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Contracts Flashcards

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1
Q

Types of Contracts:

Unilateral Contract

A

Offer expressly requires performance as method for acceptance.

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2
Q

Types of Contracts:

Divisible Ks:

A

1) Performance divided into 2 + parts under K;
2) Number of parts due from each party is the same; and
3) Performance between parties is equivalent.

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3
Q

Types of Contracts:

Option K

A

Agreement to leave open in exchange for consideration.

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4
Q

Types of Contracts:

Advertisements

A

Generally preliminary proposal unless words are to identifiable person (e.g. first come first serve).

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5
Q

Types of Contracts:

Quasi-K:

A

Equitable remedy when K results are unfair.

Prevents unjust enrichment.

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6
Q

Types of Contracts:

Mixed contracts

A

Determined by the more important part of the deal, except divided contracts in which both UCC and common law rules may apply

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7
Q

Offer:

General Requirements

A

1) A manifestation of a present intent to contract demonstrated by promise, undertaking or commitment;
2) Definite and certain terms; and
3) Communicated to an identified offeree.

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8
Q

Offer:

Specific Requirements for Sales K

A

Must include description.

Under UCC: must also include quantity. If no price included in offer, price will be a reasonable price at time of delivery.

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9
Q

Offer:

Specific Requirements for Real Estate K

A

Must identify land and price.

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10
Q

Offer:

Specific Requirements for Employment K

A

Must include duration of employment.

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11
Q

What is Revocation?

A

Unambiguous statement by offeror to offeree or unambiguous conduct indicating unwillingness to K that offeree is aware of.

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12
Q

Revocation:

Firm Offer under UCC

A

Offer can’t be revoked for up to 3 months if:

1) Offer to buy or sell goods;
2) Signed written promise to keep open; and
3) Party is merchant.

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13
Q

Revocation:

Instances Where Offer Irrevocable

A

1) Option K
2) Detrimental reliance (must be reasonably foreseeable )
3) Start of performance

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14
Q

Rejection of Offer

A

1) Counteroffers kill
2) Adding terms under common law mirror image rule
3) Lapse of time ( e.g. > 1 month)
4) Conditional acceptance

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15
Q

Definition of Acceptance

A

A manifestation of assent to the terms of an offer in the manner prescribed or authorized by the offer.

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16
Q

What Constitutes Acceptance?

A

1) Full performance
2) Start performance: for bi-lateral K, but not for unilateral K.
3) Seller of goods sends wrong goods, unless with explanation (then it’s a counteroffer)
4) Offeree promise to perform

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17
Q

Mailbox rule

A

Acceptance effective when mailed.

All else effective when received.

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18
Q

What if acceptance includes additional terms?

A

Common law: Mirror Image Rule.

Under UCC:

One party is merchant → add’l term is proposal subject to separate rejection;

Both parties merchants → add’l term is part of K unless (1) materially alters K; (2) offeror objects within reasonable time; or (3) offer limits acceptance to the terms.

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19
Q

Consideration

A

Requires bargained-for exchange of legal detriment between parties.

Substitutes for consideration:

1) Written promise when prior obligation had applicable legal defense
2) Promissory estoppel.

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20
Q

Past Consideration

A

Not considered consideration, except expressly requested performance/forbearance and expectation of payment.

New consideration required for pre-existing K or statutory duty: except in CL, unforeseen difficulty, third party promise or promise to pay debt barred by SoL.

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21
Q

Defenses to a Contract

A

1) Incapacity
2) Illegality
3) Against Public Policy
4) Misrepresentation/Nondisclosure
5) Duress
6) Ambiguity/Misunderstanding
7) Mistake
8) Statute of Frauds

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22
Q

Defenses to a Contract:

Incapacity

A

Under 18 → has a right to disaffirm K unless minor retains benefit after gaining capacity.

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23
Q

Defenses to a Contract:

Illegality

A

Subject matter illegal → K is void;

Subject matter is legal, but purpose is illegal → K enforceable only by person who didn’t know of illegal purpose.

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24
Q

Defenses to a Contract:

Against Public Policy

A

May include covenants not to compete, exculpatory clauses, etc.

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25
Q

Defenses to a Contract:

Misrepresentation/Nondisclosure

A

Innocent party may rescind if induced to enter K by fraudulent misrepresentation or non-fraudulent material misrepresentation.

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26
Q

Defenses to a Contract:

Ambiguity/Misunderstanding

A

1) Each party uses a material term open to two reasonable interpretations;
2) Each party attaches diff meaning to term; and
3) Neither party knows or has reason to know the term is subject to two interpretations causing ambiguity.

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27
Q

Defenses to a Contract:

Mistake

A

Mutual mistake → No K if mutual mistake on basic assumption of fact that materially affects agreed upon exchange and not a risk that either party bears.

Unilateral mistake → not voidable unless other party knew or should have known.

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28
Q

Defenses to a Contract:

Statute of Frauds

When does it apply?

