Contracts Flashcards
Termination of Offer
- Lapse (stated or reasonable time)
- Death or incapacity
- Revocation of offer by offeror (revoke before acceptance and communicate revocation to offeree)
Indirect Revocation
Offeror takes action inconsistent with the intent to go through with the offer and offeree learn of such action from a reliable source
Option Contract
- offer
- separate promise to keep open
- valid mechanism for enforcing the promise to keep open (i.e. consideration)
Reliance/Construction
Courts will hold offers open when the offeree has detrimentally relied on them
Firm Offer
- Offer made by a merchant
- In writing signed by the merchant
- Expressly stating it will be held open
(valid for no longer than 3 months)
Bilateral Contract
A promise exchanged for a promise. Once promises are exchanged both parties are bound.
Unilateral Contract
Offer seeking performance in return.
Common Law- offeror is free to revoke until offeree has completed performance
Modern Law-Once performance has begun an option contract is created
Acceptance of Unilateral Contract
Acceptance is only effective by completing performance
Mailbox Rule
Acceptance by mail is effective upon dispatch if properly posted.
Mailed Offer and Rejection
Whichever reaches the offeror first controls
UCC Acceptance by Seller’s Shipment
- Promise to ship goods in conformity with offer
- Prompt or current shipment of goods in conformity
- Shipment of nonconforming goods (unless sent as an accommodation, then it is a counteroffer)
Battle of the Forms
Unless acceptance is expressly made conditional on assent to the additional or different terms, the nonconforming acceptance is an effective acceptance of the offer and a valid, enforceable contract is formed.
Parties to a Battle of the Forms
If one party is a consumer, then the additional terms are mere proposals and are not part of the contract unless offeror expressly agrees to the additional terms.
If both parties are merchants, then the additional terms are part of the contract unless (1) offer expressly limits acceptance to terms of offer (2) offeror objects to the additional terms within reasonable time OR (3) the additional terms would materially alter the contract.
Knock Out Rule
Omit both offeror’s original provision and the offeree’s differing provision
Legal Detriment
Whether promise is doing something he had a legal right not to do or forgoing some activity he had a legal right to do.
Illusory Promise
Promise of performance that leaves performance to the discretion of the promising party doesn’t constitute consideration
Gratuitous Transfers
Present intent to make a gift and actual or symbolic delivery
Past Consideration
A promise in exchange for something already given or performed is not supported by consideration.
Material Benefit Test
- Promisee conferred the benefit on the promisor AND
2. Benefit is material
Promissory Estoppel
- A promise
- foreseeable reliance
- actual reliance
- injustice without enforcement
MYLEGS
Contracts that fall within the statute of frauds:
Marriage
Year or longer to perform
Land
Executor or administration to answer for a duty of decedent
Guarantee or suretyship
Sale of goods over $500
Performance
A work around the statute of frauds. Part performance will make a land sale contract enforceable if there’s (1) payment of all or part of the purchase price (2) taking possession of the land OR (3) making substantial improvements to property.
If fully performed a one year contract will be enforceable, but if only partially performed it will not be enforceable.
Satisfying the Statute of Frauds
- Signed writing
- Merchant’s confirmation (2 merchants make oral agreement and 1 sends the other a written confirmation)
- Judicial Admission
- Partial performance
- Specially manufactured goods
Warranty of Title
Implied Warranty
Good title to the goods
Rightful transfer of the goods
No liens attached to the goods
Warranty of Merchantability
Implied Warranty
Goods fit for ordinary purpose for which they would be used
Warranty of Fitness for a Particular Purpose
Implied Warranty
Goods fit for a particular purpose buyer intend to use them for
Express Warranties
Any affirmation of promise or fact
Any description of the goods
Any sample or model
Missing Terms
Price-Reasonable price at time establish by the contract for delivery
Time-Reasonable time
Place-Seller’s place of business
Extrinsic Evidence
Can be used to fill gaps (i.e. supplement terms) and resolve ambiguities (explain terms).
Cannot be used to contradict terms
Parol Evidence Rule
Extrinsic evidence can be used to explain or interpret terms and it can be used to supplement or contradict the written contract, unless the contract is completely integrated
Doesn’t apply to subsequent agreements, collateral agreements, and an attack on validity of written agreement.
Mutual Modification
Both parties agree to different performance from originally required and difference is not a mere pretense of a newly formed bargain
Unforeseen Consequence
Increased compensation can be given in exchange for same performance that has now become substantially more burdensome than reasonably anticipated when contract was formed
Unilateral Mistake
Not an excuse for performance, unless:
- other party knew or had reason to know OR
- serious clerical error and reliance
Mutual Mistake
Viodable by disadvantaged party when:
- mistake relates to material facts
- mistake made by both parties
- disadvantaged party didn’t bear risk of mistake
Impossibility
- Performance is literally impossible for anyone to perform
2. Contingence that creates the impossibility arose after making the contract and was unknown/unanticipated
Impracticability
- impracticability was unforeseen
- the risk was neither assumed nor allocated
- increased cost/burden of performance would now be far beyond what either party anticipated
Frustration of Purpose
- principal purpose in entering the contract is substantially frustrated
- frustration was substantial in nature
- Non-occurrence of the event that cause the frustration was a basic assumption of contract
Rescission
Both parties give each other consideration mid-performance to discharge the other’s duties
Accord and Satisfaction
Obligee promises to accept substituted performance in satisfaction of the obligor’s duty and performance of the accord is completed, then the original duty is discharged. Consideration is required.
