Contracts Flashcards
Learn contracts
1
Q
Battle of forms: two merchants, offeree responds and adds new terms, including clause disclaiming warranties. Offeror does not respond. What terms are in the contract?
A
All the added terms are part of the contract, EXCEPT for the disclaimer of warranty.
In BOF, additional terms will be part of the agreement unless they materially change the offer. Material changes include changing a party’s risks or remedies. A disclaimer of warranties changes a party’s risk or remedies. The clause that materially changes an offer will not automatically be included in the agreement. It must be specifically assented to.
2
Q
When mailing correspondence re: an option contract, when is acceptance effective?
A
When the acceptance is received by the offeror. The normal mailbox rule does not apply to option contracts.
3
Q
When offers, revocations, acceptances effective by mail?
A
For non-option contracts, all correspondence is effective when received by the other party EXCEPT acceptances, which are effective when mailed (mailbox).
To accept an option contract, the acceptance is effective when received by the offeror.
4
Q
Definition merchant
A
A merchant is one who deals with the goods in the contract, or who holds himself out as having special knowledge or skill.
5
Q
Definition offer
A
An offer is (1) an expression of willingness to enter into a contract, (2) with certain and definite terms, and (3) communicated to the offeree.
Manifestation of assent is judged by an objective standard of whether a reasonable person would have understood the conduct to manifest assent.
6
Q
Definition acceptance
A
An acceptance is a manifestation of assent to the terms of an offer. Acceptance must be communicated to the offeror in any reasonable manner.
Manifestation of assent is judged by an objective standard of whether a reasonable person would have understood the conduct to manifest assent.
7
Q
Definition consideration
A
Consideration is a bargained-for exchange involving legal value. An agreement is not enforceable unless there is consideration on both sides.
8
Q
Promissory estoppel
A
A promise is enforceable without consideration (1) if necessary to avoid injustice, (2) the promisor could reasonably expect to induce the promisee’s detrimental reliance on the promise, and (3) the promisee did in fact detrimentally rely on the promise.
The promisee is entitled to RELIANCE damages.
9
Q
Statute of Frauds definition, what contracts are within it, and how is the Statute of Frauds satisfied?
When is a writing NOT required?
When is the SOF not applicable even though it normally would apply?
A
To be enforceable, agreements within the Statute of Frauds must be evidenced by a writing, with essential terms of agreement, signed by the party against whom enforcement is sought. “Signature” and “writing” are liberally construed. Signature can be letterhead, and writing can mean multiple writings.
Sometimes writing not required: (1) specially manufactured goods, (2) admissions in court/pleadings, (3) partial performance/payment/delivery.
UCC’s version of Statute of Frauds, requires only a signed writing indicating quantity.
MY LEGS = Marriage, (more than one) Year, (interests in) Land, Executor (of estate), Goods over $500, Suretyship
Sometimes situations that WOULD be within SOF are NOT: (1) land sale where any 2 of 3 are present: (a) payment for the land, (b) possession of the land, (c) improvements to the land. (2) sale of goods that have been paid for, or accepted, or specially manufactured. (3) service contract that has been fully performed.
10
Q
Definition breach
A
If a party is under an absolute duty to perform and fails to perform in accordance with the contract, then the contract is breached.
Common law requires a breach to be “material.” Material means the party did not receive a substantial benefit of the bargain.
UCC does not require a breach to be material.
11
Q
What may an obligee do when an obligor breaches agreement?
A
If only MINOR breach, then obligee must still perform but may sue for damages.
If breach is MATERIAL, then obligee may suspend performance and immediately sue for damages. A breach is material if the obligee fails to receive a substantial benefit of the bargain.
12
Q
Effect of anticipatory repudiation
A
If an obligor communicates an anticipatory repudiation, then obligee:
(1) May sue either immediately or at end of performance period
(2) May suspend performance
13
Q
When can an anticipatory repudiation be retracted?
A
An anticipatory repudiation may be retracted before next performance is due unless the other party has (1) somehow indicated she considers repudiation final, or (2) materially changed her position in reliance on the repudiation.
14
Q
Effect of prospective inability or unwillingness to perform
A
When obligor manifests some prospective inability or unwillingness to perform, the obligee may suspend performance and seek adequate assurances that the obligor can still perform.
If assurances don’t come after a reasonable time, the innocent party is excused and may treat it as a repudiation.
15
Q
Definition unilateral contract
A
Offeror-promisor requests performance rather than a promise, and a contract is formed at the completion of performance. Once the offeree-promisee begins performance, the offer is irrevocable and the offeree-promisee is allowed a reasonable amount of time to complete performance.
Note: mere preparations are different from beginning performance.
