + incidental and consequential damages MINUS costs/loss avoided by not having to perform

85
Q

Restitution

A

used by the breacher or non-breacher to get the VALUE of the benefit conferred

86
Q

Reliance damages

A

reimburse expenses and losses incurred because someone breached you.

A breaching party cannot recover on a theory of reliance.

87
Q

UCC - Remedies - Buyer breaches and then keeps the goods

A

Remedy = contract price

88
Q

UCC - Buyer breaches, but seller keeps the goods

A

Put the seller in the position they would have been in but for the breach

89
Q

Lost volume seller damages
1) Buyer breaches and seller keeps the goods
2) The seller has an unlimited supply of goods
3) Seller probably would have made another profitable sale

A

Seller gets the difference between the LIST PRICE and the COST to the seller of the goods (the profit)

90
Q

Seller has breached but the buyer has kept the goods

A

Price if the goods had been perfect minus the FMV as delivered

91
Q

To cover - get the greater of:

A

Market Price - K Price
vs.
Reasonable Replacement Price - K Price

92
Q

Punitive damages are generally NOT recoverable for breach

A

Recoverable for willful, wanton, or malicious & purposeful breaches by the defendant

93
Q

If when forming the contract, Party A or Party B has reason to understand that the other intends non-party C to benefit from the contract, non-party C is an

A

Intended beneficiary

94
Q

When do third party rights vest?

A

When the third party actually acquires contractual rights and can bring the lawsuit

95
Q

Beneficiary “becomes aware” of a contract benefitting them

A

INTENDED beneficiary who can sue

96
Q

Donee beneficiary

A

1) someone who a promisee intends to benefit gratuitously
2) can enforce their rights since it stemmed from a contract between two other people with consideration on both sides

97
Q

Creditor beneficiary can sue everyone in the contract when he doesn’t get paid the full amount

A

Donee beneficiary can only sue the promisor

98
Q

if a UCC contract says “NO assignments”

A

This just means you can’t delegate

MBE (9 decks)

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