Contracts Flashcards
Contracts - APPLICABLE LAW
The common law of contracts applies to all contracts other than those for the sale of goods, to which the UCC applies.
Goods = items moveable at the time of identification to the K
Merchants = persons who deal regularly in good of the kind sold
Contracts - OFFER
An offer consists of: (1) a promise, commitment, or undertaking to enter into a K, (2) with the essential terms define and certain, and (3) communication of the promise and terms to the offeror.
Contracts - OFFER TERMINATION
1) Lapse of time
2) Death or incapacity of either party
3) Revocation
4) Rejection
Contracts - OFFER REVOCATION
Terminates offeror’s power to accept IF communicated to him before acceptance.
All offers are revocable at will, UNLESS:
1) Supported by separate consideration
2) Merchant’s firm offer
3) Detrimental reliance
4) Unilateral K with part performance
Contracts - REJECTION
Offeree refuses to accept by:
1) Express rejection
2) Counteroffer
3) Non-conforming acceptance
Contracts - ACCEPTANCE (Common Law)
Unqualified assent to the terms of an offer that is communicated to the offeror.
Effective at the moment of dispatch unless terms state otherwise OR option K.
Contracts - UCC BATTLE OF THE FORMS
Under the UCC, an acceptance that varies the terms of the offer is still a valid acceptance UNLESS expressly conditioned on acceptance of the varied terms.
DIFFERENT TERMS
Majority = knock out rule
Minority = treat as additional
ADDITIONAL TERMS
- Between merchants = part of the K unless (1) the offer expressly limits acceptance to its terms, (2) they materially alter the offer, OR (3) objection is made w/in a reasonable time after notice is received.
- If any non-merchants = terms are proposals and must be accepted to be effective.
Contracts - DEFENSES TO FORMATION
1) Incapacity
2) Mistake
- -unilateral if non-mistake party knew of mistake
- -mutual if material
3) Duress - wrongful threat leaving party w/ no choice
4) Undue influence
- -unfair persuasion used, AND
- -party was vulnerable to such persuasion
5) Fraud
Contracts - STATUTE OF FRAUDS
Ks for Marriage, Land, Executor, Goods over $500, Surety, or that can’t be performed w/in one year
Must be evidenced in a writing, signed by the party against whom enforcement is sought and including (1) the identity of the parties, (2) the nature and subject of the K, and (3) essential terms, UNLESS
(1) evidentiary or judicial admission,
(2) full performance of goods/services K, or
(3) if land, any combination of:
- payment in full or part
- possession
- making of valuable improvements
Contracts - UNCONSCIONABILITY
Procedural = bargaining process created absense of meaningful choice
Substantive = terms unreasonably favorable to one side
Ct may:
1) Refuse to enforce,
2) Excise offending clause and enforce the remainder, OR
3) Limit application to avoid unconscionable result
Contracts - PUBLIC POLICY DEFENSE
Cts will refuse to enforce a K if:
1) the subject itself is prohibited by law
2) K is formed for criminal or tortious purposes
3) Performance would violate certain value and freedoms designated by the state
Contracts - TPBs - INTENDED v. INCIDENTAL
Intended:
1) expressly designed or identifiable to time of performance
2) performance is due directly to him
3) has rights under the K
4) relationship w/ promisee suggests he wants TPB benefitted
* *Can always sue promisor; can prevent modification if vested**
Incidental - cannot enforce K
Contracts - TPBs - CREDITOR OR DONEE
CREDITOR
- Promisee is discharging an obligation to TPB
- Can always enforce against both promisee and promisor
DONEE
- Intent was to bestow gift on TPB
- Can sue promisor
- Can only sue promisee if he detrimentally relied
Contracts - TPB - VESTING
1) Manifests assent in a manner requested by the parties
2) Brings suit to enforce promise, OR
3) Materially changes his position in justifiable reliance on the promise
Contracts - ASSIGNMENT REQUIREMENTS
1) Can’t substantially change obligor’s duty
2) No writing UNLESS wages, interest in land, security interest, or chose in action over $5K
3) Must adequately describe right being assigned
4) Assignor must indicate intent to completely and immediately assign the interest
Contracts - IRREVOCABLE ASSIGNMENTS
1) Given for consideration
2) Obligor has performed
3) On delivery of a tangible claim
4) Assignment of a chosen in action in writing
5) Estoppel - foreseeable detrimental reliance
Contracts - DELEGATION
All duties are delegable UNLESS:
1) they involve personal skill/judgment
2) there is a special trust in the delegator
3) delegation would change obligor’s expectancy
4) prohibited by the K
Delegator remains liable absent clear novation.
