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Bar Prep Summer 2014 > Contracts > Flashcards

Contracts Flashcards

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1
Q

UCC

A

Applies to the sale of goods (all things movable at the time they are identified as the goods to be sold under the contract). The UCC imposes a duty of good faith in performance of the contract.

Special rules for merchants: a merchant is one who generally deals in goods of the kind sold, or who otherwise by his profession holds himself out as having special knowledge or skills as to the practices or goods involved.

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2
Q

Common Law

A

The common law applies to all other contracts, including contracts for services and sale of property.

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3
Q

Mutual Assent

A

A contract is formed whenever it appears from the parties’ communications that they intend to enter into a contract.

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4
Q

Offer

A

A promise, undertaking, or commitment to enter into a contract, with the essential terms certain and definite, and communication of the promise and terms of the offer.

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5
Q

Unilateral Contract

A

Can only be formed by full performance; occurs where the offeror clearly and unambiguously indicates that full performance is the only manner of acceptance, or when there is an offer to the public, which clearly contemplates acceptance by performance.

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6
Q

Bilateral Contract

A

Typical type of contract; a promise for a promise

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7
Q

Merchant’s Firm Offer (UCC)

A

As between merchants: if a merchant executes a written offer to buy or sell goods that, by its terms, gives assurances that it will be held open, the offer is irrevocable for a reasonable period of time, not to exceed three months.

Does not require consideration to be held open.

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8
Q

Option Contract

A

Created when an offeree gives consideration for the offeror’s promise not to revoke an outstanding offer. A rejection during the stated period of time does not revoke the offer, unless the offeror detrimentally relies on it.

An option can be assigned.

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9
Q

Revocation

A

A revocation terminates the power to accept, if received by the offeree before he or she accepts. A revocation is ineffective in an option contract (absent detrimental reliance), a unilateral contract for which performance has commenced a merchant’s firm offer, or any other situation where there has been detrimental reliance.

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10
Q

Counteroffer

A

A counteroffer differs in its terms from the offer, or conditions acceptance on new terms, and will operate as both a REJECTION of the original offer, and a NEW offer under common law.

A counteroffer does not terminate an option contract within the stated time period.

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11
Q

Rejection

A

A statement by the offeree that he does not accept terminates the offer when it is RECEIVED by the offeror.

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12
Q

Acceptance

A

An unqualified assent tot he terms of the offer, communicated by any medium reasonable, unless the offer limits modes of acceptance. Under the common law mirror image rule, each and every term must be accepted.

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13
Q

Mailbox Rule (Acceptance)

A

Acceptance is effective at the moment of DISPATCH; if a rejection is mailed before an acceptance is mailed by that same person, either is effective until recieved, at which point the first received controls.

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14
Q

Acceptance Under the UCC

A

Acceptance occurs when the buyer indicates that he will accept the goods after a reasonable opportunity to inspect them, fails to reject them within a proper time, or does any act inconsistent with the seller’s ownership.

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15
Q

UCC 2-207 (Battle of the Forms)

A

Under the UCC, whether additional or different terms become a part of the contract depends on whether the parties are merchants.

Merchants: additional terms become part of the contract unless:

  1. Offeror limits or conditions acceptance to the terms of the offer
  2. Additional terms materially alter the agreement, or
  3. Offeror objects within a reasonable time

Different terms are subject to the knockout rule and will be replaced by UCC gapfillers.

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16
Q

Consideration

A

Consideration requires a bargained-for exchange that is of detriment to the promisor or benefit to the promisee. Legal detriment results if the promisee does something that he is under no obligation to do, or refrains from doing something he has a right to do.

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17
Q

Past or Moral Consideration

A

Is generally insufficient; however, consider promissory estoppel (detrimental reliance).

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18
Q

Pre-Existing Duties

A

In the event of a modification, a promise to perform a pre-existing duty is not valid consideration, unless:

  1. Promisee gives something in addition, or agrees to vary a pre-existing duty
  2. Pre-existing duty was owed to a third party
  3. Unforeseen difficulty rises to the level of impracticability, or
  4. Scope of the duty is subject to an honest dispute
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19
Q

Modification

A

UCC: does not require consideration, so long as made in good faith.

Common Law: requires consideration for modifications.

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20
Q

Illusory Promises

A

A promise is NOT illusory if satisfaction of one party is required but is subject to standards, reservation of an unqualified right to cancel is somehow restricted, output and requirements contracts, or “I will pay as soon as I am able.”

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21
Q

Promissory Estoppel (Detrimental Reliance)

A

P.E. will make a promise enforceable to the extent that justice requires if the promisor should reasonably expect to induce definite or substantial action or forbearance on the part of the promisor, and such action or forbearance is actually induced.

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22
Q

Requirements Contract

A

A requirements contract is one in which one party agrees to supply as much of a good or service as is required by the other party, and the other party promises that it will obtain its goods or services exclusively from the first party.

