Contracts Flashcards
How to revoke offer
(1) Communicated. Effective on receipt if by mail.
(2) Offeree acquires reliable info that offeror has taken action inconsistent with intent to keep offer open.
Term of employment agreements
Assumed to be at will.
“Permanent” is too vague, means at will.
Limitations on power to revoke
(1) Option; needs consideration, unless merchant under UCC.
(2) Promissory estoppel: foreseeable reliance, to the extent necessary to avoid injustice.
(3) Partial performance: BUT offeree must have knowledge of offer when beginning performance.
(4) UCC firm offer: irrevocable if (i) offeror is merchant (type of goods/special knowledge); (ii) assurances that offer will remain open; (iii) authenticated writing.
Revocation of general offers
Must be at same level of publicity as original offer. Effective against everyone.
Mailbox rule
Acceptance effective upon mailing.
Rejection effective upon receipt.
Revocation effective upon receipt
(includes email, fax, etc.)
IF offeree sends acceptance then rejection, acceptance controls, UNLESS offeror detrimentally relies on rejection.
IF offeree send rejection then acceptance, the first to be RECEIVED will prevail.
Options: acceptance must be RECEIVED before option expires.
Counteroffers
Rejection + new offer.
BUT does not terminate option.
Notice of acceptance in unilateral K
Notice of starting performance only required if reason to know offeror would not learn of performance with reasonable certainty and promptness, UNLESS:
(1) reasonable diligence to notify offeror;
(2) offeror learns of performance in reasonable time;
(3) offer indicates notification not required.
Shipment of nonconforming goods
Acceptance + Breach.
UNLESS seller seasonably notifies buyer that goods are an accommodation –> counteroffer.
Silence as acceptance
(1) offeree intended to accept by silence;
(2) due to prior course of dealings, reasonable to believe that offeree must affirmatively decline to accept.
Mirror image rule
Common law: modification or addition of terms –> counteroffer.
UCC: modification or addition of terms is still acceptance, UNLESS:acceptance expressly conditioned on assent to new terms.
Additional terms in acceptance between nonmerchants
new terms are separate proposal, which must be separately accepted.
Additional terms in acceptance between merchants
K is under terms of the acceptance, UNLESS:
(1) terms materially alter the original K;
(2) offeror expressly limited acceptance;
(3) offeror has already objected to new terms or objects within reasonable time.
Acceptance w/ different terms
Knock-out rule (majority): different terms nullify each other, fill gap with default terms.
Last-shot rule (minority): different terms treated the same as additional terms.
UCC rules for auction sales
Each lot separate sale.
Sale is complete when auctioneer announces end.
In reserve auction, goods can be withdrawn at any time before completion of sale. Non-reserve, cannot withdraw unless no bid.
If sellers bids, then winner may cancel bid or take goods at price of last good faith bid, UNLESS (1) seller bid at forced sale or (2) seller gave notice that he would be bidding in auction.
Gift vs. valid consideration
Look to whether the offeree could have reasonably believed that the intent of the offeror was to induce the action.
Preexisting duty rule
Common law: promise to perform preexisting duty is not consideration UNLESS third party offer promise contingent upon performance by a party.
Partial payment of liquidated debt is invalid for lack of consideration, UNLESS compromise disputed in good faith (even if reason for dispute was invalid).
Past consideration
Past consideration invalid, BUT can be enforced to prevent injustice, UNLESS promisee intended act as gift. Promise enforceable only to the extent of the value received.
Modification
Common law: must have consideration, UNLESS: (1) rescission and entry into new K; (2) unforeseen difficulties, and one party agrees to compensate the other; (3) new obligations on both sides.
UCC: no consideration, good faith only.
Modification and SOF
Modification must comply with SOF if K as modified falls within SOF.
Oral modification in violation of SOF may be withdrawn, UNLESS other party relied.
Modification under installment Ks
Waiver can be withdrawn at any time by beneficiary, UNLESS retraction would be unjust because other party materially changed position based on waiver.
