Contracts Flashcards
what prevails when the common law and UCC Article II differ on the sale of goods?
UCC
“goods” for UCC Article II purposes
tangible things, but not real estate, services, intangibles (patent, etc.)
Article II “merchant”
one who regularly deals in goods of the kind or otherwise holds himself out as having special knowledge or skills relative to the practices/goods sold
why are quasi-constructed?
to avoid unjust enrichment
unilateral contracts recognized under UCC
clear and unambiguous understanding that completion of performance is the only manner of acceptance
offer to the public, like a reward offer
void v. voidable contract
can’t be enforced v. party may elect to enforce
contract elements
mutual assent (offer and acceptance)
consideration (bargained-for exchange or substitute)
no defenses (mistake, illegality, statute of frauds, lack of capacity)
requisite specificity for subject in real estate contract
land and price terms
requisite specificity for subject in sale of goods contract
quantity
requisite specificity for subject in employment/services contract
duration for employment; nature of work for other services
if an accepted offer doesn’t specify duration for employment, considered terminable at the will of either party
when is a contract missing terms still deemed formed?
parties intended to make a contract
reasonably certain basis for remedy (court can supply reasonable terms, like price for goods or reasonable time for completion)
offer when a material term is ambiguous?
no; neither under common law nor UCC (different from missing term!)
how can uncertainty of a vague term by cured?
acceptance or full performance
when can an offer be indirectly revoked?
when offeree receives:
correct info
from a reliable source
of offeror’s acts indicating to a RPP the offer is off the table
(sold the car to someone else)
when is revocation effective?
when received by offeree (unless published; then it’s effective when published)
under UCC Art. II, how long is a merchant’s firm offer open (not revocable) without consideration
often stated; otherwise a reasonable time, up to three months
(if the offer says the option will stay open for more than three months, it’s only valid for three months)
when does a unilateral offer become irrevocable?
once performance has begun
counteroffer: new offer or rejection?
both
test for mere inquiry or counteroffer
whether a reasonable person would believe the original offer was rejected
when is rejection effective?
when received by offeror
what operations of law terminate an offer?
death or insanity of either party
destruction of K’s subject matter
supervening illegality
can an offeree’s power of acceptance be assigned?
generally not
if A sends B an offer and B sends A the same offer, is a K formed? what if the offers contain the same terms?
never. offeree must be aware of the offer!
if A finds O’s watch and returns it to O without knowledge of O’s reward offer, does A have a contractual right to the reward?
no
is the offeree of a unilateral contact required to give the offeror notice that performance has begun?
no, but notice of completion is required within a reasonable time
when can silence constitute acceptance of a bilateral offer?
when, given prior dealings or trade practices, silence as acceptance is commercially reasonable
how does UCC Art. II construe shipment of nonconforming goods?
acceptance creating bilateral K and a breach
UNLESS seller seasonably notifies buyer that a shipment of nonconforming goods is offered only as an accommodation
is a buyer required to accept an accommodation?
no
what happens if a buyer rejects an accommodation? wny?
shipper is not in breach; may reclaim the goods because her tender doesn’t constitute acceptance of the original offer
under UCC Art. II, how is an offer to buy goods for current or prompt shipment construed to invite acceptance?
by promise to ship, or by current/prompt shipment of conforming OR nonconforming (accommodation) goods
does the accommodation rule apply when shipment is not used as the form of acceptance?
no
does UCC Art. II adhere to the mirror image rule?
no (but recall, Art. II doesn’t apply to real estate, services, etc. – mirror image rule still applies there)
Under UCC Art. II, when an offer for purchase or sale of goods is accepted with additional terms, is the acceptance valid?
yes
Under UCC Art. II, when any party is a nonmerchant, what is the impact of additional or different terms?
mere proposals–terms of the offer govern
Under UCC Art. II, when both parties are merchants, are ADDITIONAL terms accepted?
usually, unless:
- they materially offer original terms
- offer expressly limits acceptance to its terms
- offeror already objected to terms or does so within a reasonable time
Under UCC Art. II, when both parties are merchants, are DIFFERENT terms accepted?
authorities split (some follow knockout rule, some treat different terms as additional terms)
how to construe acceptance made expressly conditional on the acceptance of new terms?
rejection
what if a contract is not formed by parties’ communications, but they begin to perform as if they formed a contract?
formation!
mailbox rule
acceptance by mail creates a contract at the moment of dispatch, provided the mail is properly addressed and stamped
mailbox rule exceptions
offer stipulates acceptance not effective until received
option contact involved
offeree sends rejection then acceptance (whichever ARRIVES first is effective)
does mailbox rule apply to rejection or revocation?
no; the rule applies only to acceptance
Per UCC, when is an auction sale complete?
When the auctioneer so announces by the fall of the hammer
consideration elements
bargained for exchange
of legal value (benefit to promisor/detriment to promisee)
does past or moral action as consideration constitute a bargain?
no
can a preexisting legal duty constitute consideration?
no, unless:
- new or diff consideration is promised
- promise is to ratify a voidable obligation
- preexisting duty is owed to a third person
- honest dispute per duty
- unforeseen circumstances sufficient to discharge
may a promise to refrain from suing on a claim constitute consideration?
yes, if the claim is valid or the claimant believed in good faith that the claim was valid
when can a contract be voidable on grounds of mutual mistake?
