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MBE Contracts > Contracts > Flashcards

Contracts Flashcards

1
Q

Framework for contracts answers

A
  1. Has an enforceable contract been formed?
  2. If enforceable contract formed, has contract been performed?
  3. If contract not adequately performed, what are the remedies for breach?
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2
Q

Does common law or UCC govern? (Threshold question)

A

Common Law: Contract that deals with real estate or is contract for services.

UCC: Article 2 of Uniform Commercial Code. When contract deals with sale of goods. UCC merchant is someone who regularly deals in buying or selling of a certain thing.

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3
Q

If mixed services/goods contract

A

All or nothing rule: Has to be one or the other, with the exception of contracts that are divisible.

Predominant purpose test: Look at the main reason for entering the contract.

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4
Q

Offer

A

Manifestation of mutual assent to be bound, which occurs upon valid acceptance to contract. Governed by objective test. WATCH for situations with humor or anger.

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5
Q

Counter-offer

A

If there has been counter-offer, offer and acceptance process begins fresh.

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6
Q

If duration term not specified in contract

A

Courts will generally imply reasonable period of time. For employment contracts, rebuttable presumption that contract is “at will”.

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7
Q

How specific does offer need to be - Common law v UCC

A

Common law: Must be specific enough to cover all essential terms.

UCC: Willing to plug gaps if key terms left out. Only need quantity of goods but do not need to specify price of goods.
- Reasonable amount is not a sufficient quantity. But, if requirements contract, can be a valid quantity even if not specific e.g. ‘all the bread I require for next 10 years’

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8
Q

Invitation to Deal

A

Does not constitute an offer. Advertisements are generally considered as invitations to receive offers from public, unless associated with a stated reward.

The more definite the statement, the more likely it is to be an offer.

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9
Q

Termination of offer

A

Could be one of 6 fact patterns:
1. Offer or revokes through express revocation.
2. If offered learns offeror has taken action inconsistent with the ability to contract, this is constructive revocation.
3. Offeree rejects offer.
4. When offeree makes counter offer. This is considered rejection of OG offer.
5. Offeror dies.
6. If reasonable amount of time passes

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10
Q

4 types of irrevocable offer

A
  1. Where offeree buys an option, even if money for option goes towards purchase price.
  2. UCC merchant: Merchants can make firm offer to buy/sell (merchant can be anyone if transaction of business nature). Has to be written, signed by offeror, and have promise not to revoke for time stated but cannot exceed 90 days.
  3. Unilateral offer cannot be revoked by offeror if offeree has started performing, where acceptance is required action.
  4. Reliance - where parties understand offer will be relied on in some way.
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11
Q

Acceptance

A

Objective test. Offeree has to accept offer according to rules set out by offeror

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12
Q

Bilateral vs Unilateral acceptance

A

Bilateral = Offer requires acceptance by return promise.

Unilateral = Acceptance by performance

If confusion as to whether offer is bilateral or unilateral, either acceptance is sufficient.

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13
Q

Mailbox Rule

A

Mail acceptance is effective as soon as it is posted. This does not apply if offeree sends a rejection or something else back before acceptance, and does not apply to option contracts.

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14
Q

Do terms of acceptance have to exactly match offer?

A

Common Law = Mirror image rule. Terms of acceptance have to match offer exactly, otherwise it is a counter-offer (conditional acceptance is counter-offer).

UCC:
If one or both parties not merchants: Acceptance with additional terms added still valid, but additional terms are treated as proposal for addition to contract which needs to be separately accepted.

If both parties merchants: Acceptance with additional tacked on terms will be valid, but new terms will only control deal if: they don’t materially alter contract, initial offer does not expressly limit acceptance to its terms, and offeror doesn’t object t new terms.

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15
Q

Consideration

A

Rule: If there is a valid offer and acceptance that creates an agreement, agreement is enforceable if there is valid consideration. Consideration is benefit bargained for and received by promisor for a promise.

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16
Q

Consideration: Pre-Existing Duty

A

Duty to perform pre-existing duty is not valid consideration, unless a 3rd party’s promise is exchanged for the promise to perform an act that the promisor is already contractually obliged to perform.

In UCC, if contract is modified with no consideration it is binding without re-consideration as long as modification was made in good faith.

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17
Q

Consideration: Gift

A

Promise to make gift does not involve bargained for consideration. Test to distinguish is whether offerree could have reasonably believed that the intent of offeror was to induce the action. If yes, there is consideration.

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18
Q

Past consideration

A

Generally not sufficient consideration at common law

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19
Q

Defences to Contract Formatiom

A
  • Misunderstanding
  • Incapacity
  • Mistake
  • Fraud
  • Duress
  • Illegality
    -Unconscionability
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20
Q

Defense to formation: Mistake

A

Each party attaches different meaning to same words (needs to be material term), and neither party knows or should know about the confusion.

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21
Q

Defense to Formation: Incapacity

A

Applies to minors, mentally ill (where they cannot understanding consequences of their actions), or intoxication if other side is aware.

Minors have broad blanket protection, intoxication it is relevant what the other side knows, mental illness standard between the two.

