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Select Topics Part 1 > Contracts > Flashcards

Contracts Flashcards

1
Q

What law applies

A

The common law of Contract applies to all contracts, other than the sale of goods, to which the UCC applies.

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2
Q

Goods

A

Items movable at the time of identification to contract

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3
Q

Dominant Purpose

A

To determine which law applies when a contract involves both goods and services, consider the price and nature of the contract.

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4
Q

Merchant

A

Buyer or seller in goods of the kind

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5
Q

Checklist

A
  1. Formation
  2. Defenses to Formation
  3. Defenses to Enforcement
  4. Third Party Beneficiaries and Assignees
  5. Construction
  6. Conditions
  7. Breach and Remedies
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6
Q

Bilateral Contract

A

A promise for a promise

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7
Q

Unilateral Contracts

A

Requires acceptance ONLY by performance (offer for a reward)

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8
Q

Offer

A
  1. Promise, undertaking, or commitment to enter into a contract;
  2. with the essential terms certain and definite; and
  3. communication of the promise and the terms to the offeree
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9
Q

Essential Terms

A
  1. Identity of the offeree
  2. work to be performed
  3. definite subject matter)
  4. price/quantity/time of payment or performance
    a. land conveyance - definite land and price terms
    b. sale of goods - definite quantity
    c. employment - duration/nature of work

UCC: Reasonable price and time will be supplied

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10
Q

Revocation

A

Terminates power to accept if it is communicated to the offeree before she accepts.

Can be revoked if communicated directly or indirectly if offeree receives correct information from a reliable source of acts that would indicate to a reasonable person that the offer is terminated

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11
Q

Mailbox Rule

A

Revocation only effective when it is received
Acceptance effective when dispatched unless offer stipulates otherwise.

If rejection then acceptance - whichever received first.

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12
Q

Limits to Power of Revocation

A
  1. Option contract - offeree gives consideration for offeror’s promise not to revoke for time stated or if no time stated, for a reasonable time (acceptance requires receipt); or
  2. Merchant’s Firm Offer - merchant under UCC executes offer in writing giving assurances that offer will be held open for a reasonable time, up to three months (no consideration necessary)
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13
Q

Acceptance Common Law

A

Mirror image rule (unqualified assent to the terms of the offer).

Assent must be communicated to offeror.

Offer may be accepted by any medium reasonable under the circumstances

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14
Q

Termination of Offer

A
  1. Rejection
  2. Revocation
  3. Lapse of Time
  4. By law
    a. illegality
    b. incapacity - death/insanity
    c. destruction of subject matter
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15
Q

Battle of the Forms Analysis

A
  1. Are the parties both MERCHANTS?
  2. Different terms or additional terms?
  3. If DIFFERENT, apply Knockout Rule.
  4. Apply ADDITIONAL terms analysis (for Merchants)
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16
Q

Acceptance UCC

A

Battle of the Forms
Different terms contradict each other and are knocked-out and replaced with UCC Gap Fillers or course of performance

Additional terms are merely proposals are are not effective unless Seller does something to accept the proposal

As between merchants, some courts view different terms as proposals for additions UNLESS:

a. offer expressly limits acceptance to the terms of the offer;
b. they materially alter the offer; or
c. notification of objection to the additional or different terms is given within a reasonable time after notice is received.

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17
Q

Consideration

A

Bargained for exchange that causes a legal detriment to the promisor and a benefit to the promisee.

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18
Q

Promissory Estoppel

A
  1. Promisor should reasonably expect to induce definite or substantial action or forbearance
  2. and such action or forbearance is in fact induced

**Consider when there is a lack of consideration or contract fails for some other reason.

If met, promise, not contract, will be enforced. Thus, no contract damage but only reliance damages.

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19
Q

Modification

A

Common law - requires mutual acceptance and additional consideration. “No oral modification” clauses invalid.

UCC - consideration not needed for good faith written modification of a contract and for firm offers in writing by merchants. “No oral modification” clauses valid.

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20
Q

Defenses to Enforcement

A
  1. Statute of Frauds

2. Unconscionability

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21
Q

Statute of Frauds Elements

A
  1. Party to be charged (party against whom contract is enforced)
  2. executes a writing
  3. referencing the terms
  4. and signed by party against whom it is to be enforced.

