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MBE > Contracts > Flashcards

Contracts Flashcards

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1
Q

Offer

A

Objective manifestation of a willingness to enter into an agreement that creates the power of acceptance in the offeree

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2
Q

Advertisements

A

Generally only an invitation to receive offers (but may qualify as an offer if sufficiently specific and limit who can accept or if associated with a stated reward)

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3
Q

Termination of offers

A
  1. Lapse of time (specific date or reasonable period of time if none stated)
  2. Death/mental incapacity of the offeror
  3. Destruction/illegality
  4. Revocation (even if it states it will be open for a specific amount of time)
  5. Revocation of general offers – only by notice given at least the same level of publicity as offer
  6. Rejection by offeree (including counteroffers)
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4
Q

Limitations on revocation

A
  1. Option K – offeree must generally given consideration for option to be enforceable
  2. Firm offer – offeror is merchant and assurances are made in an authenticated writing that offer will remain open
  3. Promissory estoppel – if offeree reasonably and detrimentally relies on offer
  4. Partial performance – for all Ks, offeree must have knowledge of offer when performance begins
    a. Unilateral K – offeror cannot revoke once offeree has begun performance
    b. Bilateral K – commencement of performance operates as promise to render complete performance
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5
Q

Acceptance

A

Objective manifestation by the offeree to be bound by the terms of the offer

  • Shipment of goods – request invites acceptance by either seller’s promise to ship or by prompt shipment of goods
  • Nonconforming goods shipped – both acceptance and a breach, unless seller notifies buyer that goods are an accommodation, which buyer may then accept or reject
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6
Q

Mailbox rule

A

Acceptance is effective when sent, unless offer provides otherwise

  • Acceptance will control even if offeror receives rejection first (but if offeror detrimentally relies on rejection then offeree estopped from enforcing K)
  • Rule does not apply if acceptance follows rejection
  • Rule does not apply to an irrevocable offer
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7
Q

Notice of acceptance

A

Unilateral K – not required to give notice after completing performance unless offeror wouldn’t learn of performance or offeror requires it

Bilateral K – offeree must give notice of acceptance

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8
Q

Mirror-image rule (CL)

A

Acceptance must mirror the terms of the offer, so any change or addition to the terms acts as a rejection and a new counteroffer

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9
Q

UCC treatment of additional or different terms

A

One or both parties are not merchants – definite and seasonable expression of acceptance OK even if it contains new/different terms unless acceptance is conditioned upon assent to said terms

Both parties are merchants

  1. Battle of the forms – additional terms are automatically included in the K unless
    - Term materially alters original K;
    - Offer expressly limits acceptance to terms of offer; or
    - Offeror objects to new terms within reasonable time after notice of new terms is received
  2. Knock-out rule – different terms in offer/acceptance nullify each other and court uses Article 2 gap-filling provisions to fill holes in K
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10
Q

Consideration

A

Must be bargained-for legal detriment to the promisee

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11
Q

Pre-existing duty rule (CL)

A

Does not qualify as consideration unless promisor gives something in addition to what is owed or varies preexisting duty in some way

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12
Q

Modification

A

CL – must be supported by consideration

UCC – no consideration is necessary; only requires good faith

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13
Q

Accord and satisfaction

A

Generally, consideration is required for accord to be valid

Satisfaction – performance of accord agreement; discharges both original K and accord K

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14
Q

Illusory promise

A

Not legally binding because it is vague or promisor can choose whether or not to honor it

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15
Q

Promises binding without consideration

A
  1. Pay a debt barred by SOL
  2. Material benefit rule – when a party performs an unrequested service for another party, performing party can enforce promise of payment for material benefits received to the extent necessary to prevent injustice
  3. Promissory estoppel – promise is binding if
    - Promisor should reasonably expect it to induce action on the part of the promisee,
    - Promise does induce such action, and
    - Injustice only avoided by enforcement of promise
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16
Q

Mistake

A

Mutual – both parties mistaken as to an essential element; K generally voidable by adversely affected party if:

  • Mistake existed when K was formed,
  • Mistake relates to basic assumption of K,
  • Mistake has material impact on transaction, and
  • Adversely affected party did not assume the risk

