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Contracts Flashcards

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1
Q

Contract

A

Legally enforceable agreement

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2
Q

Quasi-Contract: Definition

A

Equitable remedy (restitution) to prevent injustice

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3
Q

Quasi-Contract: 3 Elements

A

(1) Plaintiff has conferred a benefit on defendant (more than just detrimental reliance)
(2) Plaintiff reasonably expected to be paid and
(3) Defendant realized unjust enrichment if plaintiff not compensated

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4
Q

Quasi-Contract: How to Measure Recovery

A

Contract price is not the measure of recovery.

Focus on the value of the benefit being conferred.

The contract price is a ceiling if plaintiff is in default– plaintiff cannot recover more than she would have in full performance of her contract

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5
Q

Bilateral Contract

A

Offer that is open as to method of acceptance

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6
Q

Unilateral Contract

A

Offer that expressly requires performance as the only possible method of acceptance

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7
Q

Assume bilateral contract unless…

A

(1) reward, prize, contract
(2) offer expressly requires performance for acceptance

3 Magic words: offer… only by

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8
Q

Common Law of Contracts

A

Applies to all contracts but the sale of goods

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9
Q

Article 2 of UCC

A

Applies to contracts that a primarily sales of goods– at any price! Most rules are the same as the common law.

Need not be between 2 merchants.

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10
Q

Does Article 2 Apply?

A

(1) type of transaction– sale not lease

(2) subject matter of transaction– goods (i.e. tangible, movable personal property

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11
Q

Mixed Deals: General Rule

A

Look to the predominant purpose.

(1) how much money on goods v. services?
(2) how much time spent on services?
(3) how sophisticated are the services (i.e. pacemaker implant surgery)
(4) does contract include sales language

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12
Q

Mixed Deals: Exception

A

If contract divides payment, then apply UCC to sale of goods part and common law to the rest

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13
Q

3 Stages of Contract Formation

A

(1) initial communication OFFER
(2) what happens after the officer– TERMINATION OF THE OFFER
(3) who responds and how– ACCEPTANCE

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14
Q

Offer: General Test

A

Manifestation of commitment.

Words or conduct showing commitment. Basic test is whether a reasonable person in the position of the offeree would believe that his or her assent creates a contract.

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15
Q

Sale of Real Estate Offer: Material Terms

A

Common law: price and description required

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16
Q

Sale of Goods Offer: Material Terms

A

Article 2

No price requirement: still an offer is parties so intend

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17
Q

Vague or Ambiguous Material Terms

A

NOT AN OFFER under either common law or UCC

*contrast with no price– okay under Article 2

Look out for
“fair”
“reasonable”
“appropriate”

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18
Q

Requirements Contracts/Output Contracts

A

A contract for the sale of goods can state the quantity of goods to be delivered under the contract in terms of the buyers requirements, the seller’s output, or in terms of exclusivity.

Terms: requirements, all, only, solely

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19
Q

Unreasonably Disproportionate Limitation on Increases

Requirements Contracts/Output Contracts

A

Buyer can increase requirements as long as the increase is in line with prior demands

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20
Q

Advertisements

A

Not an offer– just an invitation to deal

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21
Q

Advertisement: Rewards

A

Advertisement can be an offer if it is in the nature of a reward (Carbolic Smoke Ball)

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22
Q

Advertisement: Specific to Quantity and Expressly Indicate Who Can Accept

A

An advertisement is an offer if it is specific as to quantity and expressly indicates who can accept

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23
Q

4 Methods of Termination of Offers

A

(1) Lapse of Time
(2) Revocation (words or conduct)
(3) Rejection
(4) Death

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24
Q

Termination: Lapse of Time

A

time stated or reasonable time

1 month or more

Read closely for dates

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25
Q

Termination: Revocation (words or conduct)

A

A 2 player game!

Words: unambiguous statement by offeror to offeree of unwillingness or inability to contract or

Conduct: unambiguous conduct by offeror indicating an unwillingness or inability to contract that the offeree is aware of.

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26
Q

When Offeree Hears that Offer is Dead

A

If offeree hears from a reliable source that the offer is dead– terminated

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27
Q

Similar offers to similar people

A

Making similar offers to simlar people does not meant the original offer is revoked

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28
Q

Revocation of an offer sent through mail

A

Effective upon receipt

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29
Q

Revocation after acceptance

A

Breach

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30
Q

4 Situations Where an Offer Cannot Be Revoked

A

(1) option contract
(2) merchant firm offer rule
(3) reliance
(4) unilateral contract– start of performance

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31
Q

Revocation: option contract

A

An offer cannot be revoked if the offeror has (1) promised to keep the offer open and (2) promise is supported by (even nominal) consideration

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32
Q

Revocation: merchant firm offer rule

A

An offer cannot be revoked for up to 3 months if

(1) offer to buy or sell goods (Article 2)
(2) signed, written promise to keep the offer open
(3) party is a merchant

Merchant: generally a person in business

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33
Q

Revocation: reliance

A

An offer cannot be revoked if there has been detrimental reliance by the offeree that is reasonably foreseeable

Bid=offer

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34
Q

Revocation: unilateral contract– start of performance

A

Start of performance pursuant to an offer to enter into a unilateral contract makes that offer irrevocable for a reasonable time to complete performance.