16
Q
Definition void contract
A
A contract is “void” when it is totally without any legal effect from the beginning, and hence cannot be enforced by either party.
17
Q
Definition voidable contract
A
A voidable contract is one where either party may elect to avoid by raising a defense that makes the contract voidable (e.g., mental illness or infancy).
18
Q
Definition unenforceable contract
A
A contract is unenforceable when it would otherwise be valid but there’s a defense other than contract formation (e.g., Statute of Frauds).
19
Q
Requirements of definite terms for offer
A
For real estate: description of land + price
For sale of goods: quantity term only
20
Q
Requirements contracts versus output contracts
A
Requirements contract: buyer promises to buy from a seller all items it requires. Each order must be proportionate to what buyer ordered in the past.
Output contract: seller promises to sell to buyer all items it produced.
These are considered sufficiently definite quantity for an offer.
21
Q
Revoking an offer
A
An offer may be revoked directly or indirectly.
Directly: “I revoke my offer”
Indirectly: The offeree receives (1) correct information, (2) from a reliable source, (3) of acts of the offeror that would indicate to a reasonable person that the offeror no longer wishes to make an offer.
22
Q
Option contract
A
Option contract allows an offer to remain open for specific period of time, during which the offer cannot be revoked. Must be supported by consideration.
Rejecting an offer supported by consideration does not terminate the offer; the offeree can change her mind within the time period. The offer remains open for the duration of the time period.
23
Q
Firm offer rule
A
(1) offer by merchant
(2) signed writing
(3) assures offer remains open for time specified.
NO CONSIDERATION NECESSARY. If time period not stated, “reasonable period of time” and in no case longer than 3 months.
But if there IS consideration, then the offer remains open for whatever time stated (even beyond 3 months).
24
Q
Detrimental reliance on an offer
A
When the offeror could reasonably expect that the offeree would rely to her detriment on the offer remaining open, and the offeree does so rely, then the offer is considered to remain open as an option contract for a reasonable length of time.
25
An offer to buy goods for shipment may be accepted by...
A promise to ship or actual shipment. If the shipment is for conforming goods, it's easy.
If the shipment (WITHOUT a promise) is for nonconforming goods, the offer is STILL accepted but it's also an immediate breach, UNLESS the seller notifies the buyer that the nonconforming goods are an accommodation. The buyer can accept or reject, and if the buyer rejects it is not a breach.
26
Battle of Forms requirements
Two merchants
The additional terms are automatically part of the offer unless they materially alter the original terms of the offer (e.g., changing a party's risk or the remedies available, which includes a disclaimer of warranties).
Different terms depend on jurisdiction, some treat different terms the same as additional terms. Other courts follow the knockout rule and knock the terms out.
27
Auction sale with reserve
An auction sale "with reserve" means the auctioneer may withdraw the goods at any time until he announces the completion of the sale.
This is the default for all auction sales, and the auctioneer must state the sale is "without reserve" to make the sale without reserve.
28
Preexisting legal duty and consideration
Promising to perform a preexisting legal duty is NOT adequate consideration. But some exceptions:
(1) the preexisting duty is owed to a third person other than the promisor
(2) there is an honest dispute as to the duty
(3) there are unforeseen circumstances that could discharge a party (like in the case of impracticability)
Contract modifications under the UCC do NOT need additional consideration.
29
List of defenses to contract formation
I Saw U Fuck the MAID
```
Incapacity
Statute of Frauds
Unconscionability
Fraud
Mistake of fact
Ambiguity
Illegality
Duress
```
30
Mutual mistake of fact defense to contract formation
A contract may be voidable if there is a MUTUAL mistake about existing facts that (1) concern a BASIC ASSUMPTION on which the contract was made, (2) the mistake has MATERIAL EFFECT on the contract, (3) the party seeking avoidance did NOT ASSUME RISK of the mistake.
31
Unilateral mistake of fact defense to contract formation
Default rule: if only one party is mistaken about a fact, there is still a contract.
But if the non-mistaken party took advantage of the mistaken party, the contract IS VOIDABLE. If (1) the non-mistaken party knew or had reason to know of the mistake of the other party and (2) the mistake was material and (3) the mistaken party did not assume the risk.
32
Misunderstanding re: ambiguous contract language defense to formation
If both parties knew of the ambiguity or if both parties were ignorant of the ambiguity, there is not contract unless the parties intended the same meaning
If one party knew the meaning but the other didn't, then there is a contract only according to the ignorant party's meaning.
33
Fraudulent misrepresentation and misrepresentation defenses to contract formation
If a party fraudulently induces another party into a contract (i.e., knowingly lies) and the other party justifiably relied on the fraudulent misrepresentation, the contract is VOIDABLE.