Unilateral – elements of mutual mistake +

  • Mistake would made K unconscionable, or
  • Non-mistaken party caused the mistaken, failed to disclose the mistake, or knew or should have known the other party was mistaken
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17
Q

Misunderstanding

A

Each party attaches different meanings to same terms; must show that

  • Parties use material term that is open to two or more reasonable interpretations;
  • Each side attaches different meaning to term; and
  • Neither party knows, or should know, of the confusion
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18
Q

Misrepresentation

A

Statement at the time of the K that is not true

Fraudulent misrepresentation – requires proof that

  • Misrepresentation is fraudulent,
  • Misrepresentation induced assent to K, and
  • Justifiable reliance on misrepresentation by adversely affected party

Non-fraudulent misrepresentation – same elements except that, instead of fraudulent, misrepresentation is material

If misrepresentation is cured, K will no longer be voidable

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19
Q

Duress

A

Improper threat that deprives a party from making a meaningful choice

  • Economic duress: when a party makes threats to induce another party to K (or modify a K)
  • Undue influence: when a party puts very intense sales pressure on another party who seems weak minded or susceptible to high-pressure tactics
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20
Q

Capacity to K

A
  • Infancy – voidable by infant but not by adult
  • Mental illness – K is void for one who is adjudicated mentally incompetent but only voidable if there has been no adjudication
  • Intoxication – K is voidable by intoxicated party if she was unable to understand nature/consequences of K and other party knew of intoxication
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21
Q

Illegality

A

K is unenforceable if consideration/performance under K is illegal

22
Q

Unconscionable

A

K is unconscionable when it is so unfair to one party that no reasonable person in the position of the parties would agree to it

Two types

  • Procedural – defect in the bargaining process (e.g., unequal bargaining power)
  • Substantive – term that is just a rip off
23
Q

Public policy

A

K may be unenforceable if it violates significant public policy

24
Q

Implied-in-fact K

A

Conduct, not words, indicates assent or agreement

25
Q

Quasi K

A

Plaintiff confers benefit on defendant and plaintiff has reasonable expectation of compensation and court implies K to prevent unjust enrichment

26
Q

Express warranty

A

Any promise, affirmation, description, or sample that is part of the basis of the bargain, unless it is merely the seller’s opinion

27
Q

Implied warranty of merchantability

A
  • Implied whenever a seller is a merchant; goods must be fit for their ordinary purpose
  • Can be disclaimed if use conspicuous language
28
Q

Implied warranty of fitness for particular purpose

A
  • Implied whenever seller has reason to know buyer has particular use for goods and buyer is relying on seller’s skill to select the goods
  • Can be disclaimed if use conspicuous language
29
Q

Impracticability

A
  • Unforeseeable event has occurred,
  • Nonoccurrence of event was basic assumption on which K was made, and
  • Party seeking discharge is not fault

Defense available if

  • Performance becomes illegal after K is made,
  • Specific subject matter of K is destroyed, or
  • Performance becomes impracticable
30
Q

Frustration of purpose

A

Unexpected events arise that destroy one party’s purpose in entering into K, even if performance of K not rendered impossible

31
Q

Intended beneficiary

A

One to whom the promisee wishes to satisfy an obligation or otherwise benefit by the promised performance

32
Q

Incidental beneficiary

A

One who benefits from a K even though there is no contractual intent to benefit that person

33
Q

Vesting of beneficiary’s rights

A

Rights of intended beneficiary vest when beneficiary

  • Detrimentally relies on rights created,
  • Manifests assent to K at one of the party’s request, or
  • Files lawsuit to enforce K
34
Q

Assignment of rights

A

Not allowed when it materially increases duty or risk of obligor or materially reduces obligor’s chance of obtaining performance

  • Assignee takes all of the rights of assignor but takes subject to any defenses that could be raised against assignor
35
Q

Delegation of duties

A

Generally allowed, except when other party to K has substantial interest in specific individual’s performance

  • Delegator is not released from L, so he is still L if delegatee doesn’t perform
36
Q

Statute of Frauds

A

Writing required – memorandum must

  1. Be in writing
  2. Be signed by the party to be charged
  3. Contain the essential elements of the deal

Types of Ks within the SoF

  • Marriage (in consideration of)
  • Suretyship
  • One year
  • UCC (indicate K has been made, identify parties, contain quantity term, and be signed by party to be charged)
  • Real property
37
Q