Performance, not mere preparation!

Preparation may trigger detrimental reliance

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35
Q

3 Methods of Indirect Rejection

A

(1) counteroffer
(2) conditional acceptance
(3) additional terms (common law only)

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36
Q

Counteroffer

A

Counteroffer terminates the offer and becomes a new offer.

Where counteroffer made, no express contract unless counteroffer accepted.

Mere bargaining does NOT terminate. Look at punctuation

? bargaining
. counteroffer

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37
Q

Conditional Acceptance

A

Terminates the offer and becomes a new offer

Look for phrases such as “if,”
“but,” “provided,” “so long,” “on condition that”

“Acceptance is expressly conditioned”

Applies to Article 2 as well!

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38
Q

Additional Terms at Common Law

A

Mirror Image Rule

Under common law, an “acceptance” that adds new terms is treated like a counteroffer rather than as an acceptane

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39
Q

Additional Terms Under Art. 2

“Seasonable Expression of Acceptance”

A

(1) is there a contract?
Under UCC, a response to a contract that adds new terms (but does not make the new terms a condition of acceptance) is generally a “seasonable expression of acceptance”

(2) is additional term part of the contract?
if BOTH parties are merchants, general rule is that additional term is part of the contract

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40
Q

Additional Terms Under Art. 2

“Seasonable Expression of Acceptance”

Exceptions: MERCHANTS

A

(1) the additional term is NOT a part of the contract between merchants if it materially changes the offer or
(2) the additional term is NOT a part of the contract between merchants if the offeror objects to the change

Applies only when both parties are merchants!

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41
Q

Additional Terms Under Art. 2

“Seasonable Expression of Acceptance”

Exceptions: NOT MERCHANTS

A

If one or both parties is not a merchant, the additional term is merely a proposal to be separately accepted or rejected

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42
Q

Termination: Death of a Party Prior to Acceptance

A

Death or incapacity of either party after the offer but before the acceptance terminates the offer.

DOES NOT AUTOMATICALLY TERMINATE A CONTRACT

Exceptions:
Option
Part performance of offer to enter into unilateral contract

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43
Q

Who Can Accept an Offer?

A

(1) a person who knows about the offer AND
(2) the person to whom it was made

Offers cannot be assigned.

Options can be assigned unless otherwise provided.

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44
Q

Method of Acceptance: Offeree Fully Performs

A

Only possible issue is whether NOTICE of performance is required

(1) what does offer provide
(2) does offeree have reason to believe that offeror will not learn of acceptance

Conduct, not words

General rule- performance is acceptance.

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45
Q

Method of Acceptance: Offeree Starts to Perform

Bilateral Contract

A

Start of performance is acceptance of an offer to enter into a bilateral contract

Offer is open to method of acceptance so start of performance is accepted

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46
Q

Method of Acceptance: Offeree Starts to Perform

Unilateral Contract

A

Start of performance is not acceptance of an offer to enter into a unilateral contract

Offers require “performance” for acceptance

“Performance requires completion of performance.

Start of performance is not acceptance, need full performance!

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47
Q

Method of Acceptance: Offeree Promises to Peform

A

Most offers can be accepted by a promise to perform.

Mere promises are generally good enough.

Offers that expressly require performance require full performance.

Reward offers require performance

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48
Q

Method of Acceptance: Mailbox Rule

A

If offeree is “invited” to accept by mail, acceptance is effective when posted.

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49
Q

Method of Acceptance: Mailbox Rule

EXCEPTION

A

(1) generally communications are effective only when received
(2) generally, an acceptance is effective when SENT
(3) if rejection is sent first, ignore Rule 2

“schizophrenic acceptance”

Rejecting and accepting loses benefit of the mailbox rule.

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50
Q

Method of Acceptance: Seller of Goods Sends “Wrong Goods”

A

Acceptance and Breach

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51
Q

Method of Acceptance: Seller of Goods Sends “Wrong Goods”

Accomodation Exception

A

Counteroffer and no breach

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52
Q

Method of Acceptance: Offeree is Silent

A

Silence is not acceptance

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53
Q

Method of Acceptance: Offeree is Silent

EXCEPTION

A

If custom indicates silent acceptance is reasonable or offeree by words or conduct agrees that silence is acceptance, then silence is acceptable.

Objective reasonable person standard.

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54
Q

Consideration

A

Bargained for legal detriment

Identify promisor and ask what did he bargain for.

Identify promisee and ask what detriment did she incur

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55
Q

4 Forms of Consideration

A

(1) performance
(2) forbearance
(3) promise to perform
(4) promise to forebear

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56
Q

“Bargained for”

A

Asked for by the promisor in exchange for her promises

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57
Q

Legal Detriment

A

Giving up the right to do something that you were otherwise legally entitled to do

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58
Q

Promise (Alone) as Consideration

A

Promise in exchange for promise consideration UNLESS it is an illusory promise.

Need mutuality of promise

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59
Q

Adequacy of Consideration

A

Not relevant in contract law.