If (1) a party negligently induced another party into a contract (i.e., by not knowing if what they were saying was true or not) and (2) the other party justifiably relied on the misrepresentation, and (3) the misrepresentation was MATERIAL, then the contract is VOIDABLE. The representation MUST be material in this defense.
34
Duress defense to contract formation
Contracts induced by duress are VOIDABLE. Duress = assent secured by threat.
35
Undue influence defense to contract formation
Contracts induced by undue influence are VOIDABLE. Undue influence = (1) undue susceptibility to pressure by one party, and (2) excessive pressure by the other party. (e.g., a dominant and submissive relationship).
36
Situations where a contract would NORMALLY be within the SOF but are not.
Sometimes situations that WOULD be within SOF are NOT: (1) land sale where any 2 of 3 are present: (a) payment for the land, (b) possession of the land, (c) improvements to the land.
(2) sale of GOODS that have been paid for, or accepted, or specially manufactured.
(3) SERVICE contract that has been fully performed.
A modification where a contract, with the modification, would no longer be within the SOF.
37
Unconscionability defense to contract formation
Need procedural and substantive unconscionability.
38
Partial versus complete integration
Partial integration: The terms of the agreement as written cannot be changed, but NEW consistent terms can be ADDED by extrinsic evidence of other parts of the deal the parties didn't include in the writing. *UCC presumes all writings are partial integrations by default.
Complete integration: Cannot look to extrinsic evidence to change the terms of the agreement at all.
39
Parol evidence rule
Basic rule: When parties to a contract express their agreement in writing with the INTENT that it embody the final expression of their bargain, the writing is an integration. Any evidence of anything else related to the terms of the agreement (such as prior to the writing or contemporaneous with the writing) is INADMISSIBLE to vary the terms of the writing. But extrinsic evidence CAN show any SUBSEQUENT modifications that happened AFTER the writing.
Validity issues: But if instead of varying the terms of a writing a party is arguing the agreement is invalid and therefore never came into being, then the court can look to extrinsic evidence on these issues.
Interpretation issues: If there is an ambiguity in the agreement, court can look at extrinsic evidence to aid in interpretation. But ONLY IF there's an ambiguity.
40
Noncarrier case re: Delivery, risk of loss, payment
Contract for sale of goods where parties did not intend goods would be shipped.
If seller IS A MERCHANT, then risk of loss passes LATER, when buyer takes physical possession of the goods.
If seller IS NOT A MERCHANT, then risk of loss passes SOONER, upon tender of delivery.
IN BOTH cases, payment is due upon tender of delivery.
41
Carrier case re: Delivery and risk of loss
Two types: shipment contracts and destination contracts.
Shipment contract:
Parties contract for a carrier to deliver the items from seller to buyer. Seller must (1) make shipping arrangements, (2) make sure buyer has necessary documents, (3) notify buyer of shipment. Risk of loss passes to buyer when seller hands the goods to carrier. FOB indicates a shipment contract. If the goods don't conform and buyer rejects, then risk does NOT pass on to buyer. If buyer accepts but later rightfully rejects, then risk never passed on to buyer in the first place (remained on seller from beginning). Payment is due when the seller hands goods to CARRIER.
Destination contract: Parties contract for seller to deliver the goods himself. Risk of loss passes to buyer when goods are tendered to the buyer at the destination. Payment is due when goods reach destination.
42
Automatically implied warranties in sale of goods
Warranty of title, warranty of merchantability.
43
Warranty of fitness for a particular purpose
Any seller (whether merchant or not) has reason to know of a particular purpose, buyer in fact relies on seller to select the goods to fit that purpose.
44
Express warranties
Includes any statement of fact or promise that was a basis of the bargain. Buyer need not show he actually relied on it. Includes models or samples.
45
How to properly disclaim warranties of merchantability and fitness for a particular purpose
(1) implied warranty of merchantability can ONLY be disclaimed by CONSPICUOUSLY and explicitly mentioning merchantability. Conspicuous means the text looks different from that around it.
(2) disclaimer of warranty of fitness for a particular purpose can ONLY be disclaimed by CONSPICUOUS WRITING. Conspicuous means the text looks different from that around it.
(3) "As is," "with all faults," or similar language can properly disclaim warranty of merchantability and fitness for a particular purpose.
46
How to properly modify a common law contract
Traditionally, modification requires new consideration. But modern trend will allow modification without new consideration if: (1) the modification is fair and equitable and (2) due to circumstance that were unforeseen by both parties.
47
Promisor's satisfaction as condition precedent
When promisor's satisfaction with promisee's performance is a condition precedent for promisor's performance...
(1) if MECHANICAL FITNESS, utility, etc., then the condition is satisfied if a reasonable person would be satisfied by the performance.
