Contracts Flashcards
Buyer orders a good, includes essential terms. (installment K) Seller sends back writing or ships, but with materially different/add. terms (either in writing or invoice resulting from shipment) Buyer pays for the goods delivered (2 of the 5 installments), but says don’t ship anymore bc of these BS new terms. Seller sues Buyer for BOC - bc buyer refusing to accept remaining sofas (ie trying to cancel the rest of the installment K) who prevails?
Seller will prevail, but can only enforce the terms of the original offer. (the material new term will be excluded, but the original K still remains - ie crazy new price of sofa is not included, just the original price buyer sent) Offer, and acceptance, thus contract was formed when the seller accepted.
written K for a $25,000 car - subsequently dealer increases the price - what is the best defense?
Modification was not in writing. SOF applies to modifications of good that is $500 or more (w modification)
Permanent employment means
“at will” employment - can leave or be fired at any time (weird)
Impracticability
where the non-occurrence of the event was a basic assumption of the parties in making a K & neither party was expressly or impliedly assumed the risk of event - bar uses “impracticability” to encompass both imposs/imprac if these duties are excused by impossibility, impracticab, or frustration - other party’s duties will also be discharged Performance is impracticable: party who is supposed to perform has encountered: (i) extreme and unreasonable difficulty and/or expense; & (ii) its non-occurence was basic assumption of the parties when they entered the K In effect, courts will allow the party to avoid performance where subjective impossibility is found - *mere change in the degree or difficulty of expense due to certain causes will NOT be considered impracticable –> including increased wages, prices of raw materials, const of construction (unless well beyond normal) - these are types of risks fixed-priced K intended to cover
ACCORD AND SATISFACTION written K, architect agreed to draw up plans /supervise construction of a client’s new house. In return, the client agreed to pay the architect a fee of $10,000 to be paid upon the house’s completion. After completion, client claimed erroneously but in good faith that architect’s plans were defective. client orally offered to pay the architect $7,500 in full settlement of the claim for the fee. The architect orally accepted that offer despite the fact that the reasonable value of his services was in fact $10,000. The client paid the architect $7,500 pursuant to their agreement. The architect subsequently sued the client for the remaining $2,500. In a preliminary finding, the trier of fact found that there were no defects in the architect’s plans.Will the architect be likely to prevail in his action against the client for $2,500?
No, because the architect’s promise to accept $7,500 became binding when the client made the payment. architect will not recover $2,500 executed an accord and satisfaction, supported by consideration based on the $7,500 tendered and the client’s good faith dispute as to the architect’s performance. Payment of $7,500 amount to valid consideration for the accord and satisfaction because of client’s good faith belief that the architect’s plans were defective, which satisfies an exception to the pre-existing duty rule.
Consideration Issues - Accord and Satisfaction ACCORD
P contract agrees to accept a perform that differs from the performance promised in existing K, in satisfaction of other party’s existing duty (offer you 400 bike instead of 500 bonus).. -when a party agrees to accept a lesser amount of its monetary claim, there must be consideration or a consideration substitute for the partys promise to accept lesser amount. -Consideration can exist if the other party honestly disputes the claim or agrees to forego an asserted defense -BUT NOT ORIGINAL K OBLIGATIONS ARE NOT DISCHARGED UNTIL SATISFACTION IS COMPLETE
Consideration Issues - Accord and Satisfaction SATISFACTION
Satisfaction – performance of the accord agreement will discharge both the original K and the accord K -Original K NOT discharged UNTIL satisfaction is complete remember to see if there was an actual accord- did the parties have dispute over a claim or agree to something different than what they originally agreed to? if not - no accord, so no satisfaction An unliquidated or disputed claim may be discharged by negotiable instrument ie; check w/ the note “payment in full” – ONLY IF there was a dispute and they agreed to change the price if there wasn’t a dispute, can’t just unilaterally decide to change the amount, and add the words payment in full on it - and party will still recover under sue to recover what they were owed under the original contract amount ex: B and S K for price – buyers check has diff amount – seller cashes it and sues for rest — buyer cant just use the fact that the seller knowingly cashed it as a defense (they had an agreed upon amount) - they never agreed to change the original debt Even if the party cashes the check for the lesser amount – If there was no dispute about the original amount or K – the party that cashed the check can still sue for remaining amount – NOT an ACCORD AND SATISFACTION – sticking with what we agreed on clearly but when dispute - satisfaction a/s may be accomplished by a good faith tender and acceptance of a check when that check (or accompanying doc) conspicuously states that check is tendered in full satisfaction. - **don’t get tricked by the word novation*** novation involves 3p human – usually not the issue