Even a peppercorn will suffice.

NOT the same as nominal consideration– a joke transaction

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60
Q

Past Consideration

A

Past consideration is NOT considerations

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61
Q

Past Consideration

EXCEPTION

A

Expressly requested and expectation of payment

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62
Q

Preexisting Contractual or Statutory Duty Rule

Common Law: General Rule

A

Doing what you are already legally obligated to do is NOT consideration for a promise to pay you more to do merely that.

You need new consideration to modify a contract governed by common law

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63
Q

Preexisting Contractual or Statutory Duty Rule

EXCEPTION: addition to or change in performance

A

Addition or change in performance is adequate consideration

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64
Q

Preexisting Contractual or Statutory Duty Rule

Common Law Exception: Unforeseen Circumstances

A

Under MBE/Restatement view, no consideration is needed for modification if fair and equitable in view of unforeseen circumstances

Ex: rubble excavation

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65
Q

Preexisting Contractual or Statutory Duty Rule

Common Law Exception: Third Party Promise to Pay

A

Third party promise to pay is legally enforceable consideration; no original duty to 3rd party

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66
Q

Preexisting Contractual or Statutory Duty Rule

Article 2 Exception

A

Article 2 does not have a pre-existing legal duty rule:

good faith is the test for changes to an existing sale of goods contract

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67
Q

Part Payment as Consideration for Release

Ex: Promise to Forgive Balance of a Debt

A

Key is whether debt is due and undisputed.

If debt is due and undisputed, then part payment is not consideration for release.

If debt is not yet due, part payment may be consideration for release

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68
Q

Written Promise to Pay Debt Barred by Technical Defense Such as Statute of Limitations

A

Substitute for consideration

A written promise to satisfy an obligation for which there is a legal defense is enforceable without consideration

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69
Q

Promissory Estoppel (Detrimental Reliance)

3 Elements

A

The most important consideration substitute.

Elements:

(1) promise
(2) reliance that is reasonable, detrimental, and foreseeable, AND
(3) enforcement is necessary to avoid injustice

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70
Q

Contract Terms: Interpretation Priorities

A

(1) course of performance
(2) course of dealing
(3) custom and usage

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71
Q

Contract Terms: Course of Performance

A

Same people, same contract

Ex: S contracts to sell 100 chickens a month to B for 12 months. First 3 shipments are boiling hens. B does not complain

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72
Q

Contract Terms: Course of Dealing

A

Same people, different but similar contract

Ex: S contracts to sell 100 chickens a month to B for 12 months. Under prior chicken contracts, S sent boiling hens and B complained.

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73
Q

Contract Terms: Custom and Usage

A

Different but similar people, different but similar contract.

Community norms of which the parties are or should be aware.

Ex: S contracts to sell 100 chickens a month to B for 23 months. In chicken industry, chicken means up to 6 lb hens

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74
Q

UCC Terms: Delivery Obligations of Seller of Goods

No Place of Delivery Has Been Agreed Upon

A

Absent an agreement as to place of delivery, then the place of delivery is the seller’s place of business unless both parties know that the goods are someplace else, in which case that place is the place of delivery.

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75
Q

UCC Terms: Delivery Obligations of Seller of Goods

Delivery by Common Carrier: Shipment Contracts

A

Seller completes its delivery obligation when it

(1) gets the goods to a common carrier
(2) makes reasonable arrangements for delivery
(3) notifies the buyer

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76
Q

UCC Terms: Delivery Obligations of Seller of Goods

Delivery by Common Carrier: Destination Contracts

A

Seller does not complete its delivery obligation until the goods arrive where the buyer is

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77
Q

Determining Whether Contract is a Shipment or Destination Contract

A

Most of the time– shipment contract

FOB (city)

FOB(city where seller is/where goods are)– SHIPMENT CONTRACT

FOB(any other city) DESTINATION CONTRACT

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78
Q

Risk of Loss Issues Arises Where

A

(1) after the contract has been formed, but before buyer receives the goods
(2) the goods are damaged or destroyed and
(3) neither the buyer nor the seller is to blame

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79
Q

Risk of Loss: Agreement Allocates Risk

A

Agreement of the parties controls

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80
Q

Risk of Loss: Breach

A

Breaching party is liable for any uninsured loss even though breach is unrelated to problem

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81
Q

Risk of Loss: Delivery by Common Carrier Other Than Seller

A

Risk of loss shifts from seller to buyer at the time that the buyer completes its delivery obligations

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82
Q

Risk of Loss: No Agreement Allocating Risk, No Breach, No Delivery by a Carrier

A

Is seller a merchant?