Contract is voidable BUT if the subject matter of the goods contract is a necessity incapacitated party still needs to pay fair value.

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22
Q

Defense to formation: Mistake

A

Belief not in accordance with present fact.

If mutual, adversely impacted party can rescind if mistake existed at the time contract was formed, relates to basic assumption of contract, has material impact on transaction and party did not assume risk of mistake.

If unilateral, either party can generally enforce contract, but mistaken party can void if elements for mutual mistake existed and either: mistake would make enforcement unconscionable or non-mistaken party caused the mistake, failed to disclose or knew/should have known other party was mistaken.

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23
Q

Defense to formation: Fraud

A

Misrepresentation of a statement of time of contracting that was false (intentional).

Even if non-fraudulent misrepresentation, C can still be voidable if:
- Misrepresentation is material;
- Misrepresentaiton induced assent to C; and
- Adversely impacted party justifiably relied on the misrepresentation.

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24
Q

Defense to contract formation: Duress

A

Improper threat that deprives one party from being able to make meaningful choice to enter into contract.

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25
Q

SOF

A

Contracts that fall within SOF are not enforceable unless in writing (1) signed by party against whom enforcement is sought, and (2) contains the essential elements of deal.

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26
Q

What does SOF apply to?

A
  • Marriage, suretyship, contracts by its terms cannot be performed a year from its making, UCC goods (where goods worth more than $500), or contract for sale of interest in real property.
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27
Q

SOF - Main purpose exception

A

If the main purpose of paying debt for surety is in paying person’s advantage, SOF does not apply

28
Q

How to satisfy SOF - Service contract

A
  • Full performance by either side satisfies SOF/one party full performance. Part performance will not satisfy.
  • Signed writing against whom the claim is asserted will satisfy SOF. Does not have to be formally executed contract - needs to identify party and show main elements of deal.
29
Q

How to satisfy SOF: Real Estate

A

Need to show at least 2/3 of: Possession, payment and improvements to the land.

30
Q

How to satisfy SOF: UCC goods

A
  • Signed writing required that mentions quantity.
  • If there is no quantity or wrong quantity written down, only written quantity will be enforced.
  • Part performance ok for goods that are delivered/accepted.
  • custom goods exempt from SOF requirements. ‘Substantial beginning’ is all that is required.
  • SOF does not apply to goods once payment made and accepted.
31
Q

SOF - Modifications

A

If modified deal would be in SOF world, then SOF requirements also have to be met for modificaiton

32
Q

Assignment

A

Transfer of rights under a contract

33
Q

When is assignment of contract not allowed?

A

Where assignment:
- Materially increases duty or risk of the obligor; or
- Materially reduces obligor’s chance of obtaining performance.

34
Q

Formalities required for assignment?

A

No formalities needed, but must be present intent to transfer right immediately.

35
Q

If contract says rights are not assignable

A

Need to work out if in invalidates or prohibits assignments.

If prohibits, party will have breached deal, but third party can still recover.

If invalidate, third party assignee cannot recover.

36
Q

Delegation

A

Transfer of duties under a contract

37
Q

When is delegation not permitted?

A

Delegation not permitted when party to contract has substantial interest in having delegating party perform or delegation prohibited by contract.

38
Q

Delegator’s liability

A

When obligations are delegated, delegator is not released from liability

39
Q

Is delegator released from liability once duties delegated?

A

No

40
Q

Novation

A

Where one contract is substituted for new one when original obligor is released from obligations under the contract.

Can be express or implied after delegation if:
- Original promisor repudiates liability to OG promise; and
- Promisor subsequently accepts performance of the original agreement from the delegate without reserving rights against promisor.

41
Q

Parol Evidence Rule - General Rule

A

PER generally prevents party to a written contract from presenting extrinsic evidence of a prior or contemporaneous agreement that contradict terms of the contract as written (where there is a final written contract)

42
Q

Steps to undertake for PER question

A
  1. Integration: need to work out whether parties’ writing is “integrated”, meaning they intend it to be final agreement.
    a. If document is not an integration (e.g. negotiation doc or draft agreement), PER wont apply.
    b. Total integration: Parties cannot introduce any extrinsic evidence of contemporaneous understanding or negotiation.
    c. Parties integration (if writing does not set forth parties agreements about all terms), then parties can introduce supplementary evidence consistent with the writing, but not if evidence contradicts.
    d. Common law – merger clause is evidence of complete integration/if written contract appears to be detailed.
    e. Second restatement rule: if an extrinsic term of an agreement would naturally be omitted from writing, then term can be introduced if it doesn’t contradict.
    f. UCC: usually presumes written contract is partial integration and allows additional consistent terms unless court establishes that parties certainly would have included term in written contract.
43
Q

Where PER doesn’t apply

A
  • Raising defense to contract formation
  • Establishing defense to enforcement of contract
  • Seperate deal
  • Condition Precedent
  • Interpreting ambiguous terms
  • Subsequent agreements
  • Trade usage and course of dealing or performance
44
Q

Express condition

A

Must be complied with unless fully excused. Enforceable even when failure to meet condition results in denial of compensation.