Accord K
Consideration required. Both parties surrender claims.
If creditor accepts lesser amount, original K is not cancelled UNLESS there is some dispute about validity or amount, or if payment is of different type than called for in original K.
Satisfaction
discharges both accord and original K.
if accord is not satisfied, then both accord and original K have been breached.
Voidable and unenforceable promises
NOT valid consideration
Req’t and output K
quanities may not be unreasonably disproportionate to estimates of prior course of dealings.
Settlement of legal claim
Party surrendering claim must have honest belief in claim, and reasonable basis for belief.
Promises binding w/o consideration
(1) promise to pay debt barred by SOL
(2) Promise to perform voidable duty
(3) Material benefit rule: to the extent necessary to prevent injustice, UNLESS intended as a gift.
Promissory estoppel
(1) promisor should reasonably expect reliance or forbearance by promisor.
(2) promise actually induces reliance or forbearance.
(3) injustice can be avoided only be enforcement.
Charity exception: no proof of reliance required.
Construction Ks: sub-K cannot revoke offer after general K places bid.
Unilateral mistake
Mistaken party can void K if:
(1) enforcement unconcionable; or
(2) the non-mistaken party caused the mistake or failed to disclose mistake despite knowing or having reason to know that other party was mistaken or had duty to disclose the fact about which other party was mistaken;
AND
(3) no serious prejudice to other party.
Mutual mistake
Both parties mistaken about essential element of K, with no intent by the parties to allocate risk of that element of the K.
Voidable by the party adversely affected.
NOT voidable if curable by reformation of K.
NOT voidable if conscious ignorance (must be aware of limitations of one’s own knowledge).
NOT voidable if failure to learn fact constitutes failure to deal in good faith (but negligence not sufficient to show lack of good faith).
Reformation for mistake
Available if:
(1) prior agreement;
(2) agreement was put into writing;
(3) as a result of mistake, there is difference between the agreement and the writing.
Misunderstanding
IF neither party knows or should know of misunderstanding, then no K.
IF one party knows of should know, then K is formed as per understanding of the unknowing party.
IF both parties know or should know of misunderstanding, there is no K.
IF one party waives misunderstanding defense, K can be enforced as per understanding of other party.
Misrepresentation in general
Assertion contrary to existing fact (not law), or affirmative concealment of a fact.
Fraudulent misrepresentation
(1) knowingly;
(2) without confidence in the assertion;
(3) knows there is no basis for assertion.
Nondisclosure
Tantamount to assertion that fact does not exist if party knows:
(1) disclosure necessary to prevent previous assertion from being fraudulent;
(2) disclosure necessary to correct mistake AND failure to disclose would be bad faith;
(3) disclosure would correct mistake about contents or effect of writing;
(4) disclosure warranted by confidential or fiduciary relationship.
Fraud in the factum
Party does not know character or essential terms of the K. K is void UNLESS reasonable diligence would have revealed the true terms.
Fraud in the inducement
Induces other party to enter K. K is voidable by adversely affected party if reliance on misrepresentation was reasonable.
Non-fraudulent misrepresentation
K is voidable by adversely affected party IF:
(1) misrepresentation was material (reasonable person would agree to it);
(2) assent induced by the misrepresentation;
(3) reliance was justified.
Cure of misrepresentation
If facts are cured after formation of K but before K is voided, K is no longer voidable.
Reformation for misrepresentaiton
When one party misrepresents content or legal effect of writing, other party can void or force reformation of writing to express the agreed upon content and legal effect.
Unfair persuasion
Relationship where:
(1) one party reasonably believes other party will not act to his detriment; OR
(2) one party is dominant and the other dependent.
Confidential relationship
Dominant party has burden of proving K is fair, and is held to higher standards of disclosure.
Third-party undue influence
Victim may void K, UNLESS non-victim party materially relied on K in good faith without knowledge of the undue influence.