Merchant seller: risk of loss from merchant-seller to buyer upon buyer’s receipt of goods

Non-merchant seller: risk of loss shifts from a non-merchant seller when s/he “tenders” the goods

Whether BUYER is a merchant is irrelevant

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83
Q

Parol Evidence Rule

A

Importance of written contract as source of contract terms: exclusionary effect of written contract on earlier (or contemporaneous agreements) as a possible source of terms of the contract

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84
Q

Integration

A

Written agreement that the court finds is the final agreement, triggers the parol evidence rule

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85
Q

Partial Integration

A

Written and final, but not complete

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86
Q

Complete Integration

A

Written and final and complete

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87
Q

Merger Clause

A

Contract clause such as “this is the complete and final agreement”

88
Q

Parol Evidence Rules

A

(1) parol evidence is limited to the words of the parties
(2) parol evidence can be oral or written
(3) parol evidence comes BEFORE the integration
(4) need WRITTEN integration

89
Q

Parol Evidence: Establishing a Defense to Enforcement of the Written Deal

A

Regardless of whether the writing is a complete or partial integration, the parol evidence rule does not prevent a court from considering earlier words of the parties for the limited purpose of determining whether there is a defense to the enforcement of such an agreement (misrepresentation, fraud, duress)

90
Q

Parol Evidence: Changing the Written Deal

Mistake in the Integration

A

A court may consider evidence of terms inconsistent with the terms in the contract for the limited purpose of deciding whether there was a mistake in integration (i.e. a mistake in reducing the agreement to writing)

91
Q

Parol Evidence: Changing the Written Deal

A

Regardless of whether the writing is a complete or partial integration, the parol evidence rule prevents a court from considering earlier agreement as a source of terms that are inconsistent with terms in the writtten contract

92
Q

Parol Evidence: Explaining Ambiguous Terms in the Written Deal

A

Notwithstanding the parol evidence rule, earlier agreements can be considered to resolve ambiguities in the written contract

93
Q

Parol Evidence: Adding to the Written Deal

A

The parol evidence rule prevents a court from considering earlier agreements as a source of consistent additional terms unless the court finds that the written agreement was only a partial integration

94
Q

Express Warranties

A

Look for words that promise, describe, or state facts, or look for a sample or model.

Distinguish from sales talk which is more general, an opinion (mere puffing)

95
Q

Implied Warranty of Merchantability

A

When any person buys any goods from any merchant, a term is automatically added to the contract by operation of law that the goods are fit for the ordinarily purpose for which such goods are used

Seller=merchant– DEALS IN GOODS OF THAT KIND

96
Q

Implied Warranty of Fitness for a Particular Purpose

A

Triggering Facts:

  • Buyer has a particular purpose
  • Buyer is relying on seller to select suitable goods
  • Seller has reason to know of purpose and reliance

Warranty
Goods fit for a particular purpose

97
Q

Disclaimer

A

Express warranties generally cannot be disclaimed

Eliminates IMPLIED warranties of merchantability and fitness

“As is” or “with faults”

CONSPICUOUS language of disclaimer mentioning merchantability

98
Q

Limitation of Remedies

A

Does not eliminate warranty, simply limits or sets recovery for any breach of warranty.

Possible even for express warranty.

General test: unsconscionability

Prima facie unconscionable if breach of warranty on consumer goods causes injury

99
Q

Common Law Performance

A

Look to terms of contract

100
Q

Sale of Goods Performance

Perfect Tender Rule

A

Article 2 general standard: subject to limited exception: the seller is obligated to deliver 100% perfect goods

101
Q

Sale of Goods Performance

Rejection of Goods: General Rule

A

If goods are less than perfect, the buyer has the option to reject unless cure or an installment sale contract

Rejection of goods must occured before acceptance of goods

102
Q

Sale of Goods Performance

Cure

A

In some instances, a seller who fails to make perfect tender will be given a “second chance,” an option of curing.

Not every seller has the option to cure; buyer cannot compel seller to cure.

(1) Time for performance has expired
(2) Time for performance has not yet expired

103
Q

Sale of Goods Performance

Cure

Time for Performance Has Expired

A

In very limited situations, a seller has the option of curing even after the contract delivery date

Statutory test: does seller have reasonable grounds for believing that improper tender would be acceptable (perhaps with money allowances)

Look to prior dealings

104
Q

Sale of Goods Performance

Cure

Time for Performance Has Not Yet Expired

A

Comes in early with imperfect tender– buyer can reject but seller can cure

105
Q

Sale of Goods Performance

Installment Sales Contracts

A

Substantial impairment rule; no perfect tender rule

An installment sales contract requires/authorizes (1) delivery in separate lots (2) to be separately accepted

Buyer has the right to reject an installment only where there is a substantial impairment in that installment that cannot be cured.

106
Q

Sale of Goods Performance

Acceptance of Goods

A

If a buyer accepts the goods, it can not later reject them

(1) Express acceptance
(2) Payment without opportunity for inspection– NOT acceptance
(3) Implied acceptance- retention after opportunity for inspection without objection. Buyer keeps goods without objection for >30 days.

107
Q

Sale of Goods Performance

Revocation of Acceptance of Goods

A

In limited circumstances, a buyer can effect a cancellation of the contract by revoking its acceptance of goods.

Requirements

(1) nonconformity substantially impairs the value of the goods to the buyer
(2) excusable ignorance of grounds for revocation or reasonable reliance on sellers assurance of satisfaction
(3) Revocation within a reasonable time after discovery of nonconformity

108
Q

3 Payment Rules

A

(1) cash unless otherwise agreed
(2) buyer can pay by check
(3) seller does not have to take the check but that gives the buyer an additional reasonable time

109
Q

Contract Defenses: Who Lacks Capacity to Contract?

