Contracts Flashcards
Offer: elements
(1) manifestation of intent to enter into a K; (2) certain and definite terms; (3) communicated to offeree
Firm Offer
The general rule is that an offer can be revoked by the offeror at any time prior to acceptance. One exception to this rule is the Firm Offer under the UCC. A firm offer is irrevocable and requires that (1) a merchant (2) signed a writing (3) in which he made assurances to keep the offer open. If no time is stated, the offer will be kept open for a period of up to 3 months.
Note: “merchant” and “signed” are broadly defined (signature can be letterhead)
Does making an inquiry constitute a counteroffer and rejection?
No!
What are the remedies for breach of construction K–if owner breaches? if builder breaches?
Owner breaches:
––Before completion: builder gets lost profits + costs
––After completion: builder gets full K price + interest
Builder breaches:
––Cost of completion + costs of delay - benefit conferred
What are the 6 ways an offer can be terminated?
1) lapse of time
2) revocation
3) rejection
4) death b/f acceptance [but won’t terminate an irrevocable offer]
5) destruction of proposed K’s subject matter
An offer generally terminates when the offeror revokes prior to acceptance. What are the 4 exceptions to this–i.e., when is an offer irrevocable before acceptance?
1) Option
2) Firm Offer (UCC)
3) Detrimental Reliance [GC/SC]
4) Beginning performance of unilateral K
What is the exception to surety agreements being covered by the Statute of Frauds
If the main purpose of the promisor (surety) is to benefit himself, then the surety agreement does not need to be in writing.
Mistake
Mistake can be a defense to formation.
A mutual mistake will be a defense to formation and grounds for rescission if it goes to the essence of the contract–i.e., a mutual mistake of material fact as to the subject matter. A mutual mistake as to value will NOT be a defense.
A unilateral mistake is generally not a defense to formation; but, it can be when the non-mistaken party knows or should know of the mistake–in that situation, the party cannot take advantage of the mistake.
Promissory Estoppel/Detrimental Reliance + Remedy
Substitute for consideration.
Even where there is no consideration, a PROMISE can be enforced to PREVENT INJUSTICE if (1) the promisor should REASONABLY EXPECT to induce action/forbearance and (2) such action/forbearance is actually INDUCED. Under the modern view, if a court finds promissory estoppel, the remedy is reliance damages (not expectation damages).
Do modifications require consideration?
It depends…
––CL: the historical rule is that a modification must be supported by consideration pursuant to the Preexisting Duty Rule, but the modern trend allows for modifications that are not supported by consideration if it is fair and equitable and the need for the modification was not foreseeable at the time of the agreement.
–UCC: no; only requires good faith
Unconscionability
Operates as a defense to contract formation. Typically arises when one party has substantially superior BARGAINING POWER over the other party and can DICTATE the terms of the contract.
OPPRESSIVE TERMS or UNFAIR SURPRISE
Incapacity
Defense to contract formation. A party who lacks capacity–minor, intoxicated, mentally incompetent–at the time of contracting has the right to disaffirm the contract. A minor’s misrepresentation of her age does NOT defeat the defense of incapacity. However, a minor can impliedly affirm the contracting after reaching majority.
An incapacitated person will be liable in restitution for the reasonable value of necessaries (food; clothing; medical care).
Merchant’s Confirmatory Memo
Operates as an exception to the Statute of Frauds. Under the Statute of Frauds, sales of goods for $500 or more require a signed writing by the party to be bound. However, under the merchant’s confirmatory memo exception, if (1) both parties are merchants (2) the party seeking to enforce the contract signs a document confirming the details of the verbal agreement, including the quantity, and (3) there is no written objection from the party to be bound within 10 days, that satisfies the Statute of Frauds.
When do the rights of an intended beneficiary vest?
(1) learns of the K + immediately sues
(2) learns of the K + assents to it
(3) learns of the K + relies on it
When are modifications allowed on a K that involves a 3P beneficiary?
It depends…
Step 1) is the beneficiary an intended beneficiary or an incidental beneficiary? If incidental, modifications are allowed anytime.
Step 2) if INTENDED beneficiary, the contract can be modified WITHOUT the intended beneficiary’s consent ONLY IF her rights have NOT VESTED
Assignment
All contracts can be assigned–except where it (1) is prohibited by law (2) would substantially change the obligor’s duty (e.g., personal service K where services are unique) or (3) involves assignment of future rights to future Ks.
Is a writing required? NO
Is consideration required? NO
When is an assignment revocable?
It depends on whether the assignment is for value or gratuitous?
––If for value: NOT revocable
––If gratuitous: revocable, unless detrimental reliance
Accord/Satisfaction
An accord is an agreement where one parties agrees to receive a different, future performance. Satisfaction is the performance of the accord agreement. An accord will SUSPEND performance of the original agreement; once the accord is SATISFIED, then the performance is excused (discharged). An accord requires consideration.
Purpose of K damages
Place non-breaching party in position she would have been in had the contract been performed