Delegate only liable if:
1) he performs OR
2) he promises to perform and its supported by consideration
Contracts - PAROLE EVIDENCE RULE
Where parties express their agreement in writing, w/ intent that it embody the full and final expression of their bargain, any other expressions made prior to the writing and any oral expressions made contemporaneously are inadmissible to vary the terms of the writing.
EXCEPTIONS:
1) Failure of oral condition precedent to K taking effect
2) Formation defects
3) Interpretation of ambiguity of the face on the instrument
4) Showing of true consideration
Contracts - MODIFICATION
Subsequent agreement or expression varying Ks terms.
-Must be in writing if K, as modified, falls under SOF.
UCC: no consideration req’d if good faith or merchants firm offer.
Common Law: additional consideration always required
Contracts - CONDITION
Event, other than the passage of time, that will modify, create, or extinguish a duty to perform.
Failure of a condition precedent, or occurrence of a condition subsequent, constitutes an excuse from performance that avoids a breach.
Contracts - MINOR v. MATERIAL BREACH
MINOR
Non-breaching party gains the substantial benefit of the bargain and his duty is not discharged
MATERIAL
Non-breaching party does not gain the substantial benefit of the bargain and has the right to all available remedies
Contracts - ANTICIPATORY REPUDIATION
When a party to a K informs the other party, BEFORE the due date for performance that he does not intend to perform, he has committed an anticipatory repudiation. The other party is then entitled to treat the anticipatory repudiation as a breach of the K and sue immediately.
Contracts - IMPLIED COVENANT OF GOOD FAITH AND FAIR DEALING
Exists in every K and requires both parties to do nothing to prevent performance by the other party.
Contracts - DISCHARGE
Impossibility - objective and arising after K is entered into
Impracticality - extreme and unreasonable difficulty or expenses that was not and could not have been anticipated
Frustration of Purpose - destruction of the object of the K by a supervening act
Waiver - by the party benefitted by the provision
Accord and Satisfaction
Contracts - RISK OF LOSS
Shipment K (FOB Seller) - risk passes to buyer when goods are tendered to carrier
Destination K (FOB Buyer) - risk passes to buyer when goods are delivered at destination
Contracts - EXPECTATION DAMAGES
Restore π to the position he would have been in had the K been performed.
Loss of value of breaching party’s performance + incidental + consequential - payments received - costs saved as a result of breach
Contracts - RELIANCE DAMAGES
Out of pocket expenses available for promissory estoppel or where compensatory damages are difficult to calculate
Contracts - LIQUIDATED DAMAGES
Upheld if damages will be extremely difficult to ascertain and the stipulated amount is a reasonable forecast of damages
Contracts - UCC PERFECT TENDER RULE
If the goods or tender fail to conform to the K if ANY respect, buyer may accept all, reject all, or accept some and reject the rest.
Buyer’s remedy = difference between K price and EITHER:
(1) market price or
(2) cost of replacement, measured at the time buyer learns of the breach.
Contracts - UCC REPLEVIN
TYPE 1
- Buyer has paid for all or some of the goods, AND
- Seller refuses to deliver, AND EITHER:
- -seller becomes insolvent w/in 10 days of receiving 1st payment OR
- -goods were for personal, family, or household purposes
TYPE 2
- Goods are identifiable to the K AND
- Buyer is unable to find substitute goods.
Contracts - SPECIFIC PERFORMANCE
1) Valid and enforceable K, definite and certain
2) π has performed all of his conditions or they are excused
3) legal remedy is inadequate
4) Court supervision is feasible
Contracts - GROUNDS FOR RESCISSION
MISTAKE
Mutual as to a material fact OR
Unilateral as to material fact IF:
- traditional: other party knew or had reason to know OR
-modern: hardship to mistake party outweighs detriment to other
MISREPRESENTATION
1) False representation
2) Intentionally, negligently, or innocently made,
3) w/ intent to induce π to rely on the representation
4) which π in fact relies upon to his detriment
Contracts - REFORMATION
The court can modify a written instrument to conform to the parties’ previous understanding for:
1) mutual mistake of fact regarding the instrument’s conformance to the parties’ intentions
2) Unilateral mistake where 1 party knows the instrument contains an error but the other does not
3) Mistake of law as to the legal meaning of terms
4) Fraud