A

Infants under 18

Mental incompetents– lacks ability to understand agreement

Intoxicated persons if other party has reason to know

110
Q

Contract Defenses: Consequence of Incapacity: Right to Disaffirm

A

Person without capacity has right to disaffirm

111
Q

Contract Defenses: Consequence of Incapacity: Implied Affirmation

A

If a person without capacity retains benefits after gaining capacity, affirmation will be implied (more than 30 days after gaining capacity)

112
Q

Contract Defenses: Consequence of Incapacity:

Liability for Necessaries

A

A person who does not have capacity is legally obligated to pay for things that are necessary (food, clothing, medical care, shelter) but that liability is based on quasi-contract law

113
Q

Contract Defenses: Illegality: Subject Matter

A

If subject matter is illegal, agreement is void

114
Q

Contract Defenses: Illegality: Illegal Purpose

A

If subject matter is legal but the purpose is illegal, the agreement is enforceable only by the person who did not know of the illegal purpose

115
Q

Contract Defenses: Misrepresentation

A

False assertion of fact or concealment of fact

No requirement of fraud, even honest misrepresentation of facts will matter

Leads to contract rescission, not money damages

116
Q

Contract Defenses: Duress

A

Physical duress

Economic duress

  • “bad guy” makes an improper threat AND
  • vulnerable guy has no reasonable alternative
117
Q

Contract Defenses: Unconscionability

A

1) a part of contract law generally (common law + sale of goods)
2) empowers a court to refuse to enforce all or a part of an agreement
3) unfair surprise or oppressive terms
4) tested as of the time of the agreement was made
5) by the court

118
Q

Contract Defenses: Ambiguity in Words of Agreement

A

No contract if

(1) parties use a material term that is open to at least 2 reasonable interpretations
(2) each party attaches a different meaning to the term
(3) neither party knows or has reason to know that the term is open to at least 2 reasonable interpretations

IF 1 party knows– contract exists under the innocent party’s terms

119
Q

Contract Defense: Mutual Mistake of Material Fact (at time of contract)

A

No contract if

(1) both parties mistaken
(2) basic assumption of fact (not value)
(3) materially affects the agreed exchange

Key: does agreed upon subject matter exist?

Mistake re: subject matter- no contract
Mistake re: value- contract

120
Q

Contract Defense: Unilateral Mistake of Fact

A

Generally: courts reluctant to allow a party to avoid a contract for mistake made by only one party

Exceptions:

  • “palpable” (obvious) mistakes
  • mistakes discovered before significant reliance by other party
121
Q

Statute of Frauds

A

Statute(s) designed to prevent fraudulent claims by requiring “special” proof that a contract exists

122
Q

3 Primary Statute of Frauds Issues

A

(1) is the contract within the statute of frauds?
5 common law areas and UCC Art. 2

(2) If so, is the statute of frauds satisfied?
Either by performance or writing

(3) Is there a statute of frauds defense?
Statute of frauds is a defense to enforcement of the agreement within statute if statute not satisfied

123
Q

Contracts Within the Statute of Frauds

A

MY LEGS

M: Promise in consideration of marriage
Y: Service contract not capable of being performed within one 1 of the time of contract

L: Transfers of interest in real estate
E: Promise by executor to pay obligation of estate from his own funds
G: promise to answer for (guarantee) the debt of another
S: Sale of goods for $500+

124
Q

Promise in Consideration of Marriage

A

Not merely a promise to marry but rather a promise to do something or refrain from doing something if we marry

125
Q

Promise by executor/administrator to pay obligation of estate from his own funds

A

Not merely a promise to pay the estate’s expenses but rather a promise to pay the estate’s expenses from other funds (his own pocket)

126
Q

Promises to answer for (guarantee) the debt of another

A

Not merely a promise to pay, but rather a promise to pay if someone else does not

127
Q

Promises to answer for (guarantee) the debt of another: Main purposes exception

A

If main purpose or leading object of promisor is to serve a pecuniary interest of his own, the contract is NOT within the statute of frauds even though the effect is still to pay the debt of another

128
Q

Service Contract Not “Capable” of Being Performed Within 1 Year from the Time of the Contract

> 1 year

A

Specific time period, >1 year SOF

Specific time period, > 1 year from date of contract SOF

Task (nothing about timing) NO SOF

Lifetime contract NO SOF

129
Q

Transfers of Interest in Real Estate

A

Transfers of interest in real estate do implicate the SOF UNLESS

lease of one year or less

130
Q

Sale of Goods

A

Statute of frauds applies to the sale of goods for $500 or more

131
Q

Satisfaction of the Statute of Frauds Services Contract

A

Full performance by either party satisfies the statute of frauds

Part performance of a services contract does not satisfy the statute of frauds

132
Q

Satisfaction of the Statute of Frauds: Ordinary Goods

A

General rule is that part performance of a contract for the sale of goods satisfies the statute of frauds, but only to the extent of the part performance

133
Q

Satisfaction of the Statute of Frauds: Delivered v Undelivered Goods

A

Where S partially delivers goods, B will have no SOF defense for payment of delivered goods

For undelivered goods, seller has a SOF defense. Buyer cannot prove existence of a deal.