A

Applies to MY LEGS:

(1) Marriage;
(2) Contract for 1 Year +;
(3) Land;
(4) Executory guarantee;
(5) Goods > $500;
(6) Suretyships.

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29
Q

Defenses to a Contract:

Statute of Frauds

How is it satisfied?

A

Satisfy by:

1) Performance;
2) Writing; or
3) Judicial admission.

In real estate, part performance requires 2 out of 3 of the following: (i) payment; (ii) possession; or (iii) improvements.

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30
Q

Defenses to a Contract:

Statute of Frauds

What are the writing requirements?

A

Non-UCC: parties, subj matter, terms & conditions, consideration, and signature.

UCC: quantity terms and signature, unless confirmatory memo of oral K and no objection within 10 days.

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31
Q

Defenses to a Contract:

Duress

A

Improper threat and no reasonable alternative.

32
Q

Defenses to a Contract:

Unconscionable

A

Unfair surprise and oppressive terms at time of K.

33
Q

Contract Terms:

Parol Evidence Rule

A

Integration issues: (1) Did parties intend K to be final agmt? (2) Was integration complete or partial?

Merger clause: highly persuasive but not determinative K is fully integrated.

No PE to reform or contradict written terms, unless there’s a mistake in integration.

34
Q

Contract Terms:

When is Parol Evidence allowed?

A

Parol Evidence ok to:

1) Argue defense to enforcement;
2) Explain ambiguous terms;
3) Provide add’l terms if only partial integration, or
4) Provide add’l terms if they would ordinarily be in separate agreement.

35
Q

Contract Terms:

Rules of Construction used by Court when interpreting K

A

1) Course of performance (same ppl, same K);
2) Course of dealing (same ppl, similar K); or
3) Custom and usage (diff ppl, similar K).

36
Q

UCC – Delivery Obligation

A

Either Shipment Ks or Destination Ks.

FOB means “free on board.”

If city is where seller is located → shipment K.
If buyer’s city → destination K.

37
Q

UCC – Risk of Loss

A

Determined by agreement.

UCC – Risk of Loss

Breach (even slight) shifts risk of loss.

38
Q

UCC – Risk of Loss:

Delivery by Common Carrier

A

Shipment K → risk of loss to buyer when seller delivers to carrier.

Destination K → risk of loss to buyer when seller delivers to buyer.

39
Q

UCC – Risk of Loss:

If No Common Carrier Used

A

Merchant seller → risk of loss to buyer on receipt of goods.

Non-merchant seller → risk of loss to buyer upon tender.

If risk of loss on buyer → buyer pays full K price. If risk of loss on seller → possible liability on seller for non-performance.

40
Q

UCC – Express Warranties

A

Seller liable for breach (statements of fact, promises, description of goods, etc.).

41
Q

UCC – Implied Warranty of Merchantability

A

Implied in K if dealing in goods of that kind. Goods must be fit for their ordinary purpose.

All Ks have implied warranty of good faith and fair dealing.

42
Q

UCC – Implied Warranty of Fitness for a Particular Purpose

A

Implied that goods are fit for particular purpose if:

UCC – Implied Warranty of Fitness for a Particular Purpose

1) Seller has reason to know of particular purpose; and
2) Buyer relies on seller’s skill and judgment when buying goods.

43
Q

Breach of Contract

A

Occurs when a party refuses to perform under the terms of the agreement.

Such breaches are categorized as either material or minor, with material breaches excusing the other party from performance.

44
Q

Sale of Goods:

Perfect Tender

A

Seller’s performance must be perfect or buyer can reject.

45
Q

Sale of Goods:

Rejection of Goods

A

Buyer can retain and sue for damages or reject all of a commercial unit and sue for damages.

Cure: Seller has second chance at perfect tender if:

1) S had reasonable grounds to believe delivery would be accepted; or
2) Time to perform hadn’t expired.

46
Q

Sale of Goods:

Installment K’s

A

B can reject installment only if there is a substantial impairment that can’t be cured.

47
Q

Sale of Goods:

Acceptance of Goods

A

If accepting goods, B can’t later reject.

Payment doesn’t equal acceptance w/o opportunity to inspect.

Implied acceptance if B keeps for reasonable amount of time.

48
Q

Sale of Goods:

Revocation

A

If B has not accepted goods, B may cancel K by revoking acceptance if:

1) Nonconformity substantially impairs value of goods;
2) Excusable ignorance of grounds for revocation or reasonable reliance on S’s assurance; and
3) Revocation within reasonable time after B discovers nonconformity.

49
Q

Common Law Rule for Performance

A

Substantial performance

50
Q

Excuses for Non-Performance

A

1) Improper performance by other guy (material breach)
2) Non-occurrence of condition (mutually agreed promise requiring strict compliance)
3) Anticipatory Repudiation
4) Insecurity

51
Q

Excuses for Non-Performance:

Anticipatory Repudiation

A

Several options for relying party:

1) Excuse relying party from performance and immediately sue for damages (not avail if relying party fully performed);
2) Suspend performance and wait until performance date to sue;
3) Treat repudiation as offer to rescind and treat K as discharged. Retraction ok if other party hasn’t materially changed position.