Parol evidence

A

Prevents introduction of prior extrinsic evidence that contradicts terms of written K

Integration – total (complete expression) vs. partial (partial expression)

  • CL – assumes K is total integration
  • Second Restatement – if term would naturally be omitted, then term can be introduced as long as not contradictory
  • UCC – assumes K is partial integration and allows almost any outside terms

Inapplicable when

  1. Raising defense to formation
  2. Raising defense to enforcement
  3. Proving condition precedent to existence of K
  4. Interpreting/clarifying any ambiguity in K
  5. UCC – supplementing even apparently unambiguous terms by evidence of trade usage or course of dealing
38
Q

Condition

A

Future event that must take place before rights or obligations are created, destroyed, or enlarged

  • Failure of obligation relieves party of obligation to perform
39
Q

Substantial performance (CL) – implied or constructive condition of exchange

A

A party who substantially complies with the condition can trigger the other party’s obligation to perform

40
Q

Performance (UCC)

A

Perfect tender rule – substantial performance insufficient (perfect goods + perfect delivery)

Risk of loss issue

  • If dealt for with in K, then K will control;
  • If party has breached, then breaching party bears the loss;
  • If shipment K, then buyer bears the loss; or if destination K, then seller bears the loss;
  • If seller is merchant, then risk stays with seller until buyer receives goods; if not, risk moves to buyer when seller tenders goods
41
Q

Shipment K

A

Seller must delivery goods to carrier, arrange for their shipment, and notify the buyer (e.g., “F.O.B.’s seller’s place of business”)

42
Q

Destination K

A

Seller must deliver goods to the place specified in K and tender them there by holding them at the buyer’s disposition (e.g., “F.O.B. buyer’s place of business”)

43
Q

Installment Ks

A

Goods delivered in multiple shipments, each to be separately accepted

  • Buyer can only reject if nonconformity substantially impairs value to buyer and cannot be cured
44
Q

Anticipatory repudiation

A

When other party clearly and unequivocally says that he is not going to perform on K before performance is due

Two options

  1. Treat repudiation as a breach and immediately sue for damages
    - BUT, if performance is complete and you are only waiting for payment, then you cannot sue early
  2. Ignore repudiation, demand performance, and see what happens
  • Under UCC, reasonable grounds for insecurity about other side’s performance allows you to demand adequate assurance of performance; if questionable party fails to respond within 30 days, then you can treat this as repudiation
  • Party can retract its repudiation as long as other side has not commenced a lawsuit for breach or acted in reliance on the repudiation (by materially changing its position)
45
Q

Compensatory damages

A

Meant to compensate nonbreaching party for actual economic losses and put nonbreaching party in as good a position as performance would have done, plus consequential and incidental damages, less possible mitigation of damages

46
Q

Doctrine of mitigation

A

Breached-against party must take reasonable steps to reduce damages from breach

47
Q

Reliance damages

A

Non-breaching party incurs out-of-pocket expenses in reasonable reliance upon promise that other party would perform

  • Goal is to the put party in same economic position that it would be in if K had never been created
48
Q

Restitution damages

A

Seeks to restore to party benefit conferred on other party

  • Goal is to give plaintiff amount equal to economic benefit that plaintiff conferred on defendant when defendant is unjustly enriched by plaintiff
49
Q

Liquidated damages

A

Damages stipulated to by the parties to the K as a reasonable estimation of actual damages to be recovered in the event of a breach

  • Enforceable if the stipulated amount was reasonable at time of K and
  • Actual damages would be uncertain in amount and difficult to prove
50
Q

Specific performance

A
  • Valid K
  • Inadequate legal remedies
  • Enforcement is feasible/fair
  • Mutuality of performance
  • Lack of defenses

Presumptively available for real estate transactions but not personal service Ks

51
Q

Nonconforming tender – right to cure

A

Seller has right to cure defective tender if time of performance under K has not yet elapsed or seller had reasonable groups to believe that buyer would accept despite nonconformity

52
Q

Right to reclaim goods

A

Seller has the right to reclaim goods from insolvent buyer if he makes a demand within 10 days after buyer receives goods

MBE (8 decks)

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