Contracts Flashcards
What governs the sale of goods?
The UCC: UCC Art. 2 governs the sale of goods.
Applicable rules also apply to merchants.
What governs contracts other than the sale of goods?
The Common Law: Majority rules governing contracts other than the sale of goods.
How are mixed contracts determined?
By the more important part of the deal, except divided contracts where both UCC and common law rules may apply.
What is a unilateral contract?
An offer expressly required performance as a method for acceptance.
What characterizes divisible contracts?
Performance divided into 2+ parts under the contract; the number of parts due from each party is the same; performance between parties is equivalent.
What is an option contract?
An agreement to leave open in exchange for consideration.
How are advertisements generally treated in contract law?
Generally a preliminary proposal unless words are directed to an identifiable person.
What is a quasi-contract?
An equitable remedy when a contract results in unfairness, preventing unjust enrichment.
What are the three elements required for an enforceable contract?
- Mutual assent (offer + valid acceptance)
- Adequate consideration
- No defenses to formation that invalidate the contract.
What are the requirements for a valid offer?
- A manifestation of a present intent to contract
- Definite and certain terms
- Communicated to an identified offeree.
What is not required in a UCC sale of goods regarding the offer?
Price is not needed.
What is revocation in contract law?
An unambiguous statement by the offeror to the offeree or conduct indicating unwillingness to contract that the offeree is aware of.
What are the conditions under which an option contract cannot be revoked?
An option contract cannot be revoked.
What is a firm offer under UCC?
An offer that cannot be revoked for up to 3 months if it is a signed written promise to keep open and the party is a merchant.
What is detrimental reliance in contract law?
Cannot revoke if reasonably foreseeable detrimental reliance has occurred.
When does an offer become irrevocable?
Once performance has started.
What happens to an offer if it is rejected?
Counteroffers kill the original offer.
What is the mailbox rule?
Acceptance is effective when mailed; all else is effective when received.
What happens if a seller sends the wrong goods?
Unless with explanation, it is considered a counteroffer.
What is required for consideration in a contract?
A bargained-for exchange of legal detriment between parties.
What is past consideration in contract law?
Not adequate consideration, except when expressly requested performance/forbearance and expectation of payment.
What is an illusory promise?
An unenforceable promise because it is indefinite, only one side is obligated to perform, and it lacks adequate consideration.
What can substitute for consideration?
- Written promise when prior obligation had applicable legal defense
- Promissory estoppel.
Under what conditions is a promise not to sue adequate consideration?
If the promisor’s belief in the validity of the claim is reasonable or in good faith.
What is the legal capacity of a minor in contract law?
Under 18 has the right to disaffirm a contract unless the minor retains benefit after gaining capacity.
What happens to a contract if the subject matter is illegal?
The contract is void.
What is misrepresentation in contract law?
Innocent party may rescind if induced to enter a contract by fraudulent misrepresentation or non-fraudulent material misrepresentation.
What constitutes duress in contract law?
An improper threat and no reasonable alternative.
What is unconscionability in contract law?
Unfair and oppressive terms at the time of the contract.
What is ambiguity in contract terms?
Each party uses a material term open to two reasonable interpretations.
What is a mutual mistake in contract law?
No contract if there is a mutual mistake on a basic assumption of fact that materially affects the agreed-upon exchange.
What does the Statute of Frauds apply to?
MY LEGS: Marriage, Year (contract cannot be performed within 1 year), Land, Executory.
What is required for a suretyship to be enforceable?
Satisfy by performance, writing, or judicial admission
In real estate, part performance requires 2 out of 3 of the following: payment, possession, or improvements.
What elements must be included in a writing for a non-UCC contract?
- Parties
- Subject matter
- Terms & conditions
- Consideration
- Signature
UCC requires quantity terms and signature unless there is a confirmatory memo of an oral contract and no objection within 10 days.
What is the Parol Evidence Rule?
If a contract is completely integrated, no evidence of agreements outside the contract is allowed
A merger clause states that the agreement is the complete agreement between parties.
What are the three types of conduct in contract interpretation?
- Course of performance
- Course of dealing
- Custom and usage
What does FOB stand for in contract terms?
Free on board
Indicates the location where the risk of loss shifts from seller to buyer.
Under a shipment contract, when does the risk of loss transfer to the buyer?
When the seller delivers to the carrier
In a destination contract, risk of loss transfers when the seller delivers to the buyer.
In the absence of an agreement, when does the risk of loss transfer for a merchant seller?
On receipt of goods
For a non-merchant seller, risk of loss transfers upon tender.
What constitutes an express warranty under UCC?
Seller is liable for breach based on statements of fact, promises, or description of goods.
What is the Implied Warranty of Merchantability?