52
Q

Excuses for Non-Performance:

Insecurity

A

If reasonable grounds, relying party can demand adequate assurance and may suspend performance.

53
Q

Effect of Later Contract:

Rescission

A

Only if performance not completed.

54
Q

Effect of Later Contract:

Modification

A

Mutual agreement to accept different agreement to satisfy existing K.

CL: new consideration needed to modify.

UCC: not needed to modify, but must show good faith for modification.

55
Q

Effect of Later Contract:

Novation

A

Mutual agreement to substitute existing party with another, excusing performance of substituted party.

56
Q

Effect of Later Unforeseen Event:

Impossibility

A

Performance can’t be done (damage, destruction, death, subsequent law or regulation).

57
Q

Effect of Later Unforeseen Event:

Impracticability

A

Can’t be done without extreme and unreasonable difficulty or expense.

Increase in seller cost rarely an excuse.

58
Q

Effect of Later Unforeseen Event:

Frustration of Purpose

A

Unforeseeable supervening event destroys K purpose.

59
Q

List of Non-Monetary Remedies

A

1) Specific Performance
2) Rescission
3) Reformation
4) Reclamation

60
Q

Non-Monetary Remedies:

Specific Performance

A

Typically limited to real estate and sale of unique goods, but never for services.

Requirements:

1) Valid K;
2) Conditions satisfied:
3) Inadequacy of legal remedies;
4) Mutuality; and
5) Feasibility of enforcement.

61
Q

Non-Monetary Remedies:

Rescission

A

Cancels K.

Grounds for rescission: mutual mistake or unilateral mistake if non-mistaken party would suffer undue hardship or knew of mistake.

No negligence.

62
Q

Non-Monetary Remedies:

Reformation

A

Changes written agreement to conform to parties’ original understanding.

Requirements: valid K, grounds for reformation. No negligence, Statute of Frauds, Parol Evidence Rule.

63
Q

Non-Monetary Remedies:

Reclamation

A

Right of unpaid seller to get goods back.

Only if Buyer was insolvent at time of receipt and Seller makes demand for return within 10 days of buyer’s receipt or reasonable time if buyer gives express representation; and buyer has goods at time of demand.

64
Q

Rights of good faith purchaser in entrustment

A

Owner entrusts goods to person who sells that kind of good and person wrongfully sells to third party

GFP cuts off right of original owner.

65
Q

Monetary Damages:

Expectation Interest

A

Puts P in position as if K was not breached.

66
Q

Monetary Damages:

Reliance Interest

A

Puts P in same dollar position as if K was not breached.

67
Q

Monetary Damages:

Restitution Interest

A

Prevents D’s unjust enrichment.

68
Q

Damages for Sale of Goods

A

1) S breaches/B keeps – difference between value of goods delivered and fair market value had they been perfect.
2) S breaches/S keeps – difference between K price and either market price or cost of replacement.
3) B breaches/B keeps – S recovers K price.
4) B breaches/S keeps – Difference between market and K price.

69
Q

Incidental Damages

A

Cost for finding replacement.

70
Q

Foreseeable Consequential Damages

A

Damages from P’s special circumstances, only if D had reason to know of special circumstances.

71
Q

Limitations on Damages

A

Avoidable damages: P must mitigate. Certainty: Loss must be proved with reasonable certainty.

72
Q

Liquidated Damages

A

K fixes amount of damages.

Valid if: Damages difficult to ascertain & reasonable forecast.

73
Q

Third Party Beneficiaries

A

Incidental TPBs don’t have K rights, only intended TPB’s do.

No cancellation or modification after TPB’s rights have vested by either relying, assenting or suing for enforcement.

74
Q

Assignment of Rights

A

One party transfers rights under K to assignee.

Language important: If K states “Rights under this K are not assignable” → Assignment is still valid.

Assignment of Rights

Assignor is liable for breach but assignee who doesn’t know of prohibition can enforce.

BUT, if K states “All assignments under this K are void” → Assignments are invalidated.

75
Q

Gratuitous Assignment of Rights v. Assignment for Consideration

A

Gratuitous assignment: can be revoked; last gratuitous assignment wins.

Assign for consideration: no recovery from obligor.

(i) Assignor implies warranty that right exists;
(ii) Right not subject to any defenses;
(iii) Assignor won’t do anything to impair value of assignment.

First assignment for consideration wins.

76
Q

Delegation

A

Allowed unless K prohibits delegation, K calls for very special skills, or K has very special reputation.

If 3rd party doesn’t perform, delegating party always remains liable.

Delegatee liable only if receives consideration from delegating party, in which delegatee is liable to delegating party and obligee.

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