Contracts Flashcards
Contract Formation
1) Mutual Assent
2) Consideration
Mutual Assent (Consideration Element 1)
1) Valid Offer? 3 Req A) Present intent to be legally bound on Acceptance–> use objective test (reasonable expectation of parties) did they intend to be bound?
B) Essential terms must be Definite and Certain (essential terms: parties, price, subject matter, time of performance, quantity, and nature of work to be performed. C) Communication to intended offeree
2) Valid Acceptance? A) Offer to K is personal and cannot be assigned (exception option K). B) Terms of Acceptance: a) CL – Mirror Image Rule, acceptance cannot vary at all b) UCC (sale of goods) no mirror image–any acceptance or written confirmation that shows an intention to Kis effective as an acceptance. c) Offeree must know of the offer before acceptance. d) Acceptance must be communicated to the offeror.
UCC Acceptance–btw merchant and non-merchant
1) If offeror/offeree is non-merchant you have acceptance w/ varying terms but the K itself governs. Added terms do not become part of K unless offeror (one making promise) agrees
UCC Acceptance–btw merchant and merchant
Battle of the Forms controls (2-207): Added terms btw merchants become part of K unless:
1) offer expressly limits acceptance to the terms of the offer, or
2) they materially alter is, or
3) if there is a non-material alteration, it will become part of the k unless notification of objection to then has already been given or is given within a reasonable time after notice of the additional terms is received by the offeror. An alteration is considered material if it changes either the party’s risk or available remedies.
UCC Acceptance–Material Alterations (examples)
- arb cl added
- altering risk of loss
- disclaiming warranties
- excluding tort L on property
- shortening the SoL
- Limiting juris to a particular state
- Changing payment terms
Mailbox Rule
When offeree uses the same or authorized method of communication as the offeror, the acceptance is effective upon dispatch, whereas rejection by the offeree or revocation by the offeror is only effective upon receipt.
Rule is N/A in following situations:
- offer spells out the manner of communication
- acceptance of an option K and firm offer must be received within the option or firm offer period to be effecive
- acceptance by conduct
- acceptance by silence requires prior course of dealing
- Vacillating offeree problem–if the offeree sends an acceptance then rejection there is acceptance unless (i) rejection is received first and (ii) the offeror has changed his position in reliance on rejection
- If offeree sends rejection and then acceptance whichever arrives first is effective
Elements of Consideration (2)
1) Must be a bargained for exchange AND
2) that which is bargained for must have a legal value or some benefit to promisor or some detriment to promisee
Past Consideration
Are not sufficient. If something had already been given or performed before the promise was made, it will not satisify the bargained for requirement.
-Exceptions:
+debt barred by technical defense
+ a promise to pay for past requested acts
Preexisting Duty Rule
The promise to perform or the performance of an existing legal duty will not be sufficient consideration. UCC does not have.
Exceptions:
- new/diff consideration promised (modification)
- 2-209 provides that an agreement modifying a K subject to the UCC needs no consideration to be binding as long as both parties are acting in good faith
- Voidable obligaiton (ie a defrauded person agreeing to go through w k after learning of fraud)
- Preexisting duty owed to a third party (Maj Rule = new promise is consideration)
- Honest dispute as to duty
- Unforseen circumstances which rise to the level of impracticability that would discharge the duty of performance.
NY: allows past consideration if the promise is made in writing signed by the party to be charged, AND states in writing that the past consideration supports the current promise. Past consideration must have been given/performed AND it would have been valid but for the time it was given
Defense to K formation – Capacity
If one of these parties is present, ask “do they have capacity to K?”
- CORPORATION–Has capacity unless k exceeds the corporate charter (ultra vires)
- INFANTS– must be 18 at time of k unless the k affirmed after reaching age of majority (day before 18th bday). EXCEPTIONS (artistic related services, Edu Loans, Realty Ks relating to home of spouse
- INCAPACITATED PERSONS–actions of adjudicated incompetent are void and those of unadjudicated (NY: if unadjucated K is NOT void unless incompetent can restore other party to previous position.
- ILLEGALITY–regardless of intent of parties, an illegal k is void, considered never formed
- -MISTAKE, AMBIGUITY, DURESS, UNDUE INFLUENCE, FRAUD, UNCONSCIONABILITY–these are defenses to formation and they operate to make the K voidable
- -STATUE OF FRAUDS–valid k might exist but this is a defense to enforcement. Only party to K can raise defense. Spot issue: party trying to prove existence of K w/o having a writing.
Mistake (def to enforcement)
mutual mistake–where the subject matter does not exist as the parties contemplated. Unilateral mistake–the mistake party bears the loss unless the non-mistake party was aware of the mistake.
Ambiguity (def to enforcement)
is generally held against the party that was aware of it
Duress (def to enforcement)
Party under druess must show they were acting under duress. NY: economic duress/business compulsion is a species of duress rendering a k voidable. The other party must have caused the bad economic situation and not just taken advantage of it.
Undue Influence (def to enforcement)
there must be a CONFIDENTIAL RELATIONSHIP otherwise it is duress
Fraud (def to enforcement)
most common is “fraud in the inducement” where the party understands the terms and conditions of the agreement, but enters into the K b/c of a fraudulent misrep of a material fact