45
Q

Satisfying implied condition

A

Substantial performance is all that is required to satisfy the implied condition.

46
Q

Constructive condition of exchange

A

Court will imply that builder/employee must first substantially perform before the other side’s performance becomes due.

47
Q

Waiving conditions

A

The party that receives protection of the condition can waive the condition, but an express condition can only be waived by express language

48
Q

Express warranty

A

Any promise that affirms goods which is part of the promise is an express warranty.

49
Q

Implied warranty of merchantability

A

Only triggered when the seller is a merchant who deals with the goods at issue. It is a warrant that goods are fit for an ordinary commercial purpose.

50
Q

Implied warranty of fitness for particular purpose

A

When buyer relies on seller’s expertise to select an item that is best for a particular purpose. Must be in writing

51
Q

Breach of contractual duties - Common law

A

Breaching party who fails to meet performance requirements not entitled to recover under control if they have not satisfied constructive condition of exchange/have not met an express condition

52
Q

Breach of contract - UCC

A

Goods will normally require perfect tender: perfect goods and delivery. BUT rejection of goods is not rejection of the offer.

If seller fails to tender perfect goods and there is time left on contract, buyer must give seller reasonable chance to cure the issue.

53
Q

Impossibility/Impracticability of Performance

A

Doesn’t apply only if performance is made harder. Look for unforeseen event where the non-occurrence of the event was a basic assumption of the contract.

54
Q

Excuse for lack of performance - Death

A

Dying after execution normally doesn’t exclude liability - estate usually on the hook.

Need to consider if there was something special about the person undertaking the obligation

55
Q

Accord and Satisfaction

A

Parties to an earlier contract agree that some new obligation of the contract will be fulfilled by a different kind of contract. The new performance is the accord, and excusal of initial performance is satisfaction.

56
Q

When is breach material?

A

A breach is material when NB party does not get benefit of their bargain. When breach is minor, NB party may get damages but still needs to perform their obligations under contract. When breach is material, NB party does not need to perform their obligations

57
Q

Anticipatory Repudiation

A

• If one party notifies that they will not perform before performance is actually due, the other party does not have to complete their side of the bargain, as long as repudiation is clear and unequivocal.
• The NB party can treat repudiation as a breach and sue for damages (cannot sue early if you have already completed everything required under the contract and are only waiting for payment), or can ignore repudiation and demand performance.
• Party can retract repudiation if other party has not commenced lawsuit or acted in reliance of repudiation.
• UCC:
o Reasonable grounds for insecurity about other party’s performance will allow you to demand adequate assurance of performance. If not provided within a reasonable time, this can be treated as a repudiation.

58
Q

Restitution

A

Goal is to give plaintiff amount equal to the economic benefit that they conferred on the defendant. This can sometimes equal reliance damages, but does not necessarily have to.

59
Q

Specific Performance

A
  • Exception rather than the norm.
  • Equitable relief which si only awarded where monetary damages are considered inadequate e.g. real estate transactions.
  • Can still get SP for goos, but will need to ask if money is inadequate.
60
Q

Expectation damages

A
  • Standard way to calculate money damages. Purpose is to put NB party in position it would have been in if contract had been performed.
  • Even if market price for products arose subsequently to breach, that does not impact expectation damages.
  • ## Proven with reasonable certainty
61
Q

Recovering for unforeseen consequential damages

A

 Unforeseeable consequential damages are not recoverable unless the breaching party had reason to know that these consequential damages were possible at time of contracting – Hadley v Baxendale rule

62
Q

Lost volume profits

A

if paying party is the breaching party, selling party needs to mitigate by selling goods to someone else. If seller is a retailer who is in business of selling this goods all the time, the seller might argue for loss volume profits – they would have done the second sale regardless. If the seller can sell that it had lots of items to sell, and very little buyers. They are put in situations they would have been in should the contract have been executed as promised

63
Q

Reliance damages

A

Putting party in same economic position they would have been in if contract was never entered into.
- WHat loss has NB suffered that would never have taken place but for entering into the contract?
Cannot use both expectation and reliance damages.

64
Q

Third party beneficiary contracts

A

Third-party beneficiary contract results when the parties to a contract intend that the performance by one of the parties will benefit a third person who is not a party to the contract.

65
Q

3rd party beneficiary contract: Creditor and donee beneficiary

A

o If performance of a promise would satisfy an actual, supposed or asserted duty of the promisee to a third party, and the promise did not intend to make a gift to the third party, then the third party is called a creditor beneficiary.
o Creditor beneficiary has the right to sue either the promisor or promise to enforce the contract.
o Generally, intended B can only sue promisor because promisee is under no obligation to B. however, if promise tells intended B about the contract and should reasonably forsee reliance, and B justifiably relied, then intended B may also sue promisee.

66
Q

Incidental beneficiary

A

Cannot enforce contract.

67
Q

Vesting of rights of intended beneficiary (3rd party)

A

Vest when beneficiary:
- Materailly changes position in justifiable reliance on rights created;
- Manifests assent to the contract at one party’s request; or
- Files a lawsuit to enforce contract.

MBE Contracts (1 decks)

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