Remedy for undue influence
Restitution damages
Duress
Improper threat that deprives a party of meaningful choice.
improper threat = threat of criminal (good or bad faith) or civil (bad faith only) action; bad faith threat to breach K.
deprivation of meaningful choice = no reasonable alternative to succumbing to the threat. in civil action, defense is reasonable alternative, UNLESS seizure of property would make person unable to perform on other K.
Subjective standard for determining assent.
Effect of duress
If compelled by threat to inflict physical violence, K is void.
If other duress, K is voidable.
If duress caused by third party, victim may void K, UNLESS non-victim party gave value or materially relied on the K while acting in good faith w/o knowledge of duress.
Restitution damages.
Types of incompetency
Infancy Mental illness or defect Guardianship Intoxication Corporate incapacity
infancy
Voidable by infant until reasonable time after age of majority. If not voided, deemed to assent.
Liability for necessities (quasi-K): recovery limited to reasonable value.
Statutory exceptions: educational loans and insurance Ks.
Mental illness
If adjudicated mentally incompetent, K is void.
If no adjudication, K is voidable if individual unable to (1) understand nature and consequences of transaction, or (2) act in reasonable manner with regard to transaction AND other party knows it.
If made during lucid period, K is enforceable, UNLESS adjudicated incompetent.
Guardianship
Person under guardianship has no capacity to contract, BUT may be liable for reasonable value of necessities.
Intoxication
Voidable by intoxicated party IF:
(1) intoxicated party unable to understand nature and consequences; AND
(2) non-intoxicated party knew of intoxication.
Intoxicated party must promptly disaffirm and return any value received. Can be liable in quasi-K for fair value of goods or services received.
Corporate capacity
When a corporation acts ultra vires, K is voidable.
Illegality
Not enforceable, no restitution for consideration, no remedy for partial performance.
Exceptions:
(1) If one party knows of illegality and other party is justifiably ignorant, ignorant party can recover;
(2) If only one party had illegal purpose, good faith party can recover if he did not know of purpose OR if he did no facilitate the purpose AND the purpose was not of moral turpitude.
(3) If K is divisible, can recover on legal parts of K.
(4) If illegality is due to violation of revenue-raising licensing requirements (as opposed to public health, etc.), promise is enforceable.
(5) if parties are not equally at fault, less guilty party may get restitution.
(6) if one party withdraws prior to achieving improper purpose, he may get restitution.
Unconcionability
UCC: court may modify or refuse to enforce unconscionable K.
Unconsionabiltiy = no reasonable person in the position of the parties would have agreed. Also applies to unfair surprise in biolerplate language.
Unconscionability is a question of law.
Unenforceable due to public policy
K restraining marriage.
Implied-in-law K
Confer benefit with reasonable expectation of compensation, allowing benefited party to retain benefit without compensation would be unjust.
Unjust enrichment =
(1) measurable benefit;
(2) without gratuitous intent;
(3) retention unfair because defendant had opportunity to decline but knowingly accepted OR plaintiff had reasonable excuse for not giving opportunity to decline.
Remedies for quasi-K
Usually restitution for fair value of benefit given.
occasionally reliance damages.
rarely expectation damages.
Quantum meruit recovery
Breaching plaintiff can recovery under quasi-K less defendant’s damages for breach, if it is shown that defendant:
(1) acquiesced to provision of services;
(2) knew that provider expected compensation;
(3) was unjustly enriched.
BUT plaintiff may not recover for willful breach.
UCC restitution for defaulting buyer: (refund of payments) - (damages provable by seller) + liquidated damages OR (20% of the value of K OR $500, whichever is greater).
Warranty of merchantibility
Implied if merchant party.
Goods are fit for their ordinary purpose and pass without objection in trade.
Disclaimable orally or in writing, but must be conspicuous and use the term “merchanitibility”.
If buyer has examined goods prior to purchase or refused opportunity to examine, then no warranty.