134
Q

Satisfaction of the Statute of Frauds: Specially Manufactured Goods

A

If the contract is for the sale of goods that are to be specially manufactured, then the statute of frauds is satisfied as soon as the seller makes a “substantial beginning” of making or obtaining the goods

Enough has been done you know these are custom

135
Q

Satisfaction of the Statute of Frauds: Real Estate Transfer Contract

A

“Part performance” by buyer of real estate can satisfy the statute of frauds

“Part performance” is generally any 2 of the following 3:

  • payment (full or partial)
  • possession, and/or
  • improvements

Full payment by buyer of real estate does not satisfy the SOF!!!

136
Q

Writing: Statute of Frauds Other than the UCC

A

Look at

(1) the contents of the writing or writingS– all material terms test [answer the question “who” and “what”] and
(2) who signed the writing- signed by the person to be charged (i.e. the defendants)

137
Q

Writing: UCC Statute of Frauds

A

Look to the content of the writing and who signed the writing

The writing must contain the quantity term [answer the question ““how many”]

138
Q

Merchant Confirmatory Memorandum Rule

A

“Answer the damn letter exception”

Both parties must be merchants
The person who receives a signed writing with a quantity term that claims there is a contract fails to respond within 10 days of receipt

139
Q

Judicial Admission of Sale of Goods Agreement

A

Admission= statement by the defendant acknowledging the agreement NOT a contract

Judicial= statement appeared in pleadings, testimony, or in response to interrogatory

140
Q

Equal Dignity Rule

A

Authorization to enter into a contract for someone else

Authorization must be in writing if the contract to be signed is within the statute of frauds (i.e. the authorization must be of “equal dignity”)

141
Q

Statute of Frauds: Contract Modification

A

There is a legal requirement of written evidence of a contract change:

(1) look at the deal with the alleged change and

(2) determine whether the deal with the alleged change would be within the statute of frauds
if yes– alleged modification. agreement must be written

142
Q

Under Common Law, Contract Provisions Requiring Modifications Be in Writing

A

IGNORED

143
Q

Under UCC, Contract Provisions Requiring Modifications Be in Writing

A

Effective unless waived

144
Q

Performance Condition

A

A mutually agreed upon promise modifier. It is language in a contract– not merely in response to an offer– that does not create a new obligation, but merely limits obligations created by other language in the contract.

Distinct from covenant
Distinct from conditional acceptance

145
Q

How Can You Identify a Contract Provision As An Express Condition?

A

Express conditions are created by language of contract.

Watch for words such as “if” “provided that” “so long as” “subject to” “in the event that” “unless” “when” “until” and “on condition that”

rarely on the bar exam

146
Q

Standard for Satisfying an Express Condition

A

STRICT compliance with express conditions

147
Q

Standard for Satisfying an Express Condition: Reasonable Person Exception

A

Condition based on approval of one of the contracting parties is treated as satisfied if reasonable person would approve, unless subject to art or other matters that are inherently discretionary

148
Q

Excuse of Express Condition: Estoppel

A

Identify the person who benefits from or is protected by the condition.

Then look for a statement by that person giving up the benefits and protection of the condition

Estoppel is based on a statement by the person protected by the condition BEFORE the conditioning event was to occur and requires a change of position

149
Q

Excuse of Express Condition: Waiver

A

Waiver is based on a statement by the person protected by the condition AFTER the conditioning event was to occur and does not require a change of position

150
Q

4 Types of Excuse by Reason of a Later Contract

A

(1) Rescission
(2) Accord and satisfaction
(3) Modification
(4) Novation

151
Q

Rescission (Cancellation)

A

Key is whether performance is still remaining from each of the contract parties (execution)

Not fully executed
Not fully performed

152
Q

Accord & Satisfaction

Substituted Performance

A

IF + THEN

Accord: an agreement by the parties to an already existing obligation to accept a different performance in satisfaction of the existing obligation

Satisfaction: the different performance

Effect: if accord is performed, original contract excused. If accord is not performed, other party can sue on either original obligation or on the accord, but not both

153
Q

Modification (Substituted Agreement)

A

An agreement by parties to an existing obligation to accept a different agreement in satisfaction of the existing obligation

Parties know, like, and trust one another

154
Q

Novation

A

An agreement between both parties to an existing contract to the substitution of a new party (ie the same performance, different party)

Novation excuses the contracted for performance of the party who is substituted for or replaced

Delegation does not require agreement of both and does not excuse

155
Q

Excuse Due to Later Unforeseeable Events

A

(1) Something that happens after contract formation but before the completion of contract performance, and
(2) that was unforeseen, and
(3) that makes performance impossible or commercially impracticable or frustrates the purpose of the performance

156
Q

Damage or Destruction of Subject Matter of Contract

Seller’s Risk of Loss and Damage or Destruction

A

After contract, but before risk of loss passes to buyer– seller’s nonperformance excused

