CONTRACTS Flashcards
What is a Bilateral Contract?
A contract formed by an exchange of promises.
Example: A offers to sell a car to B for $5000, B promises to purchase A’s car at that price.
What is a Unilateral Contract?
A contract formed involving only one promise that expressly requires performance to accept.
Example: A promises to pay B $100 if B paints A’s fence; the contract is formed once B paints the fence.
What is a quasi-contract?
Not a contract, but restitution to prevent unjust enrichment.
What is an Express Contract?
A contract formed by express written or oral terms.
What is an Implied in Fact Contract?
A contract formed by the conduct of the parties.
What is an Implied in Law Contract?
Not a contract, it is a restitution remedy to prevent unjust enrichment.
What does Void mean in contract law?
No contract exists; the agreement has no legal effect.
What does Voidable mean?
A problem with the contract exists, but it may be enforced or rejected at the option of one party.
What does Unenforceable mean?
A valid contract that cannot be enforced because a defense applies.
What is the UCC?
The UCC governs SALE OF GOODS contracts and has additional rules if both parties are merchants.
What is Common Law in contract law?
Applies to all other contracts, such as non-movable things like real estate, services, and construction.
What are Mixed Contracts?
Contracts that are hybrid containing both goods and non-goods, courts will use the predominant purpose test to determine which body of law applies.
What are the requirements to form a valid contract?
1) Mutual assent (offer and acceptance) 2) Consideration 3) No defenses to formation.
What is an Offer?
An objective manifestation of present intent to enter into a contract with definite and reasonably certain terms communicated to an identified offeree.
What is a Counteroffer?
Terms of the initial offer are changed, making a brand new offer.
What are the ways an offer can be terminated?
1) Revocation by offeror 2) Rejection or counteroffer by offeree 3) Lapse of time 4) Death/incapacity of either party.
What is Revocation?
Revocation of an offer terminates the offeree’s power of acceptance if communicated before acceptance.
What are the exceptions to revocation?
1) Option Contract 2) UCC Merchant’s firm offer 3) Detrimental reliance 4) Start performance in Unilateral Contracts.
What is a Rejection?
A manifestation of intent to NOT accept the offer communicated to the offeror.
What is Acceptance?
The offeree’s clear expression of assent to the offer, which can be through words, conduct, or performance.
What is the Mirror Image Rule?
Acceptance must mirror the offer’s terms; cannot omit, add, or change terms.
What is the timing of offer/acceptance?
Offer/rejection/counteroffer effective when received; acceptance effective when dispatched.
What is Consideration?
Bargained for exchange of legal value that benefits the promisor or causes detriment to the promisee.
What is Promissory Estoppel?
A promise made without exchange of consideration that reasonably induces action or forbearance.
What are the requirements for modifications?
Requires mutual assent and new consideration, except under UCC where only good faith is needed.
What is Incapacity in contract law?
Lack of capacity to enter into a contract, making it voidable.
What is Duress?
Wrongful act or threat that overcomes the free will of a person.
What is Undue Influence?
Unfair persuasion from a person in a position of trust or confidence.
What is Mutual Mistake?
Voidable if both parties are mistaken about a basic assumption of fact.
What is Misrepresentation?
Fraudulent or nonfraudulent false statement of a material fact that induces reliance.
What is Illegality in contract law?
Courts will not enforce illegal contracts or those contrary to public policy.
What is Unconscionability?
Contract terms that shock the conscience of the court due to procedural or substantive unconscionability.
What is the Statute of Frauds?
Contracts subject to SoF are not valid unless in writing.
What contracts are subject to the Statute of Frauds?
1) Marriage 2) Year 3) Land contracts 4) Executory promises 5) Goods for $500 or more 6) Surety.
What are UCC SoF Exceptions?
1) Merchant’s Confirmatory Memo 2) Goods accepted or paid for 3) Custom made goods.
What is the Parole Evidence Rule?
Evidence of prior negotiations is inadmissible to contradict a later written contract.
What are UCC omitted & implied terms?
Courts will use gap fillers for price, time of payment, place for delivery, and terms.
What is a Material Breach?
Occurs when a party does not substantially perform, excusing the non-breaching party’s performance.
When are goods presumed delivered to the carrier?
Goods are presumed delivered to the carrier if the contract does not specify and shipment is by an independent carrier.
What is a destination contract?
In a destination contract, the seller must safely deliver goods to the buyer’s location (F.O.B. buyer’s location), passing ownership to the buyer when goods are delivered.
What constitutes a material breach?
A material breach occurs when a party does not substantially perform, meaning at least halfway completed, excusing the non-breaching party’s performance.
What are the factors to consider in a material breach?
