Contracts Flashcards
Seven general issues in contract law: Armadillos from Texas play rap, eating tacos.
Applicable law Formation of K Terms of K Performance Remedies for unexcused non-performance Excuse of non-performance Third-party problems
What is a contract?
An agreement that is legally enforceable.
What are the do kinds of contract offers?
1) Unilateral K offers: expressly requires performance as the only possible method of acceptance.
2) Bilateral K: all other offers. Usually silent to method of acceptance. This is the default.
Presume there’s a bilateral K unless…
1) reward, prize, contest
2) offer expressly requires performance for acceptance
What is quasi-contract?
Equitable remedy for when there is a K but it’s not fair to be bound by K rules. Resort here when K gives bad result.
What are the two kinds of law applicable in K?
CL: for real estate, services K, everything not subject to Art. 2
Art. 2: sale of goods (all things movable at the time they are sold).
What law applies when there is a mixed sale of goods and non-goods?
Apply the law that applies to the more important part of the contract to the entire K. EXCEPT if K divides payment apply UCC to goods part and CL to remainder.
What are the three possible problem areas in creating an agreement?
1) Initial communication (offer)
2) What happens after the initial communication (termination of offer)
3) Who responds and how they respond (acceptance)
Difference between void, voidable, and unenforceable
Void: w/o any legal effect from beginning. Can’t be enforced.
Voidable: one or both parties may elect to avoid.
Unenforceable: otherwise valid, but not enforceable due to defense extraneous to formation, like SOL or SOF.
What is the general test for whether an initial communication is an offer?
Manifestation of commitment by one person: Look for words or conduct showing commitment that would make a reasonable person in position of the offeree believe that his or her assent creates a K.
What must be contained in a offer for sale of goods and real estate?
Goods: quantity.
Real estate: price and description.
What is the effect of vague or ambiguous terms on whether an offer has been made under both CL and UCC?
If vague or ambiguous language relates to a material term, NO OFFER. Such terms include: appropriate, fair, or reasonable.
In determining whether communication creates a reasonable expectation of willingness to enter into K, consider these 3 factors:
1) Expression of promise, undertaking, or commitment to enter K
2) Certainty and definiteness of essential terms
3) Communication of 1 and 2 to offeree
What is the inquiry for whether terms were definite and certain enough to form basis of K?
Were enough essential terms provided so that K is capable of enforcement.
Are requirements/output Ks sufficiently descriptive in content to form agreements?
Yes if states the quantity of goods to be delivered under K in terms of buyer’s requirements or seller’s output. Look for language like all, only, exclusively, and solely to make K not vague or ambiguous.
If there is a requirements K, may requirements be increased?
Buyer can increase so long as increase is in line w/ prior demands. Limit: no unreasonably disproportionate increases.
What do we do w/ missing terms?
If appears parties intended to K and reasonably certain basis for giving remedy, enforce.
For Art. 2, if no price, price is reasonable price at time of delivery and performance is w/in a reasonable time.
What if a missing term is too vague to be enforced?
No enforcement unless there has been part performance that clarifies the vague term or acceptance by full performance.
Is an ad or quote an offer?
No. It’s an invitation for offers. EXCEPTIONS:
1) If ad is in nature of reward, offer.
2) If ad specifies quantity and indicates who can accept.
3) Price quote sent in response to inquiry = offer.
What are the ways an offer may be terminated?
1) Lapse of time (either stated or reasonable but more than a month = lapse)
2) Death of a party prior to acceptance (unless offer is irrevocable)
3) Words or conduct of offeror i.e. revocation
4) Rejection by offeree
How may an offer be revoked?
Later unambiguous statement or conduct by offeror to offeree, or that offeree is aware of in the case of conduct, of unwillingness or inability to K. Revocation is effective when received by the offeree.
How may a published offer be revoked?
By similar publication.
What are the limits on offeror’s ability to revoke an offer?
1) Option: offeree gives consideration of a promise by offeror not to revoke an outstanding offer.
2) Art. 2 Merchant’s Firm Offer Rule
3) Detrimental reliance
4) Beginning performance in response to true unilateral K offer
5) Beginning performance in response to offer indifferent as to manner of acceptance.
What is the firm offer rule?
If 1) a merchant (person in business) 2) offers to buy or sell goods in a signed writing and 3) the writing assures the offer will be held open for a period not to exceed 3 mos., offer can’t be revoked. ONLY APPLIES TO ART. 2 SALES!!!!
When can an offer not be revoked due to reliance?
Reliance that is 1) reasonably foreseeable and 2) detrimental.
What is the implication of beginning performance in response to unilateral K v. offer that doesn’t specify acceptance?
Unilateral K: beginning performance makes K irrevocable and offeree gets reasonable time to complete. Offeree isn’t bound to complete perf.
Other Ks: once performance is begun, K is complete and revocation becomes impossible.
What are the methods by which offeree may reject offer?
1) Counteroffer
2) Conditional acceptance
3) Adding additional terms* CL only.
4) Express rejection
When is rejection effective?
When received by offeror.
What is the effect of a counteroffer?
Rejects the offer and creates a new offer. BUT bargaining/inquiries don’t terminate the offer and counteroffers don’t terminate options.
What is a conditional acceptance?
Response to an offer w/ the word “accept” followed by “if”, “only if”, “provided”, “so long as”, “but”, or “on the condition that.”
What constitutes “beginning performance”?
Actually starting to do the work NOT mere preparation i.e. buying supplies (can probably recover in quasi K for this though).
