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Contracts 2015 Flashcards

1
Q

APPLICABLE LAW

A

Contracts for the sale of goods are governed by Article 2 of the Uniform Commercial Code. All other contracts are governed by general common-law contract principles.

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2
Q

MERCHANTS

A

Under the UCC, there are some special rules governing agreements between merchants. A merchant includes not only a person who regularly deals in the type of goods involved in the transaction, but also any business person when the transaction is of a commercial nature.

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3
Q

CONTRACT FORMATION

A

A binding contract is created through the process of mutual assent and consideration, and when no valid defenses to contract exist. Mutual assent occurs upon acceptance of a valid offer to contract.

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4
Q

COMMON LAW OFFER

A

An offer is an objective manifestation of a willingness by the offeror to enter into an agreement that creates the power of acceptance in the offeree.

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5
Q

UCC OFFER

A

Under the UCC, a contract is formed if both parties intend to contract and there is a reasonably certain basis for giving a remedy.

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6
Q

CONTRACT TERMS

A

For a contract to exist, the terms of the contract must be certain and definite, or
the contract fails for indefiniteness. Under common law, all essential terms (i.e.,
the parties, subject matter, price, and quantity) must be covered in the agreement. Under the UCC, it will fill the gaps as to price

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7
Q

INVITATIONS TO DEAL

A

Are preliminary communications that reserve a final approval from the speaker

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8
Q

ACCEPTANCE

A

An acceptance is an objective manifestation by the offeree to be bound by the terms of the offer. An offeree must know of the offer upon acceptance for it to be valid. In addition, the offeree must communicate the acceptance to the offeror.

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9
Q

CONSIDERATION

A

In addition to offer and acceptance, most courts require valuable consideration for an agreement to be enforceable. If either party has not given consideration, the agreement is not enforceable upon formation. Valuable consideration is evidenced by a bargained-for exchange in the legal position between the parties.

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10
Q

REVOCATION

A

In general, an offer can be revoked by the offeror at any time prior to acceptance, even if the offer states that it will remain open for a specific amount of time. A revocation may be made in any reasonable manner and by any reasonable means, and is not effective until communicated.

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11
Q

MAILBOX RULE

A

An acceptance that is mailed within the allotted response time is effective upon posting (not upon receipt), unless the offer provides otherwise. A revocation, on the other hand, is effective only upon receipt.

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12
Q

UCC FIRM OFFER

A

Under the UCC, an offer to buy or sell goods is irrevocable if: (i) the offeror is a merchant; (ii) there are assurances that the offer is to remain open; and (iii) the assurance is contained in an authenticated writing from the offeror. No consideration by the offeree is needed to keep the offer open under the UCC firm offer rule. If the time period during which the option is to be held open is not stated, a reasonable term is implied. However, irrevocability cannot exceed 90 days, regardless of whether a time period is stated or implied, unless the offeree gives consideration to validate it beyond the 90-day period.

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13
Q

OPTION CONTRACT

A

An option is an independent promise to keep an offer open for a specified period of time. Such promise limits the offeror’s power to revoke the offer until after the period has expired, while also preserving the offeree’s power to accept.

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14
Q

PROMISSORY ESTOPPEL

A

Promissory estoppel is referred to as a “consideration substitute.” The doctrine of promissory estoppel (detrimental reliance) can be used under certain circumstances to enforce a promise that is not supported by consideration. A promise is binding if the promisor should reasonably expect it to induce action or forbearance, it does induce such action or forbearance, and injustice can be avoided only by enforcement of the promise

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15
Q

UCC ANTICIPATORY REPUDIATION

A

According to the UCC, anticipatory repudiation occurs when there has been an unequivocal refusal of the buyer or seller to perform, or when a party creating reasonable grounds for insecurity fails to provide adequate assurances within 30 days of demand for assurances. Repudiation allows the nonrepudiating party to resort to any remedy given by the contract or code

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16
Q

UCC BREACH

A

Under the UCC, the seller generally must strictly perform all obligations under the contract or be in breach. The doctrine of material breach applies only in the context of installment contracts or when the parties so provide in their contract.

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17
Q

EXPECTATION DAMAGES

A

Expectation damages are intended to put the injured party in the same position as if the contract had been performed. They are those damages that arise naturally and obviously from the breach and are normally measured by the market value of the promised performance less the consideration promised by the non-breaching party. Expectation damages must be foreseeable and the non-breaching party must be able to prove them with reasonable certainty.

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18
Q

ACCEPTANCE BY SILENCE

A

Generally, silence does not operate as an acceptance of an offer, even if the offer states that silence qualifies as acceptance, unless: (i) the offeree has reason to believe that the offer could be accepted by silence, was silent, and intended to accept the offer by silence; or (ii) because of previous dealings or pattern of behavior, it is reasonable to believe that the offeree must notify the offeror if the offeree intends not to accept.