Generally cannot be delegated, because entered into due to the specific parties involved.

Quantities may not be unreasonably disproportionate to any stated estimate, or to any normal or otherwise comparable requirements.

23
Q

Suretyship

A

A promise to pay the debt of another is not enforceable unless it is in writing and supported by consideration, and is made before or at the same time the creditor performs or promises to perform.

24
Q

Statute of Frauds

A

An agreement must be in writing, signed by the party against whom enforcement is sought, that reflects all material terms (under the UCC, must include quantity), if it involves:

  1. Suretyship
  2. Purchase or sale of an interest in land
  3. Cannot be performed within a year
  4. Sale of goods >$500
  5. Marriage
  6. Death or an executory interest
25
Q

Exceptions to the Statute of Frauds

A
  1. Admission in a pleading, testimony, or in court
  2. Contracts for real property that have been partly performed: possession, full or partial payment, or substantial improvements (need 2/3)
  3. Merchant’s confirmatory memo within 10 days, and no objection
  4. Performance of specially manufactured goods
26
Q

Ambiguity

A

A contract is unenforceable if the parties use a material term that is open to at least two reasonable interpretations, each party attaches a different meaning, and neither party knows or has reason to know of the different meaning

27
Q

Fraud, Misrepresentation, and Nondisclosure

A

With the intent to induce reliance, defendant misrepresented or omitted a material fact that defendant knew, or should have known, was false, upon which plaintiff actually relied.

Nondisclosure does not amount to misrepresentation, unless nondisclosure is material or fraudulent.

28
Q

Incapacity

A

Voidable contract duties are incurred if, by reason of mental illness or defect, the contracting party is unable to act in a reasonable manner as to the transaction, and the other party has reason to know.

-Minors: voidable by someone under 18; however, can also be ratified after turning 18, and will be valid to the extent affirmed

29
Q

Mistake

A

Mutual: when both parties are mistaken about existing facts relating to the agreement, the contract may be voidable by the adversely affected party, if the mistake goes to the basis of the bargain, has a material effect on the agreement, and the party seeking rescission did not assume the risk.

Unilateral: the contract may be voidable by the non-mistaken party, unless they knew or had reason to know of the mistake.

30
Q

Parol Evidence Rule

A

Where the parties express their agreement in writing, with the intent that the writing embody the full and final expression of their bargain, any other expressions, written or oral, made prior to or contemporaneously with the writing, are inadmissible to vary the terms of the writing.

31
Q

Exceptions to Parol Evidence Rule

A

The following areas are outside the scope of the parol evidence rule:

  1. Explaining ambiguities
  2. Conditions precedent
  3. Defects in consideration
  4. Defects in formation or defenses (fraud, duress, mistake, illegality)
32
Q

Integration (Parol Evidence)

A

A writing is completely integrated if it is the full and final expression of the bargain; a merger clause is indicative but not conclusive.

Partially integrated: can be supplemented by proving up additional, CONSISTENT terms, but cannot be varied.

33
Q

Implied in Fact Contracts

A

If one party silently receives the benefits of services while having a reasonable opportunity to reject them, and knowing that the provider expects to be compensated, there is likely an implied-in-fact contract (unless the parties are close relatives).

34
Q

UCC Gapfillers

A

Place for delivery: seller’s business if he has one, or his house.

Price: reasonable price at the time of delivery.

Time for payment: due when and where buyer is to receive the goods.

35
Q

Perfect Tender (UCC)

A

A party’s basic duty under the UCC is perfect tender: the delivery and condition of the goods must be exactly as promised under the contract.

If the seller delivers non-conforming goods, the buyer is allowed to reject, but must give the seller a reasonable opportunity to cure.

36
Q

Conditions

A

A condition is an event, other than the passage of time, that will extinguish, modify, limit, or create a duty to perform, and the duty goes directly to the root of the consideration.

Failure of a condition precedent or an express condition excuses the duty to perform. Conditions can be waived, expressly or impliedly.

37
Q

Divisible Contract

A

A divisible contract is one in which:

  1. The performance of each party is divided into two or more parts,
  2. The number of parts due from each party is the same, and
  3. Performance of each side is essentially equivalent to that of the other side.
38
Q

Accord and Satisfaction

A

Occurs when there is a monetary claim that is uncertain or subject to a bona fide dispute, and there is good faith tender and acceptance of a check that conspicuously states that the check is tendered in full satisfaction of the debt.

39
Q

Anticipatory Repudiation

A

Occurs when a promisor, prior to the time set for performance, unequivocally indicates by words or conduct that he will not perform.

