CONTRACTS Flashcards
Offers
- specific terms
- offers default = revocable
- Revoking: by person who made offer
- Rejecting: by person who received offer
when an offer is IRREVOCABLE
- option contract
- firm offer
- unilateral contract
Option Contract
i. A promise to keep offer open for a period of time
ii. Are between lay (normal) people
iii. Needs additional consideration
Firm Offer
i. A promise to keep offer open for a period of time
ii. Between merchants
iii. Has to be in writing
iv. If there’s at least 1 merchant & other party is lay person = firm offer
Unilateral Contracts
i. A promise for performance
ii. The moment you begin performance –> offer is irrevocable
iii. $ isn’t owed until performance is complete
Direct Revocation
you tell someone the offer is revoked
- effective upon notice
Indirect Revocation
person offer was made to (offeree) learns that offeror sold it to someone else = indirectly revoked because offeree loses power of acceptance
Acceptance
Requires a manifestation of intent to accept
Ways to Accept
any reasonable means (words, actions, etc) as long as you manifest your intent to accept
- unless manner of acceptance is specified. in that case, must accept in manner specified
Mailbox Rule
- only apply to MAIL
- ACCEPTANCE IS EFFECTIVE WHEN MAILED
Mailbox Rule Exception
if you first mail a letter of rejection, but follow it by mailing a letter of acceptance, the letter that ARRIVES FIRST PREVAILS.
Consideration - Rule
a bargained for exchange; each party is giving something up
Consideration - Gifts
- promise to give a gift = unenforceable
- giving the gift = enforceable consideration
Consideration - Past/Moral
after you do something, they promise you consideration = unenforceable
Third Party Beneficiary
Two people make a contract & someone else benefits aka 3rd party
- usually 3 parties involved in the question
Intended 3rd Party Beneficiary
Contracting parties express their interest for 3rd party benefit
Incidental 3rd Party Beneficiary
someone is claiming to have a benefit but contracting parties never expressed their intent to benefit the 3rd party
- never had any rights
Rights Vesting
an intended 3rd party beneficiary doesn’t have any rights until the rights VEST
Rights vest when:
- 3rd party is informed of the benefit; OR
- 3rd party learns about the benefit and starts to rely on it
what is an Assignment
one party assigns away their rights in the contract
what is a Delegation
one party delegates their duty under the contract
Default Rule for Assignments/Delegations
you can freely assign/delegate whenever and to whoever
Specific Rules re Assignments/Delegations
a. Other party must accept the new person to perform
b. If new person breaches, nonbreaching party can sue both new & og
- Unless: novation is executed releasing og – never infer or assume a novation
c. New person cannot unilaterally change the terms of the original contract
d. Contract includes / parties agree not to assign & one party assigns -> assignment valid (but non-breaching party can sue for damages)
e. Cannot assign when the contract is for a personal service/special skill/unique service or expertise
- Cannot give it to someone of the same level of expertise either
SOF as a Defense
Can be used as a defense if it’s one of the applicable contracts (MYLEGS) and it’s BEFORE having to perform (aka an excuse not to perform)
once both parties perform, SOF can no longer be used as a defense
Types of Contracts under SOF
M: Marriage
Y: contracts that cannot be performed in less than 1 Year
L: Land
E: Executor
G: Garantor aka asurity Ks (guaranteeing the debt of another)
S: Sale of Good of $500 or more
Exceptions to SOF requirements
if there’s part performance:
- writing requirement is removed
Land contracts: make some payment & take possession or make improvements to land
Sale of Goods: part payment & part delivery (i.e. down payment given & 1/3 of goods delivered)
Promissory Estoppel
i. There is NO CONTRACT
ii. One party makes a statement or promise
iii. That statement or promise causes a party rely to their detriment
- Because that party relied to their detriment, the statement/promise is now enforceable
- Detrimental Reliance: you reacted because of what was said
Non-Conforming Goods - default
