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Missouri Bar > Contracts > Flashcards

Contracts Flashcards

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1
Q

Contract definition

A

Promise which the law provides for a remedy when breached

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2
Q

Common law versus UCC Article 2

A

Common law - governs contracts

UCC Article 2 - governs sale of goods contracts

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3
Q

What’s a good?

A

All things movable at the time they are identified as the good to be sold (so doesn’t apply to property, services, memberships, etc.)

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4
Q

What is an Article 2 merchant?

A

One who regularly deals in goods of the kind.

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5
Q

Standard both parties must follow in UCC contract

A

good faith and fair dealing

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6
Q

Types of contracts

A

Express - oral or written
Implied - parties actions
Quasi-Contract - NOT CONTRACTS but court imposed to avoid unjust enrichment

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7
Q

Bilateral contract

A

consists of an exchange of mutual promises. Most contracts today are bilateral.

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8
Q

Unilateral contract

A

accpetane by performance - will pay once performance completed.

Only two kinds - (1) offeror indicates completion of performance only form of acceptance and (2) reward offer

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9
Q

Void contract

A

No legal effect - cannot be enforced

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10
Q

Voidable contract

A

Parties may elect to enforce a voidable contract

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11
Q

What questions do you ask to see if contract created?

A

(1) Was there mutual assent?
(2) Was there consideration?
(3) Any defenses to creation of contract?

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12
Q

What is mutual assent?

A

An offer AND acceptance before termination

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13
Q

What three elements does an offer need to be a valid offer?

A

(1) expression of promise, commitment
(2) certainty and definiteness in essential terms
(3) communication to offeree

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14
Q

What can a court look at to see if an offer was made?

A

(1) Language used
(2) Surrounding circumstances (made in jest/anger)
(3) Prior practice and relationship
(4) Method of communication

(COMPARE WITH MERE NEGOTIATIONS OR INVITATIONS TO OFFERS - advertisements construed as invitations to offers)

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15
Q

What required definiteness is required in an offer?

A

(1) Identify offeree

(2) Subject matter must be definite

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16
Q

What definiteness in an offer required: Real Estate

A

MUST identify land and price

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17
Q

What definitenes in an offer required: Sale of goods

A

MUST identify quantity

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18
Q

What is a Requirements Contract?

A

buyer promises to buy from seller all of the goods the buyer requires.

Demand for quantity must never be unreasonably disproportionate to any stated estimate or prior output

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19
Q

What is an Output Contract?

A

Seller promises to sell to buyer all of the goods seller produces.

Demand for quantity must never be unreasonably disproportionate to any stated estimate or prior output

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20
Q

What definiteness in an offer required: employment or service contact?

A

(1) All services besides employment - nature of the work

(2) Length of work - if none stated then considered terminable at the will of either party

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21
Q

Missing terms in the offer ok?

A

YES - court will supply reasonable terms if it appears parties intended to create a contract

True for if price is missing (except property) or time frame

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22
Q

Vagueness or terms to be agreed too later in offer/contact ok?

A

NO - makes contract too vague to be enforced. Can only be agreed to later if it isn’t material.

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23
Q

How do you terminate an offer?

A

(1) Revocation by offeror
(2) Termination by offeree
(3) Termination by law

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24
Q

How can offeror revoke contract?

A

(1) communicate it to offeree (effective when received)
(2) Offeree indirectly receives revocation and it is correct and from a reliable source (effective when received)
(3) publish it in same publication (effective when published)

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25
Q

Can you revoke option offers?

A

NO - offeree gave consideration for a promise not to revoke for a certain period of time

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26
Q

Can you revoke merchant firm offer under Article 2?

A

NO, if

(1) merchant
(2) offers to buy or sell goods
(3) signed in writing
(4) writing gives assurance it will be held open (if time period not specified then 3 months. Can be longer only if consideration offered)

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27
Q

Detrimental reliance or promissory estoppel definition

A

Offeror reasonably expects offeree to rely on the offer - and offeree does so rely - it becomes an irrevocable option contract for a reasonable length of time.

