Contracts Flashcards
1
Q
What is the Applicable Law for sale of Tangible Goods?
A
UCC or Uniform Commercial Code
2
Q
What is the applicable law for all other contracts EXCEPT the sale of goods?
A
Common Law
3
Q
What is a Merchant and why is it important initially in analysis?
A
Merchant is one who deals in goods of the kind or one having special knowledge or skills re practices of goods. Its important in initial analysis because special rules apply to K that involves merchants.
4
Q
Predominant Purpose Rule states
A
When a K include both goods and services determining the predominant purpose for the K will determine the governing law.
5
Q
What are the elements for a valid contract?
A
"All Contracts Don't Stink" A - ssent C - onsideration D - no defenses applies S - tatute of Frauds
6
Q
Mutual Assent means that there must be valid what?
A
A valid Offer and valid acceptance
7
Q
What is an Offer (common law)?
A
An offer is a manifestation of willingness to enter into a bargain. Requires demonstration of intent to enter into a K, definite and certain terms and communication to the offerree.
8
Q
What is an offer (UCC)?
A
Inviting acceptance in any manner and by any medium reasonable in the circumstances. Under UCC missing terms are allowed BUT quantity and subject matter of the K is essential in establishing K.
9
Q
What are NOT CONSIDERED OFFERS?
A
Advertisements are generally not offers (more an invitation to deal, unless its highly specific as to what is being offered and indicates who may accept; Offers made in a joke; preliminary negotiations (look at whether there is intent eg. “I’m thinking of selling my car”); catalogs are invitation to deal
10
Q
What is an exception to Advertisements as NOT being considered an offer?
A
If the AD contains words of commitment and where the offeree can be identified with specificity that is sufficient to an offer
11
Q
What does QTIPS stand for?
A
Quantity, Time of Performance, Identity of parties, Price and subject matter. These refer to the definite and essential terms required in an offer.
12
Q
What are ways to terminate an offer?
A
1) rejection of offer, 2) counteroffer which terminates the first offer and offeree has new offer, 3) revocation, 4)death of the offeror, 5)lapse of time.
13
Q
What is revocation of an offer?
A
An offeror can revoke an ordinary offer at any time before acceptance, which terminates the power of acceptance.
14
Q
What is constructive revocation?
A
Unambiguous words or conduct that is inconsistent with the intention to contract
15
Q
What are irrevocable offers?
A
1) UCC Firm offers, 2) option K, 3) detrimental reliance and partial performance
16
Q
What is a UCC Firm Offer?
A
UCC firm offers are irrevocable even without consideration and require the following: 1) between 2 merchants 2) promise to keep the offer open 3) must be in writing 4) signed
17
Q
What is an option K?
A
option contract is one where consideration has been paid to keep an offer open for a specified period of time.. For example, D and P has K and D tried to revoke, P
paid $1,000 to D to keep the offer open until January 31. This constitutes an option contract
and D’s offer was irrevocable for the stated period.
18
Q
If there is detrimental reliance and partial performance on one party then what happens?
A
If there is detrimental reliance and partial performance on a K or preparations in part in reasonable reliance to a K then the offer is irrevocable
19
Q
If the death of the offeror terminates an offer, what would be an exception when it doesn’t terminate an offer?
A
When the K formed before the death of the offeror or when there is an option K
20
Q
What is acceptance?
A
Acceptance is when there is a clear expression of assent to the terms of the offer. These can be words (oral or written) creating an express K or by conduct created an implied in fact K. Offeror is the master of the offer and can dictate the manner of acceptance to the offeree.
21
Q
What are two methods of acceptance in an offer?
A
unilateral K and bilateral K
22
Q
What is a unilateral K and how does acceptance work in a unilateral K?
A
Unilateral K is formed when there is an exchange in the offeror’s promise for the offeree’s actual performance
23
Q
What is a bilateral K and how does acceptance work in a bilateral K?
A
a bilateral K is formed where both parties make promises to perform
24
Q
The power of acceptance is subject to what limitations?