(2) if contract involves PERSONAL TASTE or judgment, then the condition is satisfied only if the promisor is actually personally satisfied.
48
Test for "Divisible contract"
Three conditions must be satisfied:
(1) the performance of each party is divided into two or more parts.
(2) the number of parts is the same for each party.
(3) each part is considered equivalent to the part.
49
Definition of "installment contract"
A divisible contract for sale of goods where delivery is in several lots.
50
List of ways a contractual duty can be discharged
PIICSII FRAN
```
Performance (normal situation),
intervening illegality (the subject matter of the contract becomes illegal),
a condition subsequent,
impossibility,
impracticability,
frustration of purpose,
rescission,
accord and satisfaction,
novation.
```
51
Test for discharge by impossibility
If (1) the non-occurrence on an event was a BASIC assumption of both parties, and (2) neither party has assumed the RISK, and (3) a duty has become IMPOSSIBLE to perform, then the duty is discharged.
Impossible means objectively impossible, i.e., no one could do it.
52
Test for discharge by impracticability
A party's duty to perform is discharged if (1) an event's non-occurrence was a BASIC assumption of both parties, and (2) the party has encountered "extreme and unreasonable difficulty" and/or expense.
53
Test for discharge by frustration of purpose
There is (1) a supervening event the parties did NOT REASONABLY FORESEE when they made the contract, (2) the purpose of the contract has been COMPLETELY destroyed, (4) that purpose was UNDERSTOOD by both parties when they made the contract.
54
When and how can parties mutually rescind a contract?
Parties may mutually rescind a contract at any time, UNLESS there is a third-party beneficiary whose rights have vested.
Rescission is itself a contract, and the consideration is the giving up of the previous contractual rights.
Default rule: Oral rescission okay, even when the written contractual language says otherwise. Two exceptions:
(1) If the contract was within SOF and therefore must have been in writing, then the rescission must also be in writing
(2) If the contract was for goods under UCC + there was a written contract specifying only written rescission, then the rescission must be in writing.
55
Novation: definition and test
Definition: a NEW CONTRACT replaces one of the old parties with a new party. This discharges the old contract.
Test for valid novation: (1) the OLD contract was valid, (2) the NEW contract is valid, (3) all parties (including the new one) agree to the novation, and (4) the old contract is immediately extinguishment of old contractual duties between original parties.
56
Accord and satisfaction definition
Accord: an agreement where parties agree for a new substitute performance. Must be supported by consideration.
Satisfaction: the performance of the accord agreement.
Often comes up in debtor/creditor situations where both agree to pay less amount in satisfaction of original debt.
57
If debtor breaches accord agreement before satisfaction...
If debtor breaches accord agreement before satisfaction, creditor may sue on either the original agreement or the accord agreement.
58
If creditor breaches accord agreement before satisfaction...
[This would happen if the creditor sued on the original contract]
Then debtor can (1) raise the accord as an equitable defense, or, (2) if the creditor is successful in their lawsuit on the original contract, sue for damages for breach of the accord agreement.
59
Definition and effect of minor breach
Minor breach: the non-breaching party still receives a substantial benefit of the bargain. Does not relieve non-breaching party of duty to perform. Non-breaching party may sue for damages.
60
Definition and effect of material breach
Material breach: the non-breaching party does NOT get a substantial benefit of the bargain. Immediately relieves duty to perform and may sue for damages.
61
Effect of minor breach + anticipatory repudiation
Minor breach + anticipatory repudiation = non-breaching party can treat it as a material breach (immediately relieves duty to perform and may sue for damages).
62
Perfect tender rule and effects of non-conforming goods: normal contract versus installment contract
Perfect tender rule: if the goods fail to conform to the contract in any way, the buyer may reject all, accept all, or any proportion.
If installment contract: More like common law substantial performance doctrine. An installment can only be rejected if the nonconformity substantially impairs the value of that installment and CANNOT be cured.
Sending a non-conforming installment only constitutes a BREACH if that one non-conforming shipment substantially impairs the value of the ENTIRE contract.
63
Sale of goods, how does buyer "accept" the goods?
Acceptance of the goods can be shown in 3 ways:
(1) indicates to seller that she will keep them
(2) after reasonable time hasn't said anything
(3) does any act inconsistent with seller's ownership
64
If buyer rejects goods, what are buyers responsibilities?
Buyer must hold them with reasonable care and wait for instructions.
If seller doesn't give instructions after reasonable time, then buyer may ship them back, store them, or resell them for seller's account (and can recover expenses to do that + make a reasonable commission).
65
If buyer accepts goods, how can buyer later revoke acceptance?