If there is an executory (duties still unperformed) bilateral contract, and the repudiation is unequivocal, the non-breaching party can:

  1. Treat the repudiation as a total breach and sue immediately
  2. Suspend performance and wait
  3. Treat repudiation as an offer to rescind and treat the K as discharged
  4. Encourage performance
40
Q

Frustration of Purpose, Impossibility, Impracticability

A
  1. FOP: an unforeseeable supervening act that completely or almost completely destroys the purpose of the contract, that was realized by both parties at the time of formation, the risk of which was not assumed by either party.
  2. Impossibility: objective impossibility, due to the post-contracting occurrence of an extraordinary and unanticipated event, the non-occurrence of which was a basic assumption, and the risk of which was not assumed by either party.
  3. Impracticability: unanticipated extreme and unreasonable difficulty that was not assumed by either party, the non-occurrence of which was a basic assumption to the contract.
41
Q

Breach

A

A breach of contract occurs where a promisor has a duty and fails to perform it. Common law duty is to substantially perform; UCC is perfect tender.

42
Q

Material Breach

A

Occurs when one party does not receive the substantial benefit of the bargain. If they demonstrate a willingness and ability to perform, duties of counter-performance are excused and can treat the contract as breached.

Factors to consider include:

  • amount of benefit received
  • adequacy of damages
  • extent of part performance
  • hardship to the breaching party
  • negligent or willful behavior
  • likelihood of full performance.
43
Q

Minor Breach

A

One in which the non-breaching party gains the substantial benefit of the bargain.

Installment contracts: if payment for one installment is not made there is only a minor breach, unless there is an acceleration clause.

44
Q

Delivery of Non-Conforming Goods

A

Buyer may generally accept all, reject all, or accept in part and reject in part. Buyer may always cover by purchasing a reasonable substitute.

If buyer rejects defective goods, the seller can cure by giving reasonable notice of intent to cure, and making a new tender of conforming goods before the time for performance expires. (If time for performance has expired, seller may still cure if they had a reason to believe non-conforming goods would be accepted, and they were marked as an accommodation).

45
Q

Express Warranty

A

Arise where a seller or supplier makes any affirmation of fact or promise to the buyer, relating to the goods that are the basis of the bargain. A seller may be liable if he misrepresented or omitted a material fact that it knew or should have known was false, upon which the buyer relied.

46
Q

Implied Warranty of Merchantability

A

Goods are fit for the ordinary purpose for which they are used; arises when a merchant who deals in a certain kind of goods sells such goods.

47
Q

Implied Warranty of Fitness for a Particular Purpose

A

Arises when the seller knows or has reason to know the particular purpose for which the goods are required, and buyer is relying on the seller’s skill to select or furnish suitable goods.

48
Q

Third Party Beneficiaries

A

A third party beneficiary has standing to sue only if they are an intended beneficiary whose rights have vested, and the promisee properly performs all of his obligations under the contract.

Intended if:

  1. Expressly designated or identified
  2. Named in the K or has rights thereunder
  3. Performance is made directly to them
  4. Relationship between third party and promisee suggests the promisee wishes the third party to be benefitted
49
Q

Vesting of Rights (3rd Party Intended Beneficiaries)

A

Rights vest when:

  1. Brings suit to enforce the promise
  2. Justifiably relies on the promise in the K after becoming aware of it
  3. Manifests asset to the promisee in a manner requested by the parties

Once rights have vested, the original parties cannot modify the rights of the intended beneficiary under the contract without their consent.

50
Q

Types of 3rd Party Benficiaries

A

Creditor: if the promisee’s intent was to discharge an obligation

Donee: if promisee’s intent was to bestow a gift.

The promisOR can always be sued by a 3rd party beneficiary; promisEE can be sued by the creditor beneficiary, or the donee beneficiary if they have changed their position in reliance

51
Q

Assignment of Rights

A

All contractual rights can be assigned, except those that would:

  1. Substantially alter the obligor’s risk
  2. Substantially change the obligor’s duties (personal services contracts, output and requirements contracts)
52
Q

Requirements for Effective Assignment

A

Assignor must manifest an intent to completely and immediately transfer his rights, and the right being assigned must be adequately described.

An assignee can recover from an obligor, but an assignor for consideration cannot recover from an obligor.

53
Q

Revocability and Modification of Assignments

A

An assignment is revocable unless it is given for value, the obligor has already performed, or there was foreseeable detrimental reliance.

Otherwise, a revocable assignment may be terminated by the assignor:

  • dying or declaring BK
  • notifying either the assignee or obligor of the revocation
  • taking performance directly from the obligor
  • subsequently assigning the same right to another person

Modification: if the obligor has been notified of the assignment, subsequent modification of the contract is not effective against the assignee

54
Q

Delegation of Duties

A

All contractual duties may be delegated, except those that:

  1. Involve personal skill or judgment
  2. Involve special trust in the delegator
  3. Delegation would materially change the obligee’s expectancy
  4. K prohibits delegation or assignment

In delegation, the delegator is ALWAYS liable on the contract, even if the delegate expressly assumes duties, unless there is a novation.

Bar Prep Summer 2014 (11 decks)

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