Contracts Flashcards
Valid Offer
A valid offer is a manifestation of a present intent to contract. An offer should contain definite and certain terms and must be communicated to the offeree.
Offer Revocation
A revocation must be communicated to the offeree by words or conduct. A revocation is effective when received by the offeree. An offer is irrevocable if there is an option contract. In an option contract, an offeror agrees to hold open the offer in exchange for consideration. In a merchant’s firm offer, under the UCC, an offer is irrevocable. If a merchant offers to buy or sell goods in a signed writing and the writing gives assurances that the offer will remain open, it is irrevocable. Article 2 limits this period to 3 months.
Promissory Estoppel
A promise is enforceable without consideration if necessary to prevent injustice if the promisor should reasonably expect to induce action or forbearance and the action or forbearance is actually induced.
Parol Evidence Rule
Prior expressions are inadmissible to supplement or contradict an integrated agreement intended to be the complete and final expression of the parties’ agreement.
Evidence outside the scope of the rule may be admitted: evidence concerning validity of the contract, evidence used to interpret ambiguous words, evidence showing consideration, or reformation. Evidence can be used to show that the agreement was subject to a condition precedent to performance.
If a writing is partially integrated, it may be supplemented by additional terms (but cannot be contradicted).
Breach
If a party is under an absolute duty to perform and fails to perform in accordance with the contract, the contract is in breach. Every breach gives the nonbreaching party a right to money damages, but only a material breach excuses the nonbreaching party from performing. A breach is minor if the oblige gains the substantial benefit of the bargain despite the defective performance. A material breach means that the oblige did not receive a substantial benefit of the bargain.
Courts generally consider the following factors in determining the materiality of a breach: (i) the extent to which the nonbreaching party will receive the benefit expected, (ii) the extent to which the nonbreaching party can be compensated in damages, (iii) the hardship to the breaching party if the contract is terminated, (iv) the extent to which the breach was willful, and (v) the extent to which the breaching party has performed.
Anticipatory Repudiation
Anticipatory repudiation occurs when a promisor, prior to the time for performance of his promise, indicates that he will not perform. The nonrepudiating party has the option to treat the repudiation as total and sue for breach. For the doctrine to apply, there must be a bilateral contract with unperformed duties on both sides.
Modification
Under common law, a modification of a contract must be agreed to by both parties and supported by consideration. A modification under the UCC need not be supported by consideration.
Impossibility
At common law, contractual duties will be discharged if it has become objectively impossible to perform them due to an unforeseen event, the nonoccurrence of which was a basic assumption of the contract.
Impracticability
Extreme or unreasonable difficulty and/or expense due to an unforeseen event, the nonoccurrence of which was a basic assumption of the contract.
Frustration of Purpose
Frustration of purpose occurs when the purpose of the contract becomes valueless because of a supervening event not the fault of the party seeking discharge. At the time of the agreement, the parties must not have not seen the supervening act.
Mutual Mistake
When both parties entering into an agreement are mistaken about existing facts, the contract is voidable if (i) the mistake concerns a basic assumption of the contract, (ii) the mistake has a material effect on the agreement, and (iii) the party seeking avoidance did not assume the risk of mistake.
Liquidated damages
Liquidated damages are allowed if (i) actual damages are difficult to calculate at the time of contracting and (ii) the amount is a reasonable forecast of the likely damages (not punitive).
Third-Party Beneficiary
Third party’s rights created in a single contract. Only intended beneficiaries have rights, not incidental beneficiaries. A third-party beneficiary’s rights vest—and cannot be modified—when the beneficiary manifests assents, brings suit to enforce the promise, or detrimentally relies on the promise. A third-party beneficiary may sue the promisor on the promise, and may sue the promise, unless they are a done beneficiary.
Delegation of duties
Duties may delegated, unless they: (i) involve personal judgment or skill, (ii) involve special trust, or (iii) the performance of which by a delegate materially changes the obligee’s expectancy.