Buyer may only revoke acceptance if (1) within reasonable time, (2) the goods don't spoil, (3) the goods have a defect that substantially impairs their value AND one of the following:
(a) buyer accepted with reasonable belief the defect would be cured,
(b) the defect was difficult to discover,
(c) seller assured that the goods conformed.
66
Seller's right to cure a shipment
Seller allowed to try and cure by (1) notifying buyer of attempt to cure, and (2) delivering conforming goods by original deadline for performance.
Seller allowed to go a little over original deadline if: the seller reasonably believed the original shipment conformed (e.g., from past dealings).
67
Situations where specific performance allowed
Sale of land, sale rare goods, sale of unique goods, enforcing a noncompete
68
Equitable defenses to specific performance remedy
Laches (prejudicial delay in bringing the suit), unclean hands
69
Requirements for valid non-compete agreement
Requires (1) the services are unique, (2) the covenant is reasonable, which means (a) legitimate interest, (b) reasonable geographic scope and duration, and (c) the agreement does not harm the public.
70
Right to demand assurances of ability to perform
If there are reasonable grounds for insecurity re: other party's ability to perform, party can demand IN WRITING adequate assurances.
Demand must be in writing!
Party may suspend his own performance until he receives the adequate assurances.
30-day window: if no assurances come within 30 days, party may consider the contract repudiated.
71
Expectation damages
Benefit of the bargain, put the party in the place he would have been in without the breach
72
Reliance damages
If expectation damages too speculative, then reliance damages put the party back in position as if contract had never happened.
Usually recover cost of performance and incidental damages.
73
Consequential damages
Usually refer to lost profits. Require that a reasonable person in the position of the breaching party would have foreseen the damages.
74
Liquidated damages
Requires (1) the damages be difficult to forecast, (2) the liquidated damages calculation is a reasonable forecast (i.e., not a penalty).
These can be recovered even if there are no actual damages.
75
Lost volume seller damages
A merchant is a "lost volume seller" if the seller can obtain all goods he can sell. Then can recover special additional damages for lost profits on the lost sale.
76
Damages in employer-employee contract when either breaches
If employer breaches: the employee can get full contract price, but employee has duty to mitigate, and damages may be reduced if employee does not mitigate (i.e., employee has to find comparable job with comparable pay).
If employee breaches: employer entitled to recover cost of replacing employee.
If employment is at-will, either can terminate at any time with no right to damages.
77
Damages in construction contract breached by owner versus builder
If OWNER breaches BEFORE construction finished: builder entitled to consequential damages (profits on the deal) + recovering any costs expended.
If OWNER breaches AFTER construction finished: builder entitled to full contract price + interest.
If BUILDER breaches: owner entitled to cost of completion (finding someone else to finish) + reasonable compensation for delay. Can be offset to avoid unjust enrichment.
78
SOL under UCC
4-year default maximum in all cases, 1-year default minimum in all cases. Parties may contract for different SOL between those limits if they want to.
79
Creditor beneficiary versus donee beneficiary
Creditor beneficiary: a person to whom a debt is owed by the promisee (most often in actual creditor/lending situations)
Donee beneficiary: a person whom the promisee intends to benefit gratuitously (LIKE A "DONATION"--donee/donation).
80
Intended beneficiary versus incidental beneficiary
Only INTENDED beneficiaries have contractual rights
Intended beneficiary: a beneficiary is intended if (1) named in the contract, OR (2) receives performance directly from the promisor, OR (3) has some relationship with the promisee that indicates an intent to benefit.
Incidental beneficiary: anything else.
81
If A contracts with B for B to provide some service to C, what are each of the parties called? Who can sue whom to enforce the promise?
A is the promisee, B is the promisor, C is the third-party beneficiary.
C (third-party beneficiary) can sue B. B can raise any defense could have raised against A.
If C is a CREDITOR beneficiary, C can sue A or B.
A can sue B.
82
When can a third-party beneficiary enforce her contractual rights?
When they "vest." Rights can vest in 3 ways: if the third-party beneficiary (1) ASSENTS, or (2) SUES, or (3) materially changes position in justifiable reliance on the promise.
83
What contractual rights may be assigned?
In general, all contractual rights can be assigned. Exception: if the right is for highly unique services.
No writing necessary. Does not NEED consideration, but whether or not there is consideration changes whether the assignment is revocable.
If consideration given (including just a promise to pay a preexisting debt), assignment IRREVOCABLE.
If no consideration given, assignment is generally revocable.
84
Re: mailbox rule and mistaken address that causes a delay in completing delivery of the letter
If you mistake the address, mailbox rule does not apply. So the acceptance is effective upon receipt.
85
Under mailbox rule, what if post office loses the letter? What if the letter was improperly addressed?