A
1) timing where the acceptance must be within reasonable time; 2) only the offeree where the person whom the offer is directed may accept, 3)only in response to an offer where the offeree must know of the offer before accepting, 3) manner of acceptance, it must be accepted in the manner required by the offer and if there’s nothing specified then must be “any reasonable” means; 4) must be an objective standard
25
What is the mailbox rule?
When the mailbox rule is at play, it deals with the question of when an acceptance is effective. The mailbox rule says that acceptance is effective upon proper dispatch. Proper dispatch means that the offeree no longer as control or possession of acceptance.
26
What are the exceptions to the mailbox rule?
1) options Ks are effective upon receipt, 2) when the offer provides the terms of acceptance then those terms control, 3) when both a rejection and acceptance are sent then the rule depends whether the rejection or acceptance was dispatched first. If rejection dispatched first, then acceptance is effective if acceptance is received first. HOWEVER, if acceptance is dispatched first, acceptance is effective when dispatched in accordance with the original rule.
27
What do we do when acceptance varies from the offer?
The rule depends on whether it is common or UCC. Common will follow Mirror Image Rule and UCC says that "any expression of acceptance" or "written confirmation" will act as acceptance even if the terms are additional or different from those contained in the K UNLESS acceptance is expressly made conditional on assent to additional or different terms.
28
What is the Mirror Image Rule?
The mirror image rule says that an acceptance of an offer must be the mirror image of the offer.
29
What is the "Battle of the Forms 2-207" Rule when the acceptance has additional terms and both merchants?
If both merchants and additional terms, then the additional terms automatically becomes part of the K unless 1) offer expressly limits acceptance to its terms, 2) material alteration with added term (warranty disclaimer), 3) objection by the offeror by reasonable time.
30
What is the Battle of the Forms 2-207 Rule when the acceptance has additional terms but it deals with non merchants?
If one or more parties is a nonmerchant, then additional terms will be treated a a proposal and will not be part of the K unless the party assents.
31
What is the Battle of the Forms 2-207 Rule when there are different terms in the acceptance?
The Knock Out Rule (Majority Rule) will apply where conflicting terms will cancel each other and neither will enter the K. K will consist of agreed to terms and court will supply missing terms if needed.
32
What is the rule with acceptance with prompt shipment of goods?
An offer to buy goods may be accepted by shipping the goods (purchase order sent to the seller, seller fills it). The offer is accepted by shipping conforming and nonconforming goods. Shipping conforming goods is acceptance. Shipping nonconforming goods the rule depends on when the seller acknowledges nonconformity. Without acknowledging noncomformity means that the offer has been accepted and breaches simultaneously. With acknowledgment noncomformity means that this is an "accommodation" to the buyer and will not serve as an acceptance and will be treated as counteroffer.
33
What is Consideration ?
Consideration is the second element of a valid contract. There must be a bargain of exchange of legal value between the parties. There must be a benefit to the promisor and detriment to the promisee.
34
What does not qualify as CONSIDERATION?
1) gifts, 2) sham consideration or nominal consideration, 3) past consideration (promise to pay benefit received in the past will not provide current consideration on new consideration EXCEPT (a) new promise to pay debt that is now barred and (b) new promise to pay benefits previously received at the promisor's request; 4) preexisting duty rule (promise to do something one is already legally obligated to do will not provide consideration for new bargain unless duty is owed to third person; 5) illusory promises which means a promise to do something but in fact doesnt commit to do anything at all not enforceable. Remember that output Ks and requirement Ks may appear illusory but are valid contracts with consideration because of the implied good faith and fair dealing.
35
What is a substitute for consideration?
Promissory Estoppel where a K may be enforce by the courts as a valid K even when there is no consideration as long as there is a 1) promise (from the promisor) that foreseeably induces reliance, 2) is actually relied upon by the promisee, 3) and if enforce will prevent injustice. Reliance Damages are the sole remedy for the non-breaching party.