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28
Q

Can you revoke a unilateral contract after performance has begun?

A

NO - must give offeree reasonable time to complete performance.

Remember: prepping for performance may make it detrimental reliance/promissory estoppel

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29
Q

How can offeree terminate offer?

A

(1) express rejection

(2) Counteroffer if its on the same subject matter

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30
Q

Counteroffer versus mere inquiry

A

Does NOT terminate offer (would you consider…) - whatever a reasonable person would think is happening

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31
Q

When is rejection of offer effective?

A

When received by offeror

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32
Q

What happens when an offeree rejects an option contract?

A

It’s rejected - but time limit to keep it open doesn’t go away - offeree can come back and accept it in time period unless offeror detrimentally relied on offeree’s rejection

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33
Q

What events trigger termination of offer by law

A

(1) Death/insanity of either party
(2) Destruction of contract’s subject matter
(3) Supervening illegality

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34
Q

What is an acceptance?

A

Manifestation of assent to an offer

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35
Q

Right to accept transferrable?

A

NO - unless it was an option contract

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36
Q

When is a unilateral contract accepted?

A

Once performance completed. So no obligation to complete performance because acceptance doesn’t occur until it is completed

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37
Q

When is notice of an acceptance of unilateral contract required?

A

Not required - unless offeror wavied notice or performance would not normally come to offeror’s attention.

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38
Q

Difference between acceptance by bilateral or unilateral contract?

A

Unilateral - acceptance only by completion

Bilateral - accept by informing or BEGINNING performance

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39
Q

When is a bilateral contract accepted

A

Once it is communicated - unless offeror waives

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40
Q

How an you accept an offer to buy goods?

A

(1) Promise to ship

(2) Prompt shipment

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41
Q

Mirror Image Rule

A

Common law requires an absolute and unequivocal acceptance of each and every term of the offer

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42
Q

SHIPMENT of (not promise to ship) nonconforming goods is considered..

A

If no accomodation sent - acceptance and breach. Buyer can sue for damages

If accomodation sent - acceptance and no breach. Buyer can accept or reject. Seller not in breach if rejection.

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43
Q

Does UCC Article 2 accept mirror image rule?

A

NO - offeree can accept even by proposing additional terms.

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44
Q

Artcile 2 acceptance with additional terms

A

If nonmerchant involved - additional terms are proposals
If merchant involved - additional terms in contract, unless
(1) materially alter
(2) offer expressly limits acceptance to terms of offer
(3) offeror already objected to terms

Same rules apply to confirmatory memo

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45
Q

Mailbox Rule

A

Acceptance by mail creates a contract at the MOMENT OF DISPATCH, unless

(1) offer stipulates not effective till received
(2) option contract involved
(3) offeree sends rejection then acceptance - then whatever arrives first

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46
Q

Elements to have proper consideration

A

(1) Bargained-for exchange

(2) benefit to promisor or detriment to promisee

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47
Q

Promising to perform existing legal duty insufficient consideration, UNLESS

A

(1) New or different consideration promised
(2) Promise to ratify voidable obligation
(3) Owed to a different person and not promisor
(4) honest dispute as to duty
(5) modified and new consideration proposed

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48
Q

Does UCC need consideration?

A

NO - only needs good faith

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49
Q

Promissory Estoppel or detrimental reliance definition

A

There is no valid contract, but court enforces one because justice so requires:

(1) Promisor should reasonably expect to induce action or forebearance
(2) Such action or forebearance is induced

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50
Q

Defenses to Enforcing Contract - Five types of absence of mutual assent

A

Contract exists - but defense to enforcement exists:

(1) Mutual mistake to existing facts
(2) Transmission error
(3) Ambiguous contract language
(4) Misrepresentation

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51
Q

Mutual Mistake of Fact Defense Allowed

A

(1) Mistake concerns basic assumption on which contract made
(2) Has material effect on agreed-upon exchange
(3) Party seeking avoidance did not assume the risk

UNILATERAL mistake not allowed unless nonmistaken party knew of the mistake made by other party and said nothing.