If post office loses it, mailbox rule still applies. Acceptance was effective when dispatched.
If mistaken address, mailbox rule does not apply. Acceptance is effective upon receipt.
86
Under requirements contract, what if buyer orders a a large amount disproportionate to all previous orders and seller cannot fulfill? Is seller liable for breach?
No. There is a proportionality principle.
87
Under parol evidence rule, is extrinsic evidence admissible to prove existence of condition precedent to existence of a contract?
Yes. This goes to attacking the existence of a contract in the first place, and parol evidence is always admissible to show that a contract was not created.
88
Accord and satisfaction to resolve a debt: when the amount is in dispute versus when the amount is not in dispute
If the amount IS in genuine dispute: then an offer payment for a lesser amount IS enforceable (because there is consideration: dropping a claim for payment). Note: can be just a check sent with clear notation that it's to satisfy the debt; whether other person actually reads it not relevant. Just whether it was clear enough for them to read it.
If the amount is NOT in genuine dispute: then an offer payment for a lesser amount is not enforceable because it lacks consideration.
89
SOF and suretyship: promises to pay that are made to the creditor versus made to the debtor
To be within the SOF, a promises to pay for the debt of another must be made to the CREDITOR. Then the SOF must be satisfied by a writing.
If the promise to pay the debt is made to the DEBTOR, this is not within the SOF.
90
In Battle of Forms, what terms will NOT automatically be added to the agreement?
Additional terms that MATERIALLY change the offer. Material changes include changing a party's risks or remedies. A disclaimer of warranties changes a party's risk or remedies. The clause that materially changes an offer will not automatically be included in the agreement. It must be specifically assented to.
91
If P succeeds on a promissory estoppel claim, what kind of damages can P get?
Only RELIANCE damages.
92
Situations where (1) Statute of Frauds would normally apply but does not versus (2) situations where the Statute of Frauds does apply but the "writing" requirement does not apply
Situations where SOF would normally apply but does not:
(1) Sale of land where 2 of 3 present: (a) possession, (b) payment (partial or complete), (c) improvements;
(2) sale of GOODS that have been paid for, or accepted, or specially manufactured;
(3) SERVICE contract that has been FULLY performed.
Situations where SOF does apply but writing not required: (1) SPECIALLY manufactured goods, (2) ADMISSIONS in court/pleadings, (3) PARTIAL performance/payment/delivery.
93
Define mere preparations
In a unilateral contract situation, the offeror requests complete performance itself, not a promise of performance. If an offeree begins to perform, the offer is irrevocable.
BUT if the offeree is making "mere preparations" before performance, and not actually yet performing, then the offer is still revocable.
94
How to directly revoke an offer versus indirectly
Directly: some direct language, "I revoke this offer."
Indirect revocation effective when the offeree learns of some action from a reliable source that is inconsistent with the offer remaining open.
95
If a buyer offers to buy, and the seller accepts by shipping (without a PROMISE to ship), and the seller sends non-conforming goods, what result?
The offer is STILL accepted but it's also an immediate breach, UNLESS the seller notifies the buyer that the nonconforming goods are an accommodation. The buyer can accept or reject, and if the buyer rejects it is not a breach.
96
To whom does the implied warranty of merchantability apply?
Only to MERCHANTS who deal in goods OF THAT KIND
97
Void versus voidable contracts
A void contract was unenforceable from the beginning.
A voidable contract is unenforceable at the election of a party.
98
Analyzing contract formation
Offer, acceptance, mutual assent, consideration, no defenses to contract formation ("I Saw U Fuck the MAID")
99
Basic inquiry re: definite terms of the contract
Whether the contract is capable of being enforced
100
A written communication is "received" at a business when
The communication arrives there, regardless of whether it was actually read.
101
When is a rejection of an offer effective?
When RECEIVED by the offeror
102
To accept an offer of a unilateral contract, the offeree MUST
Know about the offer. If he coincidentally "performs" but does not know of the offer, it does not operate as an acceptance.
103
In a unilateral contract, when must offeree give notice to the offeror about the performance?
Default rule: Only needed within a reasonable time after completion of performance. But NOT required if notice requirement was waived or the offeree's performance would normally come to offeror's attention anyway.
Notice is NOT required just for beginning performance.
104
Accepting an offer by performance in bilateral contract versus unilateral contract
In BILATERAL contract, beginning performance IS an acceptance.
In a UNILATERAL contract, beginning performance is NOT an acceptance--acceptance only happens when performance is complete.
105
In a bilateral contract, can silence be an acceptance?
Generally no, but if prior dealings or trade practices would say it is, then yes.
106
Elements of consideration
Two basic elements: (1) bargained for exchange, and (2) for legal value.