**Always discuss when an agreement is VERBAL

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22
Q

Issues subject to the Statute of Frauds

A
  1. Promise to pay debt of another;
  2. creation or conveyance of ANY interests in land;
  3. contract that cannot possibly be performed within one year
  4. sale of goods of $500 or more
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23
Q

Statute of Fraud Exceptions

A
  1. Admissions (evidentiary or judicial);
  2. Full performance if the contract is for the sale of goods or is for a service;
  3. Contract involves conveyance of real property and (any two of):
    a. Performance by payment in whole or part;
    b. possession; or
    c. valuable improvements made
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24
Q

Detrimental Reliance

A

Where promisor would reasonably expect promisee to rely on the promise and promisee does so rely

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25
Q

Unconscionable Contract

A

Pre-printed contract, one-sided at the time contract is formed; unequal bargaining power

Substantive Unconsionability
Procedural Unconscionability

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26
Q

Third Party Beneficiaries

A

Promisor - party promising to perform in favord of the third party beneficiary;

Promisee - party who the contract extracts the promise from the promisor to perform in favor of the third party beneficiary;

Third party beneficiary - party who receives payment from the promisor or an obligation of the promisor

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27
Q

Intended Beneficiary Factors

A
  1. Expressly designated or identifiable at the time of performance;
  2. Performance is to be made directly to them;
  3. They have rights under the contract;
  4. The relationship between third party and promisee suggests promise wishes the beneficiary to be benefited
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28
Q

Intended Beneficiary

A

Can enforce contract if their rights are vested. Cf. Incidental beneficiaries who cannot enforce the contract

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29
Q

Creditor Beneficiary

A

Promisee’s intent was to discharge an obligation to the third party

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30
Q

Donee Beneficiary

A

Promisee’s intent was to bestow a gift on the third party

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31
Q

Third Party Beneficiary Analysis

A
  1. Is the beneficiary intended or incidental?
  2. If an intended beneficiary, are they a creditor or donee beneficiary?
  3. Did the intended beneficiary’s rights vest?
32
Q

When does an Intended Beneficiary Rights Vest?

A

When beneficiary:

  1. manifests asset in a manner requested by the parties;
  2. brings suit to enforce the promise; or
  3. materially changes position in justifiable reliance on the promise
33
Q

What happens if promisor fails to perform?

A

Any third party beneficiary may sue promisor on the contract.

Promisor may raise any defenses against third party beneficiary that they could have raised against promisee.

Donee Third party beneficiary cannot sue promisee unless claiming detrimental reliance on the promise

Creditor beneficiary can always sue promisee on the underlying obligation that promisor’s performance was supposed to discharge.=

34
Q

Assignment of Rights Issues

A
  1. What rights may be assigned;
  2. What is required for an assignment;
  3. When is an assignment irrevocable.
35
Q

What rights may be assigned?

A

All contractual rights

EXCEPT those that would substantially change the obligor’s duty - Personal services contracts; requirement and output contracts (although may be okay under UCC); and where it would substantially alter obligor’s risk (assignment of insurance contracts if nature of covered property would change).

36
Q

Obligor

A

Party to a contract who DID NOT assign it to another

37
Q

What is required for an assignment?

A

Does not require writing EXCEPT wage assignments, interest in land, choses in action of more than $5K, and security interests

Rights assigned must be adequately described in the manifestation of assignment

Assignor must indicate intent to completely and immediately assign the interest to assignee

Consideration not required

38
Q

When is an assignment irrevocable?

A
  1. if it is given for consideration;
  2. If obligor has already performed;
  3. On delivery of a tangible claim;
  4. If it is an assignment of a chose in action IN WRITING;
  5. Estoppel - foreseeable detrimental reliance
39
Q

Delegation

A

A transfer of duties.

All duties may be delegated EXCEPT:

  1. Duties involving personal judgment and skill;
  2. Where there is a special trust in delegator (like an attorney);
  3. Delegation would create a change in obligee’s expectancy; or
  4. there is a contractual restriction
40
Q

Parol Evidence Rule

A

Where the parties express their agreement in writing, with the intent that it embody the full and final expression of their bargain, any other expressions, written or oral, made prior to the writing, and any oral expressions made contemporaneous with the writing, are inadmissible to vary the terms of the writing

**LOOK FOR EXECUTED WRITTEN AGREEMENT and prior to or contemporaneous oral discussions of other terms.

41
Q

Parol Evidence Rule Analysis

A
  1. Is the writing intended as a final expression? Must be signed by BOTH parties. (Consider if it is completely or partially integrated).
  2. Are there any prior or contemporaneous expression that vary the terms (PER may bar these).
  3. Are the prior or contemporaneous expressions outside the scope of the rule? Consider:
    a. Formation defects (fraud, duress, mistake, illegality)
    b. condition precedent to effectiveness of the agreement
    c. interpretation of an ambiguity; and
    d. showing true consideration

UCC: consistent additional terms are admissible unless there is a merger clause or if the Courts find that the parties intended the writing as a complete and exclusive statement of the terms of the agreement

42
Q

Promise v. Condition

A

Promise is a commitment to do or refrain from doing something.