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52
Q

Misunderstanding of terms defense

A

Neither or both party aware - no K unless both parties wanted same meaning
One party aware - binding K based on what ignorant party believed

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53
Q

Misrepresentation defense - Fraud in the inducement

A

One party induces another to enter into K using fraudulent misrepresentation - makes K VOIDABLE if innocent party justifiably relied

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54
Q

Misrepresentation defense - Nonfraduluent misrepresentation

A

Voidable by innocent party if relied on mispresentation and it was material

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55
Q

Defense to enforcing K - No Consideration

A

No contract exists - one of the promises always illusory

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56
Q

Defenses to enforcing K - Illegality

A

If consideration or subject matter illegal - then K void, unless

(1) only one person aware of illegality
(2) one party not as culpable

If only the purpose of K is illegal - K is voidable

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57
Q

Defense on Capacity: Infant

A

Under 18 - lack capacity, however

(1) Necessaries - minor liable for restitution for value received
(2) Can affirm upon attaining 18 (keep it going to expressly state it)

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58
Q

Defense on Capacity: Mental Capacity, Intoxication, Durress

A

Voidable K

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59
Q

Defense to enforcing K: Statute of Frauds

A

Certain K’s must be in writing (ANY EVIDENCE OF WRITING - no a K per se):

(1) Marriage
(2) Year (within one - lifetime within a year)
(3) Land
(4) Executor
(5) Goods ($500+)
(6) Surety

60
Q

What do you have to prove to satisfy statute of frauds for nongoods?

A

(1) Something in writing (any type - can even be a collection)
(2) evidencing the essential terms
(3) Signed by party who will be charged

61
Q

Unconsicionability

A

Refuse to enforce a provision or entire K to avoid unfair terms AT THE TIME K FORMED

62
Q

Types of Unconscionability

A

(1) Inconspicuous Risk shifting provisions
(2) Take it or leave it contracts (Contracts of Adhesion)
(3) Exculpatory Clause (release from intentional act)
(4) Limits to certain remedies not applicable

63
Q

What rules get greater weight in K interpretation

A

In order of preference:

(1) Express terms
(2) Course of performance
(3) Course of dealing
(4) Usage of trade

64
Q

General K interpreptation rules

A

(1) Construed as a whole
(2) Ordinary meanings
(3) Written and typed over printed words
(4) Try to determine K valid
(5) Ambiguties construed against drafter
(6) Course of dealings
(7) Usage of trade
(8) Course of performance

65
Q

Parol Evidence Rule

A

Parties express the writing embody the final expression of their bargain - writing is an “integration”

66
Q

Partial integration versus Complete integration

A

Complete - writing cannot be contradicted or supplemented.
Partial - writing cannot be contradicted but may be supplemented by providing consistent additional terms

UCC presumes all writings partial integrations

67
Q

When does parole evidence rule not come into play

A

(1) Formation defects (fraud, duress, mistake, illegality)
(2) Condition precedent to K effectiveness
(3) Interpretation
(4) True consideration paid
(5) Reformation
(6) Subsequent issues

68
Q

Naturally Omitted Terms Doctrine

A

Evidence of terms that would naturally be omitted if

(1) does not conflict
(2) concerns a subject that would not ordinarily be expected to include in the K

69
Q

Article 2 Gap Fillers

A

There must be quantity, then court will fill in the gaps even if the following missing:

(1) Price - reasonable price
(2) Place of delivery - seller’s place
(3) Time for payment - when buyer receives goods
(4) Assortment

70
Q

Non-Carrier K: When does risk pass for sale of goods?

A

Seller is merchant - risk passes when buyer takes physical possession

Seller is not a merchant - risk passes upon tender delivery

71
Q

Carrier K: When does risk pass for sale of goods?

A

Shipment K - ship by carrier but no particular destination - risk passes when goods delivered to carrier.

Destination K - requires particular destination- risk passes when goods delivered to destination

72
Q

Time for payment for Carrier and Non Carrier K

A

Carrier: When buyer receives goods

Non-Carrier: Upon tender of delivery

73
Q

Effect on breach for risk of loss

A

Nonconforming or Defective goods: Risk remains with seller and risk of loss doesn’t pass until defects cured or buyer accepts the goods despite defects.