BOTH parties mistaken about existing facts re:
- a basic assumption
- mistake has material effect on the exchange
- party seeking avoidance did not assume the risk of the mistake
who can void a contract on grounds of mutual mistake?
the adversely affected party
fraud in the inducement and recourse
party induces another into K by fraudulent misrepresentation; K voidable by innocent party is she justifiably relied on the misrepresentation
material misrepresentation and recourse
innocent party justifiably relied on misrepresentation (fraudulent or not) and the point was material. Voidable.
must fraudulent misrepresentation by spoken or written?
no; can be inferred from conduct. (concealing a fact, frustrating investigation of a fact, etc.)
when can an innocent party take action against misrepresentation?
immediately–doesn’t need to sue on the K; can affirmatively act in equity to rescind the agreement and pursue all breach of K remedies
what if there’s no consideration?
there’s no K
are contracts induced by duress or undue influence void?
no, but voidable.
surety promise
promise to pay another’s debt
statute of frauds requires
certain agreements must be evidenced by a writing signed by the party sought to be bound
SoF writing requirement
one or more writings that reasonably identify: K subject K between parties essential terms (don't forget signature!)
could a memo written on a napkin satisfy SoF?
yes
SoF signature requirement
any mark or symbol with intent to authenticate
Per SoF, can signature be printed or typed?
yes
Per UCC, bay party’s initials or letterhead suffice for SoF signature?
yes
Must both parties sign to satisfy SoF?
No, only the party to be sued
In a suit by the buyer against the seller, an otherwise sufficient writing signed by seller but not the buyer satisfies SoF.
Agreements covered by SoF
MYLEGS marriage (within one) year land executor (or admin) goods (for $500 or more) surety
Per Sof, what is the impact of a party admitting in pleadings or testimony that there is an agreement?
Treated as though the party signed a writing.
Per Sof, goods valued at $500 or more for which contracts are enforceable without writing
specially-manufactured goods
admissions in pleadings or court
payment or delivery of goods (but K not enforceable beyond quantity of goods accepted/paid for!)
Mnemonic for signed writing by party to be charged not required for goods valued at $500 or more
SWAP specially made goods written confirmation by merchant admission in court performance
What remedies are available is a contract violates the SoF?
sue for reasonable value of service of part performance rendered, or the restitution of any other benefit conferred
Unconscionability is determined by circumstances as they existed ____.
at the time of contract formation
The concept of unconscionability permits a court to ___.
refuse to enforce a provision or an entire contract
When is a suretyship promise outside the SoF?
When made for the promisemaker’s own gain.
(Homeowner promises to pay contractor’s debt to building supplier if contractor doesn’t pay, so contractor can obtain supplies to work on homeowner’s house).
If contract provisions appear inconsistent, do written or typed provisions prevail?
written
Against whom are ambiguous provisions construed?
Against the party preparing the contract
Rank of weighting indicators when rules of construction conflict:
express terms
course of performance
course of dealing
trade usage
basic contract duty at common law versus UCC Art. II
common law: substantial performance
UCC: perfect tender
noncarrier case
sale in which it appears parties did not intend that the goods be moved by carrier
when is payment due for carrier and noncarrier cases?
carrier: due when shipped
noncarrier: due when delivered
implications of failure of promise v. failure of condition
failure of promise: breach (gives rise to liability)
failure of condition: relieves party of obligation to perform
condition precedent
must occur before performance is due
condition concurrent
condition to occur at the same time
condition subsequent
condition cuts off already existing duty
Agreement to pay “$10,000 if house is sold by April 1.”
What type of condition?
condition precedent
Agreement to pay “10,000 for Blackacre. Money and deed exchanged in same transaction.”
What type of condition?
condition concurrent
Agreement to buy Blackacre for $100,000 unless zoning is changed. If zoning is changed, no duty to pay $100,000 or transfer deed.
What type of condition?
condition subsequent
Does the reasonable person standard apply if the contract involves personal taste or personal judgment? (portraits, dental work, etc).
Not if the contract included a condition of satisfaction.
supervening illegality
subject of contract became illegal due to subsequently enacted law
may impossibility arise before a contract was formed?
no
if a contract is discharged for impossibility, how my parties recover goods already delivered, payment already made, etc.?
suit for recision
impact of temporary impossibility
suspends duties; does not discharge
is a contract discharged after death of the party who was to perform services?
not if the services can be delegated (UNLESS unique service like a famous artist, etc.)
elements for discharge by frustration
supervening act
not reasonably foreseen
contract purpose completely/almost completely destroyed
both parties realized purpose at formation
may a contract be mutually rescinded if the rights of a third party have already vested?
no
impact of minor breach v. material breach
minor breach: aggrieved party may recover damages but must still perform
material breach: aggrieved party need not perform
Does UCC Art. II follow common law of substantial performance?
no
UCC Art. II perfect tender rule
If goods or their delivery fail to conform to the contract in any way, buyer generally may reject all, accept all, or accept any portion fo the commercial units and reject the rest
exceptions to perfect tender rule
installment contracts (then substantial performance applies, even under UCC)
seller’s right to cure
What if buyer rejects defective goods and seller, giving reasonable notice of intent to cure, makes new tender of conforming goods?
buyer must accept
What if buyer rejects defective goods that seller reasonably believed were acceptable?