107
SOF Merchant's confirmatory memo rule
A memo sent by one merchant to another to confirm an oral agreement will bind both sellers and satisfy SOF (AS IF signed by both parties) if (1) the recipient knows or should know what the memo says, and (2) not objected to within 10 days.
108
A court will NOT enforce specific performance for ---?
Services
109
Can a court award specific performance for sale of rare or unique goods?
Yes
110
Can a court award specific performance for sale of rare or unique services?
No
111
If a breaching party sells a rare or unique item to a bona fide purchaser, can the non-breaching party get specific performance to get the item back?
No. A BFP will be shielded.
The non-breaching party will have to sue for damages.
112
When is an ad considered an offer?
An ad is generally NOT considered an offer but will be considered one if: it was sent in response to a specific inquiry.
113
Where an OWNER breaches AFTER construction starts but BEFORE completion of the home, builder can get what damages?
The profits on the contract + costs already expended
114
SOF and surety contracts: rule and exception
SOF: must be in writing
Exception: if the MAIN PURPOSE of the contract was to benefit the person making the promise, then it does NOT need to be in writing.
115
Modifications where one party changes performance (like price) and other does not change anything; and promissory estoppel
A common law contract modification requires consideration. The consideration must be new or different. If one party only does not change any performance as a result of the modification, then consideration has not been given and the modification is not enforceable.
Promissory estoppel is not available in this situation.
116
UCC: modifications: consideration and SOF
UCC does not require consideration.
SOF: look at the contract after the modification to see if would be within SOF, and if so, then SOF applies. If not, then the SOF does not apply.
117
Is parol evidence allowed to show contract modifications?
Yes
118
When contracts with minors are enforceable versus unenforceable
Enforceable at the option of the minor but not at the option of the adult.
BIG EXCEPTION: contracts for "necessities," e.g., food, health, etc. Those are enforceable against minors.
119
When do third-party beneficiary rights vest?
(1) learn + assent
(2) learn + rely
(3) learn + sue
120
When assignments are revocable versus irrevocable
Gratuitous assignments are revocable, exception when there's been reliance.
Assignments with consideration are irrevocable.
121
Is a writing required for an assignment?
No.
122
Is consideration necessary for an assignment
No, not necessary. But if there's no consideration then it is revocable at the option of the assignor (unless the assignee has relied).
123
A and B are in a contract and A and C are in a separate contract.
A assigns rights to C all of A's rights under A's contract with B.
Names:
A = ?
B = ?
C = ?
If B does not perform for C, and C sues B, what defenses can B assert?
```
A = assignor
B = obligor
C = assignee
```
B can assert only contract defenses that he could have raised against A related to the contract between A and B. B (obligor) CANNOT raise defenses that might exist between A and C's contract.
124
Does accord and satisfaction require consideration?
Yes and usually easily satisfied by having just a different form of consideration. Exception: no consideration necessary if the accord will benefit a third party.
125
Accord and satisfaction: if creditor breaches, what remedies available to debtor? If debtor breaches, what remedies available to creditor?
If creditor breaches (this means breaching the accord agreement by suing on the original contract): then the debtor may (1) raise the accord agreement as equitable defense, or (2) wait until the suit concludes and if he loses sue for damages under the accord agreement.
If debtor breaches: sue under either (1) the original agreement or (2) the accord agreement
126
What does a due date for performance usually indicate in a contract?
How can parties make the due date firm, such that not meeting it is a material breach?
Providing a date does not make time of the essence. If performance is rendered after, it is only a minor breach and the non-breaching party may sue for damages but is still under a duty to perform.
If there is a time is of the essence clause, then not meeting the deadline IS a material breach and the non-breaching party can sue for damages and is NOT under a duty to perform.
127
What are a seller's damages when the seller is a "lost volume seller"?
LOST PROFITS ON THE DEAL
128
When can a requirements contract be assigned?
Normally it cannot but can be if new party acts in good faith to keep the requirements the same.
129
Condition precedent versus condition subsequent
Condition precedent = initiates a duty to perform
Condition subsequent = cuts off duty to perform
130
Remedies: rescission versus reformation
Rescission = defects with contract formation such that no contract was created in the first place.
Reformation = a contract was created but did not conform to the parties' mutual intent.
131
Common law versus UCC: the parol evidence rule
Basically the same, but UCC treats a merger clause as conclusive of integration.
Common law:
- if partial integration, can admit consistent additional terms
- parol evidence can be admitted to explain ambiguous terms
UCC:
- if partial integration, can admit consistent additional terms
- parol evidence can be admitted to explain ambiguous evidence
132
Naturally omitted terms doctrine
Allows admission of evidence despite the parol evidence rule re: terms that would naturally be omitted from an agreement.
