Contracts Flashcards
Contract
Legally enforceable agreement
quantum meruit/quasi-K
equitable remedy (restitution)
elements of quantum meruit
- P has conferred a benefit on D AND
- P reasonably expected to be paid AND
- D realized unjust enrichment if P is not compensated
bilateral K
offer that is open as to the method of acceptance
unilateral K
offer that expressly requires performance as the ONLY POSSIBLE method of acceptance
offer
A manifestation in the form of words or conduct showing commitment of an intention to contract.
test for an offer
Would a reasonable person in the position of the offeree believe that assent creates a K?
offers that cannot be revoked
- option K
- merchant firm offer rule (UCC only): Offer cannot be revoked for up to 3 months if (i) offer to buy or sell goods (ii) signed, written promise to keep the offer open, AND (iii) party is a merchant.
- reliance: an offer cannot be revoked if there has been detrimental reliance by the offeree that is reasonably foreseeable
- the start of performance to an offer to enter into a unilateral K makes that offer irrevocable for a reasonable time to complete performance
merchant
A person in the business.
A person who regularly deals in goods of the kind sold or otherwise by his occupation holds himself out as having knowledge or skill peculiar to the practices or goods involved in the transaction.
consideration
bargained-for legal detriment
bargained-for
asked for in exchange for a promise
legal detriment
performance, forbearance, promise to perform, promise to forbear
preexisting duty rule
CL only: Doing what you are already legally obligated to do is not consideration for a promise to pay you more to do merely that. (must have new consideration to modify a CL K)
promisorry estoppel
- Promise
- Reliance that is reasonable, detrimental and foreseeable
- Enforcement necessary to avoid injustice
Who lacks capacity to contract?
- Infant (under 18)
- Mental incompetents (lack ability to understand agreement)
- Intoxicated persons IF other party has reason to know
consequences of incapacity
right to disaffirm by person w/o capacity
Statute of Frauds
Statute designed to prevent fraudulent claims. Statute designed to make it harder to make a false claim that a K exists.
3 SoF issues
- Is the K w/in the SoF?
- If so, is SoF satisfied?
- Is there a SoF defense?
Ks w/in SoF
MYLEGS Marriage Year and a day Land Executor personal obligation to pay Goods at least $500 Suretyship - guarantee to pay if someone else does not
SoF often tested as wrong answer
MES
Marriage
Executor personal obligation to pay
Suretyship - guarantee to pay if someone else does not
SoF often tested
GLY
Goods at least $500
Land
Year and a day
judicial admission of Sale of Goods agreement
K is enforceable w/o a writing if:
judicial - statement appeared in pleadings or testimony or in response to discovery
admission - statement by D acknowledging the agreement
When does a person need a written authorization in order to execute a K for someone else?
Equal Dignity Rule: The authorization must be in writing if the K to be signed is w/in the SoF (i.e. the authorization must be of “equal dignity.”)
Illegal subject matter v Illegal purpose
If the subject matter is illegal, the AGR is void.
If the subject matter is legal but the purpose is illegal, the AGR is enforceable ONLY by the person who did not know of the illegal purpose.
unconscionability doctrine
1) Empowers a court to refuse to enforce all or part of an agreement.
2) Unfair surprise AND oppressive terms are 3) tested as of the time the AGR was made 4) by the court.
ambiguity in words of agreement
Ambiguity exists if:
1) parties use a MATERIAL term that is open to at least two reasonable interpretations, AND
2) each party attaches different meaning to the term, AND
3) neither party knows or has reason to know the term is open to at least 2 reasonable interpretations.
mistake of fact existing at time of K
There will be no K if:
1) both parties are mistaken AND
2) basic assumption of fact AND
3) materially affects the agreed exchange
MoF as to what it is means the AGR is not legally enforceable.
MoF as to value is still legally enforceable.
Armadillos From Texas Play Rap Eating Tacos
Applicable law (UCC or CL) Formation Terms Performance Remedies Excuse for non-performance Third Party
integration
written agreement that court finds is the final agreement, triggers the parol evidence rule
partial integration
written and final BUT NOT complete
complete integration
written and final AND complete
merger clause
contract clause such as “This is the complete and final agreement.”
3 parol evidence bar tips
- Parol evidence is limited to the words of the parties.
- Parol evidence can be oral OR written.
- Parol evidence comes before the integration
delivery obligation of seller of goods
Absent an AGR as to place of delivery, the place of delivery is the seller’s place of business unless both parties know that the goods are some place else, in which case that place is the place of delivery.
shipment K
Seller completes its delivery obligation when it:
1) gets the goods to a common carrier AND
2) makes reasonable arrangements for delivery AND
3) notifies the buyer.
destination K
Seller does not complete its delivery obligation UNTIL the goods arrive where the buyer is.
When do rise of loss issues arise?
1) after the K has been formed but before the buyer receives the goods
2) the goods are damaged OR destroyed, AND
3) neither the buyer nor the seller is to blame
4 risk of loss rules
- agreement allocates risk (won’t happen on bar)
- breach (breaching party is liable for any uninsured loss even though breach is unrelated to problem)
- delivery by common carrier other than seller (risk of loss shifts from seller to buyer at the time that the seller completes the delivery obligation)
- no agreement, no breach, no delivery by carrier
(If SELLER is merchant-seller, buyer has risk of loss upon receipt of goods.