74
Q

Warranty of Title Definition

A

Automatic in every sale of good: Title is good and transfer is good, no liens or encumberences.

Can only disclaim by specific language

75
Q

Warranty of Merchantability

A

Implied in every K by sale by merchant who deals in goods of the kind, good is fit for ordinary purpose

Disclaimer of merchantability must be part of the offer and acceptance process.

76
Q

Warranty of Fitness

A

Implied when seller knows of buyer’s reasons and purpose for the goods, for buyer’s partciular purpose

Can disclaim by written disclaimer

77
Q

Express warranties

A

In the K expressly written - very difficult to disclaim

78
Q

Who do the warranties extend to?

A

Any natural person in the family or household or guest in buyer’s home, reasonable to assume they’d use or consume and suffered personal injury

79
Q

Modifying K due to unforseen circumstances

A

no consideration needed if into performance and

(1) circumsances were unanticipatd when K made and
(2) it’s fair and equitable

OTHERWISE, consideration needed

80
Q

Modificiation of K of good

A

UCC is liberal - only need a good faith promise of new and different terms

81
Q

Modification of K - must it be in writing?

A

Non-good - NO - even if K says it has to be in writing.

Good - YES if over $500 (it’s an SOF issue)

82
Q

No-Modification clause effect

A

Non-good: may be modified orally even if clause is there

Good: provision IS given effect. If between a merchant and nonmerchant, requires nonmerchants separate signature.

83
Q

Waiver

A

Parties attempt to modify orally when it requires a written modification (good K). Court will find a waiver if other party changed position in reliance on the oral modification.

84
Q

Performance under Common law vs. UCC

A

Common law: Party’s duty is to substantially perform

UCC: Perfect tender

85
Q

Unconditional promise versus Failure of condition

A

Unconditional promise: failure of promise is a BREACH
Failure of a condition: RELEASES party from performing

Look at intent of parties to determine condition or promise distinction

86
Q

Condition precedent definition

A

Must occur before an absolute duty

87
Q

Conditions concurrent

A

Condition and promise occur together

88
Q

Condition Subsequent

A

Cuts off already existing duty

89
Q

Personal taste or judgment exception

A

K involving personal judgment as a condition of sanctification is ALLOWED if acted in good faith and promisor is PERSONALLY SATISFIED .

90
Q

Impossibility will discharge liability when

A

(1) objective - absolutely NO chance of peformance
(2) arises AFTER K formation
(3) Either party may still sue for rescission and receive restitution of any goods delivered/payments made

91
Q

Partial impossibility will discharge…

A

ONLY to the extent of the impossible duty - remainder of performance required

92
Q

Temporary impossibility will only…

A

suspend K duties - no discharge

93
Q

partial performance before impossibility will allow the party that performed

A

To recover resasonable value of his performance

94
Q

Discharge based on death

A

Must be person necessary to effectuate the K. If the services can be delegated then K not discharged. Look at whether services were unique or not.

95
Q

Discharge by Impracticability elements

A

(1) Extreme and unreasonable difficulty/expense
(2) Nonoccurence was a basic assumption of the parties

Hard test to meet - raw material increase of 50% not enough

96
Q

Discharge by frustration elements

A

(1) Superverning Act
(2) Did not reasonably foresee the act during K formation
(3) Purpose of K almost completely destroyed
(4) Purpose of K realized by both parties at the time of K formation

97
Q

Discharge by recission elements

A

Bilateral agreement: Only need express agreement - can be oral regardless of what written agreement says unless SOF issue
Unilateral agreement: Need new consideration by nonperforming party

WATCH OUT for third party beneficiary - if their right already vested cannot be discharged

98
Q

Partial Discahrge by Modification elements

A

Only discharges those terms that were modified - not entire K - need to show:

(1) mutual assent
(2) consideration (except if article 2)

99
Q

Discharge by novation elements

A

(1) previous valid K

(2) Agreement among all the parties

100
Q

Discharge by cancellation

A

Look at the parties intent - new consideration not needed

101
Q

Discharge by release

A

must have

(1) new writing
(2) new consideration

102
Q

Discharge by accord and satisifaction

A

(1) Accord - agrees to accept new performance with new consideration (only suspends original requirement)
(2) Satisification - performance on the new accord.