133
Effect of assigning "the contract" or "all my rights under the contract"
Will be construed as assigning rights AND delegating all duties
134
How can an obligee compel a delegate/delegatee to perform
The obligee can only compel the delegate/delegatee to perform if the delegate/delegatee assumed the duties to perform.
The obligee starts out as a third-party beneficiary and can only enforce the performance if the delegate/delegatee has assumed the duties to perform.
135
Priority of assignees for value versus gratuitous assignees
If two assignees for value, who takes priority?
Assignees for value will always take priority over gratuitous assignees, no matter the order the assignments happened.
If two assignees for value, the first assignee has priority unless the second assignee pays first and has no notice of the other
136
Ways to terminate a gratuitous assignment
Assignor death, bankruptcy, explicit or implicit revocation, subsequent assignment of the same right
137
Third-party beneficiary's right to assign re: before and after vesting
A third-party beneficiary can assign his rights regardless of whether they've vested
138
Non-delegable duties and non-assignable rights
In the context of personal services like doctor, lawyer, artist, author, etc.
139
When a duty is delegated to the delegate/delegatee, and the obligee wants to enforce performance, what does he do?
First, obligee must seek performance from the delegate/delegatee. Then, if he fails to perform, the obligee can seek performance from the delegator/delegant/obligor (who REMAINS secondarily liable as surety)
140
Must assignments be in writing?
Generally no.
Minor exception: assignment for wages must be in writing.
141
Assignment to assignee, then subsequent modifications between assignor and obligor BEFORE the obligor performs for the assignee:
Common law: the assignee's rights do not change from what the assignment was when the assignee received them. They remain unchanged.
UCC: The assignee's rights will change per the modification.
142
Delegation: Name the parties:
A and B have a contract; B delegates to C
```
A = obligee
B = delegator/delegant/obligor
C = delegate/delegatee
```
143
Sale from A (seller) to B (buyer) where A was induced by fraud; and B resells to C, and C purchases in good faith for value.
Can A recover the item from C?
No. And applies also where C takes security interest, not just buying outright.
144
Enforcement rights of creditor beneficiaries versus donee beneficiaries
A creditor beneficiary can sue the promisee because they have an underlying right anyway
A donee beneficiary cannot enforce a gratuitous gift and hence cannot sue (except in narrow promissory estoppel situations)
145
How courts will determine if someone is an intended third-party beneficiary
(1) named in the contract
(2) performance was made directly to the beneficiary
(3) special relationship to the promisee that would indicate specificity
146
A and B are in a contract and C is a third-party beneficiary of performance by B; name all the parties.
If C doesn't get performance from B, who can C sue?
If C doesn't get performance from B, can A sue B?
```
A = promisee
B = promisor
C = third-party beneficiary
```
C can sue B in any case. B can raise any defense that he could have raised against A.
C can sue A only if C is a creditor beneficiary (or, if donee beneficiary, under promissory estoppel). I
A can sue B but only for specific performance to enforce the promise.
147
When a written contract says "no oral modification," is oral modification allowed?
Common law: yeah
| UCC: no
148
What kind of sellers (just merchants or also casual sellers) can be sued for breach of implied warranty of fitness for a particular purpose?
Any seller, not just merchants.
149
Modification of contract under UCC: writing required? Consideration required?
Look to see if SOF would require it after the modification
No consideration required for good-faith modifications.
150
"Tender of delivery" or "tendering goods"
Means the goods are ready for pick up
151
Gap filler for delivery: if not specified
Seller's place of business, or if none, at his home
152
Ways to disclaim implied warranties
(1) "as is" language
(2) an examination of the goods by buyer or refusal to examine when it would reveal faults
(3) course of dealing, trade usage, course of performance
153
Buyers damages (general calculation) versus seller's damages (general calculation)
Buyer:
[Benefit of bargain or cover] + [incidental] + [consequential] - [expenses saved]
Seller:
[(Benefit of bargain) or (resale) or (lost profit) or (contract price)] + [incidental damages] - [expenses saved]
154
Restitution/Unjust Enrichment/Quasi Contract
Restitution is available if:
(1) P has conferred a benefit on D with REASONABLE EXPECTATION that P would be paid
(2) D KNEW or had reason to know of P's expectation
(3) D would be unjustly enriched if no payment to P
Value of restitution is value of benefit conferred
155
Damages for construction contracts: when owner breaches versus when builder breaches
Breach by OWNER:
- Before completion: expected profit + costs expended
- After completion: contract price
Breach by BUILDER:
- Costs to complete job + incidental - quasi contract for benefit conferred
156
Duty to mitigate re: employment contracts DOES NOT mean that
Does not mean that the ex-employee must take a job outside his industry
