Contracts Flashcards
What is a valid contract?
Voluntary agreement made by competent parties containing definite terms supported by valid consideration in which parties agree to do or not to do a specific thing.
Basics of a contract
Terms (definite) express or implied
Acceptance of those terms
Consideration supporting the promises
Offer that invited an acceptance
In NY, a signed writing takes the place of consideration for (POP):
Pre existing duty rule:
- A legal duty already owed under a contract that does not constitute consideration
Contract options:
- A promise which meets the requirements for the formation of a contract and limits the promisor’s power to revoke an offer
Past consideration provided it is contained in a signed writing:
- A past promise or act which forms the basis of a future promise
Must satisfy the SOF:
Surety contracts:
- Pay a creditor if the debtor does not pay the debt or breaches an executory contract
- Involves 3 separate contracts:
a. Debtor and creditor
b. Surety and creditor
c. Surety and the debtor
Marriage contracts:
- Where the consideration to pay money or property is the other parties promise to get married
Answer for debts discharged in bankruptcy (NOT COVERED)
Testamentary promises (NY only):
- To be enforceable a promise to make a testamentary disposition must be in either:
a. A valid will or;
b. In a writing signed by the testator
Finders fee arrangements:
- A promise to pay for another’s services in negotiating the purchase or sale of a business opportunity must be in a signed writing
Leases for real property:
- Realty leases for longer than one year must be in writing and signed by the party to be charged
One year:
- bi lateral contract which by its express terms in the contract has absolutely no possibility of full performance within one year from its execution must be in a signed writing
Breach of contract defense options (2)
when sued for breach of contract, a D should consider SPARE RIBS CPLR 3211(a)(5) motion to dismiss
OR
I3 FU2MED & I S2IP
SPARE RIBS, easily resolved by the court and if there is a factual issue the court can order a hearing:
Statute of limitations:
- law which forbids someone from charging someone with a crime that was committed more than a specified number of years ago
Payment
Arbitration and award
Release
Estoppel (collateral):
- Issue preclusion, doctrine that prevents a person from re-litigating an issue.
Res Judicata:
- Claim preclusion (WHOLE CASE), preventing injustice to the parties of a case supposedly finished, but perhaps mostly to avoid unnecessary waste of resources in the court system
Infancy or incompetency of the D
Bankruptcy, P’s claim against D discharged in bankruptcy
Statute of Frauds (SMART FLYS)
Contract Defenses:
Infancy (18)
mental Incompetency
Intoxication
Fraud (deceit) or negligent misrepresentation
Unconscionability
Undue Influence
Mistake
Equity Defenses (laches, unclean hands, hardship test)
Duress
Impossibility of Performance (Excuse)
Statute of Frauds (SMART FLYS) exception of constructive trust
Statute of limitations
Illegality: At the time was entered, either formation or performance was criminal, tortuous or contrary to public policy
Parole Evidence
Mental Incompetency
Prove either, (1) did not understand the NATURE & CONSEQUENCES of the contract or (2) Executing the K was an uncontrolled reaction to a mental illness
Intoxication
SO intoxicated that they did not understand the NATURE & CONSEQUENCES of her act in entering the contract AND the other party had KNOWLEDGE of this
Fraud
One party gains advantage by lying about a MATERIAL FACT, and other party justifiable relied innocently = rescission + restitution - money damages
Prove SIR2 M:
- Knowledge (squinter) of falsity
- Lie was made to induce P
- Financial injury was suffered by P
- P justifiable relied on the misstatement (Objective reasonable reliance)
- Material fact
NY Damages = Value of what received - amount paid
Unconscionability
Such a bad bargain that no reasonable person would agree to it and no fair person would offer it.
Prove:
(1) PROCEDURAL, absence of a meaningful choice by one party
(2) SUBSTANTIVE, very unfair terms in the contract such as ridiculously unfair price
Undue Influence
Unfair persuasion by the misuse of a position of trust and confidence to be unjustly enriched at the expense of a susceptible, weaker, contracting party.
Requires:
(1) Special relationship
(2) Unfair persuasion
Mistake
One party’s belief that is not in accord with the facts
Mutual (no meeting of minds) v. Unilateral (whether known to the offeree)
Communicated to the other party
Ordinary negligence
Prompt notice of the mistake
Substantial hardship
Induced to writing, contract reformation allowed
Equitable Defenses
Laches: when the P has unreasonably and inexcusably delayed in starting a lawsuit but has nevertheless timely commenced a claim
NY = w/n 6 years
Relative Hardship Test = Balance equities of the 2 parties
Unclean Hands = doctrine seeks to prohibit equitable relief to a party who is guilty of immoral or unconscionable conduct; protects the integrity of the court.
Duress
When a party signs a contract out of fear induced by a threat that overcame her free will
Two elements:
(1) Coercion
(2) No reasonable alternative but to agree to the contract or modification
ECONOMIC DURESS: When one contracting party threatens to wrongfully withhold goods or services and demands a higher price