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19
Q

QUASI CONTRACT

A

When a plaintiff confers a benefit on a defendant and the plaintiff has a reasonable expectation of compensation, allowing the defendant to retain the benefit without compensating the plaintiff would be unjust. A court may allow restitutionary recovery if: i) the plaintiff has conferred a measurable benefit on the defendant; ii) the plaintiff acted without gratuitous intent; and iii) it would be unfair to let the defendant retain the benefit because either (a) the defendant had an opportunity to decline the benefit but knowingly accepted it, or (b) the plaintiff had a reasonable excuse for not giving the defendant such opportunity.

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20
Q

ACCORD AND SATISFACTION

A

Under an accord agreement, one party to the contract agrees to accept different performance from the other party than what was promised in the existing contract. Generally, consideration is required for an accord to be valid. By compromising, each party surrenders its respective claim as to how much is owed.

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21
Q

BILATERAL CONTRACT

A

A contract that requires a promise for a promise

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22
Q

UNILATERAL CONTRACT

A

A contract that requires a promise for performance

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23
Q

IRREVOCABLE OFFERS

A

Option, Firm Offer, Partial Performance

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24
Q

OPTION CONTRACT

A

An option contract is a promise to keep a deal open for a specified amount of time

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25
FIRM OFFER
A firm offer is an offer from a merchant that regularly deals in the type of goods at issue and agrees in a signed writing to be kept open for a stated time or for a reasonable time not to exceed 90 days.
26
DETRIMENTAL RELIANCE
Occurs when a offer cannot be revoked if the offeree detrimentally relies on the offer in a foreseeable manner
27
IMPLIED IN FACT CONTRACT
A communication that is accepted without a writing or speaking, communication can be by gestures or actions
28
MIRROR IMAGE RULE - COMMON LAW
The terms in the acceptance must match the terms of the offer exactly or it is not an acceptance but a counteroffer
29
UCC 2-207 (acceptance)
A purported acceptance that does not match the terms of the offer exactly can still count as a legal acceptance in many circumstances (being a merchant does not matter)
30
UCC 2-207(1) (acceptance - merchants)
A definite and seasonable expression of acceptance [or a written confirmation] which is sent within a reasonable time operates as an acceptance even though it states terms additional to or different from those offered or agreed upon, unless acceptance is expressly made conditional upon assent to the additional terms
31
UCC 2-207(2)
The new terms in purported acceptance may control but only if: both parties are merchants; the new term does not materially alter the deal; the initial offer did not expressly limit acceptance to its terms; and the offeror does not object within a reasonable time to the new term
32
ILLUSORY PROMISE
When a promisor does not clearly commit to the deal therefore not making sufficient consideration
33
PREEXISTING DUTY RULE
A promise to do something that you are already legally obligated to do, by prior contract or otherwise, is not consideration
34
UCC MODIFICATION
If a modification is made in good faith it is binding without additional consideration
35
PROMISE NOT TO SUE
Settlement of a legal claim, will act as consideration as long as there is an honest belief in the validity of the claim and a reasonable basis for that belief
36
DEFENSES TO CONTRACT FORMATION
Misunderstanding; Incapacity; Mistake; Fraud; Misrepresentation; Mistake; Nondisclosure; Duress; Illegality; Unconscionability
37
MISUNDERSTANDING
A misunderstanding occurs when the parties us a material term that is open to two or more reasonable interpretations; each side attaches a different meaning to the term; and neither party knows, or should know of the confusion
38
INCAPACITY
Minors; Mentally ill (person doesn't understand consequences; person can't act in reasonable manner); Very intoxicated person
39
MISTAKE
A mistake is a belief that is not in accord with a present fact
40
MUTUAL MISTAKE
Mutual mistake affects both parties and lets the adversely affected party rescind if: there is a mistake of fact existing at the time the deal is made; the mistake relates to a basic assumption of the contract and has a material impact on the deal; and the impacted party did not assume the risk of mistake
41
UNILATERAL MISTAKE
Unilateral mistake lets the adversely affected party rescind if she can prove all elements of mutual mistake plus the mistake would make the contract unconscionable; or the other side knew of, had reason to know of or caused the mistake
42
MISREPRESENTATION
A statement at the time of contracting that is not true it can be intentional (fraudulent) or accidental The party must show: a misrepresentation of a present fact; that is material or fraudulent; and is made under circumstances in which it is justifiable to rely on the representation
43
FRAUD IN THE EXECUTION
Fraud in the execution is when you trick someone into signing something that she doesn't even know is a contract
44
Nondisclosure
Generally there is not a duty to disclose the material facts unless there is a fiduciary relationship or engagement in active concealment
