Contracts Flashcards
What does the formation of a valid common law contract require?
Offer, Acceptance, Consideration, and a lack of Defenses
What are the 2 mains sources of contract law?
Common law- real estate and services (derived from courts)
Uniform Commercial Code (UCC) - Sale of goods (derived from statutory law)
Bilateral and Unilateral contracts
Bilateral- 2 promises are made (promise to pay $ if you promise to do my audit)
Unilateral- 1 promise for an act (promise to pay 100 if you find my dog)
An offer has 3 things…
Definite terms- Price, nature, parties, performance
Intent- Objective intent, what a reasonable person believes
Communicated to offeree- constructively rec’v when available to EE
The following would terminate an offer:
Expiration- after reasonable time if none stated
Revocation- must be rec’v to be effective (direct or indirect); Option contract- consideration to hold open
Rejection- refusal by EE
Counteroffer- form of rejection (except if inquiry)
Law- death, insanity, destruction
* Offer can’t be assigned, but contract can
2 important rules of Acceptance
Mirror-image rule: accept all terms and conditions unequivocally and unqualified
Early acceptance rule: “mail box”rule- effective when transmitted (dispatched)
* Maker is the master of his offer
** Acceptance rec’v after an offer has terminated considered a counter-offer
Condition precedent
Acceptance, but events outside the contract must take place first acceptance effective
Consideration
Legal term for exchanging benefits and sacrifices “of value” in a contract; must be understood by both parties
What is past consideration
A promise in exchange for an act completed prior to the making of the promise; will not be enforced because the act was not done in exchange for the promise.
Pre-existing duty rule under common law contracts
When 2 parties attempt to modify a contract; only bonding if both parties provide new consideration (additional consideration not needed for sales contract modification)
Examples of voidable contracts
Duress- coerce into contract (economic in nature)
Undue influence- violate relationship of trust to enter contract
Misrep of a Material Fact- Innocent misrep (prove MILE; Fraud in the Inducement similar, but damages could be awarded) Fraudulent misrep (prove MILE, but error caused by fraud/scienter, intentional tort)
Mistake- mutual mistake of fact or unilateral mistake
Capacity- minor (can withdraw, if reach age during contract treated as ratified if they don’t disaffirm in reasonable time); Intoxication (at time of contract, can ratify once sober); Incompetent
Examples of void contracts
Extreme duress- physical threat
Fraud in the Execution- getting to sign agreement w/out realizing they are signing contract (sue for damages)
Illegal subject matter
Incompetent persons, death
Statute of Frauds
Common law requirement that contracts be in writing [GROSS]
sale of Goods worth 500+
Real estate sales
Over 1 year to perform (impossible to perform under a year)
Suretyship - guarantee debt of another
Statements in consideration of marriage
What are the additional exceptions for contracts involving the sale of goods
[SPAM]
Specifically manufactured (enforce by seller)
Partially performed (to extent of performance)
Admits in court
Merchant does not object w/ in 10 days (bound by their silence)
*Not in writing, but still enforceable
Parole Evidence Rule
Bars from court testimony any prior oral or written contracts that contradict the written contract
- Even if contract not required to have written (Statute of Frauds)
- Rule doesn’t bar sub oral modifications, evidence to prove fraud/duress/mistakes, subjects not addressed or ambiguous to written contract
Exceptions to rights and duties being assigned and delegated, respectively
Unless contract specifically prohibits
Duty is personal in nature
Materially alters rights/responsibilities of other party
Involves specialized personal services (assignor makes implied warranties: OR will not impair assignment, assigned right exists, OR has no knowledge that would impair assignment)
Assignor still liable unless other party to contract accepts EE in place of OR, called novation
2 types of intended beneficiaries
- Donee- rec benefits as gift, only enforce against party owing them benefits
- Creditor- rec benefits to settle a debt owed them can sue either party
Discharge of contract by agreement and performance
By performance (substantial performance- may not be discharged if used substandard materials) By agreement (Recission- parties restored; Accord/satisfaction- new agreement to replace original; Novation- One party accepts performance of TP in place of party obligated under original contract
How are contracts discharged
By performance
By agreement
By Operation of Law
By breach
Discharge of contract by Operation of Law and Breach
Operation of Law- impossibility; death/incapacity for personal service; bankruptcy; illegality
By Breach- violation of contract terms; anticipatory breach (one party lets other know performance will not occur, can cancel contract, can sue for compensatory damages, anticipatory repudiation allows party to either sue at once or wait until after performance is due when other party indicates performance will not occur)
Promissory estoppel
A party who promises to waive the statute of frauds and thereby induces the other party to reasonably rely on that promise to their detriment cannot later plead the statute