No excuse if sale of widgets

157
Q

Damage or Destruction of Subject Matter of Contract

Buyer’s Risk of Loss and Damage or Destruction

A

After contract AND after risk of loss passes to buyer– buyer’s performance is NOT excused as to unique items

*Still have to pay for the Cadillac

158
Q

Excuse Due to Death

“Special Person”

A

Where breaching party is a “special person” death is excused, nonperformance is excused, and NO RECOVERY

159
Q

Excuse Due to Breach

Person Not Party to the Contract

A

Where person not party to the contract dies– nonperformance is NOT excused due to death

160
Q

Excuse Due to Breach

Party to the Contract But Not a “Special Person”

A

Nonperformance not excused, recovery permitted

161
Q

Excuse by Impossibility

Subsequent Law or Regulation

A

Later law makes performance of contract illegal

162
Q

Excuse by Frustration of Purpose

Subsequent law or regulation

A

Later law or other event makes mutually understood purpose of contract illegal

163
Q

Identifying Third Party Beneficiary Problems

A

Look for two parties contracting with common intent to benefit a third party

164
Q

Third-Party Beneficiary

A

Not a party to the contract.

Able to enforce contract others made for her benefit

165
Q

Promisor

A

Person making the promise that benefits the third party

166
Q

Promisee

A

Person who obtains promise that benefits the third party

167
Q

Intended/Incidental

A

Only intended beneficiaries have contract rights

If party’s name is mentioned in the contract, treat her as an intended beneficiary

168
Q

Creditor/Donee

A

Intended beneficiaries are either donees or creditors

Start with assumption that party is a donee

Look at whether third-party beneficiary was a creditor of the promisee before the contract

169
Q

Third Party Beneficiaries: Efforts to Cancel or Modify

A

Test: whether third party knows of and has relied on or assented as requested.

If yes– rights have vested and contract cannot be canceled or modified without her consent unless the contract otherwise provides

170
Q

Third Party Beneficiaries: Who Can Sue Whom?

A

Beneficiary can sue promisor directly

Promisee can sue promisor directly

Donee beneficiary cannot sue promisee

Creditor beneficiary can sue promisee on preexisting debt

171
Q

Third Party Beneficiaries Defenses

A

If the third party beneficiary sues the promisor, the promisor can assert any defense that he would have had if sued by the promisee

172
Q

Assignment: Definition:

A

Transfer of rights under a contract in two separate steps

(1) Contract between only two parties
(2) One of the parties later transfer of rights under that contract to a third party

173
Q

Assignor

A

Party to the contract who later transfers rights under the contract to another (Batman)

174
Q

Assignee

A

Not a party to the contract, able to enforce the contract because of the assignment

175
Q

Obligor

A

Other party to the contract (Gotham)

176
Q

Limitations on Assignments: Prohibition

A

Language of prohibition takes away the right to assign but not the power to assign, which means that the assignor is liable for breach of contract, but an assignee who does not know of the prohibition can still enforce the assignment

177
Q

Limitations on Assignments: Invalidation

A

Language of invalidation takes away both right to assign and the power to assign so that there is a breach by the assignor and no rights in the assignee

178
Q

Limitations on Assignments: Common Law

A

Even if a contract does not in any way limit the right to assign, common law bars an assignment that substantially changes the duties of the obligor.

Assignment of right to payment usually ok.

Assignment of other performance rights NOT okay.

179
Q

Requirements for Assignment

A

Need language of present assignment

Consideration is not required

180
Q

Rights of Assignee

A

Assignee can sue the obligor.

Obligor has some defenses against assignee as it would have against assignor.

Payment by obligor to assignor is effective until obligor knows of assignment.

181
Q

Gratuitous Assignments

A

Last assignee generally wins.

Gratuitous assignments are possible, but generally freely revocable. Revocation can be direct or indirect: bankruptcy, death, the assignor taking performance directly from the obligor, or the making of another assignment

182
Q

Multiple Assignments for Consideration

A

General rule: first assignee for consideration wins

183
Q

Multiple Assignments for Consideration

VERY LIMITED EXCEPTIONS

A

A subsequent assignee takes priority over an earlier assignee for value only if he both

(1) does not know of the earlier assignment AND
(2) is the first to obtain payment, a judgment, a novation, or an indicia of ownership

184
Q

Multiple Assignments for Consideration as Breach of Warranty

A

In an assignment for consideration, the assignor makes a warranty that the rights assigned are assignable and enforceable

185
Q

Delegation

A

Party to a contract transferring work under that contract to a 3rd party

Work: duties or burdens

186
Q

Delegations are permitted unless…

A

(1) contract prohibits delegations or prohibits assignments
(2) contract calls for VERY SPECIAL SKILLS or
(3) person to perform contract has a VERY SPECIAL REPUTATION

Can’t delegate to other people even with special skills or reputation

187
Q

Delegation of Duties: what is the third party does not perform?

A

Delegating party always remains liable.

Delegatee liable only if she receives consideration from the delegating party.