ILLUSORY PROMISE
not binding - bc it is vague or promisor can choose whether or not to honor it (NOT REAL CONSIDERATION) -“Reserve the right to cancel” an order before performance date illusory promise only – not consideration -“not a contract prior to the date before cancelling” – unenforceable
Valid consideration types
valid considération exists when.. Voidable/unenforceable promises - can still constitute consideration Requirements (buyer agrees to buy all that he requires) output (seller agrees to sell all) Ks *Quantities may not be unreasonably disproportionate to estimates ie. if dairy farmer ships substantially more than reasonably required Output K “I will buy evertything for the next two years” – can’t just choose to buy from someone else – good faith req Legal claim settlement A promise not to assert (or release of) a claim or defense if the party promising not to assert believes in good faith that it is valid
Promises that are binding WITHOUT consideration - ie consideration substitutes (only look for if no consideration)
- Pay a debt barred by SOL - New promise to pay debt after SOL has run is enforceable w/o new consideration 2. Perform voidable duty New promise to perform voidable duty is enforceable if it doesn’t suffer from an infirmity rendering it voidable 3. Material benefit rule party performs an unrequested service for another party, the modern trend permits the performing party to enforce the promise of payment for material benefits received to the extent necessary to prevent injustice (unless donative intent) 4. Promissory estoppel (consideration “substitute”) – a promise is binding if: a.Promisor should reasonably expect it to induce action on the part of the promise or a third person b.Promise does induce such action, and Injustice only avoided by enforcement of promise Usually applies when one party has misrepresented a fact, and other has injuriously relied
Exception to CL pre-existing duty rule
When the pre-existing legal duty was owed to Third party* (prevailing modern rule)
CL’s pre-existing rule
does not qualify as consideration unless promisor gives something in addition to what is owed, or varies preexisting duty in some way
Common Law - Modifications of services or real estate
Must be supported by consideration (and SOF requirementsif falls original K fell unde - ie real estate or over 1 year lease) and agreements to modify K are enforceable if: i.Rescission of existing K and entering into of new K ii.Unanticipated difficulties arise and modification is fair and equitable, or i.New obligations arise on both sides (consideration can be found when there is a change in the partys duties, even where that change is financially beneficial to the party – ex: K for carpenter services – error calculaction – HO agrees to pay higher price – ho agreed after securing carnpenters consent to change style of handles (even tho it would save carpenter $, still considretation bc change)
Defenses - Mutual Mistake
Mutual i.Both parties mistaken as to essential element ii.K generally voidable by party adversely affected if: 1.Mistake existed when K was formed 2.Mistake relates to basic assumption of K 3.Mistake has material impact on transaction 4.And adversely affected party did not assume the risk of mistake iii.Neither party can void K if reformation available to cure mistake *Market conditions or financial ability are not considered basic assumptions. But horse dropping dead bc unknown hear condition – that can be mutual mistake *A disadvantaged party (a builder that wasn’t aware but didn’t check for underground condition -) will not be able to avoid the contract if the risk was allocated to him the risk can be RE-allocated (risk not on them anymore) if (i) parties agree, (ii) when party believes his knowledge is sufficient (ii) risk is allocated by the court as is reasonable under circumstances
Unilateral Mistake
One party is mistaken as to essential element of K, but either party can enforce K on its terms Mistaken party can void K if he didn’t bear risk of mistake and either: 1. Mistake would make enforcement of K unconcscoinable, OR 2. Non-mistaken party caused the mistake, had duty to disclose or failed to disclose mistake, or knew or should have known the other party was mistaken Must be absence of serious prejudice to other party to rescind K