What is the effect of conditional acceptance?
At CL: rejection and counteroffer that can be accepted by conduct.
Art. 2: rejection. Any conduct that results is the sole basis for K: no terms apply.
What are the effect of additional terms at CL?
Mirror Image Rule: A response to an offer that adds new terms is treated like a counteroffer.
What are the effect of additional terms under Art. 2?
If 1) offer to buy or sell goods and 2) response w/ additional/different terms, THEN:
A) A response to an offer that adds additional or different terms but doesn’t make the new terms a condition of acceptance is treated as a seasonable expression of acceptance.
B) Additional term doesn’t become part of K unless both parties are merchants. Term is still not part of offer if term is material or term is objected to.
How does an offer terminate as a matter of law?
1) Death or insanity of a party
2) Destruction of proposed K’s subject matter
3) Supervening illegality
Who may accept an offer?
Only the person to who offer is addressed. Cannot assign power of acceptance, but right to accept under an option is transferrable. Offeree must know about the offer to accept.
How may an offer be accepted?
Offeror controls the method of acceptance, but when K is silent, offeree may accept by starting to perform (unless unilateral K where completion is required).
What is the mailbox rule?
1) All communications other than acceptance are effective only when received.
2) Acceptance is generally effective when mailed.
3) If rejection mailed before acceptance, neither is effective until received.
4) MAILBOX RULE MAY NOT BE USED TO MEET OPTION DEADLINE.
What if seller sends the wrong goods?
Generally, acceptance and breach.
BUT if accommodation exception applies, it’s a counteroffer and no breach.
What is the adequacy of consideration?
Not relevant in K law.
What is a past act and is it consideration?
Past acts as consideration for a not yet entered into K UNLESS acts expressly requested by promisor and promisee expects payment.
Is consideration required to modify a sale of goods?
New consideration is not required under Art. 2 to modify a sale of goods K. GF is the test.
Under CL, is consideration required to modify a K?
Doing what you are already legally obligated to do by K or statute isn’t new consideration for new promise to pay. New consideration required for K modification. EXCEPTIONS: addition to or change in performance, unforeseen difficulty so severe performance is excused, 3d party promise to pay.
Is party payment consideration for release (promise to forgive balance of debt)?
Key is whether debt is undisputed. If debt due and undisputed, part payment is not consideration for release.
If debt is not yet due (or disputed), early or part payment is a new detriment.
What is a consideration substitute?
A promise is legally enforceable even though there is no consideration if there is a consideration substitute.
What are the two consideration substitutes?
1) Written promise to satisfy an obligation for which there is a legal defense is enforceable w/o consideration.
2) Promissory estoppel, which requires a promise, reliance that is reasonable, detrimental, and foreseeable, and enforcement necessary to avoid injustice.
What are the consequences of incapacity?
1) Right to disaffirm by person w/o capacity;
2) Implied affirmation by retaining benefits after gaining capacity;
3) Quasi-K liability for necessaries.
What is the Statute of Frauds?
Requires claimant to have objective proof before claimant gets into court. Generally require proof of either 1) performance or 2) a writing signed by D.
What are the 4 kinds of contracts that w/in the Statute of Frauds?
1) Suretyship: promises for the debts of another;
2) Service K not capable of being performed w/in a year from the time of the contract: if specific time period of more than a year SF applies, but if no time capable of being performed w/in a year no SF.
3) Transfers of interest in real estate (w/ exception of lease for less than a year)
4) Sale of goods of $500 or more.
When does a suretyship agreement come w/in SOF?
Promise to “answer for” someone else’s debts only if that person does not herself pay. BUT the main purpose exception says that if the main purpose of the obligation guaranteed was to benefit the guarantor, then not even that guarantee is w/in SOF.
How is SOF satisfied if the agreement is w/in the Statute of Frauds?
D files motion to dismiss or motion for SJ based on SOF defense. P can still get to court by providing objective evidence of the K to satisfy court’s concern about fraud.
How can SOF be satisfied by performance in a real estate contract?
Performance in transfer of real estate requires any TWO of the following: 1) improvements to the land, 2) payment, and 3) possession.
How can SOF be satisfied by performance in a services contract?
1) Full performance satisfies SOF;
2) Part performance of a services K doesn’t satisfy SOF (but may probably recover in quasi-K for part performance).
How can SOF be satisfied by performance in a services contract?
1) Seller’s part performance when there are ordinary goods satisfies SOF but only to the extent of the part performance. W/ respect to part that is delivered, there’s objective proof.
2) Seller’s part performance when there are specially manufactured goods satisfies SOF as soon as there is a substantial beginning.
When can SOF be satisfied by writing in a non-Art. 2 case?
Look at contents of writing: ALL MATERIAL TERMS TEST. Need to know who and what, and it matters who signed the writing. No SOF defense if writing has been signed by D.
When can SOF be satisfied by writing in an Art. 2 case?
Writing must simply indicate that there is a K for the sale of goods and contain the quantity term. Must be signed by D EXCEPT in transaction between 2 merchants and there’s a delay in responding to something that is akin to a receipt or invoice.
Besides performance or a writing, how may the Statute of Frauds be circumvented?
1) D admits in pleading or testimony that he entered into a K.
2) Estoppel: reliance on oral promise can estop D from asserting an SOF defense. Critical fact is D promises it will be put in writing.
When does there need to be written proof of authorization to enter into a K for someone else?
Authorization must be in writing only if the K to be signed is w/in SOF: authorization must be of “equal dignity” w/ the K.