If SELLER is non-merchant-seller, buyer has risk of loss when seller tenders the goods.)
implied warranty of merchantability
When any person buys any goods from any merchant, a term is automatically added to the K by operation of law that the goods are fit for the ordinary purpose for which such goods are used.
implied warranty of fitness for a particular purpose
- Buyer has particular purpose
- Buyer is relying on seller to select suitable goods
- Seller has reason to know of purpose and reliance
Goods are fit for the particular purpose
perfect tender rule
Subject to limited exceptions, seller is obligated to deliver perfect goods.
general rule on rejection of goods
If the goods are less than perfect, buyer has the option to reject UNLESS cure or installment sale K
cure
In some instances, seller who fails to make a perfect tender will be given a second chance, the option to cure.
NOT EVERY SELLER HAS THE OPPORTUNITY TO CURE.
2 opportunities for cure
- time for performance has expired.
Statutory test is whether the seller has reasonable grounds for believing that the improper tender would be acceptable, perhaps with a money allowance. - time for performance has not expired
provide perfect tender by agreed upon deadline
installment sales K
An installment sales K requires or authorizes
1) delivery in separate lots
2) to be separately accepted.
Buyer has the right to reject an installment only where there is a substantial impairment in that installment that can’t be cured.
acceptance of goods
- If buyer accepts the goods, it cannot later reject them.
- Buyer has accepted on express acceptance or if buyer keeps goods w/o objection after opportunity for inspection BUT not upon payment w/o opportunity for inspection.
revocation of acceptance of goods
Requirements for revocation:
- nonconformity substantially impairs the value of the goods AND
- excusable ignorance of grounds for revocation or reasonable reliance on seller’s assurance of satisfaction AND
- revocation w/in a reasonable time after discovery of nonconformity
nonmonetary remedies - specific performance / injunction
GR: Courts reluctant to grant equitable remedy of SP. Historically, equitable remedies are available only if legal remedy is inadequate. Judicial administration of SP decree would be difficult.
When is SP available?
- Sale of real estate
2. Sale of UNIQUE goods (antiques, art, custom-made)
Is there SP for K for services?
No SP, but possible injunctive relief
reclamation
right of unpaid seller to get its goods back
- Buyer must have been insolvent at the time it received the goods.
- Seller must demand return of goods w/in 10 days of receipt (reasonable time if buyer had express representation of solvency before delivery)
- Buyer still has goods at time of demand.
purpose of money damages
to compensate plaintiff, NOT to punish defendant
Expectation interest
puts P in same economic position as if K had been performed
Reliance interest
puts P in same economic position as if K had never happened
Restitution interest
puts D in same economic position as if K had never happened (prevent unjust enrichment)
Incidental damages
cost of finding replacement K. Costs incurred in dealing w/breach. ALWAYS recoverable.
Foreseeable consequential damages
damages arising from Ps special circumstances.
Recoverable ONLY IF D had reason to know at time of K
avoidable damages
damages that could have been avoided w/o undue burden on P. No recovery for avoidable damages. Duty to mitigate.
liquidated damages
- damages were difficult to forecast at time K was made AND
2. provision is a reasonable forecast
performance condition
A condition is a mutually agreed promise modifier. It is language in a K that does not create a new obligation but merely limits obligations created by other language in the K.
express condition
Express conditions are created by language of K such as “if”, “provided that”, “so long as”, etc.
anticipatory repudiation
An unambiguous statement i) that the repudiating party will not perform ii) made prior to the time that performance was due.
AR by one party excuses the other party’s duty to perform.
AR generally gives rise to an immediate claim for damages for breach.
accord and satisfaction
accord: an agreement supported by consideration by the parties to an already existing obligation to accept a different performance in satisfaction of the existing obligation.
satisfaction: that different performance
novation
An agreement between both parties to an existing K for the substitution of a new party. (same performance, diff party)
Who is liable after a novation?
Novation excuses the contracted-for performance of the party who is substituted for or replaced
novation vs delegation
Novation requires the AGR of both parties to the original K AND excuses the person replace from any liability for nonperformance.
Delegation does not require the AGR of both parties AND does not excuse liability for nonperformance.
Excuse of performance by reason of a later, unforeseen event
Performance of K duties (other than a K duty to pay money) can be excused under impossibility, impracticability, or frustration of purpose.
- Something happens after K formation but before the completion of K performance AND
- That was unforeseen AND
- That makes performance impossible, commercially impracticable, or frustrates the purpose of the performance.
Third-party beneficiary
Not a party to the K, but able to enforce K others made for her benefit.
Promisor
Party making the promise that benefits the third party.
Promisee
Party who obtains the promise the benefits the third party.
Assignment
All Ks are assignable and delegable EXCEPT personal services Ks and long term requirements Ks.
Transfer of rights under a K in 2 steps.
1. K between only 2 parties
2. One of the party’s later transfer of rights under that K to a third party.
What does language of prohibition do?
Language of prohibition takes away the right to assign but not the power to assign.
This means that the assignor is liable for breach of K but an assignee who does not know of the prohibition can still enforce the assignment.
What does language of invalidation do?
Language of invalidation takes away both the right to assign and the power to assign so that there is a breach by the assignor AND no rights in the assignee.
Delegation
All Ks are assignable and delegable EXCEPT personal services Ks and long term requirements Ks.
Party to a K transferring work under that K to a 3rd party.
What if 3rd party does not perform delegated duties?
- Delegating party always remains liable.
2. Delegatee liable ONLY IF she receives consideration from delegating party.
condition precedent
A condition precedent is one that must occur before an absolute duty of immediate performance arises in the other party.
acceptance
An agreement to the terms of a K such that a binding contract is formed.