Condition is an event, other than the passage of time which will extinguish, modify, limit, or create a duty to perform. A condition thus modifies a promise. Failure of a condition results in breach if the duty is not performed and is an excuse for non-performance if the condition does not occur.

43
Q

Conditions precedent to effectiveness

A

Must occur before the contract itself becomes effective. Failure of condition precedent constitutes and excuse from performance that avoids a breach.

44
Q

Conditions precedent to performance

A

Must occur before a duty to perform arises. Failure of condition precedent constitutes and excuse from performance that avoids a breach.

45
Q

Condition subsequent

A

Cuts off a duty to perform and constitutes an excuse from performance that avoids a breach

46
Q

Breach

A

When promisor has a duty as a result of either a promise or condition, and fails to perform it.

**Discuss MINOR or MATERIAL

47
Q

Minor Breach

A

One where obligee gains substantial benefit of the bargain despite defective performance, and their duty to perform is not discharged, although they may recover damages attributable to the breach

48
Q

Material Breach

A

Where non-breaching party does not gain the substantial benefit of the bargain, and has the right to all remedies, including refusing to pay any of the agreed-upon consideration

49
Q

Anticpatory Repudiation

A

When party to a contract clearly informs the other party before the due date of performance that they do not intend to perform, non-breaching party may immediately sue

50
Q

Demand for Assurances

A

UCC - when one party becomes aware of circumstances that increase the risk that the other party may not perform and these circumstances give rise to reasonable grounds for insecurity with respect to the other party’s performance, a party may demand assurances in writing that performance will be timely forthcoming.

Until assurances are received, party may suspend its own performance.

If proper assurances are not given within a reasonable time, party may treat the contract as repudiated.

51
Q

Implied Covenant of Good Faith and Fair Dealing

A

Requires that both parties do nothing to prevent performance by the other party.

Breached in employment contracts where employee is terminated for refusing to do an illegal act, or insurance contracts by bad faith denial of coverage.

52
Q

Discharge by Impossibility

A

Under an objective standard, the duties could not be performed by anyone.

Impossibility may arise after the contract has been entered into.

53
Q

Discharge by Impracticability

A

Requires that party to perform has encountered EXTREME and UNREASONABLE difficulty and/or expense and difficulty was UNANTICIPATED

54
Q

Discharge by Frustration of Purpose

A

If purpose of the contract becomes valueless by virtue of a supervening act not the fault of the party seeking discharge.

Requires:

  1. Supervening act;
  2. reasonably unforeseeable at the time of contract;
  3. purpose of contract has been completely or almost completely destroyed by the act; and
  4. both parties realized the purpose when making the contract.
55
Q

Discharge by Accord and Satisfaction

A

New contract in place of an old one.

Accord - agreement where one party to an existing contract agrees to accept, in lieu of the agreed-upon performance, some other, different performance. must be supported by consideration

Satisfaction - performance of the accord agreement, and discharges the original contract by the terms of the accord

56
Q

Waiver

A

Condition of a contract may be waived by words or conduct indicating that the party will not insist that the condition be met.

Generally one-time waiver will not waive the condition on future occurrences but a series of waivers could result in permanent waiver of a condition until expressly reinforced

57
Q

Expectancy Damages

A

Benefit of the bargain - put non-breaching party in the position they would have been had the contract been performed.

Measure of Damages: Difference between CONTRACT PRICE and MARKET PRICE

58
Q

Consequential Damages

A

Additional expenses or costs that are foreseeable at the time of the contract

59
Q

Reliance Damages

A

Out of pocket damages.

Generally applied when expectancy damages are difficult to calculate.

Appropriate when there is no valid contract but court is enforcing the promise under promissory estoppel or detrimental reliance doctrines

60
Q

Nominal Damages

A

No real harm

61
Q

Contract Damages

A

Must be:

  1. Causal;
  2. Foreseeable (as of the time of formation);
  3. Certain; and
  4. Unavoidable (mitigation)
62
Q

Mitigation

A

Plaintiff must take reasonable steps to mitigate loss.