45
DURESS
An improper threat that deprives a party from making a meaningful choice to contract
46
ECONOMIC DURESS
Arises when one party makes threats to induce another party to contract or modify a contract
47
ILLEGALITY
Illegal contracts are unenforceable, a contract entered in furtherance of an illegal act that is not itself illegal will still be enforced
48
UNDUE INFLUENCE
Arises when one party puts very intense sales pressure on another party when the party is wake minded or susceptible to high pressure sales tactics
49
UNCSCIONABILITY
An action that shocks the conscience
50
PROCEDURAL UNCONSCIONABILITY
A defect in the bargaining process itself such as a hidden term or an absence of meaningful choice
51
SUBSTANTIVE UNCONSCIONABILITY
A rip off in some term of the contract
52
STATUTE OF FRAUDS
A barrier that some contracts must meet in order to become legally binding. SOF apples to Marriage; Suretyship; One Year; Goods 500+; and Real Property
53
PAROL EVIDENCE RULE
Prevents a party to a written contract from presenting extrinsic evidence that discloses an ambiguity and clarifies it or adds to the written terms of the contract that appears to be whole
54
COMPLETE INTEGRATION
Means that the contract expresses all terms of the agreement
55
PARTIAL INTEGRATION
Means that there is a writing and final writing, but some terms are not included
56
WARRANTY
A promise about a term of the contract that explicitly shifts risk to the party making the promise
57
EXPRESS WARRANTY
A promise that affirms or describes the goods and that itself is part of the basis of the bargain is an express warranty unless it is merely the seller's opinion
58
IMPLIED WARRANTY OF MERCHANTABILITY
The merchant makes an implied warranty unless disclaimed that the goods are fit for ordinary commercial purposes
59
IMPLIED WARRANTY OF FITNESS FOR A PARTICULAR PURPOSE
This warranty is triggered when a buyer relies on a seller's expertise to select a special type of good that will be used for a special purpose
60
CONDITION
A way to shift risk by stating that one party's contractual obligation will kick in only if some future event takes place
61
EXPRESS CONDITION
Created by language in the contract--must be satisfied strictly
62
CONSTRUCTIVE CONDITION OF EXCHANGE (CCE)
One party's performance is conditioned on the other side's performance
63
COMMON LAW CCE
Doctrine of substantial performance states that a party will satisfy the CCE if there is not a material breach
64
PERFECT TENDER (UCC)
The UCC requires perfect tender meaning perfect goods and perfect delivery. If seller fails to tender perfect goods and time is left or seller had reasonable grounds to believe buyer would accept then buyer must give seller reasonable time to cure
65
GOODS TENDERED AT SELLER'S PLACE OF BUSINESS
Seller just needs to give the goods to buyer
66
SHIPMENT CONTRACT (FOB SELLER'S PLACE OF BUSINESS)
If the contract is a shipment contract, the seller must take three actions for perfect tender: get the goods to a common carrier; make arrangements for delivery; and notify the buyer
67
DESTINATION CONTRACT (FOB BUYER'S PLACE OF BUSINESS)
Seller must get the goods to buyer's business and notify the buyer
68
RISK OF LOSS (IN CONTRACT)
Agreement controls
69
RISK OF LOSS (BREACH)
Breaching party bears risk of loss
70
RISK OF LOSS (NO BREACH)
Shipment K: buyer; Destination K: seller
71
RISK OF LOSS (ALL OTHER CASES-MERCHANT)
Risk of loss stays with seller until the buyer receives the goods; If, the risk of loss moves to the buyer when the seller tenders the goods
72
IMPOSSIBILITY
A contract that is impossible to perform
73
IMPRACTICABILITY
A contract that can be performed but with great difficulty
74
FRUSTRATION OF PURPOSE
Performance can still occur, but something but something has happened to undermine the entire reason for the creation of the contract
75
NOVATION
The arises when both parties agree that a substitute person will take over the contractual obligations
76
LOST VOLUME PROFITS
If the paying party breaches, then normally the selling party needs to mitigate by reselling the goods or services to another person
77
RESTITUTION DAMAGES
Goal is to give plaintiff an amount equal to the economic benefit that the plaintiff has conferred on the defendant
78
RELIANCE DAMAGES
Put a party in the same economic position that it would be in if the contract had never been created
79
LIQUIDATED DAMAGES
Damages set out in the contract
80
PUNITIVE DAMAGES
Not usually allowed in K law unless connected to a tort
81
EQUITABLE RELIEF
Specific performance or injunction
82
RIGHT OF RECLAMATION
An equitable right of an unpaid seller to reclaim goods when the buyer is insolvent. The buyer is insolvent at the time of purchase; seller must demand return within 10 days; buyer still has the goods
83
ASSIGNMENT
An assignment is the transfer of rights under a contract
84
DELEGATION
A delegation of duties occurs when a party to contract outsources her duties under contract to another party
85
CONSEQUENTIAL DAMAGES
Consequential damages are reasonably foreseeable losses to a non-breaching party that go beyond expectation damages, such as loss of profits. Damages are foreseeable if they are natural and probable consequences of breach or if they were contemplated by the parties at K formation. Defendant’s breach must have caused plaintiff’s losses. Finally, the dollar amount of the damages must be proven with reasonable certainty

Contracts (5 decks)

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