Goods must be fit for ordinary purposes and seller must know of the buyer’s purpose and reliance.
What is a breach of contract?
Occurs when a party refuses to perform under the terms of the agreement.
What is the perfect tender rule?
In the sale of goods, seller’s performance must be perfect or the buyer can reject.
What options does a seller have upon rejection of goods?
- Retain and sue for damages
- Reject all of a commercial unit and sue for damages
What is the cure provision in contract law?
Seller has a second chance at perfect tender if they had reasonable grounds to believe delivery would be accepted or if the time to perform has not expired.
When can a buyer reject an installment in an installment contract?
Only if there is a substantial impairment that cannot be cured.
What constitutes acceptance of goods by the buyer?
If the buyer accepts goods, they cannot later reject them. Payment does not equal acceptance without the opportunity to inspect.
What are the conditions under which a buyer can revoke acceptance of goods?
- Nonconformity substantially impairs value
- Excusable ignorance of grounds for revocation
- Revocation within reasonable time after discovering nonconformity
What excuses performance under contract law?
- Improper performance by the other party
- Non-occurrence of condition
- Anticipatory repudiation
What is anticipatory repudiation in contract law?
A promisor makes clear and unequivocal repudiation of promise.
What options does the non-repudiating party have in the event of repudiation?
- Immediately sue for damages
- Suspend performance and wait for performance date to sue
- Treat repudiation as an offer to rescind
What is rescission in contract law?
Cancellation of the contract only if performance is not completed.
What is accord and satisfaction?
Mutual agreement of existing obligation to accept different performance.
What is modification in contract law?
A mutual agreement to accept a different agreement to satisfy an existing contract.
What is novation?
Mutual agreement to substitute an existing party with another, excusing performance of the substituted party.
What is impossibility in contract law?
A situation where a contract cannot be performed due to damage, destruction, death, or subsequent law or regulation.
What does impracticability refer to in contract law?
A situation where a contract cannot be performed without extreme and unreasonable difficulty or expense.
What is frustration of purpose?
An unforeseeable supervening event destroys the purpose of the contract.
What is specific performance?
A non-monetary remedy typically limited to real estate and sale of unique goods, but never for services.
Requires a valid contract, conditions satisfied, inadequacy of legal remedies, mutuality, and feasibility of enforcement.
What does rescission do?
Cancels a contract.
Requires grounds for rescission such as mutual mistake or unilateral mistake with undue hardship.
What is reformation in contract law?
Changes a written agreement to conform to the parties’ original understanding.
Requires a valid contract and grounds for reformation, with no negligence, Statute of Frauds (SoF), or Parol Evidence Rule (PER).
What is reclamation?
The right of an unpaid seller to get goods back.
Only applicable if the buyer was insolvent at the time of receipt and the seller makes a demand for return within 10 days or a reasonable time.
What are the rights of a good faith purchaser in entrustment?
Cuts off the right of the original owner if the owner entrusts goods to a person who sells that kind of good and that person wrongfully sells to a third party.
What is expectation interest?
A monetary damage that puts the plaintiff in the position as if the contract wasn’t breached.
What is reliance interest?
A monetary damage that puts the plaintiff in the same financial position as if the contract had not been breached.
What does restitution interest aim to do?
Prevents the defendant’s unjust enrichment.
How is damages calculated for sale of goods if the seller breaches and the buyer keeps the goods?
The difference between the value of goods delivered and the fair market value had they been perfect.
What are incidental damages?
Costs incurred for finding a replacement.
What are foreseeable consequential damages?
Damages from the plaintiff’s special circumstances, only if the defendant had reason to know of those circumstances.
What is the plaintiff’s duty regarding avoidable damages?
The plaintiff must mitigate damages.
What is liquidated damages?
A predetermined amount of damages fixed in a contract.
Valid if actual damages would be difficult to ascertain if a breach occurs and are reasonable at the time of contract formation.
What defines a third party beneficiary?
Only intended third party beneficiaries have rights under a contract, while incidental third party beneficiaries do not.
What happens to a contract after a third party beneficiary’s rights have vested?
No cancellation or modification can occur by either party.
What is the significance of assignment language in contracts?
If a contract states ‘Rights under this K are not assignable,’ the assignment is still valid.
What is a gratuitous assign?
An assignment that can be revoked; the last gratuitous assign wins.
What is required for an assignment for consideration?
No recovery from the obligor, and the assignor implies warranty that the right exists.
What are the conditions for delegation of duties?
Allowed unless the contract prohibits it, calls for special skills, or has a very special reputation.
Who remains liable if a delegated party fails to perform?
The delegating party always remains liable.
When is a delegatee liable?
Only if they receive consideration from the delegating party.
