Contracts Flashcards
Applicable contract law
UCC- contracts for the sale of goods
Common law- all other contracts
Predominance test if both
Merchant
Under the UCC special rules apply to merchants, a merchant is one who deals in goods of the kind involved in the contract.
A valid contract requires
- offer - Common law manifestation of willingness to enter into a bargain, requires a demonstration of intent to enter into a contract, definite and certain terms, and communication to the offeree, offer remains open for a reasonable time. UCC any manner reasonable.
- acceptance - Common law manifestation of assent to the terms of the offer. UCC any expression of acceptance.
- consideration - is a bargained for exchange of legal detriment.
Termination of the offer
A counteroffer is a rejection and a new offer.
UCC firm offers are:
1. made by a merchant
2. in writing
3. gives assurance it will be held open for a specified time (no longer than 3 months without consideration)
Option contract
Consideration required, offer is irrevocable for stated period.
Mirror image rule
Common law new terms are a rejection and counteroffer.
UCC any expression of acceptance works even if there are different or additional terms. If one party or more is not a merchant, additional terms will not become part of the contract. If both parties are merchants, additional term becomes part of the contract UNLESS:
1. offer expressly limits acceptance to its terms
2. material alteration with added term
3. offeror object within a reasonable time.
Conflicting terms cancel each other out and the court will supply missing terms.
Exceptions to consideration
A promise is not an illusory promise if it constitutes a requirement contract (buy all that buyer requires from same seller) or if it is an output contract (buyer agrees to buy all the seller can produce).
Past consideration
A promise to pay for a benefit recieved in the past will not provide current consideration on a new bargain. Exceptions, promise to pay a past debt that is now barred (SOL) or new promise to pay for benefits previously recieved.
Preexisting duty
Promise to do something that one is legally obligated to do will not provide consideration unless the duty is owed to a third person.
Promissory estoppel
A promise that foreseeably induces reliance and is actually relied upon may be enforceable. Recovery is limited to reliance damages.
SOF
Writing required for:
Marriage
Real property
Suretyship
Contracts impossible to perform in one year
Sale of goods of $500 or more
Defenses to contract formation
- misrepresentation
a. false statement of material fact
b. justifiable and actual reliance - fraud
a. false statement of material fact
b. knowledge of falsity
c. intent to induce reliance
d. justifiable and actual reliance
e. damages - unconscionability - no reasonable person would have agreed to it
- mistake
a. mutual mistake
i. basic assumption
ii. material effect
iii. did not assume risk
b. unilateral mistake - three factors above and other party knew or should have known
Parol Evidence Rule
Limits the extent to which evidence made prior to or contemporaneous with the signed written contact can be admitted and considered part of the agreement. It depends on whether the writing is a total intergration or a partial integration. If a partial integration, PER may not contradict a term but may supplement a term. If a total integration, PER is not allowed to contradict or supplement a term. PER exceptions include, evidence of formation defenses, conditions precedent, and clarifying ambiguous terms. For ambiguous terms may look at:
1. course of performance
2. course of dealing
3. usage of trade
In that order^
Third-party beneficiary
An intended third party beneficiary may sue to enforce the contract, an incidental beneficiary is one who indirectly benefits from the contract and may not sue.
Assignment, delegation, novation
Anticipatory repudiation
Nonrepudiating party may:
1. Sue immediately
2. Suspend performance
3. Rescind
4. Urge performance and sue later
Right to demand adquate assurances
When the conduct of a party gives reasonable grounds for insecurity the insecure party may suspend performance and demand adequate assurances of performance in writing. A repudiation occurs when the party fails to respond in a reasonable time. (30 days)
Material breach
Where there was not substantial performance on the contract.
Minor breach may still get damages but must perform.
Perfect tender
Buyer may:
1. Reject the whole
2. Accept the whole
3. Accept in part and reject in part
A seller may cure the defect any time before performance is due with notice and new tender.
Warranties
a. express
b. implied warranty of merchantability - fit for ordinary purpose
c. warranty of fitness for a particular purpose - buyer relies on sellers judgement
d. implied covenant of good faith and fair dealing
Accord and satisfaction
May substitute performance, consideration is required.
Defenses to enforcement
All other defenses AND:
1. condition precedent not met
2. impossibility - neither party assumed the risk
3. impracticability - performance is extremely and unreasonably difficult. The event must have been a basic assumption of the contract and neither party assumed the risk.
4. frustration of purpose - both parties know the purpose of the contract, the event is not reasonably foreseeable, frustration must be total
Contract remedies
Damages must be (1) foreseeable (2) not too speculative and (3) duty to mitigate losses.
Expectation damages (K expectation), consequential damages (lost profits), and incidental damages (cost incurred by breach).
Lost volume seller
Seller may recover lost profits if seller:
a. has supply to make K sale and resale
b. would likely made profit on both sales
Quasi-contract
Where there is no enforceable K but the defendant has derived a benefit, measure of relief is the value of the benefit conferred.
Specific performance
- Valid K
- Conditions on Pla satisfied
- Inadequate legal remedy
- mutuality of performance
- feasibility of performance
- no defenses
a. laches
b. unclean hands
c. all other K defenses