Watch for check that states “full satisification” - easy way to satisfy discharge by accord and satisfaction

103
Q

Breach of accord and satisfication

A

Debtor breached - Creditor can sue on original or accord

Creditor breached - (1) raise accord agreement or (2) wait until debtor damaged then bring breach of accord action

104
Q

Discharge by lapse vs. Effect of Statute of limitations

A

Lapse - discharges K (immediately only if time is of the essence stated)
SOL - makes it unenforceable in court

105
Q

Minor breach definition

A

obligee gained substantial benefit of her bargain - does not relieve aggrieved party of her duty to perform (just right to damages)

106
Q

Major breach definition

A

obligee did not receive substantial benefit of her bargain - may treat contract as ending and pursue remedies

107
Q

How do you determine if breach is material?

A

Look at

(1) Amount of benefit received
(2) Adequacy of compensation
(3) Extent of part performance
(4) Hardship
(5) Negligent behavior
(6) Likelihood that breaching party will perform

HOW LONG IT TOOK TO PERFORM AFTER DEADLINE - reasonable time allowed before considered breach

108
Q

UCC Article 2 breach

A 
Perfect tender rule - if not perfect, then considered breach of contract and buyer can, 
(1) reject all
(2) accept all
(3) accept some and reject rest 
Also entitled to damages
109
Q

Specific Performance

A

court orders breaching party to perform

Available for
(1) land/rare/unique goods

110
Q

Covenant not to Compete

A

(1) Services are unique
(2) covenant is reasonable
- protects a legitimate interest
- reasonable as to geographic location and duration
- No harm to public

111
Q

Equitable defenses when P pursuing remedy

A

(1) Laches
(2) Unclean hands
(3) Sale to a bonafide purchaser

112
Q

Right to Replevy Identified Goods partially paid

A

Buyer can claim the partially paid goods when

(1) seller becomes insolvent within 10 days after receiving buyers first payment, or
(2) purchased for personal, family, household purposes

Must pay rest of money

113
Q

Right to recover goods from buyer due to buyer’s insolvency on goods partially paid

A

(1) reclaim the goods within 10 days after buyer’s receipt of goods

114
Q

Right to demand assurances vs. Anticipatory repudiation

A

Right to demand assurances: Arises when one party has an insecurity with respect to a party’s performance - get it in writing - temporarily suspends performance. If not given within 30 days then can treat as repudiation.

Anticipatory repudiation: Need much more than an insecurity - need clear indication party is not going to perform

115
Q

Compensatory Damages

A

Put nonbreaching party in position as if the promise had been performed (expectation damages), or that the contract had never been performed (reliance damages)

116
Q

Consequential Damages

A

Special damages that reflect losses (loss profits) over expectation damages. Can recover these damages if

(1) At time K made, could have foreseen damages if K was breached
(2) could not avoid damages through reasonable efforts
(3) can be proved with reasonable certainty

In UCC case - only buyer can recover consequential damages

117
Q

Incidental Damages

A

Only for UCC cases - damages include expenses reasonably incurred by inspection, shipping, storing, reselling goods

118
Q

Damages cannot be….

A

SPECULATIVE - must be certain

119
Q

Punitive Damages

A

Not awarded in K cases

120
Q

Nominal damages

A

$1 can be awarded if breach shown but no damages

121
Q

Liquidated damages

A

allowed - must be reasonable and damages difficult to estimate at K formation

122
Q

Money damages available to BUYER when seller does not deliver

A

(1) Benefit of Bargin
Market price - Contract Price

OR

(2) Cover
Cost of replacement - K price

AND - BUYER GETS THESE
+ incidental damages + consequential damages - expenses saved