63
Q

Liquidated Damages

A

Parties stipulate to a damage amount in their contract.

Common law - Upheld if damages are:

  1. Extremely difficult to ascertain and
  2. The stipulated amount is a reasonable forecast of the damages

(Look at proportionality between stipulated amount and the reasonable forecast of damages).

UCC modifies to measure either at time of contract or at breach.

Otherwise void as a penalty.

64
Q

UCC Buyer’s Remedies if goods or tender fails to conform to the contract

A

Buyer may:

  1. Accept all the goods;
  2. Reject all the goods; or
  3. Accept some and reject the rest.

Buyer must allow Seller time to tender conforming goods if seller offers to do so within the time of performance.

Rejection must be made within a reasonable time after delivery or tender through seasonable NOTICE.

Measure of Damages: Difference between CONTRACT PRICE and EITHER:

 a. MARKET PRICE; or
 b. Cost of REPLACEMENT (COVER) measured at the time of buyer learns of breach.

Measure of Damages for Breach of Warranty: Difference between VALUE AS DELIVERED and VALUE had they been AS WARRANTED plus INCIDENTAL and CONSEQUENTIAL damages

65
Q

Right to Remedy of Replevin

A
  1. Buyer has paid for some or all of the goods;
  2. Seller refuses to deliver; AND EITHER
  3. Seller becomes insolvent within 10 days of receiving buyer’s first payment; OR
  4. Goods were purchased for personal, family, or household purposes

Right to Replevin if goods have not been paid for when:

  1. Seller anticipatorily repudiates the contract;
  2. Goods are identified to the contract; and
  3. Buyer is unable to find substitute goods (cover)

**Does not require that title pass to Buyer.

66
Q

Equitable Remedies

A
  1. Specific Performance;
  2. Rescission; and
  3. Reformation
67
Q

Specific Performance

A
  1. When there is a valid and enforceable contract, definite and certain;
  2. Party has met all the conditions required;
  3. The legal remedy is inadequate; and
  4. Remedy is feasible.
68
Q

Provisional Remedies

A

TROs, then Preliminary Injunctions.

Plaintiff must show:

  1. reasonable likelihood of success on the merits;
  2. threat or irreparable harm if injunction is not granted; and
  3. balancing of the hardships in Plaintiff’s favor
69
Q

Rescission

A

Undoing of a contract. P effects a cancellation of the contract by prompt notice of rescission and tender back of the consideration or by lawsuit seeking rescission and tender back of consideration.

Grounds for rescission must have existed at the time of the making of the contract (making it voidable)

**Look for Mistake and Misrepresentation

70
Q

Mutual Mistake

A

Both parties may a mutual mistake as to a material fact that goes to the basis of the bargain.

Mistake must be as to the nature of or identity of the subject matter of the contract, not its quality.

71
Q

Unilateral Mistake

A

Grounds for rescission if non-mistaken party knows or should know of mistake and mistake is of a material fact.

Modern trend - grants rescission if mistake is basic and the mistaken party’s hardship outweighs detriment to the non-mistaken party’s expectations under the contract.

72
Q

Misrepresentation

A
  1. False representation;
  2. Intentionally, negligently, or innocently made;
  3. With intent to induce Defendant into relying on the representation;
  4. Which defendant in fact relies upon to their detriment.

Fraudulent and negligent misrepresentations allow for rescission and damages as remedy

73
Q

Reformation

A

Remedy by which courts alter or modify a written instrument such as a contract or deed to make it conform to the parties’ previous understanding.

Grounds for reformation include:

  1. Mutual mistake of fact regarding whether the instrument conformed to parties’ intentions (including scrivener’s errors),
  2. Unilateral mistakes;
  3. Mistake of law as to the legal meaning of terms, and
  4. Fraud
74
Q

Quasi-Contract

A

Legal theory imposing a legal obligation on the defendant who receives a benefit pursuant to an unenforceable contract or a wrongful act.

Where contract is unenforceable due to Statute of Frauds, incapacity, fraud, duress, or illegality, defendant who has received the benefit under the unenforceable contract may be forced to make some form of restitution to avoid his unjust enrichment.

75
Q

Volume Seller

A

Seller sells as many of an item as purchasers would purchase.

If Buyer repudiates, Measure of Damages: LOST PURCHASE on item, even if item is resold to another purchaser

76
Q

Incidental Damages

A

Expenses reasonably incurred in the shipping, care, and custody of the goods and, for the seller, in carrying and reselling the goods after breach.

Select Topics Part 1 (5 decks)

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