36
What are the Defenses to Contract Formation?
Remember "DUMMMIIS" which stands for 1) Duress, 2) Unconscionable, 3) Misunderstanding, 4) Mistake, 5) Misrepresentation, 6) Illegality, 7) Incapacity and 8) Statute of Frauds
37
What is Duress?
Duress can physical or economic duress. It is a wrongful physical or economic threat that overcomes a party's free will.
38
What is Unconscionability?
A K may be voidable if it is unconscionale where there is unfair bargaining power between the two parties resulting to the K being unfair or oppressive to one party. Unconscionability is assessed at the time of K formation.
39
What is Misunderstanding?
A K is void/voidable where there is significant misunderstanding during K formation. Misunderstanding arises where there is ambiguity concerning the terms of the K. If no party is aware or both parties are aware of the ambiguity, then there is no K formed unless both parties intended the same meaning. If one party is aware of ambiguity, then there is a K formed but the K is enforced according to the unaware party's intention.
40
What is Mistake?
If both parties are mistaken at the time of K formation, the mistake materially affects the agreed upon exchange and the adversely affected party did not assume risk of the mistake, the K may be voidable by the adversely affected party.
41
What is misrepresentation?
Tort of misrepresentation may be a defense to K formation where one party made a false statement of material fact and the other party justifiably and actually relied on the false statement resulting to the party suffering damages.
42
What is Illegality?
K may be voidable if the K was procured for illegal subject or illegal purpose. If a K is procured for legal subject matter but illegal purpose, the K is enforceable only with respect to the party who does not know about its illegal purpose.
43
What is incapacity?
infants and mentally incompetent person lack the capacity to K. Intoxicated person may lack the capacity to K if the other party has reason to know of the intoxication.
44
What is Ratification?
Usually infants lack the capacity to K, however, an infant can ratify the K and can be enforced if the infant has gained the capacity and retained the benefits of the K.
45
What does it mean when infants are liable for necessities?
Usually infants lack the capacity to K, however, infants are legally obligated to pay for necessities such as food, clothes, and medical care.
46
What is the Statute of Frauds?
SoF is a defense to K formation. Contracts that fall within the SoF are unenforceable unless they are in writing.
47
What is the writing requirement for the SoF?
The writing must 1) be signed by the party to be charged and 2) contained essential elements of the deal. The writing requirement for the SoF is subject to exceptions.
48
What are the exceptions to SoF writing requirement?
1) Merchant's confirming memo allows a writing to be enforced against both the signer and recipient where it is a) between 2 merchants, b) one party receives sign confirmation (eg letterhead or fax) and has reason to know of its contents c) except if the recipient objects within 10 days of receipt. 2) judicial admission in pleadings or testimony that there was an agreement will allow the agreement to be enforced without writing, 3) promissory estoppel theory where party detrimentally relied on the agreement.
49
Which type of Contracts are subject to the SoF?
"Mr. Dog"
M -arriage - K made upon consideration of marriage such as a prenuptial
R - eal property - sale of an interest in land (sale, mortgage, leases, easement of at least 1 year)
D - ebt or suretyship, promise to pay the debt of another
O-ne Year - Contract usually service K incapable of being performed in 1 year. The time starts at the day the K is made
G - oods - sale of goods of $500 or more
50
What is the exception to marriage Ks where it doesn't have to comport with the requirements of the SoF?
Usually K made upon consideration of marriage such as prenups are subject to the SoF EXCEPT promises made in consideration of marriage such as agreeing to sign a prenup
51
What is the exception to Real property K where it doesn't have to comport with the requirements of the SoF?
Remember the saying, "PIP says at least two!"
A real property K does not have to fall within the statute of frauds requirement if it meets the following: 1) where the conveyance is made or 2) performed in part either in payment, improvements or possession ((you need at least two)
52
What is the exception to Debt or suretyship Ks where it doesn't have to comport with the requirements of the SoF?