If buyer receives non-conforming goods on the DAY OF DELIVERY, buyer may reject; accept; or accept in part & reject in part
Non-Conforming Goods means
not what the buyer ordered
doesn’t have to be broken or defective
Installment Contracts
Series of deliveries
- 1 non-conforming installment is not a total breach, UNLESS it substantially impairs the value of the whole contract
Non-Conforming Goods - Prior to Date of Delivery
if prior to date of delivery: if seller proves he can, seller must be given opportunity to cure by delivery date
Non-Conforming Goods - On Day of Delivery with Reasonable Belief
if on day of delivery & seller had “reasonable belief” that buyer would accept: seller must be given opportunity to cure within a reasonable time
Modifications under Common Law
- additional consideration needed
- services or land
Modifications under the UCC
no consideration need - only good faith
- sale of goods
Conditions generally
conditions = an event
- If it happens –> have to perform
- if it doesn’t happen –> discharged
- “only if;” “unless;” “but for”
Condition Precedent
condition will happen before K performance
Condition Subsequent
condition happens after K performance
Concurrent Condition
condition happens on day of contract performance
Waiver of Condition
can be waived
“forget about it;” “don’t worry about it;” “do it anyway”
what is parol evidence
After a contract is formed, one party tries to admit oral evidence in the contract
- Prior to or contemporaneous with the contract
when Parol Evidence is always allowed
a. To prevent fraud or duress;
b. To prove existence of condition precedent;
c. In a sale of goods hypo to show course of dealing (how parties have conducted biz between each other) OR trade / custom (custom in biz/industry)
Partial K
- consistent, additional terms admitted
- terms that materially alter OR contradict material terms = NOT admitted
PARTIAL K = DEFAULT, unless they tell you it’s final
Final K
- NOTHING admitted
- parol evidence is INADMISSIBLE
- evidence only admitted if to clear up an ambiguity
NEVER ASSUME K IS FINAL UNLESS THEY TELL YOU
Types of remedies
legal ($) & equitable
Legal Remedies - Money
$ = expectation damages
- Expectation: to put the non-breaching party in a position had the contract been performed
default expectation damages formula: contract price – market value = expectation damages
Legal Remedies - Liquidated Damages
Usually a clause in a contract
- predetermined when you enter a contract
- enforceable if reasonable (generally 10% or less of k) and not acting like a penalty / punishment
ex: late fines/penalties; down payment
Equitable Remedies
No adequate remedy at law aka money won’t help you
(a) Specific Performance: Someone has to perform = K is unique (land is always unique)
(b) Injunction: stop someone from performing (prevent irreparable harm)
(c) Recission: to rescind; go back; put parties in a position prior to K
- usually when there’s not meeting of the minds
- ex: mistake; misrepresentation
Anticipatory Repudiation - Default
Prior to contract date, one party unequivocally refuses to perform
has to be an absolute refusal to perform
Anticipatory Repudiation Options/”Remedies”
Non-Breaching Party may:
- hold in total breach; OR
- wait until day of contract, and/or
- begin looking for new party
Anticipatory Repudiation - Not Repudiation but in Doubt
if puts other party in doubt about ability to perform, though not repudiation, can demand assurances.
Party which assurances are demanded from must respond in a reasonable amount of time.
- if party responds in reasonable amount of time: must wait
- if party doesn’t respond in reasonable amount of time: you can sue
Impossibility
objectively, nobody could perform
ex: subject-matter of contract was destroyed; performance becomes illegal
Impracticability
due to unforeseen circumstances, performance, though possible, has now become too difficult
- too unfair to make someone perform
Ex: too expensive (requires drastic change in cost; some fluctuation in market is foreseeable)
Unilateral Mistake
1 party
- Not a defense to performance, UNLESS the other party knew of the mistake
Mutual Mistake
if BOTH parties were mistaken about a basic assumption of the contract, mutual mistake is ALWAYS A DEFENSE
- Remedy is usually recession