123
Q

Money damages available to SELLER when buyer does not accept

A

(1) Benefit of Bargin (Market - K price)
(2) Resale (K price - resale price)
(3) Lost Profit (K price - cost of goods) - only available remedy is to loss volume seller
(4) Action for price (K price - only available if cannot be resold)

AND - SELLER GETS THESE
+ incidential damages - expenses saved

124
Q

Damages in Employment Contract - Breach of Employee

A

Cost of replacing employee - amounts owed to employee for work done

125
Q

Damages in Employment Contract - Breach of employer

A

Full Contract Price - amount employee made or would have made by taking similar position

126
Q

Damages in Construction Contract - Breach by Owner

A

Before completion: (expected profit + costs expended)

After completion: K Price

127
Q

Damages in Construction Contract - Breach by Builder

A

Cost of completion + damages from delay - quasi K recovery for benefit conferred by builder unless K required for full performance before receiving any money.

128
Q

Restitution

A

When K is unenforceable or no K exists, restitutionary damages is available for an implied in law K, quasi K or quantum meruit.

129
Q

Quasi K restitution available when

A

(1) P conferred a benefit
(2) P had reasonable expectation of being compensated
(3) D knew or had reasont o know P’s expectation
(4) D would be unjustly enriched

130
Q

Recission Remedy allowed in

A

(1) Mutual mistake of fact
(2) Unilateral mistake
(3) Misrepresentation of fact or law
(4) duress, undue influence, illegality, capacity

131
Q

Reformation remedy

A

Change the writing so it conforms to original intent of parties

132
Q

Reform based on mistake

A

(1) An agreement between the parties
(2) agreement to put it in writing
(3) variance between original agreement and new writing

133
Q

Reform based on misrepresentation

A

(1) Choose between reformation or avoidance

If reformation chosen, then the misrepresentation must relate to the content or legal effect of the record.

134
Q

Statute of Limitations for breach of Sales K

A

Generally: 4 years from date of breach (can limit it to no less than 1 year)
Breach of Warranty: starts on delivery of goods
Express warranty: when buyer should have discovered
Implied warranty: starts on delivery of goods

135
Q

Intended Third party beneficiary of K rules (incidental third partys never have rights)

A

Promisor and promisee can modify K until third party’s rights have vested. Intended third party rights do not vest until

(1) it manifests assent in a manner invited or requested by the parties (AWARENESS NOT ENOUGH - look for signs that they assesnted as well)
(2) justifiable reliance
(3) bring a lawsuit to sue under it

136
Q

What K can be assigned?

A

All K’s may be assigned in any means possible (oral or written), unless

(1) substantially change the obligor’s risks
(2) assignment of future rights
(3) assignment prohibited by law

137
Q

Clauses prohibiting assignment in K

A

Absent contrary language, only prohibit delegation of assignor’s duties. General clause will not prevent assignment, will give right to other party to sue

138
Q

Assignments for value

A

(1) Done for consideration
(2) on preexisting debt

CANNOT be revoked

139
Q

Gratuitous Assignments

A

Not done for value - CAN be revoked unless

(1) performance completed
(2) put in writing
(3) detrimental reliance or proimssory estoppel

140
Q

Can assignee sue obligor?

A

YES - assignee (not assignor) becomes real party in interest

141
Q

Can assignee sue assignor?

A

YES - if assignor

(1) has not made a prior assignment
(2) there was no right to assign
(3) interefers with assigned right

142
Q

What K can be delegated?

A

All K’s may be delegated, except

(1) involve personal judgment or skill
(2) change obligee’s expectancy
(3) contractual restriction

Delegation and assignment used loosely and intertwined on exam

143
Q

Novation

A

Substitute new party for old party - completely released old party - requires consent among all parties

144
Q

What do you have to prove to satisfy statute of frauds for goods?

A

If both merchants - only need to have the terms in writing and no objection within 10 days of receipt.

145
Q

How to determine between incidental and intended third parties

A

Look at

(1) is third party mentioned in K?
(2) Is performance to be made directly to third party
(3) third party control anything?
(4) Relationship with promisee

146
Q

Implied contract in fact

A

formed by conduct between the parties, not oral or written language

Missouri Bar (15 decks)

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