A K to pay another person's debt or suretyship does not have to comport within the SoF requirement when the main purpose of the agreement is because the promisor has his or her own economic interest in the debt K.
53
What is the exception to the one year service Ks requirement where it doesn't have to comport with the requirements of the SoF?
A service K that is usually incapable of being performed within a year does not have to comport with the SoF requirements if the K can't be performed in 1 year BUT full performance ACTUALLY occurred.
54
What is the exception to the sale of goods of $500+ where it doesnt have to comport with the SoF requirement?
If a good is worth $500, then its sale must be within the SoF UNLESS the goods are accepted or paid for; admission in a pleading or court testimony or specially manufactured goods not suitable to others
55
What is a condition?
A condition is an event that MUST occur before performance by the other party is due.
56
What happens if a condition does not occur?
If a condition does not occur then performance by the second party is excused
57
What is an express condition?
created by the language of the parties demonstrating the intent to have a condition. strict compliance is required
58
What is constructive condition?
is a condition that is supplied by the court for fairness, it doesnt require strict compliance, substantial performance is required
59
Who has the power to waive a condition?
The party the condition is intended to benefit always has the power to waive it.
60
How does waiver of a condition occur?
waiver of a condition can occur by receiving and keeping a benefit OR failure to insist on compliance.
61
Can a waiver of a condition be retracted?
Yes a waiver of a condition can be retracted UNLESS the party detrimentally relied
62
When does the Parol Evidence Rule come in to play?
When you are trying to interpret and enforce a K, the issue is always whether the written instrument is the complete embodiment of the parties' intention.
63
What is the Parol Evidence Rule?
The PER limits the extent to which evidence of discussion of writings made prior to, or contemporaneous with, the signed written contract can be admitted and considered as part of the agreement. The rule depends on whether the writing is a partial integration or total integration.
64
What is a partial integration?
Partial integration is intended to be the final expression of the agreement BUT NOT intended to include all details of the parties' agreement. Therefore, the PER rule says that evidence of writings prior to or made contemporaneous with the agreement are admissible ONLY TO SUPPLEMENT BUT NOT TO CONTRADICT a term in the partial interration
65
What is total integration?
Total integration is NOT ONLY THE FINAL EXPRESSION OF THE AGREEMENT BUT INTENDED TO INCLUDE ALL DETAILS of the parties' agreement. Therefore PER rule states that if the K at issue is a total integration, then evidence of writings prior to or made contemporaneous with the K IS NOT ADMISSIBLE TO SUPPLEMENT OR CONTRADICT the total integration.
66
What are the PER exceptions?
PER will allow certain types of evidence as follows: remember acronym "CAC"
C - Contract formation or enforcement defects - if there's evidence of fraud, duress, mistake, any allegations that would render the K void
A - ambiguous terms - PER doesnt bar evidence interpreting ambiguous terms. UCC follows the following rules to aid in K interpretation: 1) Course of performance, (refers to the evidence of the conduct of these parties regarding K at hand, best evidence to use if available) 2) course of dealing (refers to evidence of past dealings between these parties, 2nd best evidence to use), 3) usage trade refers to evidence of meaning others in same industry would attach to a term ( least persuasive)
67
Can a contract be modified?
Yes
68
Are oral K modifications allowed?
Yes oral K modifications are allowed. An Oral K modification must be in writing if the K as modified falls within the SoF. If the modification is not in writing then the original K stands.
69
When is an oral K modification must be in writing?
An Oral K modification must be in writing if the K as modified falls within the SoF. If the modification is not in writing then the original K stands.
70
What is required under common law modification?
consideration and mutual assent
71
what is required under UCC modification?
under UCC no consideration is required BUT GOOD FAITH AND MUTUAL ASSENT IS REQUIRED
72
What is a Third Party Beneficiary?
A TPB is one whom the promisor intends to benefit from the K who is not already a party to the K. A TPB can be intended TPB or incidental TPB.
73
What is an intended TPB?