Factors include extent of performance, adequacy of compensation for loss, hardship, whether the breach was intentional, and likelihood of curing.
What is a minor breach?
A minor breach does not excuse performance and can only result in a lawsuit for damages.
When is delayed performance not a material breach?
Delayed performance is typically not a material breach unless it significantly deprives the other party of the benefit of the contract or there is a time of essence clause.
What is the UCC Perfect Tender Rule?
Under the UCC, the seller must deliver conforming goods; the smallest non-conformity is considered a breach.
What options does a buyer have under the UCC if goods are non-conforming?
The buyer can reject delivery, accept all delivery and sue for damages, or accept some and reject others (only for commercial units).
What is the Right to Cure under UCC?
The seller has the right to cure when the time for performance has not expired or when the seller had reasonable grounds that a substitute would be acceptable.
What happens in installment contracts if an installment is defective?
The buyer can cancel the contract only if an installment is so defective that it substantially impairs the value of the entire contract.
How does acceptance of goods occur under UCC?
Acceptance occurs when the buyer signifies that goods are conforming, fails to reject after inspection, or acts inconsistently with the seller’s ownership.
When can a buyer revoke acceptance of goods?
A buyer may revoke acceptance if non-conforming goods substantially impair their value and the defect was difficult to discover or acceptance was induced by the seller’s assurance.
What is impossibility in contract performance?
Impossibility occurs when performance is objectively impossible due to death, incapacity, unanticipated destruction, or supervening illegality.
What is impracticability in contract performance?
Impracticability occurs when an unanticipated event makes performance extremely or unreasonably difficult or expensive.
What is frustration of purpose?
Frustration of purpose occurs when the purpose of the contract no longer exists due to a substantially frustrating unforeseeable event.
What is anticipatory repudiation?
Anticipatory repudiation occurs when a party unequivocally communicates their inability or unwillingness to perform before performance is due.
What is an accord in contract law?
An accord is a new agreement to accept alternative performance in lieu of the original performance obligation.
What is satisfaction in contract law?
Satisfaction occurs upon the completion of the accord, excusing further performance under the original contract.
What is novation?
Novation is when all parties to a contract agree to discharge the original party and substitute a third party in their place.
What is a warranty of title?
A warranty of title warrants that the title is good, free from securities, liens, or encumbrances.
What is an express warranty?
An express warranty is created when the seller makes an affirmation of fact, promise, description, or provides a sample related to goods.
What is an implied warranty of merchantability?
An implied warranty of merchantability ensures that all goods sold by a merchant are fit for their ordinary purpose.
What is an implied warranty of fitness for a particular purpose?
An implied warranty of fitness for a particular purpose applies when the buyer relies on the seller’s skill or judgment for a specific purpose.
What is the difference between intended and incidental third-party beneficiaries?
Intended third-party beneficiaries have rights because the contract was intended to benefit them, while incidental beneficiaries do not have rights and cannot sue.
What is required for third-party beneficiary rights to vest?
Rights vest when the third party knows and manifests assent, determinately relies on the promise, or sues to enforce the promise.
What are the requirements for assignment of rights?
Rights may be transferred if the assignor manifests intent to transfer and the assignee assents to the assignment.
What are the exceptions to assignment?
Exceptions include materially altering what’s expected, being prohibited by law or policy, or being specifically prohibited in the contract.
What is the expectation damages principle?
Expectation damages aim to put the non-breaching party in the same position they would have been in if the contract had been performed.
What are consequential damages?
Consequential damages arise indirectly from the breach, such as lost profits, and must be reasonably foreseeable and certain.
What are incidental damages?
Incidental damages are reasonable costs incurred as a result of the breach, such as costs to return or inspect non-conforming goods.
What are reliance damages?
Reliance damages are expenditures made in reliance on a contract, meant to put the non-breaching party in the position they would have been in if the contract never existed.
What are restitution damages?
Restitution damages are awarded to prevent unjust enrichment, reflecting the value of the benefit conferred.
What is the duty to mitigate damages?
A party must take reasonable steps to mitigate losses; if they fail, the court will reduce total damages by the amount that could have been avoided.
When is specific performance allowed?
Specific performance is allowed only if monetary damages are inadequate, typically for unique goods and land, not for personal services.
What is the waste doctrine?
The waste doctrine allows courts to award damages for diminution in value instead of expectation damages when completion costs exceed the value of completed work.
What remedies does a seller have when a buyer breaches?
Seller remedies include withholding delivery, canceling the contract, covering damages, and stopping delivery.
What remedies does a buyer have when a seller breaches?
Buyer remedies include canceling the contract, recovering amounts paid, and recovering damages.