On reasonable notice to buyer, seller may take reasonable time BEYOND contract deadline to produce conforming tender
Per UCC Art. II, can a defective shipment in an installment contract be rejected?
Not if the defect can be cured.
benefit of the bargain damages
sufficient money to purchase substitute performance
when are buyer and seller damages measured?
buyer’s: time she learns of breach
seller’s: time for delivery
Standard UCC SoL
four years from breach (can be shortened, but no shorter than one year from breach)
Does the mailbox rule apply when an offer states that acceptance will not be effective until received?
No.
Does the mailbox rule apply when the offeree sends a rejection followed by acceptance?
No; whichever is received first controls.
Per UCC, does a merchant have to sell goods of the kind?
No. Almost anyone in business who has knowledge of certain business practices is considered a merchant in that business.
For UCC purposes, a professional pianist is a merchant in the piano selling business.
When does an implied-in-fact contract arise?
When assent is manifested by conduct, as opposed to assent by oral or written language.
when may a condition imply a promise?
when the condition’s occurrence is w/in the benefactor’s control: that party impliedly promises a good-faith effort to make the condition happen
do courts prefer promise or condition?
promise, because it supports the contract (condition may release)
where common law and UCC Art. II differ on sale of goods, what prevails?
UCC Art. II
merchant’s firm offer
Per UCC Art. II: if a merchant makes a signed, written promise to keep an offer open, it will not fail for lack of consideration during the time stated, or a reasonable time if none stated (up to three months)
test for determining mere inquiry
whether a reasonable person would believe the original offer was rejected
when is rejection effective?
when received by the offeror
Does the mailbox rule apply when the offeree sends acceptance followed by rejection?
Yes (though if offeror receives rejection first and relies on it to his detriment, promissory estoppel can block contract enforcement)
Statute of Frauds exceptions
judicial admission (party admits to K in pleadings or testimony)
part performance (2 of pay/possess/improve)
estoppel
What is the UCC’s time limit on the irrevocability of a merchant’s firm offer?
three months
Can a promise not to sue over a conflict be valid consideration, even if ultimately the premise of the threatened suit turns out to be untrue?
Yes. The person threatened with suit had the right to investigate before agreeing.
Must the modification of a contract for services be supported by consideration?
Yes.
Per the UCC, what happens if a firm offer is specified for beyond three months?
Rather than invalidate, the firm offer will stand; but it will only last for the three-month maximum.
Under the UCC, what if there is no consideration for an offer by a merchant to buy or sell goods in a signed writing, by its terms, gives assurances that it will be held open?
The offer is not revocable for lack of consideration during the time stated (not to exceed three months).
Under the UCC, if an offer by a merchant to buy or sell goods includes a term assuring that the offer will be held open via a form supplied by the offeree, what else must occur for the option to be valid?
The form supplied by the offeree must be separately signed by the offeror.
Can an option contract be prematurely ended by the offer?
No.
If a promisor fails to perform under a contract, a donee third-party beneficiary whose rights have vested can sue whom, and on what grounds?
The promisor, to enforce the contract.
Absent detrimental reliance, a donee beneficiary cannot sue the promisee because generally there is no right to sue for nondelivery of a gift.
Per the UCC, regardless an FOB agreement for passing title, when may a seller refuse to deliver except for cash?
When the buyer becomes insolvent.
UCC remedies when buyer refuses to accept conforming goods:
Seller may recover incidental damages PLUS:
- diff in market price and contract price
- diff in contract price and resale price
- lost profits (diff in contract price and at-cost value, if merchant could’ve made additional sales – a la car dealers)
When a builder in construction breaches and doesn’t complete, what may the builder recover?
Costs of substantial performance less whatever the customer had to pay to have someone else complete the work.
When will a penalty provision be enforced?
When it’s construed as a liquidated damages provision.
When can a builder who breaches a construction contract part of the way through construction recover the FULL performance price less the cost of substitute completion?
When substitute builders were readily available to the customer.
May a party seek specific performance when a legal remedy is adequate?
No
May a partial integration be contradicted?
No; only supplemented by evidence of additional consistent terms.
Per UCC, in a deal between merchants, when does it not matter that the party to be bound didn’t sign something?
If the other party confirms the deal in writing and the party to be bound doesn’t object within 10 days.
Can minors be held liable for restitution regarding benefits they received from contracts they made for necessities?
Yes.
If a 17-year old begins an installment contract and continues making payments after turning 18, has he affirmed the contract such that it is enforceable against him?
Yes.