An intended TPB is one whom the promisor intended to benefit from the K. An intended TPB CAN SUE TO ENFORCE THE K.
74
What are the two types of intended TPBs?
A creditor TPB and donee TPB
75
What is a creditor TPB?
One whom the promisor intends to the benefit from the K because the promisor owes him money
76
What is a donee TPB?
One whom the promisor intends to give a gift
77
What is an incidental TPB?
An incidental TPB is one who indirectly benefits from the K but not intended by the promisor. Incidental TPB have no rights to enforce a K.
78
What usually happens in assignment and delegation?
Assignment and delegation concerns the transfer of rights and duties to a third a person
79
What is an assignment?
An assignment is when a party to an existing K transfers her rights under the K to a third party. The assignor (party receiving performance) assigns the assignee (third party) the performance due under the K from the obligor (party performing). All rights are assignable. No consideration is required, gratuitous assignment (gift) is allowed. Assignee “Stands in shoes” of assignor. Can’t assign if material change in duty/risk
Eg. K for Artist to Perform
Artist (obligor) ----------------------- Uncle (assignor)
Third party nephew (assignee)
80
What is a Delegation?
When a party to existing K appoints to third party duties owed to K. The delegator (party owing performance) appoints to the delegatee (third party now performing) the performance due under the K to the oblige (party receiving performance). Most duties can be delegated except cannot delegate duties of special skill or judgment. The delegator remains liable.
Eg. K for Roy Choi Chef to Cook. Roy choi just hired as normal cook not for skill then ok. But for skill then no.
Restaurant Owner (obligee) ----------------------- Roy Choi Chef (Delegator)
Another Chef (Delegatee)
81
What is a novation?
A novation substitutes a new party for an original party to the K. It requires the assent of all parties and completely releases the original party. There needs to be 1) previous valid K, 2) agreement among all parties including new parties to the new K, 3) a valid and enforceable new K.
82
Explain Accord and Satisfaction
Remember: (“According to this new agreement, our original K is Satisfied”)
In limited situations, when there is a dispute over the validity of the contract or the amount owed, a party can agree to accept a different performance than what was agreed upon in the contract. Accord is the new agreement where a party agrees to accept a different performance that what was agreed upon. Consideration is required. Satisfaction occurs when the different performance is completed by the other party, which discharges the contract duties and the accord agreement duties.
83
What is anticipatory repudiation?
An anticipatory repudiation is where a party makes an UNEQUIVOCAL EXPRESSION to the other party BEFORE THE TIME OF PERFORMANCE IS DUE that he will NOT be able to perform under the contract. The nonrepudiating party can do either the following: 1) sue immediately for breach even though time to perform hasn’t pass but nonrepudiating party cannot do this if only part of performance left is payment; 2) suspend performance and wait; 3) treat K as discharged and repudiation as offer to rescind, 4)urge performance and sue later.
84
What is insecurity?
Insecurity is when the party’s conduct does not rise to a level of an anticipatory repudiation, but causes reasonable grounds for the other party to be insecure about the other party’s performance and inability to perform under the K.
85
What is the Right to Demand Adequate Assurances?
When there is an INSECURITY, the insecure party can DEMAND ADEQUATE ASSURANCES OF DUE PERFORMANCE FROM THE OTHER PARTY. This must be IN WRITING. In addition, the insecure party can SUSPEND HER OWN PERFORMANCE until receiving adequate assurances.
86
What happens when a party who received a justified written demand for adequate assurance FAILS TO RESPOND within a reasonable time, such exceeding 30 days?
A REPUDIATION of the K occurs
87
What is a BREACH?
A breach occurs when one of the parties to a contract does not perform and that
performance was not excused.
88
What is the difference between MATERIAL BREACH AND MINOR BREACH?
A breach may be classified as either material or minor. A material breach is one
that goes to the essence of the bargained-for performance. By contrast, a minor breach
is a slight deviation in the performance that was expected.