Establishing Anticipatory Repudiation
- party makes a definitive statement that it will breach OR
- there is a voluntary act that renders party unable to perform
Adequate Assurances
If reasonable grounds for insecurity exist, the insecure party can make a demand for adequate assurance of performance.
Quantum Meruit
Breaching party may recover reasonable value of benefits conferred which will be reduced by damages caused by breach
Right to Cure
Seller must give buyer reasonable notice of intent to cure and cure by the contract deadline
Imperfect Tender in Installment Contracts
If substantially impairs value of this installment then the buyer can reject the installment but cannot cancel the whole contract. If not substantially impaired, then buyer has to allow seller opportunity to cure.
Necessities for Minor
Viodable but merchant has the right to seek reasonable value of goods and services
Mental Incompetency
Must be mentally incompetent at time of contracting. Must return any goods received and is liable for damages or reasonable value for use, unless the other party was aware of mental incompetency.
Fraudulent Misrepresentation
- misrepresentation
- intent to mislead and knew or should have known of false statement
- material misrepresentation
- reasonable reliance
Misrepresentation
- misrepresentation
- material
- reasonable reliance
- Negligent misrepresentation-reasonable care would have revealed misrepresentation
innocent misrepresentation-good faith assertion that was not true
Fraudulent Nondisclosure
- Nondisclosure was material to contract
- Reasonable reliance on nondisclosure
- Duty to disclose
Remedies for Misrepresentation
Avoidance-defense to contract claim Rescission Reliance damages For Fraud and Non-Fraud: Live with contract and sue for benefit of the bargain For fraud only: punitive damages
Duress
- threat
- wrongful in nature
- no reasonable choice but to succumb to the threat
- Remedies-avoidance and restitution
Undue Influence
unfair persuasion and other party was vulnerable to such persuasion.
remedies: voidable contract at option of aggrieved party and restitution damages
Unconscionably
Procedural Unconscionably: Bargain process creates absence of meaningful choice for aggrieved party
Substantive Unconscionably: Contract terms unreasonably favor one party
Remedies: refusal of enforcement of the contract, excise the offending clause and enforce the remainder, limit application of offending clause to avoid unconscionable result.
Public Policy
A contract will not be enforced if:
- subject is prohibited by law
- contract formed for the purpose of committing a crime
- violates certain/values or freedoms
Remedy: void or voidable at option of defending party
Expectation Damages
Position he would have been in had the contract been performed. Cannot be recovered when:
- cost of performance greatly exceeds market value
- cannot be calculated with reasonable certainty
- damages are unforeseeable
- damages can be mitigated
Reliance Damages
Restores aggrieved party to position before contract. Available when expectation damages are uncertain.
Restitution Damages
Value of benefits conferred upon other party in transaction. Calculated in court’s discretion and as justice requires by the reasonable value or cost of benefits conferred or extent to which the other party’s property has increased in value because of the performance rendered. Available when other party hasn’t fully performed.
Liquidated Damages
Enforceable if designed to compensate for breach. Unenforceable if a penalty for punishing breach.
- Did parties intend for clause to be LDP or penalty?
- Was clause reasonable at time of contracting in relation to anticipated harm?
- Is clause reasonable in relation to harm/losses that actually occurred?
Seller’s Remedies
- If resold: Contract Price - Resale Price
2. If not resold: Contract Price - Market Price
Lost Volume Sellers
Can recover profit they would have made on the lost sale. Must show:
- Could have sold to both breaching buyer and resale buyer
- Would have been profitable to make both sales
- Probably would have made the additional sale regardless of buyer’s breach
Buyer’s Remedies
Covered: Contract Price - Cover Price
Not Covered: Contract Price - Market Price
Accepts Nonconforming Goods: Value of Original Goods - Value of Nonconforming Goods
Incidental Damages
Expenses incurred in either seller dealing with the goods after buyer’s breach or buyer arranging for cover
Consequential Damages
Buyer can recover damages that were reasonably foreseeable to the seller at the time the contract was entered into (i.e. lost profits because of the delay in obtaining the goods)
Specific Performance
Available when money is inadequate (i.e. unique objects, need only adequately search and be unable to find reasonable substitutes), not available for personal service contracts or contracts requiring continued relations between the parties.
Non-Compete Clause
Is there a significant business justification for enforcing restraints?
Scope of the non-compete clause reasonable?
Express provision?
Promissory Estoppel
Expectation or reliance damages or choose on a case-by-case basis.
Creditor Beneficiary
Promisee seeks a performance from promisor to satisfy an obligation owed to a 3rd party. Can sue the promisor but not the promisee.
Donee Beneficiary
Promisee seeks performance from promisor in order to make a gift of that performance to a 3rd party. Can sue the promisor but not the promisee.
Incidental Beneficiary
3rd party who will benefit from promisor’s performance as a practical matter, but are not intended beneficiaries. Do not have standing to sue.
Vesting of 3rd Party Rights to Sue
- Beneficiary brings suit on the matter
- Beneficiary changes position in justifable reliance on contract
- Beneficiary manifests assent to the contract at the request of promisor or promisee
- Rights of beneficiary have vested under express contract terms
Assignment
All rights are assignable unless:
- it materially alters duties of other party
- obligor has personal interest in rendering performance to the obligee and not a 3rd party
- would violate law or public policy
- assignment prohibited by contract
Assignee gets whatever rights to the contract assignor had and takes subject to whatever defenses obligor could have raised against assignor. Payment to assignor unless otherwise stated.
Delegation
Doesn’t create a transfer of duties absent a novation (agreement by all parties). Generally all duties are delegable, except for personal services and when contract prohibits delegation.