Liable to delegating party and original party (3rd party beneficiary obligation)

188
Q

Common Law Material Breach Rule

A

(1) Damages can be recovered for any breach
(2) only a material breach by one guy excuses the other guy from performing (clearly less than 50%)
(3) whether a breach is material is a question of fact (and therefore not likely to be a bar exam question)

189
Q

Material Breach & Divisible Contract Exception

A

Material breach rule is applied on a unit by unit bases

Remember- the sale of goods- Art. 2- perfect tender rule

190
Q

Anticipatory Repudiation

A

Unambiguous Statement that

(1) that the repudiating party will not perform
(2) was made prior to the time the performance was due

Anticipatory repudiation by one party excuses the other party’s duty to perform. It also generally gives rise to an immediate claim for damages for breach.

191
Q

Anticipatory Repudiation: Retraction

A

Anticipatory repudiation an be retracted so long as there has not been a material change in position by the other party.

If the repudiation is timely retracted, the duty to perform is reimposed, but performance can be delayed until adequate assurance is provided.

192
Q

Inability to Perform

A

One party’s inability to perform will excuse the other party’s performance

193
Q

Specific Performance: Injunction

A

Courts reluctant to grant equitable remedy of specific performance.

Historically, equitable remedies are available only if legal remedy is inadequate.. Secondly, judicial administration of SP decree would be difficult.

Courts now somewhat more open to granting SP.

194
Q

Specific Performance: Contracts for Sale of Real Estate

A

Yes, specific performance available

All land is unique

195
Q

Specific Performance Contracts for the Sale of Goods

A

No SP unless (unique goods) antiques, art, custom-made) or other appropriate circumstances

196
Q

Specific Performance Contract for Services

A

No specific performance, possible injunctive relief

197
Q

Reformation

A

Equitable remedy; court changes contract (reforms)

Facts to watch for:

  • mistake in writing agreement, commissions, clerical errors, etc.
  • fraudulent misrepresentation as to what is in the agreement (can also get rescission)
198
Q

Reclamation

A

Right of an unpaid seller to get its goods back

Key facts:

  • buyer must have been insolvent at the time that it received the goods
  • seller demands return goods within 10 days of receipt (becomes a reasonable time rule) if there had been an express representation of solvency by buyer, and
  • buyer still has goods at the time of demand
199
Q

Rights of Good Faith: Purchaser in Entrustment

A

If an owner leaves her goods with a person who sells goods of that kind, and that person wrongfully sells her goods to a third party, then such a good faith purchaser (BFP for value) cuts off rights of the original owner/entruster

200
Q

Purpose of Money Damages

A

Compensate plaintiff for loss, not punish defendant

201
Q

Measure of Interest

A

Expectation interest

Put plaintiff in same economic position as if contract had been performed

202
Q

Reliance interest

A

Put plaintiff in same economic position as if contract had never happened

203
Q

Restitution Interest

A

Put defendant in same economic position as if contract had never happened (prevent unjust enrichment)

204
Q

Damages Rules for Sales of Goods

2 Relevant Facts

A

(1) who breached

(2) who has the goods

205
Q

Damages Rules for Sales of Goods:

Seller Breaches, Buyer Keeps the Goods

A

Buyer entitled to

fair market value (if perfect) MINUS fair market value (as delivered)

206
Q

Damages Rules for Sales of Goods

Seller Breaches, Seller Keeps the Goods

A

Buyer entitled to

market price at time of discovery of the breach MINUS contract price

OR

replacement price MINUS contract price

207
Q

Damages Rules for Sales of Goods

Buyer Breaches, Buyer Has Goods

A

Seller gets contract price

208
Q

Damages Rules for Sales of Goods

Buyer Breaches, Seller Has Goods

A

Seller will get

Contract price MINUS market price at time and place of delivery

OR

Contract price MINUS resale price

AND, in some situations

provable lost profits

209
Q

Damages Rules for Sales of Goods

Buyer Breaches, Seller Has Goods

Lost Volume Seller Rule

A

Where there would have been 2 sales, and Sale #2 does not replace Sale #1, (ie Sale # 2 would have happened anyways)

Can recover provable lost profits

210
Q

Plus Incidental Damages

A

Costs incurred in dealing with breach are always recoverable

doesn’t matter if foreseeable or not

211
Q

Plus Foreseeable Consequential (Special) Damages

A

Damages arising from plaintiff’s special circumstances; recoverable only if defendant had reason to know at the time of contract

“be chatty rule”

212
Q

Certainty Limitation

A

Reasonable certainty: damages can’t be “speculative”

213
Q

Less Avoidable Damages

A

No recovery for damages that could have been avoided without undue burden on plaintiff

Burdens of pleading and proof on defendant

214
Q

Liquidated Damages

A

Contract provision fixing amount of damages

215
Q

Validity of Liquidated Damages

A

Concern is whether provision is too high– a penalty

Test for enforceability:

(1) damages were difficult to forecast at time contract was made and
(2) provision is a reasonable forecast

216
Q

Limitation of Remedies

A

Look for contract provision limiting amount that can be recovered.

Concern is whether provision is too low (so low as to be unconscionable) at time of formation

217
Q

Contracts Short Outline Checklist

A

Armadillos from Texas Play Rap Eating Tacos

Applicable law
Formation
Terms
Performance
Remedies 
Excuse
Third party rights and obligations

Bar Exam (15 decks)

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