89
What is a material breach under COMMON LAW?
when the non-breaching party does not receive the substantial benefit of the bargain. The non-breaching party can withhold any promised performance and pursue remedies for breach. Courts will look at the following factors: party did not receive substantial benefit of bargain, extent of any part or full performance, time is NOT of the essence in a K unless specifically agreed to, and thus delay will not amount to a breach.
90
What is material breach under UCC - Perfect Tender Rule?
Under the UCC, the parties (including the seller) must strictly perform all duties under the contract, or they will be in breach. K with single delivery applies the perfect tender rule and if the goods fail to conform to the K, the buyer can: reject the whole within reasonable time, accept the whole, or accept any commercial unit.
91
What is an exception to the Perfect Tender Rule?
Perfect Tender Rule doesn’t apply to installment K where parties have contracted for more than one delivery. Did the nonperfect tender substantially affect the K and if not can the seller cure? (*acceptance of nonconforming goods is acceptance + breach)
92
What is the Seller's Right to Cure?
Buyer’s right to reject nonconforming goods is subject to seller’s right to cure defect. Seller may cure anytime before performance is due but seller must give notice to the buyer and seller must make new tender within time for performance, if seller has reasonable belief this is acceptable for buyer.
93
What is a Minor breach?
A minor breach occurs when the breaching party has substantially performed, but not fully performed. The non-breaching party is entitled to pursue remedies for the minor breach, but it still must perform under the contract.
94
What contract warranties are available that may be violated?
1) Express warranty
2) implied warranty of merchantibility
3) warranty of fitness for a particular purpose
4) implied covenant of good faith and fair dealing
95
What is express warranty?
Its made explicitly
96
What is implied warranty of merchantibility?
It warrants that the goods will be fit for the ordinary purpose for which such goods are used. It can be disclaimed.
97
What is warranty of fitness for a particular purpose?
only applies where the buyer relies on the seller’s judgment to select appropriate goods for stated purpose. Warranty can only be disclaimed in writing and if conspicuous.
98
What is Implied Covenant of Good Faith and Fair Dealing?
It is inherent in every K
99
What are other defenses to enforcement?
no mutual assent, lack of consideration, no writing where SoF requires writing, condition precedent not met, "DUMMIIS", Impracticability, Impossibility and Frustration of purpose
100
What is Impracticability?
An unforeseeable event occurs (such as a natural disaster) making the performance of the contract extremely difficult; the nonoccurrence of the event was a basic assumption at the time of the contract; and the party seeking discharge was not at fault. Note: Non-extraordinary increases in the cost of performance are not a sufficient basis for this defense.
101
What is Impossibility?
An unforeseeable event occurs, making it objectively impossible for the party to perform.
102
What is Frustration of Purpose?
If an unexpected event arises that destroys the party’s purpose for entering the contract, the party will be entitled to rescind the contract, even if the performance is still possible. Similar to Impracticability, the nonoccurrence of the event must have been a basic assumption at the time of the contract and the party seeking discharge was not at fault.
Example 6: Frustration of Purpose: Gina agrees to rent an apartment in San Francisco for one day, so she can watch the Giants’ victory parade after winning the World Series. On the day of the parade, an earthquake occurs and the parade is canceled. Gina’s performance may be excused (paying rent) because the purpose of renting the apartment has been frustrated, even though she could still pay the rent.
103
MBE Rule: WHEN is surrender of an invalid claim STILL CONSIDERATION?
The surrender of a claim that turns out to be invalid constitutes consideration nonetheless if either (1) the claim IS IN FACT DOUBTFUL because of the uncertainty as to the facts or the law or the (2) surrendering party BELIEVES that that the claim may be valid.
fact pattern: in the MBE question, remember (1) is the fact pattern because the sister's attorney told sister that her claim to the piece of land in the front was doubtful but not invalid (sister tried to K the piece of land to chef when she doesnt have it yet because current conflict with the bro to that same land). SO the sister surrender of that claim to the land is bargained for exchange to the chef's promise to pay constiututed consideration., the promise of chef is enforceable
